Development and Modern Industrial Policy in Practice

Development and Modern Industrial Policy in Practice

Issues and Country Experiences

Edited by Jesus Felipe

Development and Modern Industrial Policy in Practice provides an up-to-date analysis of industrial policy. Modern industrial policy refers to the set of actions and strategies used to favor the more dynamic sectors of the economy. A key aspect of modern industrial policy is embedding private initiative in a framework of public action to encourage diversification, upgrading, and technological dynamism to achieve development in the twenty-first century. The book reviews key questions that policymakers ask about industrial policy, such as: who selects sectors; what is the rationale for sector selection; what are the main tools to promote sectors; what is the role of human capital; and what are the mechanisms for monitoring and evaluation? Expert contributors discuss how to undertake industrial policy effectively and examine the experiences of Australia, the EU, the Republic of Korea, Malaysia, and the US.

Chapter 12: Diversification and industrial policies in Malaysia

Tham Siew Yean

Subjects: economics and finance, industrial economics, industrial organisation, politics and public policy, public policy, social policy and sociology, labour policy

Extract

Since independence in 1957, the economic structure of Malaysia has changed significantly. At that time, Malaysia was a rubber and tin producing economy. Today, it is a vibrant producer and exporter of manufactured goods and services. In 1960, agriculture contributed 60% of gross domestic product (GDP), compared with just 7.3% in 2012 (Leete 2007). Following a similar pattern, the share of agricultural employment in total employment declined continuously over this period, and stood at 11% in 2012. Amid that decline, manufacturing value added has grown steadily, accounting for 25% of GDP in 2012 from just 9% in 1960, while the share of manufacturing employment in total employment was 29% in 2012. Malaysia’s services sector, meanwhile, is now the largest, representing 55% of GDP and 54% of total employment in 2012.

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