The Industrial Sector
Robotic arms at work in a PROTON plant in Tanjung Malim, Perak. In 2005, there were six motor vehicle manufacturers, nine assemblers and 50 franchise holders in Malaysia.
Malaysia’s economic development since the Industrial Master Plan (IMP) in 1986 has been so rapid that the country has been classified as a newly industrialized economy. The prime engine of growth has been the manufacturing sector, which in 2005 accounted for 31.4 per cent of GDP, 28.7 per cent of employment and 80.5 per cent of total exports at RM430 billion.
Malaysia’s record of outstanding growth in this sector has been the result of an industrialization programme that dates back to the Pioneer Industries Ordinance 1958, Investment Incentives Act 1968 and the Industrial Coordination Act 1975. Since 1958, the industrialization strategy has undergone several distinct phases as a result of the policies formulated in response to changing internal and external circumstances. The first phase was based on a policy of import–substitution. This phase lasted until the end of the 1960s when, owing to the limited size of the domestic market, the initial growth spurt began to taper off, and subsequently there were rising levels of unemployment and social unrest. In the 1970s, the objective was to attract foreign direct investments, and growth through labour-intensive and export-oriented industries was seen as a solution.
In the early 1980s, measures were taken to widen and deepen the industrial base through the development of import-substituting heavy industries, resulting in the 1983 ‘national car’ project. In 1986, the IMP was launched, and in the 1990s, a new transitional phase began with the launch of IMP2 (1996—2005) which emphasized the development of clusters of inter-related, capital-intensive, high value-added and high-technology industries. The 1990s also saw the construction of mega projects such as the Kuala Lumpur International Airport and the Sepang Formula 1 circuit.
The new emphasis of industrial policy, as enshrined in IMP3 (2006—20), is on biotechnology. This new growth area is expected to spearhead the next phase of the country’s journey towards full industrialization by the year 2020. Another key aspect is the development of dynamic industrial clusters and small and medium enterprises (SMEs) to encourage strategic alliances in high value-added and high-tech industries.
The evolution of the industrial sector has brought about dramatic developments in society. Production assembly jobs created by the electrical, electronics and textiles industries enabled record numbers of women to participate in the labour force. Later, in the 1990s, rapid industrialization led to labour shortages and the introduction of large numbers of foreign workers. Industrial development did not merely create a new landscape of firms and factories, but it resulted in new patterns of urbanization, and with it, new lifestyles and socioeconomic trends.