ity to be transformed into OEM contracts in the future $ ^{49} $ ; b) Joint-venturing especially with foreign SMEs, a practice which has already been followed to a certain extent in the production activities with Japanese and Taiwanese firms and gives the opportunity to upgrade domestic technologies.

## 2 ) Creation of linkages

A second critical problem for Malaysian electronics industry concerns the need of integration with different sectors and of diversification among its sub-industries. Integration is related to the appropriate development of the backward and forward linkages which are generated not only inside electronics but also with other service-related or manufacturing sectors $ ^{50} $ . In addition, the need of diversification is due to the over-dependency on microelectronics, with particular regard to employment and exports' shares. Although, as we saw in section 4, the situation is gradually improving $ ^{51} $ , the problem still remains in terms of technology-intensity. In fact, foreign companies have relocated only some of the simplest assembly productions of the computer and telecommunication sub-industries, while the more technology-intensive ones have still not been transferred.

## 3 ) Technological development

Other main problems affecting the pattern of Malaysian electronics development are related to the process of technological development. We will shortly discuss three points: a) the need of improving the effectiveness of technology transfer occurring by means of FDI; b) the need of stressing on educational activities and infrastructure; c) the need of increasing public efforts in R&D investments.

With regard to the first point, we have already underlined that from the one hand, foreign MNEs are not required to follow any particular regulation (discouraging the pursuing of a local strategy); while from the other hand, the problem lies in the local absorption capability, which is related to a lack of indigenous entrepreneurs, firms and skilled labor. Consequently, the second point is referred to the need of creating new education facilities, which should be more oriented towards the technical fields $ ^{52} $ , in order to satisfy the increasing demand for specialized workers. Furthermore, the relocation of generally more sophisticated productions has implied the growth of a new demand not only for basic, but also for more specialized infrastructures, which need to be provided in a relatively short time $ ^{53} $ . Finally, the third point is related to the fact that the growth of a local, more autonomous, industry implies the increase of public investments in research and development activities. The technology transfer provided by foreign companies responds to business strategies and it is often not sufficient for a complete technological development of Malaysian firms.

Our discussion may finally converge to some policy implications. In particular, Malaysia could try to take advantage of the process of industrial development transmission occurring from Japan in electronics. This will create enormous potential for Malaysian entrepreneurs to venture into the industry, and they will succeed according to the degree the technology catching-up industrialization will be followed. Consequently, the strategies of industrial development for electronics in Malaysia can be divided according to the following time partition: