Chapter 2 Toward Continuous Competitiveness: Expanding Malaysian Electrical and Electronic Exports ‐ Macro Perspective

In the Theory of Continuous Competitiveness (CC) presented in Chapter 1, two necessary conditions for CC are: (1) technology transfer (Techtransfer) and (2) recipient‐initiated modification of transferred technology (Modifications). Public statements by the Prime Minister of Malaysia and the Deputy Prime Minister confirm that the two necessary conditions are virtually absent, making it necessary for CC to be achieved in other ways. To provide a macro‐perspective, we identify numerical measures of importance of Electrical & Electronic (E&E) [Industry] to the nation. E&E, the single largest foreign exchange earner, earned 66.0 percent of the export earnings from manufactured goods in 1995. Electronic components earned 42.86 percent, consumer electronics 25.9, and industrial electronics 31.95 percent of E&E exports in 1995. To improve CC, the 1995 share of global exports of semiconductors (9.7%) and consumer electronics (27.9%) should be enhanced. E&E should increase its share of the major markets: Asia, USA, and Europe. We develop three original measures of Export Productivity: (1) per unit of Capital Investment, (2) per unit of Import Input, and (3) per unit of Raw Material Input. Where should capital investment be made to boost E&E exports? In consumer electronics which yield 2.95 times as much exports share as electronic components; and in industrial electronics with a yield of 2.35 times. In 1995, E&E output was RM 71 million, but exports were RM 85 million. We attribute to the Assembly Technology contribution of Multi‐national Corporations (MNCs) the majority, if not all, of the RM 14 billion. Southeast Asia's first fully integrated silicon manufacturing facility, expected to start production in Malaysia in 1998, is estimated to increase the value‐added from the current 8% for Assembly to 35% for Fabrication.