Manufacturing industries in Malaya.

By the 1920's, the Malayan economy had become dependent on rubber and tin for its prosperity. The dangers of specializing in two export commodities that were subject to violent price fluctuations were soon recognized. Industrialization was advocated as a means of diversifying the economy and reducing the dependence on rubber and tin. A few primary manufacturing industries to process rubber, tin, pineapples, tapioca, etc., were successfully established. But the early efforts to establish secondary manufacturing industries were ineffective in the face of severe competition from Japan, Indonesia, and Philippines. The depression of the 1930's further hampered the establishment of secondary manufacturing industries. At the outbreak of war, the country's industrial possibilities were more systematically and thoroughly investigated and it was concluded that industrialization of the country was impractical. As recently as 1954, a report by the IBRD on the Economic Development of Malaya stressed that apart from Major technological or geological discoveries, the possibilities of establishing large new industries are limited; and, concluded that Malaya's industrial development in the future, as in the past, was likely to follow the pattern of individually small advances over a wide range of industries. This pessimistic forecast about Malaya's industrial possibilities was confirmed by the slow rate of growth of the manufacturing sector between 1947 and 1957. But, since 1959, the manufacturing sector has expanded very rapidly. Besides, most of the expansion did not result from the expansion of existing primary manufacturing industries or the growth of extensions of primary manufacturing industries (as the IBRD report had expected); but, from the rapid expansion of the secondary manufacturing sector, and the growth of several, relatively large, new industries. In this thesis, the causes of this sudden spurt in the expansion of secondary manufacturing industries are investigated. In Chapter I, a more detailed introduction to the problem is provided. In Chapter II, the structure and growth of the manufacturing sector are discussed. In Chapter III, the problems of measuring productivity in Malayan manufacturing industries are discussed, and a crude measure of labour productivity computed. The economics of expansion are discussed in Chapter IV and policies and prospects are reviewed in Chapter V. The main conclusions that emerge from this inquiry into the growth of secondary manufacturing industries are: (1) The rapid expansion of secondary manufacturing industries were caused by (i) a decline in the price of Malaya's agricultural exports favouring the production of non-agricultural goods for the domestic market; and (ii) the implementation of various Government policies designed to encourage the development of the secondary manufacturing sector. (2) The various incentives introduced by the Government encouraged the capital absorbing industries to expand faster than the labour absorbing industries. (3) The three main objectives of industrialization--industrial diversification, expansion of employment opportunities, and raising the per capita income--were all achieved to some extent. But, the non-agricultural sector must continue to grow faster than the agricultural sector for many more years if the country is to be transformed into an industrial economy. In order to expand employment in the manufacturing sector more rapidly, the growth of labour absorbing industries should be encouraged. (4) Even countries with little domestic supply of capital and industrial raw materials can successfully develop secondary manufacturing industries provided the country is equipped with an "adequate" economic infrastructure; "educated" workers who can be rapidly trained to acquire industrial skills and be subject to industrial discipline; and, the country is willing to encourage the flow of foreign capital to take advantage of the abundant supply of labour. (5) Immediate prospects for further development of secondary manufacturing industries in Malaya are good.Arts, Faculty ofVancouver School of EconomicsGraduat