S-Space College of Social Sciences (사회과학대학) Institute of Economics Research (경제연구소) Seoul Journal of Economics (SJE) Seoul Journal of Economics vol.32 no.1~4 (2019)
Caught-In or Breaking-Free from the Middle Income Trap: The Case of Malaysia
- Issue Date
- Seoul Journal of Economics, Vol.32 No.1, pp. 1-22
- A previous version of this paper was presented at the 2018 SJE Conference on Political Economy of the Middle-income Trap held in Seoul.
- Malaysia is among the developing economies that has shown relative promise in breaking its middle income trap (MIT). However, the lack of sophistication of institutions for industrial upgrade and the attainment of productive routines means that many local firms remain self-organized and suffer from the absence of complementarities. This study seeks to understand Malaysias position on MIT and compare the countrys current trajectory against newly industrialized economies (e.g., South Korea and Taiwan). This study focuses on five explorations that depict Malaysias performance position in achieving developed status: (1) income and foreign direct investment, (2) economic structure, (3) upgrading, (4) social capital, and (5) education. This study argues that the key barriers that prevent Malaysia from exiting MIT stem from the lack of effective measures in terms of social capital to improve education and institutions. Thus, the development of productive routines with instituted inclusive measures to accelerate the upgrading process is crucial to break MIT.