R&D in Thailand – A way out of the Middle-income Trap?

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Through greater government support for R&D, tax breaks for both foreign investors and domestic researchers and the creation of knowledge clusters, Thailand hopes to reposition itself as a regional R&D leader and pull itself out of the middle income trap.

For a long time Thailand’s economy has been seen as stuck in the middle-income trap: it has lost competitiveness towards lower-cost neighbors Cambodia, Vietnam and Laos, while in terms of technology, it has not yet been able to catch up with countries such as Singapore and Malaysia. Lessons from more successful countries in the region such as South Korea and Taiwan indicate that sustainable development requires countries to generate added value through innovation — and that the government needs to play a key role in transforming the structure of the economy.

The Thai government is aware of this, and in recent years has been ramping up efforts to promote innovation and R&D, to enhance the country’s global competitiveness. One of the latest measures has been increasing corporate tax deductions to 300 percent of R&D spending. Authorities are also considering the creation of one central department to facilitate all R&D-related processes. “The long-term goal is to turn Thailand into a knowledge-based economy and society,” confirms Somchet Thinapong, chairman of the National Innovation Agency (NIA). “Thailand ranks below Singapore and Malaysia in terms of R&D budget, but I am proud to state that the current government supports R&D in Thailand and the budget for R&D is gradually moving from 0.4 to 3 percent,” explains Yongvut Saovapruk, governor of the Thailand Institute of Scientific and Technological Research (TISTR). The Institute was created in 1963 and currently focuses on the development of agricultural and food technology, pharmaceuticals as well as natural products. “In order to continue growing as an organization we must be innovative by conducting R&D. But besides innovation it is crucial to perform technology transfer,” adds Saovapruk.

“The current government supports R&D in Thailand and the budget for R&D is gradually moving from 0.4 to 3 percent.”

Yongvut Saovapruk – Thailand Institute of Scientific and Technological Research (TISTR)

To support R&D efforts in the life science sector, back in 2002-03 the government established the Thailand Science Park (TSP), a hub destined to private sector’s industrial R&D activities under the management of the National Science and Technology Development Agency (NSTDA), as well as Thailand’s Center of Excellence for Life Sciences (TCELS). “The organization is vital to the development of technology creation in Thailand and works as an intermediary platform to exchange ideas with both local companies and international organizations,” explains Nares Damrongchai, CEO of the center. “Thailand is at a pivotal turning point in the healthcare and life sciences industry because it is trying to grow and position itself as a place to invest and conduct research,” he points out. Currently, the nation’s main income generating sectors are tourism, car manufacturing and electronics, but there is space for the healthcare and life sciences sector to develop. “Thailand is in a transitional phase and we are going to see regulatory changes in the coming years that will allow for more transparent business practices and will create a more welcoming environment for companies to invest,” he claims.

Although it is too early to say whether these measures will be effective, many in the pharmaceutical industry believe Thailand can play a prominent role in clinical R&D. “Our neighboring nations offer economic incentives for foreign investors by providing tax breaks, but the advantage of conducting R&D in Thailand, as opposed to our neighboring Southeast Asian nations is the space we have to conduct clinical trials, as well as the strategic geographic location,” points out Saovapruk.

One organization betting on Thailand’s capacity to compete globally in this field is ACLIRES, whose ambition is to promote the Kingdom as a destination for early phase studies. “Thailand is an especially unique environment to conduct clinical trials because it is part of a fast growing environment. The potential here for companies is endless,” explains Renate Schirrow, senior vice president for operations. Sirilak Suteekul of Boehringer Ingelheim states that, “over the last 10 years many policies have already changed, which have allowed for early stage (phase II) studies to grow at an exponential rate and for the development of phase one studies to start. If Thailand is able to rally up a bit more support from the government, […] I believe it would lead to massive expansion of growth in the local healthcare, life science and pharmaceutical sectors.”

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