Local Innovation: Key for Malaysia to Escape Middle Income Trap

In 1970’s, almost half of Malaysian still lived below the poverty line with a GDP per capita of around $USD 390. Currently, GDP per capita has reached more than $USD 10,000 and less than 1% of Malaysians live below the international poverty line of $1.25 per day (World Bank, 2011). Huge growth rate between 1980s and 1990s that averaging at 9% per year has successfully transformed its economy from a poor, agriculture based economy into a modern, upper-middle income country. However, from 2000 onwards, Malaysia’s economic growth started to decline and its GDP per capita remained stagnant at middle-income level. Countries such as Taiwan, Korea and Singapore that have relatively same GDP per capita level with Malaysia in the early 1970s have overtaken Malaysian in term of economic growth and successfully put their countries at high-income level status. Therefore, Malaysia needs to reform its economy in order to escape from middle-income trap that could transform the country into high-income nation.

Research done by Foxley and Sossdorf (2011), that examine the successful cases of Korea, Finland, Spain and Ireland to escape middle income trap has identified four main factors that enable these countries to transform from middle income to high income economy: 1) good macroenomic management 2) flexible exchange rates and labour markets 3) high rate of investment in education and innovation 4) stable political and social condition. Malaysia seems to fulfill all the requirements mentioned above except for investment in education and innovation.   Malaysia’s main economic  growth contributor relies heavily on export-oriented manufacturing supported by foreign investment. Malaysia’s local companies have not done enough innovation to add value to their products. Report done by World Bank (2010) that examnie the innovation growth in Malaysia found that there is a huge decline in private investment in Malaysia from mid-1990s onwards and R&D spending stays low, at about 0.6% of GDP (compared to 3.5% in South Korea). Malaysia’s educational policy that is racially biased where it discriminates Chinese and Indian racial minority admission to public universities hinders the true potential for Malaysia to fully develop its human capital. 

If Malaysia is going to escape the middle-income trap, the government must implement a massive reform in educational and research institution.  Strengthening the education system by giving equal access to all people is important to enable Malaysia to have better human capital that can fulfill high skilled labor demand that can drive innovation in the country. Instead of relying from foreign firms’ technology, Malaysia should innovate locally in order to maintain sustainable growth in the future. Unlike in Taiwan and South Korea, there are only a few industries in Malaysia that has become world-class industries. As stated by Foxley & Sossdorf, (2011), South Korea successes in achieving high income status are largely due to its local innovation successes that have been able to create homegrown, internationally competitive industries. South Korea for example has more than 15 companies listed as Fortune Global 500 Company whereas Malaysia only has one, which is PETRONAS, Malaysian national Oil and Gas Company.  Government can help to foster local innovation by channeling more financial resources to local start-up companies and other potentially innovative firms. Economic Transformation Programme, a Malaysian government initiative that have been introduced in 2010 to attract private investments in national key economic areas such as oil and gas, financial services, and manufacturing might help to resolve this issue.

Works Cited

Foxley, A., & Sossdorf, F. (2011). Making the Transition: From Middle-Income to Advanced Economies. Washington DC: Carnegie Endownment.

Hazri, H. (2011, January 26). Malaysia’s Middle-Income Trap. In Asia .

 World Bank . (2010). Malaysia Economic Monitor: Growth through Innovation. Thailand : The World Bank .

World Bank. (2011). World Development Indicators. World Bank.

How Effective is Malaysian Capital Control Policy in Handling 1997-1998 Financial Crisis?

