Malaysian Journal of Economic Studies

Institutions and Economic Development: Cheong Kee Cheok’s Contribution to Economic Thought

Rajah Rasiah — Sat, 15 Jun 2024 00:00:00 +0800

This paper seeks to review the theories and arguments of two leading economic schools that Cheong Kee Cheok dabbled on, initially originating with neoclassical economic thinking to gradually appreciate evolutional economic thinking. In doing so, the paper makes it clear that logic, merit and evidence drove much of Cheong Kee Cheok’s economic thinking, including acknowledging that within the context of the real world where markets (relative prices) often lacked its allocative role when faced with complicated and often opaque circumstances. However, his analyses stayed clear of illogical arguments predicated on the politics of the majority and the politics of the powerful to be transcendental and humanistic in nature. With these credentials as the central pillars of his character, Cheong Kee Cheok gained popularity as an unbiased universal scholar who exchanged ideas freely with people of all walks of life, including with the countless students he mentored.

Cheong Yoke Choy (1873–1958): A Grandson Looks Back

Kam Hing Lee, Danny Tze-ken Wong, Miau Ing Tan — Sat, 15 Jun 2024 00:00:00 +0800

Colleagues and friends remember Professor Cheong Kee Cheok as an eminently qualified and respected economist, who served first at the University of Malaya and later at the World Bank. Few were aware, however, that he came from a very wealthy and prominent family. His grandfather, Cheong Yoke Choy, was a pioneering and highly successful tin miner and banker in early twentieth-century Kuala Lumpur. However, Professor Cheong rarely talked about his grandfather. It was only a few years before Professor Cheong passed away that he decided to write about the senior Cheong. Part of the reason for eventually working on the biography was because Professor Cheong had, by then, become interested in Chinese family business and had researched and published on several Chinese business groups. He was able, therefore, to see his grandfather within the framework of early Chinese entrepreneurs and the values they held. Equally important, he had family records, as well as access to the memories of surviving family members.

Drivers of and Challenges Facing Adoption of Industrial Revolution 4.0 Technologies: A Study of the Electrical and Electronics Industry in Malaysia

Khai-Leang Yeap, Rajah Rasiah, Fumitaka Furuoka — Sat, 15 Jun 2024 00:00:00 +0800

This paper examines the main drivers and challenges of adopting Industrial Revolution (IR) 4.0 technologies in the electrical and electronics (E&E) manufacturing industry in Malaysia. The E&E industry is selected as a case study because it is Malaysia’s largest contributor to manufacturing employment, value added and exports. The empirical findings indicate that the two strongest drivers for adoption are internal benefits associated with improvements in production efficiency and cost reduction. The findings also suggest that the biggest challenges faced by the E&E industry are the shortage of necessary talents and skills, limited funds available for technological upgrading, and a lack of convincing business evidence to justify such investment.

Measuring Structural Power in Global Value Chains: Evidence from Malaysian Manufacturing

Miao Zhang, Rui Yang, Rajah Rasiah, Mingzhang Jiang — Sat, 15 Jun 2024 00:00:00 +0800

The global value chain (GVC), as the most important feature and driving force of globalisation has profoundly shaped state–market relations, as well as the international political economy. This paper uses Malaysia as a case study to demonstrate a country’s embedding structural power in GVC. Deploying the OECD’s Inter-Country Input-Output Table from 1995 to 2018, two indicators were constructed, namely power of value added (PV) and interaction of value added (IV), to measure Malaysia’s structural power in GVC. The results indicate that Malaysia’s PV in GVCs has declined over the years. A combination of high GVC participation but low GVC position indicates that Malaysia’s export sector remains stuck in low value-added activities despite being highly integrated into global production networks. Also examined is the value-added interaction between Malaysia and major economic powers, such as the US, China and Japan. In so doing, we provide an evolutionary explanation of Malaysia’s location in the international political economic system where economic and political power are increasingly intertwined.

Malaysia Meets (and Remains in) the Middle-Income Trap: Lost Coalition amidst Industrial Value Migration

Chan-Yuan Wong, Guanie Lim — Sat, 15 Jun 2024 00:00:00 +0800

Once an aspiring nation on the path towards achieving high-income status, Malaysia’s efforts to break its vicious cycle of low productivity-cum-low wage were hindered by ineffective attempts to form an upgrading coalition. The coalition not only failed to make material progress in addressing industrial needs, but also faced an increasingly isolationist international trade and investment climate where transnational corporations were encouraged to reshore/friendshore productive activities back to their home/like-minded economies. This paper analysed three structural reasons miring the nation in the middle-income trap. Firstly, the Malaysian economy was struggling to establish its competitive niche. This occurred as Malaysia grew increasingly reliant on extractive and service-based industries, while its labour-intensive activities struggled in adapting to the demands of Industry 4.0. Secondly, there was insufficient interest in promoting indigenous technologies and championing industrial upgrading. The statebusiness coalition primarily focused on highly regulated, non-tradable industries such as utility provision, banking and real estate. Finally, we observed a skills mismatch between the push for science and technology education and the labour market’s demand for general, undifferentiated skills to support low value-added operations. Unless these interrelated challenges are effectively addressed, the nation will likely experience frustration in breaking through the impasse.

