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Introduction: A Historical Perspective on Sovereignty
As we celebrate Merdeka on 31 August and Malaysia Day this coming 16 September, I am brought to reflect on the historical conditions that led to the polities now comprising our beloved Malaysia falling under the yoke of colonialism in the first place. The reasons for their downfall were undoubtedly multifaceted. Traditional sources, such as the Sejarah Melayu, allude to the ruler's decadence, internal disunity, and betrayal as factors in Malacca’s collapse1. In later waves of colonialism, power struggles among royals and nobles enabled British colonisers to wriggle their way into the Sultan's court, recognising a compliant claimant to the throne while rejecting those who resisted. While these were clearly internal weaknesses, a critical external factor that enabled the colonisers to exploit these vulnerabilities was their superior technology.
The role of technology differed between the early and later colonial powers, reflecting the distinct forms of imperialism they practised. The Portuguese engaged in outright conquest, and their superior naval and artillery technology proved decisive. These advanced armaments easily vanquished the Malaccan forces, who, by some accounts, possessed only lighter, inferior artillery that they lacked the experience or tactics to effectively deploy. Their forces were primarily reliant on traditional weapons such as swords, kris, lances, and bows and arrows. The British, in contrast, mastered a more subtle form of technologically-backed coercion. They dominated not through direct conquest but through treaties, compelling rulers to accept an adviser or resident whose counsel was to be followed. Rulers were obliged to honour these agreements out of fear of the British military, particularly their navy, which was the world's strongest at the time, having benefited from innovations brought by the Industrial Revolution. Furthermore, once established, British rule systematically diminished native authority as the introduction of transport and communication technologies, such as locomotives and the telegraph, allowed power to be centralised and colonies to be managed from afar. This historical context brings me to the key issue I want to discuss in this essay: can a country's national sovereignty be preserved in the long term if it lacks technological sovereignty? Our own history suggests a clear negative: the technological inferiority of our ancestors and the corresponding technological superiority of the Europeans enabled their domination. It is clear that possessing only inferior weapons made us militarily vulnerable.
The Problem with Technological Dependency
However, do we necessarily need to produce our own high-tech goods to obtain them? Some would argue that a country need not pursue high-tech production. According to the principles of comparative advantage, we can specialise in producing low-tech goods where we are efficient and trade them to obtain high-tech goods from more technologically advanced nations. This strategy, they contend, prevents the wasteful pursuit of industries in which we may not be competitive. But is such a strategy truly sustainable in the long run, especially if it limits a nation's productive capabilities to low-tech goods while maintaining a state of dependency on others for high-tech products?
Trade and Political Coercion
The trouble with this strategy is that a nation dependent on others for critical technologies is susceptible to the sudden interruption of trade relations. Countries may employ "strategic trade policies," a euphemism for import quotas or tariffs, as a political tool to pressure others into implementing policies that serve their interests. As a low-tech producer, a country’s products often face stiff competition from numerous other nations. Additionally, without its own technology, a country may depend on foreign multinational corporations (MNCs) to establish a high-tech industry. However, the output of these firms may be destined solely for their related entities in the home country, or the final product may require a specific technology monopolised by the foreign firm, making it difficult to sell to other buyers. This creates a trade structure where the partner becomes the sole dominant user of the dependent country's product, while the dependent country cannot easily switch suppliers for the technology it needs. This one-sided reliance weakens a country’s power to impose reciprocal trade actions, as doing so would hurt it more than its partner. The recent use of tariffs by President Donald Trump, which leveraged America's prominent role as both a major importer and a supplier of high-tech goods, clearly underscored how trade can be used as an economic weapon. The use of trade as an economic weapon, as highlighted by these examples, demonstrates how a nation’s one-sided dependence on technology can be leveraged to compromise its political autonomy.
As the above shows, keeping a country's production capabilities limited to low-tech goods sacrifices technological sovereignty, particularly if a trade partner holds a monopoly over the required technology. This, in turn, can lead to a loss of political sovereignty as a nation is coerced to comply with the policies of its technologically dominant partner. As development economist Albert Hirschman recognised, a key way to keep a country politically pliable is to prevent it from industrialising2. Indeed, the monopolisation of advanced weapons manufacturing by only a few nations means that a country's national sovereignty, in the fundamental sense of being able to defend itself, rests in the hands of these few suppliers. The manufacturers of these weapons, such as warplanes, often impose conditions on their use, and non-compliance can render the equipment useless in the long term, as the supplier can suspend parts and servicing. This leaves a country vulnerable to aggression, particularly if the aggressor is the supplier itself or a favoured ally.
The Middle-Income Trap
Beyond the risks to national security, technological dependence also has significant economic consequences, limiting a country's potential for income growth. The phenomenon of the middle- income trap, which Malaysia is suspected of facing, is a direct result of the lack of a competitive domestic high-tech industry and an over-reliance on foreign direct investment for job creation. While foreign MNCs may introduce high-tech capital goods and produce high-tech products in a developing country, their primary motivation is often to take advantage of lower labour costs. Consequently, the activities they establish tend to be lower value-added tasks like assembly, while high value-added activities such as R&D and marketing remain in their home countries. If local workers demand higher wages, these MNCs can easily uproot and relocate to other countries with similar infrastructure and lower labour costs. This competition from other developing nations places a low ceiling on wage growth. In essence, this dependence on foreign MNCs creates a systemic ceiling on income growth, making it exceedingly difficult for a country to escape the middle-income trap.
