Question

discuss the role of government policy in promoting or retarding economic growth in one of the following “development states” of east or south-east Asia: South Korea, Indonesia, Malaysia (1000 words with reference)

Answer 1

Role of government policy in promoting rhe economic growth of Malaysia.

Malaysia has today become an export-driven economy spurred by high technology, knowledge based and capital intensive industries. The market oriented economy and government policies that maintain a business environment with opportunities for growth and profits have made the country a highly competitive manufacturing and export base. Multinationals have been at the forefront in this process and working hand in hand with the government through a process known as ‘hand holding’. As firms move up the value chain, their requirements change and to remain competitive in a global environment, the government has had to change its policies and approach to ensure that this objective is not compromised. Based on this evidence we conclude that for successful industrialization, developing countries will require flexible governments that facilitate the development of the private sector. This approach will generate greater benefits than would otherwise occur if developing countries were to adopt either government or market based development trajectories.ae

its independence in 1957, the new Federation of Malaya’s government inherited an economy dependent upon rubber and tin production and export. Furthermore, these industries were dominated by British corporations. Policies were immediately adopted to diversify the economy by promoting and developing other activities. Poverty was widespread (up to 49% in 1970) with indigenous Malays (“Bumiputera”, meaning ‘sons of the soil’) holding less than 3% of the national economy.

In 1975 the government created incentives to expand large-scale manufacturing and energy-intensive industries. The Heavy Industries Corporation of Malaysia (HICOM), for example, was formed to assist in the manufacture of pig-iron, aluminium die casting, pulp and paper, steel, cement, motorcycle and heavy engineering. At the same time, export incentives were initiated.

The government is in the tenth of its five year development plans. In addition to State-Owned Enterprises in water, power, rail, bus and air travel, telecoms, broadcasting, banking and oil and gas (Petronas is the 75^th largest company in the world, contributing 45% of government revenue), the direction of economic development is significantly influenced by state-backed Sovereign Wealth Funds (SWF)and financial institutions tasked with nurturing high value manufacturing and services. The largest of these is Khazanah Nasional Berhad Ltd whilst others include the Employees Provident Fund, Malaysia Development Berhad and other development financial institutions.

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