K Based Economy Malaysia

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ECN 3161: MALAYSIAN ECONOMICS

Assignment 3:

Knowledge-Based Economy in Malaysia

PROF. MADYA DR. RUSMAWATI BT. SAID

HAIDATUL INSYIRAH BT. SAHIMI (180084)

1.1         INTRODUCTION

A lot of things have been achieved in the effort to transform Malaysia from a rubber and tin exporter to electronics and other manufactured goods (production economy) since 31 August 1957 until now, a. Today, in the dawn of millennium era, our focus and direction is to move our country, Malaysia production based economy towards a knowledge based-economy.

Knowledge economy also defined as economy of knowledge which main target on the production and management of knowledge. From the past, neo-classical economics just only focused on production of labor and capital as their main factor. Nowadays, neo-classical economy getting transform into knowledge-based economy by start replacing capital and energy into information and knowledge as their primary wealth-creating assets. Dr. Mahathir had been said that: "In our pursuit towards developing the K-economy, knowledge has to replace labor and capital as the key factors of production in our economy. The challenge for Malaysia is to develop this knowledge amongst our citizens so that our success will be due to the contributions of Malaysian talents and knowledge workers" (Dr. Mahathir bin Mohamad, Putrajaya 8 March 2001 advertisement in the New Straits Times 13-04-2001).

1. WHAT IS K-BASED ECONOMY

An economy in which knowledge, creativity, and innovation play an ever-increasing and important role in generating and sustaining growth is the knowledge- based economy be defined as. In this situation, knowledge is the most critical and important factor of production. It generates more wealth than the other traditional factors, such as land, labor, and also capital. Contrast to production- based economy, knowledge plays a less prominent role, and growth is the most priority in the accumulation of the traditional factors of production. Educated and skilled human resources, or human capital is the most valuable asset in the K-based economy.

As we enter the 21st century, Malaysia's economy is currently changing into knowledge based economy since announcement a long term project called Vision 2020, which was a plan turn Malaysia to a fully developed country and knowledge rich society through the development of ICT sector. According to Mahathir "some have wondered why 2020 and not some other year. As a doctor I am attracted to the optometrist measurement of vision; 2020 indicates 100 per cent good vision in both eyes. Our 2020 vision for Malaysia implies this clear vision of where we want to go and what we want to be" (Mohamad, 2007).

1. WHY MALAYSIA SHOULD MOVE TOWARDS A KNOWLEDGE-BASED ECONOMY.

There are at least seven reasons why Malaysia should undertake the development of a

K-based economy:

• Malaysia’s global competitiveness has seen some erosion.
• Foreign competition has increased.
• Globalisation and liberalisation are motivating Malaysia to prospect for new products and

services that will be competitive in the global market.

• There is a need to seek higher value-added, partly to offset higher costs
• There is a need to move into more profitable and wealth-generating stages of production.
• New sources of growth are required.
• There is a need to meet the challenge of enhancing total factor productivity.

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There are therefore strong push and pull factors behind Malaysia’s initiative to become a knowledge-based economy. At the end, the transformation will allowed Malaysia to regain and enhance its competitiveness in the global economy while at the same time enabling it to sustain the rapid economic growth that has been the hallmark of its development since the Seventies.

1. CHALLENGES TOWARDS A KNOWLEDGE-BASED ECONOMY.

To move towards a knowledge-based economy, Malaysia need to face some challenges. Firstly, the difficulty of Malaysia to assure people who are form different sectors and constituencies about how the importance to move towards new economy. Plus, to change the mindset of the people from thinking about production for the old economy to the new one also is quite complicated.

Besides that, a lot of citizens in Malaysia are still clueless about what is knowledge-based economy is all about. Malaysia also will having a problem in having a highly skilled labor force.