ABSTRACT

Malaysia's sustained high growth performance has generated mounting academic and policy interest, particularly in comparison with the other East Asian high-performing economies. Building on a strong tradition of macroeconomic stability and export-oriented commercial agriculture, Malaysia responded to a mid-1980s recessionary shock by retreating from a heavy industrialization experiment and moving to liberalize trade and domestic markets. In 1995, the net output of the Malaysian manufacturing sector accounted for 33.1 percent of the Gross Domestic Product and manufacturing employment accounted for 25.5 percent of total employment. Manufacturing has come to play a bigger role as a foreign exchange earner in line with the government's intention of reducing Malaysia's dependence on primary exports. The decline in the growth rate in the early 1980s can be partly attributed to Malaysia's rising real effective exchange rate over that period and partly to the recession in the international economy.