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Deborah Loh has a rather interesting article at The Nut Graph on getting Malaysia out of the rut. Most of the suggestions, vague as they are, were quite good. Except that of Universiti Kebangsaan Malaysia’s Prof Dr Ragayah Mat Zin:

Other problems she identifies: over-dependence on foreign workers in the labour market, and manufacturers’ reluctance to spend capital on high-technology methods of production. At the same time, Malaysia has lost its competitive edge as a cheap-labour destination to neighbouring countries which are also providing better investment incentives.

Its rare when a contradiction like this is placed next to each other. Weaning Malaysia out of our “over-dependence on foreign workers” while simulatenously encouraging capital investment on “high-technology methods of production” means Malaysia will become less efficient – and this means we become less competitive against our “cheap-labour destination” competitors.

If capital-intensive, high-tech means of production is cheaper than foreign labour, there would already have been a shift in production means. But labour market autarky means higher costs and a smaller local market for producers, as well as higher prices for consumers – all for a bump in wages for some workers, and an easier night of sleep for xenophobic Malaysians.

As for our competitive edge against China, Vietnam, Indonesia, et al – Malaysia has a competitive edge (better institutions, more straightforward taxes and regulation, less corruption, etc). Malaysia can deepen that simply by letting the market be (that is, allowing freer movement of labour into Malaysia) and further strengthening our institutional edge. After all, if MNCs are just looking for the lowest wage costs, the manufacturing power houses would have been edged out themselves.

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