Abstract

The article explores the main features of the middle-income trap in Malaysia within the evolving context of the Southeast Asian development pattern. In particular, it investigates the determinants of the Malaysian manufacturing declining performances after the Asian crisis (1997-1998), as well as the reasons underlying the simultaneous interruption of the catchingup process. In this respect, an analysis of Malaysian structural weaknesses has been carried out with a specific focus on the deficits in local absorptive capacities and the lack of innovative capabilities of the Malaysian manufacturing sector, which undermined the industrial upgrading prospects. Such limits of the production structure derive from the dependent position of the country in the regional division of labor and the ineffectiveness of the fdi-led industrial and technological policies implemented by the Malaysian government. The conclusions are confirmed by a descriptive analysis which adopts Revealed Comparative Advantage index and Economy Complexity Index as two indicators of industrial competitiveness.