The greater difference between the East Asian NIEs and Thailand might rest on the
latter making use of taxation and other incentives through BOI. On the basis of the
experience of many developing countries including Thailand, these are seen to breed
corruption and rent-seeking activities and they also severely affect the quality and equity in
the tax system. The incentive system was expected to fail owing to the fact that it only
provided a one-way privilege (see Thomas, et al., 1991). Moreover, there was no such a built
in rewarding system that could be used to penalize those firms with poor performance or
failure to meet any economic criteria. This encouraged foreign firms to import machines and
equipment which were originally designed to be labour-saving, reflecting the situation of
scarce labour in the developed countries. This led Thai industrialization to contribute to high
economic growth with insignificant technological content and weak absorptive labour. In
contrast, Japan, South Korea and Taiwan are prominent in high labour absorptive capacity of
industrialist. In the Japanese case it could be seen as a proto-type of the developmental state
in terms of technology transfer and foreign investment during the 1950s. The Japanese state
exercised its power to channel foreign technologies into targeted key industries set by the
Ministry of International trade and Industry MITI as well as to ensure favorable contract
terms for Japanese firms. A foreign investment law was set up to empower the state to ensure
that most technology transfer contracts must have benefited her economy.