Technology Transfer, Technological Progress and Economic Growth: The Role of Institutional Quality in Pakistan

Nazia Nazeer, Rajah Rasiah — Sat, 15 Jun 2024 00:00:00 +0800

This study investigates the role of institutions in Pakistan’s efforts to stimulate technological progress, specifically analysing the evolution of institutional quality, technology transfer through technical cooperation grants, technological progress and economic growth. The role of institutional quality is emphasised, as proactive institutional coordination is paramount to achieve technological upgrading. As the evidence amassed shows, Pakistan’s institutional quality ranks lower than the successful industrialisers of East Asia, such as Japan, Korea and Taiwan. To ensure the robustness of our findings, data from 1996 to 2020 was deployed. The findings underscore the importance of policymakers in Pakistan directing their attention to fostering skills and competencies essential for patents or cultivating an entrepreneurial mindset, underlining the critical role of strong institutions in this process.

Chinese Investments in Malaysia: Synthesising the Evidence Ten Years into the Belt and Road Initiative (BRI)

Siew Yean Tham — Sat, 15 Jun 2024 00:00:00 +0800

The launch of the BRI in 2013 raised the interests of Chinese investors in Malaysia. However, views of the BRI in Malaysia are often based on a few mega projects, which are financed by federal loans. This leads to a misleading view that Chinese investments are motivated by geoeconomic interests alone rather than commercial interests. This study synthesises the existing evidence on Chinese investments in Malaysia, ten years into the BRI, using an antecedent, decision and outcome (ADO) framework. It seeks to shed light on the nature, drivers and motivations as well as some of the outcomes of these investments. It is found that Chinese investments in Malaysia are diverse in terms of sectoral coverage, drivers and entry modes while the long-term impact on technology transfer remains unclear. The focus on geoeconomic considerations has led to a general neglect in research on examining the impact of these investments on Malaysia’s economy.

State-Business Relations and Public-Public Partnerships: China’s State-owned Enterprises in Southeast Asia

Edmund Terence Gomez — Sat, 15 Jun 2024 00:00:00 +0800

China’s hegemonic leader, Xi Jinping, had one core agenda, the Belt & Road Initiative (BRI), which was to be implemented primarily by employing his country’s state-owned enterprises (SOEs). Since 2013, BRI projects have featured extensively in Southeast Asia, a region where countries are led by strongmen leading economies featuring strong state intervention. As the presence of China’s SOEs in Southeast Asia grew, this led to major changes in the nature of state-business relations (SBRs). In this context, where structural power lies with the state, or in this case, the two states of China and the host nation, a fundamental query emerges: who governs in these SBRs? This article analyses this question with a focus on three core themes – China’s mounting presence in Southeast Asia through the BRI, the growing role of SOEs in these economies, and evolving SBRs.

The Bank of China: From a Turbulent Past to a Strategic Future – What Does Its Presence in Malaysia Show?

Ran Li, Kee-Cheok Cheong — Sat, 15 Jun 2024 00:00:00 +0800

Historically, the Bank of China (BOC) has shouldered responsibilities for the various governments of China. And recently, since Bank of China is in the strategic sector of China, it has assumed the policy responsibilities of the Chinese state such as “Going Out” strategy and Belt and Road Initiative. Most of BOC’s Malaysian business only deal with the home (China) country’s international business rather than the host (Malaysia) country’s local business. Albeit, the BOC has ventured into more local businesses than before, the BOC’s Malaysia’s China-related business is not only far more extensive but also more competitive than its local business activities. Although some efforts have been taken to strengthen its local business and to localise, the internationalisation of the BOC has focused most on the internationalisation of renminbi rather than the internationalisation of the bank/company. Hence, if localisation is viewed as one major method of internationalisation, then the BOC has yet to participate strongly in that activity. Consequently, the focus on home country’s favourable support is likely to make BOC less competitive internationally. Hence, we take the position that the BOC should focus strongly on localisation to gradually join the ranks of localised mainstream foreign banks to become more competitive.

Comparing the Causes and Consequences of the Asian and Global Financial Crises on Southeast Asia

Kee-Cheok Cheong, Rajah Rasiah, R. Thillainathan — Sat, 15 Jun 2024 00:00:00 +0800

The arrival of the global financial crisis (GFC) just a decade after the Asian financial crisis (AFC) may have settled for now the argument about whether the world had learned enough so that economic crises are no longer possible. But it has not settled the argument of whether lessons were learned. This paper deals with this question by focusing on the experience of Southeast Asia, which has borne the full impact of both crises. For this region, these crises emerged through a combination of factors that were as different as they were similar between one crisis and another. The lessons that were learned or not learned in interpreting those factors with respect to each crisis determined each country’s response to that crisis, with politics being an important part of the calculus. Indicators just before the onset of the GFC and of its impact showed that some, but not all, lessons from the AFC were indeed learned. Whatever the lessons learned, however, Southeast Asian stock markets were decimated but which quickly rebounded. Nor would learning lessons guarantee insulation from future crises because the external environment facing Southeast Asia has changed and will continue to change.