Foreign Capital and Industrialisation in Malaysia

280 Pages·1995·14.877 MB·English

by  Rajah Rasiah

FOREIGN CAPITAL AND INDUSTRIALIZATION
IN MALAYSIA
STUDIES IN THE ECONOMIES OF EAST AND SOUTH-EAST ASIA
General Editors: Peter Nolan, Lecturer in the Faculty of Economics and
Politics, University of Cambridge, and Fellow and Director of Studies in
Economics, Jesus College, Cambridge, England; and Malcolm Falkus,
Professor of Economic History, University of New England, Armidale,
New South Wales, Australia
In the last decades of the twentieth century the small and medium-sized
nations of East and South-East Asia have begun a process of potentially
enormous political and economic transformation. Explosive growth has
occurred already in many parts of the region, and the more slowly-
growing countries are attempting to emulate this vanguard group. The
impact of the region upon the world economy has increased rapidly and
is likely to continue to do so in the future.
In order to understand better economic developments within this vast and
diverse region, this series aims to publish books on both contemporary
and historical issues. It includes works both by Western scholars and by
economists from countries within the region.
Published titles include:
Rajeswary Ampalavanar Brown
INDIAN CAPITAL AND THE ECONOMIC TRANSFORMATION
OF MODERN SOUTH-EAST ASIA
John Butcher and Howard Dick
THE RISE AND FALL OF REVENUE FARMING
Mark Cleary and Shuang Yann Wong
OIL, DEVELOPMENT AND DIVERSIFICATION IN
BRUNEI DARUSSALAM
Yujiro Hayami and Toshihiko Kawagoe
THE AGRARIAN ORIGINS OF COMMERCE AND INDUSTRY
Medhi Krongkaew (editor)
THAILAND'S INDUSTRIALIZATION AND ITS CONSEQUENCES
Rajah Rasiah
FOREIGN CAPITAL AND INDUSTRIALIZATION IN MALAYSIA
Foreign Capital and
Industrialization in
Malaysia
Rajah Rasiah
Lecturer, Faculty of Economics
Universiti Kebangaan, Malaysia
r
© Rajah Rasiah 1995
All rights reserved. No reproduction, copy or transmission of
this publication may be made without written permission.
No paragraph of this publication may be reproduced, copied or
transmitted save with written permission or in accordance with
the provisions of the Copyright, Designs and Patents Act 1988,
or under the terms of any licence permitting limited copying
issued by the Copyright Licensing Agency, 90 Tottenham Court
Road, London W1P9HE.
Any person who does any unauthorised act in relation to this
publication may be liable to criminal prosecution and civil
claims for damages.
First published in Great Britain 1995 by
MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire RG21 2XS
and London
Companies and representatives
throughout the world
A catalogue record for this book is available
from the British Library.
ISBN 0-333-61505-0
Transferred to digital printing 1998
02/780
Printed in Great Britain by
Antony Rowe Ltd, Chippenham, Wiltshire
First published in the United States of America 1995 by
Scholarly and Reference Division,
ST. MARTIN'S PRESS, INC.,
175 Fifth Avenue,
New York, N.Y. 10010
ISBN 0-312-12405-8
Library of Congress Cataloging-in-Publication Data
Rasiah, Rajah.
Foreign capital and industrialization in Malaysia / Rajah Rasiah.
p. cm. (Studies in the economies of East and South-East
Asia)
Includes bibliographical references and index.
ISBN 0-312-12405-8
1. Malaysia—Manufactures—Foreign ownership. 2. Industries-
-Malaysia—Foreign ownership. 3. Investments, Foreign—Malaysia.
I. Title. II. Series: Studies in the economies of East and South-East
Asia
HD9736.M32R37 1995
338.8'886897—dc20 94-31773
CIP
To Dayita

Contents
List of Tables ix
List of Figures xii
List of Appendices xiii
Acknowledgements xv
1 Introduction 1
2 Foreign Manufacturing Capital in Developing Economies 5
2.1 Historical Overview 6
2.2 Economic Arguments 9
2.3 Neoclassical 9
2.4 Structural 21
2.5 Marxist 30
2.6 Alternative Framework 40
2.7 Summary 42
3 Manufacturing in Colonial Malaya 45
3.1 Classification Problems 46
3.2 Framework of Analysis 47
3.3 Pre-Colonial Malaya 48
3.4 Colonial Malaya 49
3.5 Manufacturing Linkages 56
3.6 Summary 67
4 Manufacturing Branches 74
4.1 Framework of Analysis 74
4.2 Industrial Policy 76
4.3 FDB/LDB Classification 82
4.4 Performance of Manufacturing Branches 84
4.5 Summary 97
5 Manufacturing Industries 104
5.1 Framework of Analysis 104
5.2 Industrial Policy 105
vii
viii Contents
5.3 Foreign Ownership 110
5.4 Performance of Manufacturing Industries 112
5.5 Summary 131
6 Foreign Firms 133
6.1 Framework of Analysis 133
6.2 AA and BA Briefly 136
6.3 Branch Share 138
6.4 Direct Pecuniary Linkages 139
6.5 Direct Technological Linkages 141
6.6 Summary 161
7 Local Firms 165
7.1 Framework of Analysis 165
7.2 Machine Tool Firms 167
7.3 Textile and Garment Firms 176
7.4 Human Capital Transfer 182
7.5 Host Government's Role 188
7.6 Summary 194
8 Conclusions and Policy Implications 197
Notes and References 207
Bibliography 231
Index 252
List of Tables
2.1 Sectoral distribution of foreign direct investment,
1970-90 (US$Billion) 8
3.1 Manufacturing employment, Malaya, 1947 and 1957 60
3.2 Output growth in selected manufactures, Malaya,
1953-55 61
3.3 Factories employing power driven machinery, Malaya,
1955 64
4.1 Proposed investments in manufacturing projects approved,
1983-88 (Million SDRs) 78
4.2 Foreign share in manufacturing, Malaysia, 1968-91 (%) 81
4.3 Sectoral output growth, Malaysia, 1956-90 83
4.4 Sectoral employment growth, Malaysia, 1961-90 83
4.5 FDB/LDB classification 85
4.6 Growth and composition of FDBs and LDBs, 1968-90 86
4.7 FDB-LDB manufacturing output elasticities, Malaysia 87
4.8 FDB-LDB manufacturing output GDP elasticities,
Malaysia, 1972-90 88
4.9 Capital-intensity and productivity growth in FDBs and
LDBs, 1968-90 89
4.10 Trade indicators, FDBs and LDBs, 1968-90 92
4.11 Trade elasticities, FDBs and LDBs, 1968-90 93
4.12 Direct and total linkages, Malaysian economy, 1970,
1978 and 1983 96
5.1 Protection and subsidies in manufacturing, Malaysia 108
5.2 Foreign share in fixed assets in manufacturing industries,
Malaysia, 1968-90 (%) 111
5.3 Growth and composition of manufacturing industries,
Malaysia, 1968-90 113
5.4 Industry-manufacturing output elasticities, Malaysia,
1960-90 116
5.5 Industry-manufacturing output elasticities, Malaysia,
1972-90 117
5.6 Capital-intensity and productivities in Manufacturing,
Malaysia 1968-90 119
5.7 Trade indicators, manufacturing industries, 1968-90 122
ix