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Sunday, October 24, 2010

The Star: Economist: Remove protectionism in stages

The Star Online, Thu, Oct 21, 2010 at 8:11 pm

Economist: Remove protectionism in stages

KUALA LUMPUR: The continued protection in the local automotive industry should be removed gradually in order to transform the country's economy and, this requires political will, says an economist.

Prof Datuk Dr Mohamed Arif said the gradual removal would actually add more growth in the manufacturing and services sector following the growing demand in the industry, going forward.

It's about time these changes take place and Malaysia has to allow foreign automotive manufacturers to come in and establish plants, he said, adding that the country must find a way to expose the automotive industry and attract more partners.

"Before, when foreign automotive manufacturers wanted to come (to set up plants) in Malaysia, they couldn't and they moved to Thailand.

"Being the largest passenger car market then, Malaysia was the logical place. We should have gone into components and parts manufacturing rather than completely-built-up units and allow multinational companies to set up plants here.

"With Thailand's political instability and some companies wanting to move out from China as well as with all the economic transformation plan in place, it is the right time for changes," said Mohamed Arif, who is also the Distinguished Fellow of the Malaysian Institute of Economic Research.

In an interview with Bernama recently, he said the move would have other spillover effects on economic growth.

"Now, too much focus is being placed on the electronics industry. We have to diversify," he added.

With the external environment changing, there are competitors who are growing in the region with a lot to offer, therefore, the right move at the right time to boost the automotive industry is vital.

Last week, the Director, Institute of Malaysian and International Studies at Universiti Kebangsaan Malaysia, Tham Siew Yean, told a workshop on "Trade Policies and Industrialisation in Southeast Asia" that without changes in liberalisation, the decline in the manufacturing sector cannot be arrested.

She said the automotive industry was still not competitive after more than two decades of shelter.

The national car has not faced competitive pressures due to a "guaranteed" domestic market, including government procurement, in the face of continued protection.

"Since there are increasing pressures on trade and foreign direct investment liberalisation, it is important that complimentary domestic policies are in place to reap the fruits of liberalisation."

- Bernama


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