- 23
- March
China has ordered the removal of all foreign software by 2027. South Korea mandates government agencies to use only domestic cloud services. Both countries share a clear strategy: governments create the "market" for domestic software companies — they do not build software themselves to compete with the private sector. The result is explosive growth in their domestic software industries. So what can Thailand learn from this proven model?
Key Takeaways
- China (Xinchuang): Mandates all government agencies and SOEs to replace foreign software with domestic alternatives by 2027 — creating a $155 billion industry
- South Korea (Digital New Deal): Invested 76 trillion won ($62 billion) channeled to private companies — created 550,000 jobs and became OECD #1 in Digital Government
- The winning model: Government acts as a "customer," not a "competitor" to domestic software companies
- Lesson for Thailand: If the Thai government adopts this model, the domestic software industry can achieve sustainable growth
China — The Xinchuang "Delete America" Initiative
In 2022, China's government issued Document 79, mandating all government agencies and state-owned enterprises (SOEs) to replace all foreign software with domestic alternatives by 2027. This covers every system — ERP, HR, CRM, financial systems, operating systems, databases, and cloud services.
The critical point is: The Chinese government does not build the software itself — it orders agencies to buy from private Chinese companies such as Yonyou (ERP), Kingdee (ERP), and WPS Office (productivity suite). This creates a massive market that enables these companies to invest in R&D and develop products that can compete globally.
Foreign Software vs. Domestic Replacements (China)
| Foreign Software | Domestic Replacement (China) | Category |
|---|---|---|
| Microsoft Office | WPS Office (Kingsoft) | Office Suite |
| Microsoft Windows | KylinOS / UOS | Operating System |
| SAP ERP | Yonyou | ERP |
| Oracle ERP | Kingdee | ERP |
| Oracle Database | DM Database / OceanBase | Database |
| AWS / Azure | Alibaba Cloud / Huawei Cloud | Cloud |
Xinchuang Implementation Timeline
| Phase | Target | Status |
|---|---|---|
| Phase 1 | Government agencies and military | Completed |
| Phase 2 (by 2025) | All state-owned enterprises (SOEs) | In progress |
| Phase 3 (by 2027) | Critical infrastructure private sector | Planning stage |
Xinchuang Results
The Xinchuang industry grew from $52 billion (2023) to a projected $155 billion (2025) — nearly tripling in just 2 years. Yonyou became China's #1 ERP with 30% market share in the SME segment, while SAP and Oracle continue to lose ground in China.
South Korea — Digital New Deal + Regulatory Moat
South Korea took a different approach but achieved the same outcome: investing 76 trillion won ($62 billion) over 5 years through the Digital New Deal program. All funds flowed to private Korean companies — not to government-built software projects.
Beyond direct investment, South Korea also uses regulations as a tool to create markets for domestic companies:
South Korean Policies and Their Impact
| Policy | What It Does | Beneficiary |
|---|---|---|
| CSAP (Cloud Security Assurance Program) | Government agencies may only use CSAP-certified cloud — effectively restricting to Korean providers | Samsung Cloud, Naver Cloud |
| NIS Guideline | Government agencies may only use Korean-developed LLMs/AI | Naver HyperCLOVA |
| KONEPS | Transparent government procurement platform enabling fair competition for SMEs | Small and mid-size Korean software companies |
| Digital New Deal | 76 trillion won ($62 billion) invested over 5 years — all channeled to private companies | Created 550,000 jobs |
| Sovereign AI Initiative | $735 billion AI initiative — Samsung investing $230 billion | Korean AI industry |
South Korea's Results
South Korea rose to become OECD #1 in Digital Government, created 550,000 digital jobs, and nurtured world-class tech companies like Samsung, Naver, and Kakao — all of which grew from the domestic market before expanding globally.
Comparing Three Countries: China vs. South Korea vs. Thailand
| Aspect | China | South Korea | Thailand |
|---|---|---|---|
| Role of Government | Acts as "customer" — orders agencies to buy from Chinese companies | Acts as "customer" + creates regulations favoring domestic companies | Some agencies develop software internally |
| Key Policy | Document 79 — mandatory full replacement by 2027 | CSAP, NIS, Digital New Deal | No mandatory domestic software policy yet |
| Government Builds Its Own Software? | No — purchases from private companies | No — invests in private companies to develop | Some agencies build internally |
| Impact on Software Industry | $155B industry + Yonyou, Kingdee become global ERP players | OECD #1 Digital Gov + 550K jobs | Significant room for growth |
| Data Sovereignty | Data stays in China, maintained by Chinese engineers | Data stays in Korea, maintained by Korean engineers | Some data hosted overseas |
A Lesson from History — When Thailand Had Its Own Linux
Over 20 years ago, Thailand had companies developing their own Linux operating systems — KW Linux and Grand Linux were building domestic alternatives and promoting open-source adoption. During the same period, South Korea had HaanSoft, a company developing its own Linux distribution. Both countries had just weathered the 1997 Asian Financial Crisis together, and both had small software companies starting out in the open-source era.
But the two countries chose different paths.
South Korea chose to "support private companies" — creating government procurement markets, establishing regulations that favored domestic software, and investing through the Digital New Deal. Thailand, during the same period, saw a government research agency develop its own Linux distribution and distribute it for free.
