Malaysia should focus on SME-type development, says Morgan Stanley

  • Business
  • Wednesday, 29 Oct 2003

MORGAN Stanley Dean Witter believes Malaysia should move away from the single-track mass manufacturing export-oriented model funded by foreign direct investment into a more balanced dual-track model that pays more emphasis to the development of a thriving small- to medium-sized industry base. 

Its vice-president and South-East Asian economist Dr Daniel Lian said the defunct export-based economic model, which he referred to as the East Asia Economic Model (EAEM), thrived on excess investment by multinational companies (MNCs) in generic production capacity that formed part of their global supply chains. 

Dr Daniel Lian

At “The Malaysian Capital Market Summit 2003” in Kuala Lumpur yesterday, Lian said the MNCs were motivated by fiscal and infrastructure incentives, and cheap labour.  

“It is hard for the host country to create intellectual content out of its generic participation in the global supply chain,” he said. 

According to Lian, calls for Malaysia to emulate South Korea's development are also misplaced. 

South Korea was a terrible example to learn from, he said, because it had massive industrial might, compared with Malaysia's industrial capacity that was nearly funded totally by foreign investments. 

Rather than create industrial might, he suggested that Malaysia look at SME-type production, which tends to be more nimble and flexible. In this regard, he singled out Thailand for its success in small- and medium-scale enterprise (SME) building. 

Lian said the government had initiated efforts to dismantle the excessive adherence to the EAEM since last year, beginning with Budget 2003. 

“In our view, Budget 2004 decisively reverses the “pump-priming course” pursued by Malaysian policy makers over the past six years and takes further steps to ensure the economy is on the new “dual-track” development path. 

“We firmly believe these 'second-track' initiatives will generate substantial domestic demand and economic benefits in the near future,” he added. 

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