Issues and Challenges in the Malaysian Economy

Towards Inclusive Growth

Mohd Fahmee Ab Hamid, Umar Abdul Basar, Rozilee Asid, Wan Farisan Wan Sulaiman, Elya Nabila Abdul Bahri, Nor Fatimah Che Sulaiman, Norlee Ramli

• Publisher: Emerald Publishing Limited
• Year: 2019
• ISBN:
  9781838674816
• Topic: Economics
• Subtopic: Development Economics
• Index: Economics

Focusing on Malaysia's shifting economic profile and position, this book investigates a range of new developments impacting on growth, such as the effects of the digital economy on jobs creation and the threats of environmental degradation and trade protectionism. In developing the debate around the importance of achieving high economic growth through various government initiatives, the chapters discuss a number of issues, including:

• trade and innovation economics
• capital flight risk
• financial development
• income inequality
• fiscal policy sustainability
• agricultural economy

A leading team of Malaysian economics and business scholars offer new insights and perspectives to scholars and researchers working in the fields of economic policy, developing economics and East Asian studies, who are interested in the multiple challenges facing this fast-moving economy.

1

How Foreign Capital, Triadic Patent Propensity and Intellectual Property Rights Protection Can Assist in Inclusive Growth: Implications From Developing Economies

Rozilee Asid

1.1 Introduction

Recently, innovation is a priority key policy for governments around the world, especially for developing and emerging economies. Because innovation matters for growth, it is increasingly prominent on government agendas. Innovation can be mobilised to improve economic growth, to increase productivity and efficiency. Unlike technology-frontier nation, majority of developing and emerging economies are still lacking behind in their innovative capability and capacity to develop specific technology needed to support industrial needs. However, due to globalization in the international trade, obtaining foreign state-of-the-art innovation or technology through imports are now becoming preferable channel accessible to assist that process.

1.2 Review on Trade, Innovation and Productivity

In the past, a large volume of research has recognised the significant role of trade on foreign state-of-the-art innovations as a source of research and development (R&D) spillovers into the domestic economy. However, such processes are subject to several factors such as the sensitivity of the intellectual property rights (IPR) protection specifically related to the patent system regime that being enforced and imitation capability of the trading partners. As different variations on patent laws differently exercises across the globe has now been harmonised in the WTO-TRIPS 1995 agreements, the effectiveness of that policy is timely to be investigated.

There exists a vast literature that accepts the ideas of trade-related spillovers as a channel of technology diffusion for the recipient countries as we mentioned earlier in this section. Why trade-related spillover becomes one of the important channels for technology diffusion? As argued by Eaton and Kortum (2001), trade on newly invented technologies is dominated by a few of the leading countries to the laggard countries, but it is always subject to various limitations than perfections (Coe, Helpman, & Hoffmaister, 2009). Since newly invented technologies produced by the leading frontier countries are always as costly as its benefits, trade issues remain high on the agenda when standards of patent protection are not properly enforced in the first place.

The effects of R&D technology that spill over into the receiving countries have been largely documented in the past. Gustavsson, Hansson, and Lundberg (1999) provide various perspectives on how technology may be diffused and identified but arguing that most previous studies have failed to identify factor endowments as the potential important candidate. Research on trade as a channel for knowledge diffusion as pioneered by Coe and Helpman (1995) have been a subject of discussion by many, see for examples Coe, Helpman, and Hoffmaister (1997), Keller (1998), Bayoumi, Coe, and Helpman (1999), Bitzer and Geishecker (2006) and Coe et al. (2009). One thing in common is that trade in the commercialised foreign R&D by itself induce growth and efficiency either exogenously or endogenously.

Technology may also be generated endogenously through locally-initiated innovations. Innovative capacity of a country has widely been regarded as the driving force behind economic growth and competitiveness. As explained by Hu and Mathews (2005), most of the latecomers (i.e., developing countries) had taken a longer time to catch-up to the leading frontier due to different needs. While the leading frontier countries are interested in maintaining their position as a leader in the state-of-the-art technology, the latecomer however focus their innovation efforts to more targeted industrial sectors in order to maintain their status as leading producers of certain products for instance information and communication technology (ICT) and electronics being led by South Korea, China, Taiwan and Singapore, whereas for pharmaceuticals, medical and biotechnology also being led by the aforementioned countries with the addition of India.

Standards protection of IPR across nations are also believed to promote better incentives to innovate and t...