Globalisation and international competitiveness: The Malaysian perspective

Globalisation is the phenomenon that enables products, financial and investment markets to operate internationally, largely as a result of deregulation and improved communication. In short, it is anything that involves two or more countries in any undertakings. Despite its possible negative effects, globalisation often brings numerous benefits to fast developing countries, such as Malaysia, in the form of reduction in poverty, increase in standard of living and reduction in unemployment.

For a country benefit from globalisation, it has to be internationally competitive, that is, it has to be able to compete with others in order to penetrate into other’s domestic economics, investment or market. There are three main areas of competition arising from globalisation: investment, technological development and market penetration.


Malaysia’s economic growth had largely been propelled by foreign direct investment (FDI). However, of late, FDI in Malaysia had declined as many foreign investors from countries such as the United States of America and Europe have turned to China, Vietnam and others. To attract more FDIs to the country, there is a need to look at the factors that influence international of foreign investment in Malaysia. Among them are:

  • Labour cost – Malaysia is a medium wage country. However, wages are rising at a faster rate compared to its neighbouring nations such as China, Vietnam and Indonesia. Thus, Malaysia can no longer just bank on low wage as competitive advantage. Instead, it has to improve its labour productivity in order to attract more FDIs to the country.
  • Infrastructure – Malaysia has a well-developed infrastructure which is an attraction to foreign investors. However, it has less developed infostructure. Thus, Malaysia needs to develop both its infrastructure and infostructure in order to make it a more attractive destination for foreign investors.
  • Political and social environment – Political stability and a conducive social environment are important factors that enhance foreign investment. Malaysia is a country where there is racial harmony. This has helped to some extent to attract FDIs to Malaysia. However, Malaysia needs to continue to nurture a tackling the problems of the increasing number of foreign labours in the country and the rising number of social problems such as crime.
  • Diverse cultures/multiracial society – The racial harmony among the three major ethnic groups in the country, namely Malays, Chinese and Indians, provides an assurance of peace in the country which eventually will encourage foreign investment. However, Malaysia needs to continue harnessing the richness of her culture and use it as an advantage in attracting more FDIs to the country.
  • Malaysian government has been emphasizing the importance of education, especially the learning of English as it is an international medium of communication. The ability to converse well in English is extremely vital as it is an attraction for foreign investors to invest in our country.
  • Social, health and recreational amenities – the government is concerned with the social needs of the foreign investors in Malaysia. For instance, the government provides international schools for the children of the expatriate families. However, better health and recreational amenities need to be provided to cater for the needs of these foreign investors.

Technological development

Technology has been found to be an important determinant of competitiveness. Many of the advanced countries today such as Japan, USA and the European nations built their competitive advantage based on technological development. The use of technology also has been found to be able to reduce if not eliminate the traditional barriers of time, space and form. Thus, it is important for Malaysia to enhance her technological development. However, the life span of technology is short. This calls for the need to update our technology. The presence of adequate infrastructure, for instance the educational infrastructure and qualified human capital such as scientists and engineers, are important to enhance technological development. In addition, Malaysia needs to develop its indigenous technology in order to compete internationally. For instance, it should develop the technology to manufacture products from local agricultural produce which Malaysia has comparative advantage. Joint venture is another aspect that should be considered for technological development.

Market penetration

The local market has limited scope for expansion due to its small population. We must be able to penetrate into the global market. In deciding where to export, we need to conduct research on potential foreign markets. Pricing and product quality have been the two major considerations for firms in marketing products. Generally, in making purchasing decisions, price rather than the quality is the main concern among consumers in developing countries due to their lower purchasing power. In developed countries, the opposite is true.

There is a trend for countries in a region to cooperate and form a common market. This trend towards regional collaboration and regional unity is to broaden the market. For instance, the creation of ASEAN + 3 is to create a bigger regional market. In Malaysia, the government promotes the marketing of its products, in particular the agriculture products through the creation of “Kitchen Malaysia” – a good initiative to help in establishing restaurants all over the world to promote Malaysian food.

In international trade, free trade is an idealised market model whereby trade of goods and services between countries flow unhindered by government -imposed prices. The history of free trade is a history of international trade focusing in the developments of open market. The free trade theorists offered trade as the reason why certain cultures prospered economically. However, trade barriers have restricted the development of free trade among countries in the world.

In fact, the World Trade Organisation (WTO) was established to promote international trade through the reduction of trade barriers and provide a platform for countries to negotiate trade issues. Despite the efforts of the WTO to develop trade among nations, international trade today is hampered by a myriad of trade barriers. International trade is dominated by the superpowers, namely United States of America, the United Kingdom, Japan and the fast-rising China. Developing countries such Malaysia have to strategically compete with the bigger powers.

In conclusion, the future global trading environment is becoming more complicated and competitive. This calls for ongoing efforts to upgrade products and services, and to inculcate a high technological and knowledge society. In particular, Malaysia needs to focus on R&D in product development for higher value-added product, and identify our strength and weaknesses as it is better to compete on strength and not on weaknesses. For Malaysia to meet the challenges of globalisation and be internationally competitive it must develop its own niche products, focus continuously on human capital development, be visionary, improve productivity and enhance product quality, improve the government’s service delivery system, enhance innovation and creativity among domestic enterprises,improve the scientific technology infrastructure, and enhance value-added creations.