An Economic Perspective
Mansor Md. Isa
Faculty of Business and Accountancy
University of Malaya
50603 Kuala Lumpur, Malaysia
Paper presented at the “10th Biennial Tun Abdul Razak Conference”, Multicultural Center, Ohio University, Athens, Ohio, USA, 11-12 May 2007. Malaysia and the Challenges of Globalization:
An Economic Perspective
Mansor Md. Isa, University of Malaya
One of the main focus of the third Malaysia’s Outline Perspective Plan that was termed as the National Vision Policy that runs over a 10-year period 2001-2010 was stated as “enhancing competitiveness to meet the challenges of globalization and liberalization”. In fact similar assertion was already made in the previous 10-year plan, the National Development Policy, 1991-2000. It was towards the end of the eighties and into the nineties that the Malaysian government gave explicit recognition to the need of our industries to increase its competitiveness to face the world of globalization. However, enhancing competitiveness is just one of many responses towards globalization which itself has many facets of interpretations. Globalization may be defined as a process of promoting greater movement of people, goods, capital and ideas due to increase economic integration especially in the form of trade and investments as manifested in efforts by many countries to remove trade and travel barriers. In many respects, globalization is not a totally a new phenomenon as people have been interacting economically, socially and politically, with each other from great distances for centuries. What is really new is that the pace of this interaction has accelerated dramatically in the last few decades, as countries have opened their economies to trade and capital through the implementation of free-market economic systems and the reduction in barriers to international trade. The term globalization in the economic sense can be broadly defined as a process relating to the integration of economies worldwide where world economy is viewed as a single market and production area with regional or sub-sectors rather than a set of national economies linked by trade and investment flows. In addition it is characterized by cross border operations of economic activities in terms of investment, financing, technology utilization, production and marketing with the aims of achieving cost competitiveness. The term globalization is often used in tandem with the term liberalization. In fact liberalization is a response to or resulting from globalization. If countries were to obtain maximum benefit from globalization they need to liberalize or “open-up” domestic market. Liberalization include the reduction of tariff and non-tariff barriers; deregulation of domestic laws, rules and procedures such as the relaxation of investment and capital flows between countries; and enhanced transparencies in policies and practices.
2. The Blessings of Globalization
Logically globalization should bring more benefits than costs to all participating countries. In a rather slanted view, Griswold, 2000 insisted that the less-developing countries (LDCs) have the most to gain from engaging in the global economy. First, they gain access to much larger markets, both for imports and exports. On the import side, consumers gain access to a dramatically larger range of goods and services, raising their real standard of living. Domestic producers gain access to a wider range and better quality of intermediate inputs. On the export side, domestic industries can enjoy a quantum leap in economies of scale by serving global markets in addition to selling in domestic market. However in order to benefit from international trade industries in LDCs must achieve global competitiveness in their production and marketing activities. Second, LDCs that open themselves up to international trade and investment gain...