2018/19 KSP-ADB Joint Consultation Report
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Presented by the MOEF, Republic of Korea 2018/19 KSP-ADB Joint Consultation Report Malaysia Korea’s Industrialization and Structural Reform: Practical Lessons for Development of Malaysia Government Publications Registration Number 11-1051000-000956-01 2018/19 KSP-ADB Joint Consultation Report Malaysia Korea’s Industrialization and Structural Reform: Practical Lessons for Development of Malaysia 2018/19 KSP-ADB Joint Consultation Report Project Title Korea’s Industrialization and Structural Reform: Practical Lessons for Development of Malaysia Prepared for The Government of Malaysia In Cooperation with Ministry of Economic Affairs of Malaysia Asian Development Bank (ADB) Supported by Ministry of Economy and Finance (MOEF), Republic of Korea Prepared by Korea Development Institute (KDI) Project Directors Sanghoon Ahn, Executive Director, Center for International Development (CID), KDI Youngsun Koh, Executive Director, Global Knowledge Exchange & Development Center, Former Executive Director, CID, KDI Project Manager Youngsun Koh, Executive Director, Global Knowledge Exchange & Development Center, Former Executive Director, CID, KDI Project Officers Jee Hee Yoon, Senior Research Associate, Division of Policy Consultation, CID, KDI Jiyoung Lee, Senior Research Associate, Division of Development Research, CID, KDI Principal Investigator In Soo Kang, Professor, Sookmyung Women’s University Authors Chapter 1. In Soo Kang, Professor, Sookmyung Women’s University Andrew Kam Jia Yi, Associate Professor, National University of Malaysia Chapter 2. Backhoon Song, Professor, Dongguk University Muhammad Imran Kunalan Bin Abdullah, Adjunct Professor, University of Malaysia Chapter 3. Moonsung Kang, Professor, Korea University Mohd Fadlee A Rasid, Consultant, Universiti Putra Malaysia English Editor IVYFORCE Government Publications Registration Number 11-1051000-000956-01 ISBN 979-11-5932-452-9 979-11-5932-438-3 (set) Copyright ⓒ 2019 by Ministry of Economy and Finance, Republic of Korea 2018/19 KSP-ADB Joint Consultation Report Korea’s Industrialization and Structural Reform: Practical Lessons for Development of Malaysia Preface Knowledge is an essential ingredient in a country’s economic growth and social development. Of particular importance is government capacity to formulate and implement policies. The global society is making various efforts to promote knowledge sharing between countries and improve their policy capacity to tackle development issues and enhance global prosperity. Indeed, knowledge laid the foundation for Korea’s unprecedented transformation from a poor agro-based economy into a modern industrialized nation with an open and democratic soci- ety. Technology transfer from abroad and educational investment helped expand the domes- tic knowledge stock and made this transformation possible. The Korean government could also accumulate invaluable practical lessons not found in a conventional textbook through the course of development. The Ministry of Economy and Finance (MOEF) of Korea introduced the Knowledge Sharing Program (KSP) in 2004 to share Korea’s development experience with the international com- munity through joint research, policy consultations, and capacity-building activities. Since its inception, the program has played a vital role in supporting socio-economic development of partner countries around the world. Korea Development Institute (KDI) has participated in the KSP since the program’s launch and has been working with more than seventy foreign countries and organizations. KDI, Korea’s leading think-tank with an extensive experience in policy research, has provided solutions to the challenges that partner countries face in a variety of fields, ranging from industrial devel- opment to public-sector reform. In the 2018/19 KSP, KDI carried out policy consultation and capacity-building projects with twenty-two partners including three new participants—Bela- rus, Serbia, and the ASEAN Secretariat. Among these meaningful projects for mutual learning, this one was initiated by the Minis- try of Economic Affairs (MEA) of Malaysia to deliver “Korea’s Industrialization and Structural Reform: Practical Lessons for Development of Malaysia.” Upon the request of the MEA, the MOEF and KDI organized a research team consisting of Malaysian and Korean experts. The team conducted in-depth analysis of internal and external policy environments, identified Ma- laysia’s key development challenges, and offered policy recommendations and action plans. On behalf of KDI, I would like to express my deepest appreciation to the Government of Ma- laysia and the Economic Planning Unit (EPU) of the MEA for their collaboration in the project. In particular, I would like to extend my profound gratitude to Mr. Ting Kok Onn and Ms. Nor- maya Binti Nordin, Principal Assistant Directors at the MEA for their unwavering support. The completion of this project would not have been possible without their devotion. I also wish to thank the KSP consultation team—Principal Investigator Professor In Soo Kang, researchers Professor Backhoon Song and Professor Moonsoo Kang, and local consultants Mr. Andrew Kam Jia Yi, Mr. Muhammad Imran Kunalan Bin Abdullah, and Mr. Mohd Fadlee A Rasid—for producing this report. This project benefited greatly from many others both inside and outside the Malaysian gov- ernment, including Mr. Ramesh Subramaniam, Director-General, Mr. Alfredo Perdiguero, Director, and Mr. Kwang Jo Jeong, Economist at Regional Cooperation and Operation Division, Southeast Asia Department, Asian Development Bank (ADB). I would like to extend my sincere thanks to all who have made valuable contributions to a successful completion of the project. I am also grateful to the Center for International Development of KDI, in particular Executive Director Dr. Sanghoon Ahn and former Executive Director and Project Manager Dr. Youngsun Koh, for their hard work and dedication to the project. I firmly believe that the KSP will serve as a stepping stone to further elevate mutual learning and economic cooperation between Malaysia and Korea, and hope it will contribute to their sustainable development. Jeong Pyo Choi President Korea Development Institute (KDI) Contents 2018/19 KSP-ADB Joint Consultation in Malaysia ·····································································013 Executive Summary ····················································································································019 Chapter 1 Charting Malaysia’s Industrial Policy for the Future Summary ····································································································································027 1. Introduction ····························································································································029 2. Structural Problems of Malaysia’s Industry ··········································································030 2.1. Malaysia’s Industrial Structure ·······················································································030 2.2. Diagnosis of the Structural Problems of Malaysian Industry ·······································046 3. Critical Review of Industrial Policies of Malaysia and Korea ················································054 3.1. Critical Review of Industrial Plan of Malaysia ································································054 3.2. Korea’s Industrial Policies in Transition Period ······························································063 4. Industrial Policies of Malaysia and Korea in the Era of the Fourth Industrial Revolution ·····072 4.1. Fourth Industrial Revolution and Malaysia’s Industry ··················································072 4.2. Korea’s Smart Industry Innovation Strategy ··································································074 5. Applicability of the Korean Experience ·················································································082 5.1. Policy Coherence and Coordination of Malaysia ···························································082 5.2. Applicability of the Korean Experience ··········································································086 6. Conclusion ······························································································································091 References ··································································································································094 Chapter 2 Accelerating the Growth of the Digital Content Industry in Malaysia Summary ····································································································································099 1. Introduction ····························································································································101 2. Digital Content Industry in Malaysia ·····················································································103 2.1. Overview of the Digital Content Industry ······································································103 2.2. State of Play of the Digital Content Industry in Malaysia ·············································105 2.3. The Building Blocks of the Malaysian Digital/Creative Content Industry Development ···110 2.4. Accelerating Growth – Way Forward ··············································································119 3. Korea’s Experience in the Digital Content Industry ······························································122