ABSTRACT
This chapter highlights that Malaysia's successful economic diversification strategy is a function of its institutional character and historical process. Malaysia's diversification story is a function of its idiosyncratic institutional qualities - a product of its political, social and economic character. The chapter explains the path dependent nature of Malaysia's economic policy and the increasing returns from the development of other economic sectors that have made the oil and gas sector only an add-on to the country's already varied economic production structure. It demonstrates that the affirmative nature of Malaysia's New Economic Policy (NEP) unintentionally gives the state little choice but to continue to adopt an economic diversification strategy in the bid to expand the economy and provide legitimacy to redistributive policy. The chapter also describes how the state has consistently instituted the economic diversification that has cognitively prepared the public to look beyond natural resources for economic sustainability.
