Carmelo Ferlito of the Center for Market Education said Malaysian capitalism was largely based on small and medium-sized enterprises.
Most of them did not have the capital needed to go big, he told FMT.
He was commenting on former prime minister Dr Mahathir Mohamad’s call for the nation to look beyond foreign direct investments and to develop the economy by dominating the market of major industries. Mahathir cited the boom glove makers enjoyed at the height of the Covid-19 pandemic.
Ferlito noted that most of the capital needed was available in government-linked companies, but said the problem was that Putrajaya operated “outside the market”.
“The economic decisions taken by government bodies are at high risk of failure because they respond to policy makers’ dreams rather than to market signals,” he said.
“Malaysian capitalism has a certain structure which is the result of many factors. So it may be that going big is just not an option at the moment.”
He said Mahathir’s idea would work if the economy could be centrally directed but this was not the case.
“In fact, it is not just a matter of technical know-how. To a certain extent, it is not even just a matter of capital availability. It is mostly a matter of entrepreneurial choices, institution set-ups and markets.”
Ferlito said there were certain sectors that Malaysian entrepreneurs had gone big into as a response to market stimuli, such as chicken breeding.
“But the transformation can only happen over time and as a response to market signals, not out of the prime minister’s command,” he said.
Another economist, Ahamed Kameel Mydin Meera of the International Islamic University Malaysia, agreed that Malaysia needed to go beyond FDIs to develop the economy, saying foreign firms could be roped in if there was no local expertise.
But he called for the employment of local talents as much as possible, saying there must be some technology transfer so that Malaysia could eventually operate on its own.
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