KUALA LUMPUR, Feb 16 — Asia’s emerging markets, including Malaysia, cannot rely on exporting cheaply made goods to grow their economy but should instead tap into the region’s booming population if they want to be rich, a US-based academic John Lee has said.

The senior fellow at US-based Hudson Institute said countries such as Malaysia, South Korea and Taiwan had in the past benefited by taking on Japan’s post-World War II development model of manufacturing and exporting products at a cheaper and more reliable rate to developed nations.

But Lee noted that with low global trade growth, the export-reliant economic model is no longer as effective for rapid development in poor Asian countries with big populations including China, Indonesia, Vietnam and Myanmar.

“If Asia wants to grow more prosperous, it needs to change its economy from being producers to becoming end consumers. It needs to create its own markets, rather than simply producing goods cheaply for advanced economies.

“Doing so will require radical policies that overturn the decades-old mindset that prioritises the corporate sector over households. Instead governments will need to encourage consumption and remove subsidies to investment,” the adjunct associate professor of the Australian National University wrote in an opinion piece published in the Wall Street Journal today.

In his opinion piece titled “East Asia needs a new growth formula”, Lee forecasted an end to the old East Asian economic model due to a switch in population size in Asian exporting nations and the Western consuming nations.

It was previously easier to achieve growth through exports previously with Japan, South Korea, Taiwan, Singapore and Malaysia’s joint population size in the 1980s at over 150 million when compared to US and Europe’s over 400 million population size, Lee said.

But the population in East Asia’s developing countries has overtaken those in advanced countries in the West with the figures being two billion against one billion consumers, he said.

Consumption growth in the US and European countries are only at 2 per cent in real terms or half the historic average about 60 years ago, Lee said, adding that families there are now opting not to borrow more money to buy Asian-manufactured products.

Lee said the exports’ share of the global economic growth has now dropped to 22 per cent from its peak of 27 per cent in 2008 and from 15 per cent in the early 1990s, with Vietnam being virtually the only East Asian economy last year to escape falling export figures when it chalked a 5 per cent rise.

This is in contrast to South Korea, China, Japan, Singapore and Taiwan’s exports falling between 5 per cent and 17 per cent.

Economic superpower China has kept a significant portion of the low-cost and low-skill intermediary trade between Asian nations while also boosting its share at the higher-end trade, Lee observed.

“This means China is now competing with exporters in low-income countries like Indonesia and the Philippines, as well as with firms in Malaysia, Singapore, Japan and South Korea,” he said as he expected increasing competition in trade in the region.

With China as the “poster child” for how the old export-oriented model may not work anymore, Lee also said there are increasing odds on whether it can ever become a high-income nation like its neighbours Japan, South Korea and Taiwan.

“All the while, little attention or emphasis has been given to the building of institutions that are necessary for any country to escape the so-called middle income trap: rule-of-law, secure property and intellectual property rights, and the creative destruction of failing state-owned firms, to name three,” he said when commenting on China.

“Even if Asia’s developing countries recognise the need for a new model, they are unlikely to replicate the spectacular growth rates of their predecessors. That means over the next two decades, populous Asian countries such as China, Indonesia and Vietnam will face the challenge of aging populations before they gain developed status,” he said.

On February 5, the Ministry of International Trade and Industry said Malaysia’s export value for 2015 grew by an overall rate of 1.9 per cent, leading to a total of RM779.95 billion in exports.

The ministry said the manufactured goods segment had spearheaded export performance, seeing an increase of 6.5 per cent to RM625.46 billion. The segment takes up 80.2 per cent share in the country’s total exports.