APL (Ajiken Power Lunch)

APL (Ajiken Power Lunch) is a lunchtime workshop open to public, including IDE staffs, visiting research fellows, IDEAS students, outside researchers and graduate students. This workshop provides a platform for presentation of any work in progress where we can discuss in either English or Japanese.

Those who would attend a seminar are asked to announce yourself to receptionists on your arrival at the IDE and to obtain APL Organizers' signature on your admission card after the seminar.

March 20, 2019. (Wednesday) 13:00-14:30

Institute of Developing Economies, Japan External Trade Organization C24 Meeting Room 　

Escaping the Middle Income Trap: China and Malaysia Compared

This paper compares the policy instruments utilized by China and Malaysia in their attempts to break out of the middle income trap. This is illustrated through a comparison of the evolution of the Chinese and Malaysian electronics industry, especially the technology-intensive semiconductor subindustry. The paper will unpack the ways policymakers of both economies attempt to acquire know-how from abroad and to generate lasting linkages with the domestic ecosystem. While both China and Malaysia rely to a large extent on attracting foreign direct investment, China has implemented a more proactive set of industrial policy to embed foreign expertise and promote domestic technological deepening. Some of the more noteworthy policies include the establishment of well-managed and capital-intensive state-owned enterprises to overcome market failure as well as institutions to cultivate science/technology/engineering/mathematics learning. For Malaysia, it has rolled out similar policies, but they have not borne fruit because of a lack of political will. Malaysian policy autonomy ultimately hinges on its decades-old affirmative action policy, which has severely curtailed meritocracy and distorted its domestic political economy. In other words, China is simultaneously conforming to and defying its comparative advantage while Malaysia has largely conformed to its comparative advantage. As a result, China is showing more concrete signs of technological and industrial sophistication than Malaysia. Such mastery is a useful platform for aspiring Chinese firms to progressively climb the technological ladder and to capture more value from the production and sales of increasingly complex goods and services, helping China escape the middle income trap. The principles discussed in this paper provide policy lessons, or at least some initial guidance, for other developing economies aspiring to beat the middle income trap.

Dr. Guanie Lim (Research Fellow, Nanyang Technological University)

Mai Fujita

English