Malaysia Economic Condition

Is Malaysia deindustrializing for the wrong reasons?

By: SAMIRUL ARIFF BIN OTHMAN Malaysia is currently at the investment-driven stage of economic development. In this stage, efficiency in manufacturing becomes a nation’s dominant source of competitive advantage. The products produced may be sophisticated, and there is much reliance on imported technology and designs. Technology is accessed through foreign direct investment, licensing, joint ventures, and imitation at this stage of economic development. Malaysia had started out as a primary commodities producer & exporter after independence. By around the mid-1980s, manufacturing had overtaken agriculture as the main contributor towards the country’s GDP. The rapid expansion of Malaysia’s export-oriented manufacturing sector, made possible by high inflows of foreign direct investment, had helped the country break away from its overdependence on commodities. Not only that, the growth of the sector helped solve the problem of unemployment. By the early 1990s, the economy had virtually reached fullemployment. The manufacturing sector also helped reduce poverty incidence and increase overall living standards in Malaysia. As manufacturing has long been recognized for its role as an “engine of growth” in the development process, and considering the major role it played in the economic development, its continued strategic importance to Malaysia cannot be overstated. However, according to data from the Economic Report published by the Ministry of Finance, the manufacturing sector seems to be at a crossroad. Its contribution towards the national GDP has been slipping. The sector’s share of GDP had increased from 26.9 per cent in 1990 to 32.3 per cent in 2000, but fell to 30.1 per cent in 2007. Though the manufacturing sector’s share of total employment has trended upwards over the years, the rate of increase has dropped perceptibly in recent times. It had spiked upwards from 19.9 per cent in 1990 to 27.6 per cent in 2000....