Question

Explain about 4 phases of policies for industrial strategies and trade orientation in Malaysia (1958-2010)

Answer 1

Phase 1 (1957 to 1967): Import Substitution Industrialization Strategy (ISIS)

After independence in 1957, the Malaysian governments mainly focused on foreign substitution industrial development strategy, even they started in 1950 for this. Pioneer Industries Ordinance Act 1958 was introduced in that phase. The main aim of these strategies is to develop local manufacturing industries that were previously imported from foreign. The government decided economic realism by changing the industrial policy, which reduced the margins of foreign firms and protected the local industry. IN the end of 1980, the portion of FDI as compare to country’s GDP was 76% which came from MNCs

Phase 2 (1968-1980): Oriented Industrialization Strategy (EOIS)

In this industrialization phase, Malaysian governments mainly worked on Export Oriented Industrialization Strategy (EOIS), EOIS is an government industrialization strategy characterized by exportation of industrial goods to external markets. In the end of 1980, the portion of FDI as compared to the country's GDP was 76% which came from MNCs. Investment Incentives Act 1968, Industrial Coordination Act 1975, and 1975 and Free Trade Zone was introduced during that phase.

Phase 3(1981-1996): Reintroduced ISIS 1981 until 1986 and it reverted to EOIS in 1987

This phase was divided into two sub phases, first between 1981 and 1986, the Malaysian government embarked on heavy investment in local industrial development. Malaysia reintroduced ISIS in 1981 until 1986 when it reverted to EOIS in 1987 which was the second sub phase. There was a more focus on Small and Medium Enterprise (SME) investments to enhance small local industries and creation of jobs. Heavy Industrial Policy 1981, Look East Policy 1981was introduced during that phase.

Phase 4(1997 to 2005): The Asian crisis

Due to shocking economic downturns associated with the Asian Financial Crisis, the Malaysia industrial and technology policy was called for policy re-consideration. AT that time China, Vietnam and India had also risen manufacturing competitors and started attracting FDI from the region. As consequences, the internal value creation and the development of industrial clusters were less than Industrial Master Plans-2 anticipated. The main focus during this phase was on To increase manufacturing linkages and competitive -Resource industries and encouragement for exports.

Phase 5 (2005 onward): Globalization

The Third Industrial Master Plan (IMP3) was introduced during this phase. The aim of Malaysia is to achieve global competitiveness through transformation and innovation processes of the manufacturing and services sectors. knowledge-intensive technologies, collaborations among Government research institutes, institutions of higher learning, science and technology parks and industries, research-based industrial clusters are the key strategies of this phase.