Introduction
Strategies for industrialization
Industrialization is characterized by specialization and division of labor, and involving the application of technology and mechanical power to improve production process.
i. import substitution
• It was embarked in 1960s for two main reasons. First, the rapid population growth and second, the need for diversification in the economy.
• Population growth by 3.3%, agriculture sector alone insufficient to absorb the increasing work force.
• Need to diversify to eliminate the total dependence on rubber and tin.
• Tariff advisory board was established to protect domestic market.
• Benefited by resource-based industries such as tobacco, furniture, rubber products, wood products, food, beverages, wearing apparels, printing & publishing, plastics, leather products, and electrical machinery.
• Serious shortcomings. First, the limitation of import substitution lies in the efficiency of the industry and the size of the market. Second, the small domestic market could not sustain the long term requirements of the strategy. Third, the objectives of the strategy were not fully achieved.
ii. Export orientation
• Introduction of Investment Incentives Act in 1968. This Act incorporating tax holidays to firms granted pioneer status, and additional tax holiday based on the nature of the product, the location of the firm, and the content of the local raw materials.
• Abolished Tariff Advisory Board and replaced with Federal Industrial Authority.
• Gives incentives rather than imposing controls, and measures
• Gives incentives to production for both domestic and export markets.
• Easier to detect effectiveness of export promotion policies because can be easily observed.
• Export promotion gives industries the opportunities to enlarge their markets and achieve greater economies of scale.
• Force industries to compete in the international markets.
• Success of this export oriented policies can be attributed to: 1. industries were simple and light industries. 2. Mainly labor intensive & Malaysia had abundant labor supply. 3. Use simple technology. 4. Use Malaysia abundant natural resources.
• Investment Incentive Act, Free Trade Zone Act,
The foundation of the AEC is the ASEAN Free Trade Area (AFTA), a common external preferential tariff scheme to promote the free flow of goods within ASEAN.
The ASEAN Free Trade Area (AFTA) is an agreement by the member nations of ASEAN concerning local manufacturing in all ASEAN countries. The AFTA agreement was signed on 28 January 1992 in Singapore.
When the AFTA agreement was originally signed, ASEAN had six members, namely, Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. Vietnam joined in 1995, Laos and Myanmar in 1997, and Cambodia in 1999.
The latecomers have not fully met the AFTA's obligations, but they are officially considered part of the AFTA as they were required to sign the agreement upon entry into ASEAN, and were given longer time frames in which to meet AFTA's tariff reduction obligations.
• Industrial Master Plan
• Look East and Privatisation Policy
Look East Policy
• Referred to the emulation of rapidly developing countries of the East- Japan, Korea & Taiwan..
• Important element of the policy: diligence and discipline in work, loyalty to the nation, group orientation, increasing national productivity, quality, upgrading efficiency, cutting cut waste and narrowing the gap between executives and workers.
• Heavy industry was emphasized due to first, the nation needed to reduce its dependence on imports of capital and intermediate goods to sustain the growth process. Second, it would generate a host of ancillary supporting industries which would promote immense forward & backward linkages in the manufacturing sector. Finally, it was vital for economic success.
• Emphasis on four areas:
i. expanding infrastructure facilities.
ii. Upgrading the quality of the workforce.
iii. Improving technology.
iv. Increasing investment in R & D.
Privatization program
In Malaysia, two main policies that are directly associated with privatization of public entities are the Privatization Policy (Dasar Pensawastaan Malaysia) and Malaysia Incorporated Policy (dasar Pensyarikatan Malaysia). Both policies were instituted in 1983.
The privatization policy
• To procure positive changes to the organization, management and the performance of the public enterprises that previously rested with the government.
• To reflect the government‘s commitment to reduce direct engagement in economics activities, reduce the level and the scope of public spending and allow market forces to govern the economy.
• It means the transfer of 3 components, namely government management responsibilities, assets (together with or without liabilities) or right to use the assets, and personnel.
Objectives of privatization
• To relieve the government‘s financial burden.
- the funds saved can be used to finance other economic development projects, concentrate on traditional functions of maintaining law and order.
