‘STAY OPEN AND REAP THE BENEFITS’
Diversifying trading partners will prepare Malaysia for eventualities, says World Bank
MALAYSIA and other Asian countries that remain committed to trade openness in the face of rising protectionism will continue to benefit from global flows of knowledge and opportunity, said the World Bank.
Its chief economist Paul Romer said diversifying its trading partners would prepare Malaysia for any developments.
“Trade and openness to the flow of corporate entities and people and goods has been valuable for the developing world, and we must do our best to preserve the openness,” he said in an interview with NST
Business recently.
Historically, countries which cut themselves off and refused to remain open would suffer as there would be other countries that continued to keep the open economy system alive.
Romer recalled that countries in the developing world were hesitant towards foreigners and foreign investment until the 1980s and 1990s.
“But now, I am caught off guard by the fact it is the rich countries which are talking about cutting others off.”
However, Romer does not believe they will actually follow through with the protectionist threat as the costs will be too high.
“The part of the world which remains committed to openness will have the vast majority of the world’s people.
“Openness of economies will not only see gains from the sales of goods but also, more importantly, learning, thanks to opportunities through the availability of jobs and working with those who are equipped with different skills and technology.”
Romer said it was prudent for Malaysia to start diversifying its trading partners and be ready for any development that should take place.
He said global trade flows might go through a slower growth phase, especially between the North and South, but opportunities should still arise within the South-South countries.
To Romer, the challenge for most developing nations is to focus on growing the skills of their human capital.
“It may be a misplaced focus that we need productivity firms and high-tech firms, when we need to focus on people with the ability to solve new problems and do new types of valuable work. And we should focus on policy efforts to create the conditions where people can acquire more skills.”
Romer said if Malaysia was like the makers of Nokia or BlackBerry devices, it could be a high-tech leader for a while but would go into decline unless it created conditions for people to acquire further skills.
Urban centres could create those conditions, he added.
“We need to think about creating job opportunities for people to learn on the job and move to higher skilled jobs.”
Some initiatives will take time, such as investing in a mathematics and science curriculum.
Six months into the job, Romer admits that he is “learning a lot”.
“If you can get a large number of people to cooperate, even loosely, we can do amazing things.
“It is a challenge to get people to cooperate and move in a new direction, especially when you try to change the direction a little bit, the way I am in emphasising skills,” he added.