Financial crisis in Asia during 1997-1998 have created a huge economic downturn for South East Asian economy, particularly in Thailand, Indonesia, and Malaysia. Thailand and Indonesia were forced to follow IMF policies to handle the financial crisis in return for IMF’s financial assistance. These countries were obliged to float their exchange rates, increase interest rates, tighten their fiscal policy, shut down troubled banks and liberalize their capital account (Stiglitz, 2002).  However, Malaysia took a very different path in handling the financial crisis. Instead of relying on IMF financial assistance, Mahathir Mohammad, Malaysia’s prime minister at that time reduced interest rate, imposed strict capital controls, and fixed the exchange rate at RM 3.80 against the US dollar. Malaysian economic policies were seen as “radical” and many economists at that time criticize Malaysia’s decision to abandon IMF measures. On the contrary, Malaysia’s choice to impose capital control have able the country to recover faster and stronger compare to Indonesia and Thailand.    

Stiglitz (2002) argues that imposing capital controls was an effective way to stabilize the economy at that time and he criticizes the IMF decision to interfere with Thailand’s economic policy. He argues that the interventions of IMF in the Thailand economy that force it to liberalize its capital account have dampened the economic recovery process in the country.  IMF utilized similar measures that they have done in Latin America to improve Thailand and Indonesia economic condition, but the situation is not exactly the same. Most of IMF measures have negative effect for targeting countries. For example, IMF has forced Thailand and Indonesia to increase their interest rate. Alas, increasing these countries’ interest rate has dampened the consumption demand in these countries and makes matters worse. High interest rates implementation have put many firms and businesses to be in high levels" of indebtedness because the cost to borrow money has become more expensive. This has led to reduce in investment in most of the major driver of economy in the country.

Malaysia’s decision that was very contrary with Thailand and Indonesia, which is to reduce interest rate instead of increasing it and to suspend capital account, have revived the domestic demand in the country. Malaysia’s capital control policy put an end to speculative activities in the currency and stops the investment rush to exit the country. Due to the effective capital control policy in handling 1997-1198 Asian financial crisis, Malaysia was able to recover faster and stronger compare to other Asian crisis economies such as Indonesia and Thailand. Malaysia has accumulated large surpluses from the external current account allowing an accumulation of international reserves. Unemployment in the country has steadily declined, and inflation remained low (Meesook, et al., 2001). The econometric analysis presented by Kaplan and Rodrik (2001) that compare the control of capital in Malaysia with the International Monetary Fund’s policies in other countries are consistent with the conclusion that control of capital was the best response to the crisis at that time.  

Bibliography

Kaplan, E., & Rodrik, D. (2001). Did the Malaysian Capital Controls Work? NBER Working Paper, No. w8142.

Meesook, K., Lee, I. H., Liu, O., Khatri, Y., Tamirisa, N., Moore, M., et al. (2001). Malaysia: From Crisis to Recovery. International Monetary Fund.

Stiglitz, J. E. (2002). The East Asia crisis: how IMF policies brought the world to the verge of a global meltdown. In J. E. Stiglitz, Globalization and its Discontents (pp. 89-132). New York : Norton.

Book Review: The Travels of A T-Shirt in the Global Economy

Pietra Rivoli in this book explicates the story of producing a piece of T shirt to be sold in America in term of politics, economic and social issues. She was intrigued to investigate this issue when she attended a demonstration against globalization in Georgetown University. Rivoli began her investigation with a $5.99 T-shirt that she bought at Walgreen and literally she unveiled the story behind the production of that T-shirt. Rivoli starts by tracking down the printing manufacturer of that T-shirt and this leads her to Lubbock, Texas, the place where the cotton of that T-shirt probably originates. In Part I of the book, Rivoli reveal the historical detail of American cotton industry. According to Rivoli, the American cotton industry has been strongly subsidized by the government and this is one of the reason that explain why America are still of the top cotton producer in the world. Besides high subsidy, the efficiency and entrepreneurship of the cotton farmer in the US also is one of the factor that contribute to this achievement.

After Texas, the cotton that has been harvested was shipped to China. The competitive advantage that China has in term of cheap and huge labor supply, and obedience of their worker put China as the ideal place for textile industry.  Also, the implementation of hukou class system in China that prevents rural people in China to migrate to city has created a huge supply of excess labor. This excess of labor has been place in construction and textile industry. Although, the working condition there is bad and their right is limited but according to Rivoli in a way, the migration of the worker from farm to textile industry has created a sense of freedom to these workers.   