Macroeconomic Sovereignty
The lack of technological sovereignty also constrains a country's macroeconomic policy. An economy's ability to engage in substantial fiscal deficit spending with open capital markets depends on whether its currency is in high demand as a reserve currency among central banks and international asset managers. Countries with reserve currency status can sustain high levels of government debt because their debt papers have high demand as international reserves, and they face little risk of a sudden cessation of purchases. Historically, a currency's rise to international reserve status has been underpinned by its importance in global trade, which, in turn, is driven by the high demand for its high-tech exports—goods for which substitutes are difficult to find. This was true for the British pound during the 19th-century Industrial Revolution, as the UK exported steamships and locomotives. Similarly, the US dollar's ascendance in the 20th century was backed by strong demand for its manufactured goods, such as machinery and vehicles.
Conversely, a country that lacks high-tech exports and produces goods that can be easily sourced from elsewhere is unlikely to see its currency achieve reserve status. The value of its currency then depends heavily on trade and the perceived attractiveness of its capital markets, which are tied to the financial performance of its firms and, more critically, the perceived solvency of its national government and the risk of high inflation. Even if a developing country monetises its debts without an immediate rise in inflation, international investors often perceive this negatively. This can lead to them selling off their assets denominated in that country’s currency, causing inflation to become a self-fulfilling prophecy and underscoring the lack of full monetary sovereignty for a developing country with open capital markets. While possessing high-tech exports may not instantly grant a currency important reserve status, it can help a country achieve a current account surplus and accumulate international reserves, which can be used to defend its currency's stability.
The Strategic Imperative for Industrial Policy
I believe I have successfully shown the importance of investing in a country’s own technological development to obtain technological sovereignty. This is crucial not only for national security— without which the state could be destabilised, making economic welfare impossible—but also for transcending the middle-income trap and ensuring long-term prosperity. The increased wealth resulting from this strategy, in turn, creates a positive feedback loop, allowing the state to invest more in security.
Does this imply advocating for autarchy—complete self-reliance in all the technologies needed for a society to thrive? Not necessarily. While it is imperative to develop some key technologies, a nation does not need to develop all of them. To secure its position, a nation must develop a key technology that its partner is also reliant on. This creates a relationship of mutual dependence, which serves as a powerful deterrent against trade disruption. Therefore, a country does not need to develop every key technology it needs, but rather a strategic few that would prevent a trade partner from holding all the leverage3.
Furthermore, we cannot leave the development of key technologies to the free market alone, especially in a developing country. A developing economy is typically more labour-abundant than capital-abundant, and the market deems it more efficient to produce labour-intensive goods. Since high-tech goods are capital-intensive, a developing economy aiming to become a high-tech producer must go against the conventional logic of the market.
Thus, industrial policies that distort market-determined prices are necessary to target the development of key technologies. Countries like Japan, South Korea, Taiwan, and China have successfully used such policies to develop frontier technologies. These policies could include preferential loans, R&D grants and subsidies, controlled competition, import controls, mandated technology transfers, export promotion, leveraging large state-owned enterprises to drive innovation, and investing in human capital. Under the current regime of the WTO and free trade agreements, governments must apply these policies in ways that do not contravene those agreements. A state should also target emerging technologies where dominant players have not yet been established to increase its chances of becoming a key player. Alternatively, participating in short-cycle technology industries may also provide an opportunity for a newcomer to leapfrog existing players, as technologies in these sectors become obsolete faster, reducing the effectiveness of a frontrunner’s advantages4. Although industrial policies are initially criticised for inefficient resource allocation, they can eventually lead to the creation of internationally competitive industries. This demonstrates that while comparative advantage is a static analysis, a dynamic view shows how a seemingly inefficient allocation can become highly efficient in the long run5.
Conclusion
In conclusion, we should thoughtfully consider investing in the development of key technologies, even if the short-term costs are high. Technological sovereignty is crucial for a country's national sovereignty, economic welfare, and macroeconomic policy independence. While there is a chance of less-than-ideal outcomes, the cost of not making this effort exposes a country to the very probable and high risks of political subservience, stagnant incomes, and greater constraints on its ability to implement policy. This becomes a greater imperative in a world where international institutions meant to promote peace, such as the International Criminal Court, are easily sidelined by the very nations that once championed them to protect their favoured allies.
The blatant disregard for international agreements should make us wary of placing all our hope in these institutions to guarantee our peace and sovereignty. The aversion of some neoliberal economists to industrial policy is misguided, as their premises focus solely on maximising economic welfare without considering issues of national security. Even on their own terms, they are often wrong, as industrial policies have been shown to successfully support technological and economic development far more effectively than leaving everything to the market. Therefore, our government must undertake a serious and concentrated effort to develop key technologies for our survival and prosperity.
