Di­ver­si­fy­ing trad­ing part­ners will pre­pare Malaysia for even­tu­al­i­ties, says World Bank

New Straits Times - - Business - RUPA DAMODARAN KUALA LUMPUR ru­pa­banerji@me­di­aprima.com.my

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.

Gov­ern­ments need to think about cre­at­ing op­por­tu­ni­ties for peo­ple to learn on the job and move to higher skilled jobs.

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