Surprisingly, after travelling to another part of the world, China, the travel of Ravoli’s unfinished (without graphics) T-shirt continues to Miami or New York City. Here, her T-shirt was printed with graphics by the wholesaler or retailer and ready to be traded into the market. The reason why the T-shirt was completed in United States, rather than China is because of complex trade rules involving quota system that shape clothing and trade with China. Finished T-shirts are likely to be more quotas restricted than unfinished T-shirts, so the importer have to import unfinished T-shirts to enable them to have bigger quota and revenues.

Rivoli also discusses the role of politics in the T-shirt trading process. She explains the responsibility of politicians at Washington D.C and how they affect the trade movement of clothing industry in the United States.  Due to incredible complicated special-interest rules, political affairs and trade policies, the travel of Rivoli’s t-shirt get a little bit complex here. Although the United States textile industry is declining, it continues to be very dominant because of the implementation of quota limits, high tariffs, and political influence by the policy makers here in D.C. For example, a bias and nonflexible quota system restricts the quantity of Chinese clothing items that can be imported into the United States. Indeed, Chinese imports are among those most profoundly controlled. The United States clothing trade policies are heavily influenced by representative of textile and apparel organization that want to protect the local textile industry from cheap imports from developing country that can jeopardize small American communities. 

Rivoli argues that the globalization of textile industry to compete in free trade is good for everyone. For Americans, the inflow of cheap T-shirt into the country will boost their purchasing powers and incomes. For developing countries, the emergence of new factories will provide employment sand eliminate poverty that can heighten their living status. However, Rivoli also clarify that free trade “may not be the best course” in the short run because local community will be negatively affected.

The next stage of Rivoli’s T-shirt will be textile recycling. Once American consumers are done with their T-shirts, they usually will donate them to charitable organizations such as Goodwill or the Salvation Army to be recycled, in this case to Tanzania. In other cases, if the T-shirt was ragged or else damaged, it will be predestined to be shredded. Later it will be used as raw material for furniture padding and throw rugs all over the world. Finally, landfill will be the last final stop for the T-shirt. 

Abstract: Petroleum System and Stratigraphy of Malay Basin Province, offshore Peninsula Malaysia

Malay Basin, an intracratonic basin, is a northwest trending elongate basin located in the north-eastern part of peninsular Malaysia. It is composed of complex half grabens structure that filled with sediments that are Tertiary to recent in age. The stratigraphy of Malay Basin is divided accordingly based on seismic markers and well log readings that are confined by unconformities and sequence boundary. It was labeled from Group A to Group M from younger to older strata. These sediments are mostly lacustrine shales, coal and continental siliciclastics. The basin has undergone three major tectonic events that give rise to the current structure in the basin; 1) Extension during Late Cretaceous to Early Miocene, 2) Thermal subsidence during Early Miocene to Middle Miocene, and 3) Compression during Late Miocene to Pliocene. Half grabens structure across the basin area was formed by the extension during Late Cretaceous to Early Miocene. Fluvio-deltaic and lacustrine sediment from Group M, L and K that are Oligocene to Miocene in age are recognized as the source rock for the petroleum system in this basin. The main reservoir zone is in the Group K to Group D sediments that are mostly from fluvial origin was deposited during the thermal subsidence event that occurs during Lower Miocene to Middle Miocene. The compression that occur during middle Miocene to Pliocene reactivated the normal fault along the half grabens structure and gave rise to domal anticlinal features, which is the main type of hydrocarbon trap in Malay Basin. The widespread regional shale that occurs in Malay Basin reacts as the seal rock. All these petroleum system elements are well-preserved and are correctly placed in time and space in the Malay Basin and provide a suitable condition for hydrocarbon accumulation and production.

