Malaysian Economy - ECON 3010

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Questions and Answers

What was one significant commodity exported by Malaysia during the British colonial period?

Cocoa

Tin (correct)

Rice

Palm oil

What event significantly contributed to the growth of Malaysia's manufacturing sector in the early 1970s?

The establishment of the textile industry

The introduction of rubber

The depletion of tin resources

The opening of export processing zones (correct)

Which sector became the leading contributor to Malaysia's GDP in the mid-1980s?

Manufacturing (correct)

Mining

Agriculture

Tourism

Which phase of industrial policy was marked by the reliance on tax-free incentives for exports?

Export-oriented trade regime Signup and view all the answers

What was a major factor contributing to the slowdown of the manufacturing sector in the late 1990s?

Asian Financial Crisis Signup and view all the answers

Which of the following countries contributed to the capital inflows into Malaysia in the 1970s?

Japan Signup and view all the answers

What significant change occurred in Malaysia's export commodities by the late 1970s?

Shift from rubber to palm oil Signup and view all the answers

Which industry was a main contributor to Malaysia's manufacturing sector until the 1990s?

Electric-electronics Signup and view all the answers

What was the primary goal of the import-substitution (IS) strategy in Malaysia during its first phase?

Generate employment and reduce imports Signup and view all the answers

Which industrial policy was introduced in Malaysia during the first phase of IS from 1958 to 1968?

Pioneer Industries Ordinance, 1958 Signup and view all the answers

In the second round of the IS regime, which industries were primarily focused on?

Heavy industries such as steel and automotive Signup and view all the answers

Why was tariff protection not extensively used during the first round of IS in the 1960s?

The government feared it would increase costs for domestic producers. Signup and view all the answers

Which policy instrument was introduced in Malaysia during the period of 1968-1980?

Investment Incentives Act, 196 Signup and view all the answers

What was a major characteristic of trade policies during the first round of IS in Malaysia?

Concentration on tax and subsidies only Signup and view all the answers

What was the aim of the second phase of EO1–IS1 from 1968 to 1980?

To integrate import-substitution with export-orientation Signup and view all the answers

Which of the following periods marked a shift from IS1 to IS2?

1980–1985 Signup and view all the answers

What was the average annual manufacturing growth rate from 1990-1994?

11.7% Signup and view all the answers

What was the contribution of manufacturing to GDP in 2009?

26.6% Signup and view all the answers

Which of the following factors contributed to the slowdown in manufacturing?

Labor shortages Signup and view all the answers

What trend occurred in average manufacturing growth from 2005-2009?

Growth decreased to 0.2% Signup and view all the answers

What is a reason for the decline in the manufacturing sector's contribution to GDP?

Rise of new competitive sites Signup and view all the answers

Which of the following statistics reflects a decline in manufacturing productivity?

Annual manufacturing growth rates Signup and view all the answers

What major change occurred in Malaysia's manufacturing growth between 2000 and 2009?

From expansion to significant slowdown Signup and view all the answers

What was a main reason for the low export shares during the first round of industrialization?

The industries were inefficient and unable to compete internationally. Signup and view all the answers

What has been a significant challenge for Malaysian manufacturing industries?

Ability to innovate within higher value-added segments Signup and view all the answers

When did the effective rate of protection (ERP) for manufacturing rise significantly?

From 25% in 1962 to 50% in 1966. Signup and view all the answers

What contributed to the manufacturing sector's growth in GDP from 1957 to 1969?

Higher tariffs and protective measures. Signup and view all the answers

What factor limited further industrial expansion by the early 1970s?

Small domestic market size. Signup and view all the answers

Which of the following was NOT a factor identified for low export shares during the first round of industrialization?

Direct competition from international markets. Signup and view all the answers

How much did the manufacturing sector grow on average per year during the 1960s?

10.2% Signup and view all the answers

What was established based on the recommendations of the World Bank mission in 1963?

Tariff Advisory Board and Federal Industrial Development Authority. Signup and view all the answers

What was one of the main objectives of implementing a more comprehensive tariff protection?

To stimulate new industries. Signup and view all the answers

Which of the following were characteristic of the heavy industries during the IS phase?

High capital intensity Signup and view all the answers

What was a reason for heavy industries performing poorly in the 1980s?

High cost of production relative to international standards Signup and view all the answers

What event prompted a major relocation of foreign direct investment (FDI) into South East Asia?

The Plaza Accord Signup and view all the answers

Which of the following strategies was included in the Industrial Master Plan (IMP)?

Prioritizing specific sub-sectors Signup and view all the answers

What was the purpose of extending tax relief for eligible companies under the new EO policy?

To incentivize reinvestment and exports Signup and view all the answers

What issue impacted the economy due to massive capital inflows during the EO regime?

Economic overheating Signup and view all the answers

Which of the following was NOT a protectionism policy under the IS regime?

