Industrial Upgrading and Export Diversification: A Comparative Analysis of Economic Policies in Turkey and Malaysia

This paper considers the prospects of manufactured exports of Turkey and Malaysia given the rising standards of global competition. While Malaysia has the advantage of having an export-oriented MNC-led industry in high-technology manufactures, Turkey has a weaker, stagnant export structure when it comes to increasing its technology content. Its low-technology textile and food manufacturing industries face difficulties in competing against Asian producers which have access to much lower real wage levels. In more sophisticated parts of manufacturing, Turkish firms find it difficult to compete against high-technology European firms. The divergent trends in net barter and income terms of trade is a reflection of these structural differences. A periodical comparison of actual economic policies’ impact on industrial and trade outcomes is followed by an econometric analysis of trade liberalization on trade performance and balance of payments. Conclusions are drawn from the implications of these qualitative and quantitative assessments. [Working Paper No. 266]