For full paper, visit:  http://sdrv.ms/Ne2aqH

LGBT rights as the 9th MDG?

For the last two decades, lesbian, gay, bisexual, and transgender (LGBT) rights movement have been the focus of human rights discussion. Since the establishment of the United Nations (UN) in 1945, sexual orientation and gender identity issues had not been discussed until December 2008, when France delegation brought up the issue in the United Nations General Assembly meeting (Macfarquhar, 2008). Currently, there is no section in MDGs that specifically aimed to stop discrimination and criminalization of LGBT person. According to the United Nations High Commissioner for Human Rights (2011),  76 countries of the UN’s 193 member states still criminalizing homosexuality (some with the death penalty), it is critical for the world leaders to do something at this critical moment to address this human rights violation issues.

To include LGBT rights as a part of MDGs is important because there is a strong pattern of violence and discrimination against LGBT individuals around the world. According to Human Rights Council (2011) report on LGBT discriminations, there are numerous cases on violations of human rights by UN member states towards LGBT community. According to the report, the violations include, but are not limited to – “killings, rape and physical attacks, torture, arbitrary detention, the denial of rights to assembly, expression and information, and discrimination in employment, health and education”. For example, in Iran, more than 6,000 gay men and lesbians have been executed for homosexuality acts since 1979.The number of cases for LGBT violence and discrimination usually are understated due to the fear of punishments by the authority and lack of study that have been done to analyze this issue. Furthermore, discrimination towards LGBT individuals from seeking medical services occur constantly and this deter the progress to combat HIV/AIDS, which is one of the goals for MDGs.

World leaders and major NGO groups have often oversaw violence and discrimination based on sexual orientation and gender identity. The UN agencies, especially Office of High Commissioner for Human Rights and other international groups must ensure that the rights expressed in Universal Declaration of Human Rights are applied to the LGBT community as well, which has suffered from discrimination and violent oppression throughout history.

There is still a lot of work that need to be done to improve LGBT rights and to abolish LGBT discrimination around the world. Certainly, United Nations and its agencies play an important role to stop the discrimination towards LGBT individuals. So, say yes to LGBT rights as the 9th MDGs!

Malaysia Successes and Challenges in Achieving MDGs

 Malaysia has made substantial advancement toward achieving most of the Millennium Development Goals (MDGs). According to Tengku Mohd. Dzaraif, one of the Malaysian diplomats to the UN, “Malaysia’s successes in achieving MDGs are remarkable in aggregate terms”. However there are some key areas that need to be focused on such as maternal mortality, universal access to contraception, women participation in executive and government positions, and HIV/AIDS prevention.

For MDG 1 [Eradicate extreme poverty and hunger], Malaysia have been able to achieve the target to reduce the proportion of people whose income is less than one dollar a day by halve, though, there is still huge income inequality between rural and urban population in the country. United Nations Development Programme and Malaysian Economic Planning Unit are currently working together to address this issue by locating and identifying the target group that need to be assist in the rural area. For MDG 2 [Achieve universal primary education]and MDG 3 [Promote gender equality and empower women], the net enrollment ratio in primary education is high (more than 95%) and the number of female outnumbers the number of male students enrolled in school and tertiary education. Nevertheless, the percentage of women in executive and government position remain low and further action by the government and private sectors need to be done to support women empowerment agenda. In terms of MDG 4 [Reduce child mortality], Malaysia has been able to reduce the child mortality rate by two thirds and currently it is on par with developed countries progress on child health issues.

MDG 5 [Improve maternal health]  is one of the troublesome issues in Malaysia developmental progress. The maternal mortality ratio (MMR), which is the main indicator for MDG 5, is a little bit alarming in Malaysia since traditional labor and delivery still widely practice in certain part of Malaysia.

