2) Taking as an example one of the middle income Southeast Asian countries that seem to...

2) Taking as an example one of the middle income Southeast Asian countries that seem to be caught in this trap, and drawing on the literature on the Middle Income Trap, discuss the following: a. What is the evidence that the country is caught in the middle-income trap? b. Why is the country caught in the trap c. Giving reasons, discuss what you believe are the important steps that the country should take to get out of the trap?

Expert Solution

2) Taking as an example one of the middle income Southeast Asian countries that seem to be caught in this trap, and drawing on the literature on the Middle Income Trap, discuss the following:

a. What isthe evidencethatthecountryis caught in themiddleincometrap?

The theory of middle-income trap indicate that the determinants of growth in low-income and high-income levels may be different，and countries may try to transition from an effective growth strategy at low-income levels to a strategy at high-income levels, and thus may fall into the middle income level.

The Malaysiais considered an upper middle-income country. Malaysia used to rely on cheap labour resources to attract foreign capital and advanced technology to develop labour-intensive industries, which lead to rapid industrialization. As Malaysia's economy grows, its national income levels rise and its labor costs rise.

b. Whyisthe countrycaught in the trap?

Singlecompetition (e.g. Saudi Arabia)

Low technology

There are too much cheap labour.

income distribution structure is unbalanced

c. Givingreasons,discuss whatyoubelievearetheimportantsteps that thecountryshould take togetout ofthe trap?

¨ The Malaysia government launched an economic, political and social transformation programme.

¨ Attach importance to development of human capital, cultivate enterprised’ independent innovation ability and encourage technological research and development.

¨ Use private investment to gradually relax restrictions on foreign capital. Because the Malaysia need to input a large number of capital to development.

Rahul Sunny answered 8 months ago

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