Final answer:
To increase foreign trade activities, Malaysia can focus on targeted protectionism for competitive industries, invest in technology and human capital, deregulate economic controls, and stabilize its macroeconomic and political environment to attract foreign investment.
Step-by-step explanation:
To overcome low foreign sector activities in Malaysia, several international trade policy tools can be proposed. These tools aim to enhance Malaysia’s participation in global trade and spur economic growth through strategic policy measures.
- Targeted Protectionism and Subsidies: Rather than broadly applying protectionist measures and subsidies, Malaysia should focus on industries where it has the potential to excel globally. This would involve identifying sectors with a competitive advantage and providing them with the support needed to innovate and thrive.
- Investment in Technology and Human Capital: Prioritizing the development of technology and investing in education to improve human capital will aid in creating a more skilled workforce. This, in turn, can lead to higher productivity and an increase in foreign trade activities.
- Deregulation and Reducing Government Control: Reducing excessive government controls and deregulating the financial sector can create a more conducive environment for business operations, encouraging foreign investment and trade.
- Stabilizing Macroeconomic and Political Environment: By creating a stable macroeconomic climate and transparent political processes, Malaysia can increase its attractiveness to foreign investors, leading to increased trade and investment.
These policy tools help in aligning Malaysia with the forces of globalization within the international network of economic relationships. The aim is to develop the economy using Malaysia's labor and resources, increasing the standard of living for Malaysians through international trade.