ABSTRACT

As with other high-performing economies in East Asia, the industrial policy of Malaysia has gone through several stages as illustrated in Figure 8.1. In the early years of independence the main objective was diversi¼cation of economic structure to escape from heavy reliance on a small number of traditional primary commodities. In its 1955 report on the economic development of Malaysia, the World Bank advised diversi¼cation through the development of additional primary commodities and new industrial products. To carry out this strategy, pioneer industries status was invented in 1958, which exempted corporate income taxes for two to ¼ve years for eligible ¼rms. Most of the approved pioneer industry ¼rms at that time belonged to the import-substituting consumer goods sector. During this early period, the free-market principle was upheld with little of¼cial intervention into private-sector activities.