Redistribution with Growth? The Dilemmas of State-Sponsored Economic Development in Malaysia
Author(s)
Bowie, Alasdair
Abstract
Countries of the developing world have watched with envy as the newly industrialized countries (NICs) of East Asia have transformed themselves into modern industrial states over the past twenty years. However, major differences of culture, size, resource endowments, etc, separate the typical Third World state from these small-state NICs. Addressing the question of how such differences might affect the outcome of NIC-inspired industrialization policies when applied to other developing countries, the impact of two factors, communal divisiveness and resource wealth, on attempts to formulate and implement an industrial development strategy for Malaysia is explored. Abundant natural resources, including petroleum and natural gas, tend to hinder rather than promote the process of economic transformation. In the presence of major communal divisions along ethnic lines and the absence of any immediate imperative to industrialize, developmental expenditures are used to satisfy distributional demands rather than industrialization goals. A “high level trap” of relative prosperity combined with continued vulnerability to external shocks and less than optimal long-run growth is the result.