In 2009, the MMR in Malaysia is around 28 per 100,000 births. It is relatively high compared with developed countries where the maternal mortality rate is around 6 per 100,000 births. Also, another MDG 5 target is to provide access to contraception and reproductive health. Malaysia’s contraceptive usage rate has declined 50% over the past 25 years, and this resulted in high cases of unplanned pregnancies and unwanted births, particularly for women with less education.

According to Mr Dzaraif, combating HIV/AIDS is the most problematic issues in Malaysia MDGs progress. The most prevalent spreading of HIV/AIDS is among active drug users and female sex workers. “It is unclear whether this goal can be achieved by 2015”, he adds. For MDG 7[Environmental sustainability], the government has implemented various key strategies and policy to ensure environmental sustainability. Furthermore, Malaysia has achieved the target to halve the proportion of the population without access to safe drinking water and basic sanitation. In terms of MDG 8[Global partnerships for development] , Malaysia is on track to provide basic telecommunications infrastructure.  However, in rural areas in Sabah and Sarawak the penetration rate is poor. This creates a significant digital divide between urban and rural areas population group.

Clearly, the MDGs have become a guiding force for development strategies in Malaysia.  With only three more years to go for the deadline of MDGs, Malaysia is committed to help and encourage development in the country so that it can improve social and economic conditions of the world. 

Book Review: True Enough: Learning to Live in a Post-Fact Society by Farhad Manjoo

     Farhad Manjoo in his book, True Enough: Learning to Live in a Post-Fact Society depicts studies from various fields such as sociology, psychology, economics, and political science to demonstrate how new information technologies have deviated general public from obtaining the truth. This book encapsulate the idea of a "Better-Never" situation as described by Gopnick (2011), because new information media such as internet, podcast and talk radio are crowded with unreliable information that can mislead the general public. Before the invention of internet, news was once circulated by a few organizations, but nowadays, people can get the information from all direction (Praiser, 2011). According to Pew Research Center (2010), roughly 45% of Americans say that they get their news from the internet and other digital sources. Manjoo argues that the internet and news media do not necessarily present objective truth to the general public. In this book, Manjoo main claim’s is “at the same time that technology and globalization has pushed the world together, it is driving our minds apart” (p.1). He further explores how human make the judgment in selecting and interpreting information in a way that concurrences with their belief. 

     Manjoo discusses that people regularly process information through "selective exposure"; it is a situation where people pick and choose information that suit with their ideology.  This situation explains why fact does not always succeed in the new information media. Providing people with information that challenges their fundamental belief does not necessarily prompt them to reconsider their viewpoint, but instead they will pick and choose evidence that is coherent with their ideology. The unlimited choice of information on the internet has diverted the truth because people need to make the decision on what information that they want to consume. Manjoo quotes a study by Pew Research Center (2010) that reveals people who consider themselves as Republican tend to choose right news media such as FOX News while people that consider themselves as Democrats tend to choose left wing media such as CNN and MSNBC. This act of media selection creates a divergent in the society because people will only stick with their ideology group. This is the irony of living in the globalization age, as our world become more open and interconnected, people become more isolated because they can easily find their social group online and create their own closeted view of “reality”. 

     The second question that Manjoo try to answer in his book is: how people interpret documentary evidence in a world now filled with all sort of information? Manjoo explains this through "selective perception" process; the tendency to interpret evidence and information according to ones long held belief. Manjoo states, “everything that happens around us is as much in our minds as it is in the world” (p.71) and our senses play a vital role in the way we perceive information. In order to discuss how the new media have diverted the truth, Manjoo utilizes 9/11 event as one of his example; This event is an exemplary illustration for media fragmentation because there are so many videos and photographs that record the event, but these still create a conflicting opinion in the public. Manjoo interviewed Phillip Jayhan, a 9/11 conspiracy theorist that believe 9/11 is an inside job, to analyze why certain group of people believes in that particular view. Manjoo founds that Jayhan use the same video and photo that are widely available on the internet and interpret it accordingly to his own view. Based on the Flight 175 videos and photographs that crashed into WTC on that day, Jayhan believe that he evidently saw a missile attached to the plane. Manjoo, however, says that it is very hard to distinguish any significant detail because the image is too blurry and the entire impact takes place in less than a fraction of a second. Even though Manjoo and Jayhan watch the same thing, each of them ends up seeing differently from one another. That is because the way they interpret and perceive the evidence is not the same. In this information age, various photos and videos that are available on the YouTube and Flickr will lead to greater uncertainty because each person has their own interpretation of the evidence. 