The result: Thai private companies that had invested in developing and selling Linux could not compete against a free government product. Some went out of business. Others had to pivot to entirely different business models. And the government's own Linux distribution? It was eventually discontinued as well, because it lacked a sustainable business model.
In the end, nobody won — both the private sector and the government project stalled. Thailand never developed its own OS.
Now look at South Korea today — HaanSoft grew to become part of Hancom Group, the largest software company in Korea. And they have Samsung, Naver, and Kakao — companies that started in the domestic market and grew to compete globally.
Early Linux Industry — Thailand vs South Korea
| Aspect | South Korea | Thailand |
|---|---|---|
| Early Linux companies (~2000) | HaanSoft — developed Haansoft Linux, co-founded Asianux with China+Japan | KW Linux, Grand Linux — developed Linux distributions for the Thai market |
| Government approach | Support private sector — government as "customer" | Government agency built its own and gave it away free |
| Impact on private sector | Revenue → R&D investment → growth | Can't compete with free → shut down or pivot |
| Impact on government project | No need to build — private sector handles long-term | Project discontinued — no sustainable business model |
| Today | Samsung, Naver, Kakao competing globally | No domestic OS, still dependent on foreign software |
Why "Government Creates Markets" Works Better
From the cases of China, South Korea, and Thailand's own history, a clear pattern emerges:
When government acts as customer — software companies earn revenue, invest in R&D, hire more engineers, continuously improve their products, and eventually compete internationally. China used this model to create a $155 billion industry — if China had let each ministry build its own ERP, Yonyou would never have existed.
When government builds internally — even with good intentions, the outcome tends to be: private companies lose market → no revenue → no R&D → industry doesn't grow. Meanwhile, government projects themselves often lack sustainability, depending on annual budgets and personnel who may transfer to other agencies at any time.
Pros and Cons of Each Model
| Aspect | Government as "Customer" — Buys from Thai Companies | Government Builds Software Internally |
|---|---|---|
| Thai software industry | Grows — has revenue and can invest in R&D | Loses market, lacks revenue, shrinks |
| Thai engineer employment | Private companies hire more, create long-term careers | Limited to government positions, knowledge lost on transfers |
| System sustainability | Companies provide long-term support with SLAs | Depends on annual budget and staff — may stop when leadership changes |
| Global competitiveness | Thai companies grow strong enough to export (like Yonyou, Naver) | Internal systems with no scale |
| Real-world examples | China: $155B industry / Korea: OECD #1 | Thailand's early Linux era — both private and government projects ended |
Thailand has both the capability and the historical lessons to learn from. The country has talented software companies with extensive experience serving government agencies and a deep understanding of the Thai context. What is needed is a clear policy to promote government procurement from Thai software companies — exactly what China and South Korea have done so successfully.
Saeree ERP and Thailand's Digital Sovereignty
Saeree ERP is an example of a Thai-built ERP system that has been serving Thai government agencies for years — including the Office of the Permanent Secretary for Higher Education, the Election Commission, the Thailand Greenhouse Gas Management Organization, and the National Science Museum, among others. It offers capabilities that foreign ERP systems cannot match:
- Full Thai Buddhist Era (B.E.) calendar support — Thai fiscal year, government holidays, Thai official document formats
- GFMIS integration support — Thailand's Government Fiscal Management Information System
- Thai Government Procurement Act compliance — full support for Thai government procurement processes
- Thai tax compliance — VAT, withholding tax, tax invoices formatted per Revenue Department standards
- Data sovereignty — all data remains in Thailand, maintained by Thai engineers
- AI Assistant in development — currently in the training phase to assist users in the future
If Thailand were to adopt policies similar to China's and South Korea's approach of promoting domestic software, Thai software companies like Grand Linux could expand their services more broadly, invest in new technologies, and create more jobs for Thai software engineers.
Summary — 5 Lessons from China and South Korea
| Lesson | Details |
|---|---|
| 1. Government should be customer, not competitor | China and South Korea do not build software — they purchase from domestic private companies |
| 2. Clear policy = clear market | Document 79, CSAP, NIS give companies confidence that a market exists, encouraging investment |
| 3. Domestic markets build global companies | Yonyou, Samsung, Naver all started in their domestic market before expanding internationally |
| 4. Data sovereignty is national security | Government data stays in the country, maintained by local engineers — reducing geopolitical risk |
| 5. Thailand has the capability — it needs the policy | Thai software companies are ready — what is needed is clear government promotion policy |
"Smart governments don't build software themselves — they build the 'market' for domestic companies to grow. When the software industry is strong, the entire nation is strong."
If your organization needs a Thai-built ERP system that supports the Thai Buddhist Era calendar, GFMIS integration, the Thai Government Procurement Act, and full Thai tax compliance — contact the Saeree ERP team for a free consultation.
References
- Reuters — China orders state firms to replace foreign software within three years
- South China Morning Post — China accelerates push to replace foreign tech
- Korea Ministry of Economy and Finance — Korean New Deal: National Strategy for a Great Transformation
- OECD — Digital Government Review of Korea
- IDC — China Xinchuang Market Forecast 2023-2027