Deregulation Signup and view all the answers

What did the lack of monitoring standards contribute to in the heavy industries during the IS phase?

Massive losses Signup and view all the answers

What was a significant policy shift in Malaysia during the 1970-1980 decade?

Promotion of export orientation Signup and view all the answers

What was included in the Investment Incentives Act of 1968 to attract foreign firms?

Tax holidays and tariff exemptions for exporting firms Signup and view all the answers

Which of the following was NOT an incentive provided during the First Round of EO Regime?

Import barriers for local products Signup and view all the answers

What was a key feature of the 'Look East Policy' in Malaysia?

Focus on discipline in work Signup and view all the answers

Which industries were promoted during the Second Round of IS Regime?

Automobile assembly, steel mills, and petrochemicals Signup and view all the answers

How were tariffs and quotas utilized during the Second Round of IS Regime?

They were raised or maintained to promote IS policy Signup and view all the answers

What was one of the labor regulations during the First Round of EO Regime?

Trade unions were not allowed until 1989 Signup and view all the answers

What establishment was incorporated to lead the development of heavy industry in Malaysia?

Heavy Industries Corporation of Malaysia (HICOM) Signup and view all the answers

Study Notes

Malaysian Economy - ECON 3010 - Topic 5: The Industrial Sector

Malaysia's economy transitioned to a primary commodity exporter during British colonialism
British involvement started in Perak in 1874, driven by tin mining and exports
Rubber became a major export in the early 20th century
Tin and rubber dominated Malaysian exports until the 1970s
Tin resources depleted and rubber replanted with oil palm reduced exports by the late 1970s
Industrialization policy initiated in 1958, but manufacturing and employment growth were slow
Significant growth happened following the establishment of export processing zones in 1972
Tax-free incentives in export processing zones fostered rapid manufacturing growth from the early 1970s
Manufacturing became the leading contributor to Malaysia's GDP in the mid-1980s
Malaysia received large capital inflows from the US, Europe, and Japan since the mid-1970s
The rise of Asian Tigers (e.g., Hong Kong, Taiwan, South Korea, Singapore) contributed to even higher capital inflows
Increased capital inflows helped Malaysia become a major exporter of electronic-electric goods
The textile and clothing industries were also key contributors to Malaysian manufacturing until the 1990s
Manufacturing sector began to slow down in the late 1990s due to factors like the Asian Financial Crisis, loss of competitiveness, and ineffective government policies
Malaysia experienced four major phases of industrialization between 1968 and 2010
These phases involved differing trade orientations and policy instruments

Phases of Industrial Policy

Import Substitution (IS) Strategies: Aimed at attracting investors, generating employment, and reducing imports by developing domestic industries to serve the domestic market.

  - First round (1958–mid-1960s): Focused on developing light industries, food, and clothing; tariff protection was not extensively used.  Concerns about deterring imports and impacting rubber and tin producers, as well as government reluctance to appear pro-Chinese business.  The World Bank's 1963 mission prompted the establishment of the Tariff Advisory Board (TAB) and the Federal Industrial Development Authority (FIDA). Limited tax incentives and non-existent non-tariff barriers.

  - Second round (early 1980s–1985): Focused on developing heavy industries; tariff protection increased. Supported by measures, such as the formation of the Heavy Industries Corporation of Malaysia (HICOM).

Export Orientation (EO) Strategies: Aimed at boosting the manufacturing sector to compete globally, driven by large capital inflows and the success of nations like Japan and South Korea, also promoted by international organizations like the World Bank and UNIDO.

  - First round (1970s–1980s): Supported through the Investment Incentives Act in 1968 and Free Trade Zones established in 1972. This included tax holidays, tariffs, and targeted recruitment of MNC.

  - Second round (1985–2010):  The Industrial Master Plan (IMP) prioritized specific subsectors like food processing, electrical machinery and directed investments. This era also saw the consolidation of fiscal incentives and an emphasis on R&D activities

From Expansion to Slowdown

Manufacturing industries struggle to achieve higher value-added segments within the value chain
Average annual manufacturing growth decreased significantly from 11.7% (1990-1994) to 0.2% (2005-2009)
Manufacturing's contribution to GDP also declined from 30.9% in 2000 to 26.6% in 2009

Deindustrialization Explanations

Factors like reduced R&D expenditure in Malaysia compared to other Asian economies are considered possible contributors to deindustrialization.
The growth of researchers and engineers per million population differ substantially between developed countries and Malaysia.

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Description

Explore the key developments in Malaysia's industrial sector from colonial times to the rise of manufacturing. This quiz covers major export goods like tin and rubber, along with significant policies that led to industrial growth. Test your understanding of the economic transitions that shaped Malaysia's GDP.

Malaysian Economy - ECON 3010 - Topic 5

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