Industrialization in Malaysia

by Rokiah Alavi

Did the 'infant industries' of the 1960s ever grow up? Is the scepticism surrounding import-substitution (IS) strategies justified? Import-substitution strategy enjoyed its heyday in the 1970s but has been largely discredited and replaced by free-market policies in the 1980s. However, it has been recently acknowledged that some of the most successful growth economies in the Pacific Rim combined protectionist import-substituting industry (ISI) policies with export-orientated policies. A systematic rethinking of the relationship between import substituting and export-orientated industrialisation strategies is provided by this study using direct price comparisons to estimate the effective rate of protection (ERP), an examination of the dynamic performance of infant industries using total factor productivity growth (TFPG) and domestic resource cost (DRC), and a comparison of the experience with the case of South Korea.