2 isolation from foreign competition."

1. Bela Balassa, ’G-rowth Strategies in Semi-Industrial C o u n t r i e s ’, Quarterly Journal of E c o n o m i c s . Peb.

1970. No. 1. P. 28.

2. Malaysia, Pirst Malaysia P l a n , 1965-70, Government Printers, Ruala Lumpur^ T965T P. 134.

The Government also concluded that it had no %i

intention of restricting imports which explains why tariffs have remained low*

Provision of industrial research facilities to improve the methods of production of local industries is yet another measure adopted in industrial promotion, A sum of $5 million was allotted in the Pirst Malaysia Plan for the establishment of a National Institute of Scientific and Industrial Research (NISIR.) to provide all industrial enterprises with scientific and technical •support. It is also equipped to study problems associated

with industrial processing of locally available raw

materials. In addition to NISIR, the Standards Institute of Malaysia (SIM) was set up to advise industries on

standards of production. It functions as a body for quality control.

lastly, the Government argued that any programme of industrialisation required a labour force trained to meet industrial requirements. This important element

brings to the fore-front the measures taken to restructure the education system to meet the man-power requirements for the operation of modern industry. It started in

1961 when ^ 277.4 million of public expenditure was allocated towards education and training.

Universal free primary education was introduced in that year in West Malaysia, followed by the introduc­ tion of comprehensive education. To ensure that

vocational, technical and scientific facilities are available, in 1969* with the assistance .of World Bankj agricultural, vocational and technical schools were

6o

established. In addition, two Industrial Training Institutes, one in Kuala Lumpur and a second in Penang were set up to provide training tailored to specific

industrial skills.

The a i m is to indicate movement away from the literary towards an education with a technical bias.

fo r purposes of administrative co-ordination the federal Industrial Development Authority (PIDA) was set up in 1967* It was also vested with the powers of implementing all the promotional measures outlined, w i t h the assistance of the Ministry of Commerce and

I n d u s t r y .

This summarises briefly the promotional measures based on the free enterprise strategy of industrializa- i tion. In the next chapter an attempt is made to

evaluate the success of the policies by studying the ■changing pattern of industrial activity.

CHAPTER III

THE INITIAL PHASE OP INDUSTRIAL PEVELOPf.BIPF 1957-1958

3.1 Definitions

It is appropriate here to define the term •manufacturing1 as applied in the Malaysian context. The definition of manufacturing as-used in the West Malaysian Census of Manufacturing Industries followed that of the International Standard Industrial Classifi­

cation (ISIC) of all economic activities published in 1958 by the Statistical Office of the United Rations.

“Manufacturing is defined as the mechanical or chemical transformation of inorganic or organic sub­ stances into new products whether the work is performed by power-driven mechines or by hand, whether it is done in the factory or in the w o r k e r ’s home, and whether the products are sold at wholesale or retail. The assembly of the component parts of manufactured products is

considered manufacturing except in cases where the

activity is appropriately classified under construction. Establishments primarily engaged in repair works are

included, and classified according to the type of product

■ ^ 1

re pa ire a .ri

1. West Malaysia, Department of Statistics, Census of Manufacturing Industries West M a l a y s i a , 1 *9d8." fl T0.

62

. Unlike the IS10 and that of the West Malaysian Census, the National Accounts include all processing of agricultural commodities under the term manufacturing. Thus, in all the National Accounts estimates of domestic product hy industrial origin, oil palm fruit processing w h i c h is undertaken largely on estates is included

under 'chemicals'. Rubber milling and processing which is performed, hoth on and off estates and smallholdings is given a separate heading within manufacturing and it is not grouped together under 'rubber products'. Con­ versely, in the census and the ISIG only that part of

rubber processing and milling done off estates or

holdings is included under manufacturing. It is given a separate heading as 'processing of estate-type agri­

cultural products in factories off estates.' This activity includes tea factories off estates, coffee bean hulling off estates, rubber remilling and latex processing off estates, rubber smoke houses off estates, and crude coconut oil mills off estates ana copra kilns

off estates. Similar activities performed on estates are classified as agricultural activity.

The reporting or statistical unit adopted in this thesis, as in the Census,is the 'e s t a b l i s h m e n t ’, conforming to the " United nations definition of an establishment as !a single economic unit w h i c h engages under a single ownership or control, that is, under a single legal entity, in one, or predominantly one kind of economic activity at a single physical l o c a t i o n . '

This definition is specially useful in a geographical analysis, where industry "breakdown and spatial dis- tribution is an important aspect of the study*

The Industrial classification adopted in this research is taken from the census. It is the Malaysian Industrial Classification (MIC) w h i c h generally follows the ISIC. In it 'industry' is defined as a group of economic establishments all of which are primarily

■ engaged in the same kind of activity or in producing the same kind of products. The four levels of the MIC are discussed in Appendix A3*1* In this thesis the

individual industrial activities of w h i c h one hundred and seventy-nine different types were known to exist in

1968 are grouped into five main categories according to , the nature of the products and processes. These are

elaborated upon in the Appendix A3o2. These five groups .are termed: elementary resource-based industry, advanced resource-based industry, consumer non-durable Indus try, intermediate industry and capital goods Industry.

Having defined the term manufacturing as it would be applied throughout this thesis, an attempt is made to evaluate the changes that have occurred in the manufacturing sector since independence, at the national and regional levels.

3 o?. The Growth Performance of the Manufacturing Sector 1957 to 1968

In 1957 the industrial sector as a whole

64

(GDP) at current prices. The share of the manufacturing sector was 8.4 percent. The most dominant contributors to GDP were services and agriculture.

The very insignificant contribution of the manufacturing sector as referred to earlier was a reflection of the dominance of export-oriented agri- cultural economy, a feature characteristic of most developing countries. But what was most noticeable was that until 1960 the position of the manufacturing

sector remained almost unchanged,as shown in Table 3*1* This situation existed despite the acclaimed policy

of industrialization.

Generally among most newly independent countries a progressive increase in the share of manufacturing

has been observed arising from an improvement in the per capita income which in turn stimulated a change ■in demand in favour of non-foodstuffs, thus,creating a

market w hich enabled import-substitution of a wide range 1

of commodities to replace imports.

In West Malaysia, 'contrary to this trend, the inci’ease in the share of manufacturing until 1960 was least spectacular although the institutional and

2

attitudinal factors conducive to the growth of modern industries existed, especially in the west coast States.

1. Arguments for import-substitution have been summarised by P.B. Clark in Clark, P.B., Planning Import Substitution, North-rlolland Publisning Comoany Amsterdam. London 1970 P. 20-25.

2. I.B.R.D., fReport on Economic Development of M a l a y a , John~HopFin Press, Baltimore^ T955 P. 20.