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Here is a brief overview of industrial policy in Malaysia.
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Industry in Malaysia

Malaysia has a strong and vibrant industry. Since the mid-1980s, the Malaysian economy has metamorphosed from a commodity-based to a manufacturing-based economy. Some of the major industries in Malaysia are: rubber, textiles, basic metals, food processing, petroleum, and electronics.
The growth and structural transformation of the economy over the last three decades in Malaysia has occurred within the framework of a liberal trade and investment regime as well as the extensive use of the industrial policies. Much of the past and present successes of the Malaysia economy have been credited to a series of industrial policies in Malaysia since the 1960s.
Industry policy in Malaysia falls into four major types. Each type is characterised by different objectives.
  • Wealth redistribution industrial policy is intended at making sure of a fair distribution of wealth amongst different races in the nation.
  • Export promotion industrial policy is aimed at endorsing the development of manufacturing industries serving foreign markets.
  • Import substitution industrial policy is meant for promoting the development of manufacturing industries serving domestic markets.
  • Response to globalisation industrial policy aims at dealing with new competition from large firms in the domestic markets.
Wealth Distribution Industrial Policy
There were racial riots in Malaysia in 1969. In response the Government introduced the New Economic Policy (NEP) in 1970 with an aim to wipe out poverty and rectify the unequal distribution of wealth among the different races. This has been under renewals under successive policies. In executing this policy, the government has preference to businesses on the basis of criteria other than market competition.
Export Promotion Industrial Policy
Malaysia has executed this policy extensively for the years. This has assumed the form of granting tax incentives and holidays, establishing export processing zones and industrial areas.
Import Substitution Industrial Policy
Malaysia has executed at least two types of import substitution policies. The first type targeted at promoting the development of light industries like food, paint, and clothing. The second type had focus on the development of heavy industries like steel and car industries. This kind of industrial policy is executed through targetted government investments supported by tariff protection, import restrictions, and at times government procurement favouring products manufactured locally.
Response to Globalisation
The opening of domestic markets to foreign entry has been a key area of worry for policy makers. Few of these developments are connected to Malaysia’s commitment under WTO. One prominent reply to these developments has been the support of the Government towards Industry consolidation. Such policies have major bearing on competition. It is important that Malaysia applies a competition policy. Malaysia is one of the few countries in the Asia Pacific region that has not implemented a national competition policy. One of the main reasons for Malaysia to be cautious about implementing a national competition policy is the extensive use of industrial policy in the country. Much of the successes of the Malaysia economy have been credited to a series of industrial policies in Malaysia since 1960s and there is an opinion among policymakers that competition policy is in conflict with some of the important existing industrial policies.

Last Updated on: 18-11-2009

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