Infant Industries Protectionism: The Case of Automobile Industry in Malaysia
International Journal of Business and Economics Research
Volume 9, Issue 2, April 2020, Pages: 68-72
Received: Nov. 22, 2019; Accepted: Feb. 24, 2020; Published: Feb. 28, 2020
Views 380      Downloads 294
Author
Dalia Ibrahim Mustafa, Department of Islamic Banking, School of Shari'a (Islamic Studies), the University of Jordan, Amman, Jordan
Article Tools
Follow on us
Abstract
Having a competitive advantage in infant industry is a vital factor for a country to be efficient in protecting it since usually those infant industries lack the economic scales needed to survive in the market. The protectionism started in eighteenth century in USA as a suggestion for the government to promote the economy. The paper covers several tools are used such as; tariffs and tariff rebates, quotas, governmental subsidies and import-substitution industrialization (ISI). Theoretically it was proved the possibility of achieving the desired results. Then the paper illustrated Malaysia as a case of study that faced several failed stories of providing protection of its automobile infant industry; Proton and Perdua automobile companies were investigated. The results showed that those policies and tools used became a burden on the government budget without being able to compete internationally after decades of protection. Many reasons behind this shock fact such as the tendency of being secure which yield to conceal the truth of being prepared to face the global market competition without protection shields from the government. Also, those countries provided protectionism slowed down economically which led to more obstacles for the protected infant industries to be competitive internationally. Even the efforts of connecting the infant industry with strategic foreign partner have failed miserably in Malaysia. Hence as a recommendations for future attempts of protecting infant industries; the time span of protection should be predetermined and be flexible to adjust simultaneously. In addition, the government should monitor the protected firms to let them disclose the truth. Also, there should be a mix of protection tools used to achieve the optimal goal which is not only to protect the infant domestic industries but to promote them and be internationally competitive and that result can be reflected in growth of the economy.
Keywords
Infant Industry, Protectionism, Malaysia, Tariffs, and Quotas
To cite this article
Dalia Ibrahim Mustafa, Infant Industries Protectionism: The Case of Automobile Industry in Malaysia, International Journal of Business and Economics Research. Vol. 9, No. 2, 2020, pp. 68-72. doi: 10.11648/j.ijber.20200902.12
Copyright
Copyright © 2020 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
References
[1]
Alexander Hamilton, Report on the Subject of Manufactures, To the Speaker of the House of Representatives, (Philadelphia: December 5, 1791). Accessed 24th September 2018, https://founders.archives.gov/documents/Hamilton/01-10-02-0001-0007.
[2]
Ali, Salamat. (2011). "Why have most cases of infant-industry protection failed to generate benefits in terms of economic development?". London School of Economics and Political Science. Working paper.
[3]
Baldwin, R. E. (1969). The case against infant-industry tariff protection. Journal of Political Economy, 77 (3), 295-305.
[4]
Borer D. and B. Chua. (2018). How costly is the Malaysian car? Estimations of Welfare Costs of Protecting the Vehicle Industry of Malaysia. Conference paper. 2018 International Conference on Technology and Humanities IcoTECH 2018 in Cooperation with KDU University College Penang November 17-18, 2018.
[5]
Chang, H. J. (2003). Kicking away the ladder: Infant industry promotion in historical perspective. Oxford Development Studies, 31 (1), 21-32. https://www.tandfonline.com/doi/pdf/10.1080/1360081032000047168?needAccess=true
[6]
Cordon W. (2002). "Trade Policy and Economic Welfare". Second Edition. Clarendon Press. Oxford. New York. United States of America.
[7]
Encyclopædia Britannica: Friedrich List.
[8]
Feenstra, R. C. and Taylor, A. M. (2002). International Economics. 2nd international ed. Houndmills, Basingstoke, Hampshire.
[9]
Grossman G. and E. Helpman (1994). "Protection for Sale". American Economic Review. Vol 84. Pp: 833- 850.
[10]
Hausman R. and D. Rodrick (2003). "Economic Development as Self-Discovery". Journal of Development Economics. Vol. 72. Pp: 603-633.
[11]
Kicsi, R., & Buta, S. (2010). Protectionism and “Infant” Industries. Theoretical Approaches. The Annals of “Dunarea de Jos” University of Galati. Fascicle I – 2010. Economics and Applied Informatics.
[12]
Krueger, A. O. and Tuncer, B. (1982). 'An Empirical Test of the Infant Industry Argument.' The American Economic Review 72 (5): 1142-1152.
[13]
Magee, C. S. (2011). Why are Trade Barriers so low?. Economic Affairs, 31 (3), 12-17.
[14]
Mill, J. S. (1848). Principles of Political Economy in Collected Works, vols II–III.
[15]
Milward, B. (2019). International Trade and Sustainable Development: Economic, Historical and Moral Arguments for Asymmetric Global Trade. Routledge.
[16]
Ministry and International Trade and Industry, (2018). (2018). https://www.miti.gov.my/miti/resources/Media%20Release/Media_Release_-_Automotive_Outlook_2018_%E2%80%93_Holistic_Industry_Growth_Continues_As_National_Automotive_Policy_2014_(NAP2014)_Enters_Fifth_Year.pdf
[17]
Ministry of Trade, Malaysia. (2006)
[18]
Pack, H. and Saggi, K. (2006). 'Is There a Case for Industrial Policy? A Critical Survey.' The World Bank Research Observer 21 (2): 267-297.
[19]
Panagariya, A. (2011). A re-examination of the infant industry argument for protection. Margin: The Journal of Applied Economic Research, 5 (1), 7-30.
[20]
Petkov, Vladimir P. (2007). Infant Firm Subsidization in Industries with Dynamic Structure. J Ind Compet Trade.
[21]
Ravikumar, B., Riezman, R., & Zhang, Y. (2018). Optimal Infant Industry Protection. In 2018 Meeting Papers (No. 1016). Society for Economic Dynamics.
[22]
Tong, J. T., Terpstra, R. H., & Lim, N. C. (2012). Proton: Its rise, Fall, and Future Prospects. Asian Case Research Journal, 16 (02), 347-377.
[23]
Xu B. (2006). "Infant Industry and Political Economy of Trade Protection". Pacific Economic Review. Vol. 11, No. 3. Pp: 363- 378.
ADDRESS
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
U.S.A.
Tel: (001)347-983-5186