     According to Manjoo, expert opinion is "the soul of modern media" (p.104). Manjoo explains that when a person does not really understand certain situation at hand, they tend to believe and accept what the authorities say. This of course is a convenient way of knowing, however, in this digital age, there are numerous people claiming to be an expert and each of them will say a different thing. With the limitless varieties of experts’ opinion, people need to make a choice on which experts they want to believe. Usually, people will tend to choose an expert that is agreeable to their own personal view. For example, according to Manjoo, reality is splitting over global warming because they are a small percentage of scientist that do not accept the majority scientific consensus of global warming as reviewed by the Intergovernmental Panel on Climate Change (IPCC).  People that do not believe in global warming will often quote these experts that say there is no conclusive evidence for global warming. With the emergence of social media, these experts can reach a larger group of audience and can divert general public from the truth. Manjoo cites a study by Pew Research Center in 2006 that reveals more that 60% of Americans think that global warming is a hoax. This statistic is worrisome because as we move toward more civilized and globalized society, there are still huge percentages of people that do not want to believe in scientific fact.  

     Gopnick (2011) states "cognitive entanglement, after all, is the rule of life" (p.1), which means that in the information society, deception and treacherous arguments are inevitable. Certainly, in the global information network, especially through internet, everyone has the right to speak and express their idea freely without censorship. Coll (2011) in his article, The Internet: For Better or For Worse writes "internet can be used for both good and evil" (p. 2). Ultimately, it is up to the reader itself to judge the quality of information and reliability of the sources that they want to believe.   

     Overall, Manjoo have done a terrific job to analyze the dystopian state of information technology where it creates a divergent in the general public opinion. Manjoo also has used scientific studies and statistics extensively to back up his main claim. Even though, some critics claim that this book is a little bit repetitive, they still praise Manjoo’s book for critically examine the information society issue that we are facing nowadays (Kane, 2008; Johnston, 2008). Personally, I would highly recommend this book to anyone that interested to learn more about the information society because it gives a new perspective on the negative side of the internet and new media. 

---

     Farhad Manjoo is a journalist and currently a staff writer for Slate magazine. He recurrently writes about new media, information technology, politics and the role of internet in journalism. He graduated from Cornell University in 2000. True Enough: Learning to Live in a Post-Fact Society is his first book that was published in 2008. The book got a truly excellent review from various critiques such as in CHOICE, a publication for the Association for College and Research Libraries and Columbia Journalism Review. To find more information about Manjoo, you can visit his personal blog, Wikipedia page and his own column in Slate magazine. If you are interested to buy the book, it is available on Amazon.com in both physical copy and kindle version.   

---

Works Cited

Coll, S. (2011, April 7). The Internet: For better or for worse. New York Review of Books .

Gopnick, A. (2011, February 14). The Information: How the Internet gets inside us. The New Yorker .

Johnston, D. C. (2008, July). My facts. your facts: America and the pursuit of wilful delusionm. Columbia Journalism Review, 59-60.

Kane, P. E. (2008, August). [True enough]. Choice, 45(12), p. 2054.

Manjoo, F. (2008). True Enough: Learning to Live in a Post-Fact Society. New Jersey: John Wiley & Sons, Inc.

Pew Research Center. (2010). Ideological News Sources: Who Watches and Why . Washington DC: The Pew Research Center For The People & The Press.

Praiser, E. (2011). The Filter Bubble: What the Internet Is Hiding from You. New York: The Penguin Press.