Malaysia Beyond 2015Developing A Research Agenda

30 December 2015

Expectations…

The plan… 1st session

• Malaysia and the middle-income trap… 2nd session

• From session 1’s key findings, identify research areas of interest for MMU Melaka’s Economics Unit

Malaysia and the middle-income trap

Session 1

Malaysia and the middle–income trap “Middle-income trap” = “growth slowdown”?

Malaysia’s middle income trap / growth slowdown?

Issues in the short & medium term: Deep determinant vs. proximate determinants (Discussion)

• Institutional capacity?• Political capacity?

Malaysia today & tomorrow Is Malaysia in trouble today?

• If yes: what trouble; what is the cause for it…• If no: will Malaysia be in trouble in the future and

if so, why… And conversely…

• Is Malaysia doing well; if yes, what are the things Malaysia does well; what is the cause for it…

A big picture…

Source: Rodrik et. Al, 2003

Deep determinants vs. Proximate Determinants…

Selected readings…• Kharas & Kohli (2011), “What is the middle

income trap, why do countries fall into it, and how can it be avoided?”

• Eichengreen et. al, (2013), “Growth Slowdowns Redux: New evidence on the middle-income trap.”

• Felipe et. al, (2012), “Tracking the middle income trap: What is it, who is in it, and why?”

• Aiyar et. Al (2013), “Growth slowdowns and the middle income trap.”

Middle income trap – the concept

• “…The economy is caught in a middle income trap – caught between low-wage producers and highly-skilled innovators and caught with a viable high-growth strategy...” (NEAC 2010:34)

• “…unable to compete with low-income, low-wage economies in manufactured exports and unable to compete with advanced economies in high-skill innovations….” (Kharas and Kohli 2011: 282).

Middle income trap – some evidence

• Latin America and the Middle East provide strong evidence for the trap hypothesis: in these two regions, most economies reached middle-income status as early as the 1960s & 70s; but have remained there ever since;

• Of 101 middle-income economies in the 1960s, only 13 became high income by 2008 – Equatorial Guinea; Greece; Hong Kong; Ireland; Israel; Japan; Mauritius; Portugal; Puerto Rico; South Korea; Singapore; Spain & Taiwan.

Malaysia & the MIT…

Source: Gill & Kharas, 2007

Malaysia in comparison…

Source: The Economist

South Korea vs. Malaysia

Source: The Telegraph

Middle income trap – some empirics

MIT covers a lot of ground

• Most countries were poor: Only Australia, Netherlands & UK were not low income countries in the first half of 19th century (Felipe et. al)

• These countries took awhile to get rich

MIT – some more empirics Lower-income cut off: $1,005 per capita;

Upper-income cut off: $12,275 per capita;

• If country A grows at 5%, it will take 50 years to move from one end to the other;

• If country A grows at 3%, it will take 80 years;• It takes country A only 19 years to get from $400

to $1,005 at 5%

Not all countries are the same…

How to avoid

Source: Kharas & Kohli, 2011

Can authoritarian nations do it? • “…authoritarian growth will not be sustained…”

• “…In the case of China, the growth process based on catch-up, import of foreign technology, and export of low-end manufacturing products is likely to continue for a while. Nevertheless, Chinese growth is also likely to come to an end, particularly once China reaches the standards of living level of a middle-income country. The most likely scenario maybe for the CCP and the increasingly powerful Chinese economic elite to manage to maintain their very tight grip on power in the next several decades. In this case, history and our theory suggest that growth with creative destruction and true innovation will not arrive, and the spectacular growth rates in China will slowly evaporate…” (Acemoglu & Robinson, 2012)

Question…• Is a democratic system the solution?

• Is democracy a good way to manage & contain social & elite conflicts?

Setting a research agenda

Session 2

Intellectuals and independent thoughts

Are we intellectuals?

• Can we think independently? What motivates us to research?

What is the culture on research?

• Platforms for collaboration among/between faculty with stakeholders: within & without the university; students; community

Key issues identified• Let’s identify these together…

Influence…