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Advantages Of Infant Industry Theory

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Infant industry in economic is defined as the newly establish industry, at the first stage of development which is incapable to compete with other industries in the market. One of the most famous topic and also known as the oldest argument in economy is the infant industry agreement. It is been debated intensively whether continuous protection for the infant industry is good or bad for a country. The father for the infant industry is Alexander Hamilton. Infant industry is later picked up and developed by Daniel Raymond and Friedrich List in the 19th century. In year 1972, Hamilton insisted that government have the responsibility to protect the newly developed industry in domestic market until the industry have grow up and strong enough to compete …show more content…

From the point of dynamic comparative advantage, it is said that the countries are not allocating the resources, taking comparative advantages as the basis in the short run. According to the Ricardian and Heckscher-Ohlin models of trade, the resources are been allocated efficiently in the countries if the prices of the goods before they are been traded in the world market is lower than the prices charged in other parts of the world. Taking United States and Germany which applied infant industry theory at the first place as the example, they should have use their resources in producing goods which they have comparative advantage and import cheaper industrial goods from Britain. This is the idea that proposed by Ricardian and Heckscher-Ohlin comparative advantage, in order to maximize the countries’ economic …show more content…

When people talk about infant industry in Malaysia, it will directly refer to automobile industry in Malaysia. In early 1980s, prime minister of Malaysia, Tun Dr. Mahathir bin Mohammad introduced a Heavy Industrial Policy which brings a significant change towards the industrialization of Malaysia with the intention to build its own automotive industry. Formation of joint venture between Heavy Industry Corporation of Malaysia (HICOM), Mitsubishi Motor Corporation (MMC) and Mitsubishi Corporation (MC) of Japan successfully come out with the first national automotive project, namely, PROTON. The joint venture is aimed to help increase the local production in manufacturing sectors and to achieve economies of scale so that Malaysia’s manufacturing sector is able to compete internationally. In year 1985, Malaysia automobile industry successfully gives birth to their first child. The automobile industry then opened out new branches which are small car manufacturer (PERODUA) in 1993, heavy vehicle company (Malaysian Bus and Truc, MTB) in 1994, national motorcycle manufacturer (MODENAS) in 1995 and a light vehicle commercial manufacturer (INOKOM) in

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