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2010-06-06

Duel aims of Malaysia's NEM interesting, but realistic?

Comments on Shankaran Nambiar “Malaysia’s New Economic Model as a rebalancing strategy”, 5/06/2010, http://www.eastasiaforum.org/2010/06/05/malaysias-new-economic-model-as-a-rebalancing-strategy/
It seems that rebalancing has been very fashionable and now become a buzz word.

Despite that, I would like to go against the fashionable trend and focus on the other point the author of the post did not discuss much.

I note that Shankaran Nambiar stated that "Malaysia’s New Economic Model (NEM) serves to address two crucial issues that confront the nation. First, Malaysia for some time now has had its feet caught in the ‘middle income’ trap. It is now keen to graduate to a high income status, joining the likes of Singapore, Taiwan and Korea."

Shankaran Nambiar seems to argue that high aggregate savings in Malaysia in the past or at present are abnormal and are only normal in economies where uncertainties are high. High savings, of course, are seen by some as sins that caused global imbalances that need to be rebalanced.

Shankaran Nambiar somewhat appeared to be caught in a difficulty that the GFC seems to imply the death of export driven growth model and yet Malaysia is too small in terms of population to become a sufficient market for it to grow.

I somehow seem also being caught by Shankaran Nambiar's difficulty, but for different reasons.

I was wondering if Malaysia's NEM has duel aims to both catch up with Korean, Hong Kong and Singapore and rebalance, then whether the paths of the latter's growth where high savings and export driven growth may have played an important role have any relevance to the NEM.

It seems to me that Malaysia needs to be much more creative to create a new growth model that is supposed to be better than the models of the other three.

That is my difficulty with Shankaran Nambiar's ambitions duel aims that implies a high degree of uncertainties, perhaps even much higher than that implied by the high savings.

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