electronics equipment it concerns the pervasive presence of Japanese MNEs, while in the case of electronic components it mainly regards the massive relocation process recently undertaken by SMEs.

### 5.3 Future Prospects for the Malaysian Electronics Industry

To conclude, let us briefly discuss about electronics' role in Malaysian industrial development process and some of the policy options which could be adopted by local authorities. We start by introducing three main issues, as they originated from our previous analysis:

1) Over-dependence on foreign companies

From the comparison between the PC and CPC theories, we observed the existence of a trade-off between “high technology intensity” and “scarce presence of local firms”. In turn, this is one of the main problems which Malaysian electronics has been facing: the need of increasing locally originated technology. To this regard, one position is that the dominating presence of foreign firms in will not cause any serious obstacle to the process of economic development. Malaysian population is still small, electronics is only one of the several manufacturing activities, and internal resources, it is said, could be more efficiently distributed to the development of other sectors where local entrepreneurs are traditionally stronger (like services or activities related to natural resources). This view, however, does not properly consider the relative importance of the industry $ ^{46} $ itself and underestimates its relevance in terms of linkages for the upgrading of the overall industrial structure, as we discussed in section 2. In particular, electronics is able to generate a rapid growth of employment, foreign exchange earnings, GDP, being one of the main sources of innovations and spillovers which, in turn, benefit the whole economy. Consequently, the competitiveness of a large part of the manufacturing sector relies on technologies originated inside this industry, and the development of electronics should be considered as a necessary condition for industrialization.

Related to these previous observations it is the problem of foreign MNEs' over-presence. May a country like Malaysia depend on foreign capitals and technology for ever, or is it necessary to enlarge the locally controlled share? At present, Malaysia is lacking of indigenous firms. Moreover, domestic entrepreneurs do not seem to be able of keeping pace with the rapid evolution of new product technologies, or undertaking activities for product design and development $ ^{47} $ .

The nature of electronics products is such that not only a deep knowledge on the hardware, but also a great ability in managing the software is required. In other words, once the machine is built, there is the need of a pool of expertises and technicians holding the know-how of the systems incorporating the technology and able to make a proper use of it. The government should therefore programme a long term industrial policy in order to improve technological skills and create a locally-controlled electronics industry of a certain importance.

For the moment, due to the presence of several entry-barriers $ ^{48} $ there seems to be two possible ways for local firms to increase their participation in the electronics field and in particular in the sub-industries of electrical and electronics equipment and components: a) Subcontracting with foreign MNEs, which require little capital outlay and offers the possibil-