Future of resource-based industries

Abstract

Ever since independence, the Malaysian economy has undergone rapid structural transformation, evolving from a purely primary commodity producer, solely dependent on tin and rubber, which has been regarded as the twin pillars of the Malaysian economy (accounting for 70% of total export earnings and 36% of total employment in 1957), to a more diversified economy, broadening its industrial base. In the ensuing years, primary agricultural production witnessed within the sector itself, a gradual diversification into other export crops like oil palm and cocoa. The ability to foresee the commercial value of oil palm beyond its initial purpose of just an ornamental plant goes to show the innovative spirit of the planners. The initial move towards an industrialisation policy was more of an effort at import substitution relying on rudimentary attempts to meet the domestic market demand for food, particularly in canned food and beverages. By the late 60s, questions were raised as to the viability of this strategy in view of the small domestic market. Moreover, such a strategy was also unable to absorb the rapidly expanding labour force. Hence, in 1968, the focus of policy shifted to export-led growth. In line with this strategy, the Investment Incentives Act, 1968, which broadened the scope for incentives in industrial development was introduced.