Edited by Akifumi Kuchiki and Masatsugu Tsuji
Chapter 7: Industrial Upgrading: Cluster Development in the Malaysian Electronics Industry
Saha Dhevan Meyanathan 7.1 INTRODUCTION Malaysia is in need of urgent industrial upgrading. The industrial policies of the past have outlived their usefulness. A whole new set of circumstances confront Malaysia. Growth and private investment have stagnated; China and India have emerged as industrial superpowers. China in particular has absorbed the lion’s share of the foreign direct investment into the region and is improving by leaps and bounds in terms of industrial capability and the density of its industrial clusters. If Malaysia cannot compete with China, which has captured the higher end of the industrial value chain, can it compete in its traditional lower wage, lower skilled, lower value-added segments of the global electronics value chain? Even here, Malaysia’s position is threatened by rapidly industrializing countries like Vietnam. Policies of the past that included industrial zones, efficient infrastructure, generous tax incentives, encouraged the biggest electronics multinationals to establish a foothold in Malaysia – to produce for the world market. Electronics has been the largest export item. While new policies were introduced to deepen clustering of the sector, compared with countries like Singapore, Korea, and China, much remains to be done, especially with regards to the national innovation system and human resources. In this chapter, the flowchart approach to cluster formation developed by Kuchiki and Tsuji (2008) is used to offer prescriptions and identify the sufficient conditions for deepening the electronics cluster in Malaysia. It is noted from this analysis that the first stage (Stage One) of the electronics cluster development effort...
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