Malaysia: Industrial success and the role of the government

This paper deals with the debate on industrial policy in Malaysian industrialization. This was recently led by exports, mainly of electrical and electronic products by multinationals. Domestic‐oriented industrialization was promoted by moderate protection and state ownership of heavy industry. The government is now withdrawing from direct ownership, shifting to an East‐Asian‐style targeting of activities for promotion and concentrating on support measures. It is concluded that the neo‐liberal case that only market friendly policies were responsible for Malaysia's success is unwarranted. It notes the deficiencies and benefits of industrial policy, and makes a case for interventions in the future.