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Can Malaysia escape the middle-income Trap ? a strategy for Penang

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  • Yusuf , Shahid
  • Nabeshima, Kaoru

Abstract

How can Penang upgrade and diversify its economy? This paper addresses this question using a number of methodologies that have been developed for assessing competitiveness and identifying the direction of future industrial evolution. The results show that although Penang was successful in attracting foreign direct investment to the electronics industry, this has not translated into a deepening of industrial capabilities or the nurturing of innovation capacity in Penang. No large Malaysian firms in Penang have taken the lead in innovation and there is little new entry by local firms, despite incentives provided by local and national governments are generous. Universiti Sains Malaysia, the principal university in Penang, is contributing through provision of skills, and it is beginning to multiply university industry linkages. However, the university’s research activities are too limited and too diffuse to significantly initiate innovation by local industry. Under the current circumstances, and given its relatively small size, Penang will have to try much harder to strengthen its competitive advantage in its most important industry -electronics- through actions that build research capital. It will also have to increase its efforts to develop the potential of other value-adding activities, such as medical services and tourism. A strategy focused on localization economies is likely to be the most feasible option.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4971.

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Date of creation: 01 Jun 2009
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Handle: RePEc:wbk:wbrwps:4971

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Keywords: Technology Industry; Tertiary Education; E-Business; ICT Policy and Strategies; Agricultural Knowledge&Information Systems;

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Citations

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Cited by:
  1. Prema-chandra Athukorala, 2011. "Growing with Global Production Sharing: The Tale of Penang Export Hub," Departmental Working Papers, The Australian National University, Arndt-Corden Department of Economics 2011-13, The Australian National University, Arndt-Corden Department of Economics.
  2. Rigg, Jonathan & Promphaking, Buapun & Le Mare, Ann, 2014. "Personalizing the Middle-Income Trap: An Inter-Generational Migrant View from Rural Thailand," World Development, Elsevier, vol. 59(C), pages 184-198.
  3. Im, Fernando Gabriel & Rosenblatt, David, 2013. "Middle-income traps : a conceptual and empirical survey," Policy Research Working Paper Series 6594, The World Bank.
  4. Lee, Keun & Kim, Byung-Yeon & Park, Young-Yoon & Sanidas, Elias, 2013. "Big businesses and economic growth: Identifying a binding constraint for growth with country panel analysis," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 561-582.
  5. Zhang, Linxiu & Yi, Hongmei & Luo, Renfu & Liu, Changfang & Rozelle, Scott, 2012. "The Human Capital Roots of the Middle Income Trap: The Case of China," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil, International Association of Agricultural Economists 131119, International Association of Agricultural Economists.
  6. World Bank, 2010. "Ecuador : Diversification and Sustainable Growth in an Oil - Dependent Country," World Bank Other Operational Studies 18503, The World Bank.

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