GDB2073 MALAYSIAN ECONOMY

TEST 1

10 Percent

Name: __________________________

Matric: _________________________

1. The following questions is based on video titled “Clayton Christensen on disruptive innovation -
Clarendon Lectures 10th June 2013” at https://www.youtube.com/watch?v=rpkoCZ4vBSI
(Duration – 59:14)

a) Briefly discuss the role of disruptive innovations and efficiency innovations in terms of jobs
and capital? (10 marks)

Disruptive innovations pose a challenge to market leaders that many fail to overcome.
Disruptive innovation creates new markets separate to the mainstream; markets that are
unknowable at the time of the technologies conception. A disruptive technology or disruptive
innovation is an innovation that helps create a new market and value network, and eventually
goes on to disrupt an existing market and value network. The concept disruptive technology
is widely used but disruptive innovation seems a more useful concept in many contexts since
few technologies are intrinsically disruptive. It is rather the business model than the
technology that enables and creates the disruptive effect.
Efficiency innovations – the ones most common in our current economy – are the ones that
reduce or simplify the processes in the creation and delivery of an existing service or
product. Efficiency innovations are a natural part of the economic cycle, but these are the
innovations that streamline process and actually reduce the number of available jobs.
Efficiency innovations focus on streamlining and wringing bottom line savings and additional
profits out of our existing organizations. It is missing out on the opportunity to open up new
markets where great empowering innovations and extraordinary new profit and job creation
can occur.

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 b) How the disruptive innovations economically transform the production of computer? (10
marks)
A disruptive innovation is an innovation that creates a new market and value network and
eventually disrupts an existing market and value network, displacing established market
leaders and alliances. The popularization of personal computers illustrates how knowledge
contributes to the ongoing technology innovation. The original centralized concept (one
computer, many persons) is a knowledge-defying idea of the prehistory of computing, and
its inadequacies and failures have become clearly apparent. The era of personal computing
brought powerful computers "on every desk" (one person, one computer). This short
transitional period was necessary for getting used to the new computing environment, but
was inadequate from the vantage point of producing knowledge. Adequate knowledge
creation and management come mainly from networking and distributed computing (one
person, many computers). Each person's computer must form an access point to the entire
computing landscape or ecology through the Internet of other computers, databases, and
mainframes, as well as production, distribution, and retailing facilities, and the like. For the
first time, technology empowers individuals rather than external hierarchies. It transfers
influence and power where it optimally belongs: at the loci of the useful knowledge. Even
though hierarchies and bureaucracies do not innovate, free and empowered individuals do;
knowledge, innovation, spontaneity, and self-reliance are becoming increasingly valued and
promoted.

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 2. Why do Malaysia government promote industrialization? (10 marks)
It follows the structural argument that its increasing returns properties offers countries the
potential for driving economic specialization into higher-value-added activities, and with that the
creation of higher wage jobs. Developing country governments have also been driven by the
fallacy of composition argument that was rife in the period 1960–2000 following the works of
Singer, Sarker and Prebisch that argued that agricultural commodities have an inherent structural
problem of facing falling terms of trade with manufacturing. Apart from oil and gas, low relative
prices of commodities against manufactured goods in the 1960s until the turn of the millennium
strengthened many governments resolve to promote manufacturing aggressively.
Brazil, India, Indonesia, Mexico and Malaysia are some of them. Some countries lacked natural
resources and hence saw manufacturing as the vehicle of rapid economic growth right from the
early years of economic development, e.g. Korea, Singapore and Taiwan. However, the rising
importance of commodities since 2008 assisted by the diversion of a number of commodities into
bio-diesel, and expansion in demand for food products made possible because of rapid growth of
populous countries such as China, India and Vietnam has driven up agro-food prices. It will be
interesting to see if this development will remain in the long run.

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 3. “Biotechnology has been adopted as a new paradigm for agriculture by the scientific community,
but NOT by the agricultural farmers themselves”. Do you agree with this statement as far as
Malaysia is concerned? (10 marks)

This statement is very much true. Despite government efforts to raise awareness and to stimulate
its adoption, biotechnology has remained elusive to especially the small poor farmers. Not only
are most of the small farmers still glued to the utilization of old agricultural technology and lack
the knowledge and technology to appreciate it, they are also less equipped to understanding the
benefits of biotechnology. The scientific community that understands the critical issues well
must use a variety of channels to reach and convince the small poor farmers about its benefits
and with that the ways of deploying biotechnology to apply environment-friendly farming
methods and at the same time raise yields.

4. Explain the role of depletion policy in petroleum development in Malaysia. (10 marks)

The National Depletion Policy of 1980 was a policy framework designed to safeguard the
depletion of oil reserves by controlling the rate of crude oil production to avoid over-
exploitation. The underlying motivation for introducing the National Depletion Policy was largely
to do with the predictions at that point in time that Malaysia would run out of oil in about 12
years’ time given the average 200,000 barrels of oil production a day. This has now been proven
to be unfounded with more oil discoveries over the years as well as with the technological
advancements in enhanced oil recovery techniques which improves the amount of oil that can be
viably extracted. The National Depletion Policy is intended to conserve the country’s energy
resources, in particular oil and gas, as these resources are finite and non-renewable. In this
respect, the production of crude oil is limited to an average 630,000 barrels per day (bpd) while
the consumption of gas in Peninsular Malaysia is limited to about 32,000 million standard cubic
feet per day.

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