Answer to Question #54776 in Macroeconomics for Tan Ser Ying

Question #54776
Explain Protectionism of Malaysia
Defence industries of Malaysia
Expert's answer
Protectionism is the economic policy of decreasing or even restraining trade between countries through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow fair competition between imports and goods and services produced domestically. Such policy allows to support national production and exports to increase the power of the country on the world market and its economy development.
Asean countries such as Malaysia must allow more foreign investments with their peers for Asean Economic Community (AEC) to become a reality, with protectionism being one of the biggest stumbling blocks. Most of Asean countries are seen to be afraid to open up their market fast as they want to protect their local interest.
The development of the Malaysian defence industry started in the early 1970s when the country embarked on the establishment of a government owned ordnance factory. This was then followed by the privatisation of the depot facilities of the Royal Malaysian Air Force and the Royal Malaysian Navy in the 1980s and 1990s. The 1990s also saw the Malaysian government placing a requirement for offset programmes and technology transfer to be included in any purchase of foreign defence equipment although neither were required to be military or defence industry related. This was in line with the then Prime Minister Mahathir Mohammad’s ‘Vision 2020 ‘ goal of making Malaysia a fully industrialised and technologically advanced nation by 2020 and in line with this was the development of Malaysian industries, especially the aerospace and defence industries via transfer of technology and offset programmes.

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