THE IMPACT OF THE LIBERAL EQUITY POLICY ON THE PATTERN OF INVESTMENT OWNERSHIP IN THE INDUSTRIAL MANUFACTURING SECTOR IN MALAYSIA

Since the export-oriented industrialisation strategy was introduced, foreign direct investment (FDI) has been identified as an important mechanism in the development of the industry in this country. In an effort to attract foreign investors, the government has introduced a range of financial and non- financial incentives and regulatory aspects which are much more liberal to induce foreign investors to set up their production activities in this country. The participation of foreign capital in the industrial manufacturing sector is increasingly important since the introduction of the Pioneer Industries Ordinance in 1958, followed by the Investment Incentives Act 1968 and the Free Trade Zone Act in 1971. Permission was granted to foreign ownership of export-oriented investment projects, including cases with 100% foreign equity, if the company exports are at least 80%. However, the Liberal Equity Policy, which became effective on 17 June 2003, permitted 100% foreign equity ownership to all investments in new projects and additional projects or diversification (expansion/diversification) without taking into account the level of exports of these companies. Liberalisation in terms of investment ownership has major implications on the status of ownership in the industrial sector of this country and the benefits and advantages accrued from foreign companies as well as their impact on the development of local industry. This article will discuss the impact of Liberal Equity Policy on ownership patterns in the industrial manufacturing sector and the implications of this liberal policy on the development of the industrial sector of the country and the achievement of national development policies as the country moves towards becoming an advanced industrial country. Based on the statistical data obtained from the Malaysian Industrial Development Authority (MIDA), it clearly shows that there has been a marked increase in foreign-owned investments as a whole in the industrial sector, particularly in the electrical and electronic industry sector since the early 1990 s.