Japanese Technical Intern Training Program: A Way to Develop Human Capital in South East Asia

Abstract

Introduction :

It is well known that the Asian Newly Industrialized Economies (NIEs) achieved their remarkably fast economic growth through export-oriented policies that led to Foreign Direct Investment (FDI) and acquisition of foreign technology since the 1960s. The other South East Asian countries (hereafter SEACs) also replicated these policies following the Asian NIEs. Japan, due to increasing labor costs, relocated its labor-intensive manufacturing to the Asian NIEs in the early 1960s. During that time Japan was in the second stage of industrial restructuring to catch up with the Western economies. However, after the Yen appreciation in 1985, Japanese export started to decline and lost its competitive situation against the Asian NIEs in consumer electronics. Thus, Japan relocated its manufacturing firms again to low cost SEAC countries, such as Thailand and Indonesia.

Even though, these SEACs used similar strategies in developing their own economies as the Asian NIEs like South Korea since the 1960s, they still have not been able to escape from the “Middle Income Trap” (MIT) passing the required amount of GNI per capita (i.e. pass $12,535 GNI p.c. in 2020). One reason why SEACs are still in the MIT lies in their lack of human capital (HC). The foreign firms use various strategies such as retaining tacit knowledge, separating the production process in different countries, in order to keep the secrets by themselves. Like what happened in Asian NIEs, the duty of absorbing foreign knowledge and technology lies upon the host country’s workforce. Therefore, Human Capital Development (HCD) is imperative to increase the absorptive capacity of the host country. One of the ways used by SEACs in recent times for HCD in their home countries is through Japan’s Technical Intern Training Program (TITP). A question arises whether TITP is an effective way of HCD in labor sending SEACs.