ABSTRACT

Malaysia was an important beneficiary of foreign investments, explaining the trend rise in foreign ownership of fixed capital in most manufacturing industries. From 1981, the government intervened strongly to promote heavy industries, through the Heavy Industries Corporation of Malaysia. As Malaysia is rich in timber, rubber, palm oil, petroleum and tin ore, it is generally economic to support downstream activities when demand reaches sufficient levels. Industrialization occupies central importance in the development agenda of most economies. If the state in South Korea offered import-substitution rents to local capital in return for meeting stringent performance standards, the Malaysian state offered monopoly rents to foreign firms without imposing performance conditions, that is, the carrots were given without the stick. From the mid-1980s, with the introduction of the Industrial Master Plan, the government assumed a more progressively interventionist stance in some regards, while withdrawing from other areas in line with its commitment to economic liberalization, giving the overall impression of incoherent industrial policy.