Malaysian Development Experience: Lessons for Developing Countries

This paper describes the policies pursued by Malaysia in her attempt to attain growth with equity, which she has achieved relatively well. These include education provision and employment creation, export-oriented industrialisation, rural development, and restructuring equity ownership and asset accumulation. Her success is indicated by her structural transformation from an agricultural to an industrial economy as well as improved quality of life and income distribution with low poverty incidence. The positive lessons that could be drawn for other developing countries with similar background comprise, first, emphasising agricultural development through large allocations that enabled Malaysia to a leading producer of rubber and palm oil which helped finance the industrial sector. Second, despite its weaknesses, the New Economic Policy was successful in promoting growth and equity and maintaining racial harmony and political stability. The latter, together with trade-friendly policies, investment in infrastructure, human capital development supported the policy of promoting growth through foreign direct investment. Fourth is the importance of literacy and widespread access to education. Finally, there were social safety nets to assist the less fortunate. And the most important of the pitfalls to be avoided is state-government-party collusion that promoted rent-seeking behaviour.