• To improve work efficiency and productivity
• To facilitate economic growth
• Reduce the size and presence of the public sector in the economy
• To meet the new Economic policy (NEP)
The modes of privatization in Malaysia are as follows.
1. Sale of Equity
This method involves the transfer of three organization-related components, namely management responsibility, assets (together with or without liabilities) and personnel. It can be partial or complete sale of shareholdings in state-owned public company. Examples are Telekom, TNB, Proton.
2. Sale of assets
It involves the transfer of one, two or even all three components. For example, the case of quarries in Selangor, Perak, and Penang.
3. Lease of assets
It involves the transfer of rights to use assets for a specific period of time, for a specific amount of payment. For example, the lease of facilities to Malysiaan Airport Bhd. And Malaysian Railway (KTM)
4. Management Contract
Some government services were contracted out to the private sector. For instance, parking services and garbage disposal.
5. Management-Buy-Out (MBO)
It involves top management personnel of a company taking over the company that they are initially employed in.
6. Build-Operate-Transfer (BOT)
It entails the private sector constructing a facility using its own funds, operating it for a period known as a concession period and transferring it to the government at the end of the period.
7. Build-Operate (BO)
The “BO” is similar to the “BOT” method. However, BO does not involve the transfer of the facility to the government.
8. Build-Transfer
It is to accommodate innovative recommendations and requirements submitted by private sector.
The Malaysia Incorporated Policy (Dasar Pensyarikatan Malaysia)
It was launched on February 25, 1983. The main aim is to establish and strengthen cooperation that would benefit both the private and public sectors.
Several steps were taken to implement the policy.
• To reduce misunderstanding among private and public sectors.
• Both sectors should have one main goal, which is, to achieve national objectives.
• Both industries are responsible to promote and maintain a good image for the country.
• To change the rules and work procedures which are not appropriate in the public sector. The private sector should take the initiative to recommend suitable work procedures in the public sector.
• To enhance the relationship between government ministries, departments and statutory bodies.
The performance and accomplishments of privatization
• First, easing the government financial burden. For the period 1991 to 1995, the government saved RM51.59 billion on capital expenditure.
• Second, contributing efficiency and productivity of the private sector. Example, Telekom, the return on assets increases from 4.0 before privatization to 9.3 after privatization.
• Third, Malaysian companies that collaborated with foreign equity holders or management contracts will have the opportunities to be exposed to new technologies, expertise and skills that will improve production. Example, North-South Highway where Malaysians learn to adopt and manage new technologies in construction and transportation. The completed highway saves time and cost of transportation, which led to an increase in manufacturing activities.
• Fourth, it reduces the size and presence of the public sector in the economy. Between period 1991 to 1995, there were 204 public entities were privatized, hence, allowing the economy to be increasingly led by private sector.
• Finally, it encouraged Bumiputra participation in the economy, in line with the NEP.
Strategies that have been taken to implement Bumiputra participation are as follows.
• Implementing vendor-developemnt programs to develop SMI. For example, Proton, known as the “anchor company”, has established the Component Scheme program to source automobile parts from 64 SMI vendors.
• Imposing a condition that at least 30% of contract works of privatized projects are reserved for Bumiputra.
Introduction
Strategies for industrialization
Industrialization is characterized by specialization and division of labor, and involving the application of technology and mechanical power to improve production process.
i. import substitution
• It was embarked in 1960s for two main reasons. First, the rapid population growth and second, the need for diversification in the economy.
• Population growth by 3.3%, agriculture sector alone insufficient to absorb the increasing work force.
• Need to diversify to eliminate the total dependence on rubber and tin.
• Tariff advisory board was established to protect domestic market.
• Benefited by resource-based industries such as tobacco, furniture, rubber products, wood products, food, beverages, wearing apparels, printing & publishing, plastics, leather products, and electrical machinery.
• Serious shortcomings. First, the limitation of import substitution lies in the efficiency of the industry and the size of the market. Second, the small domestic market could not sustain the long term requirements of the strategy. Third, the objectives of the strategy were not fully achieved.
ii. Export orientation
• Introduction of Investment Incentives Act in 1968. This Act incorporating tax holidays to firms granted pioneer status, and additional tax holiday based on the nature of the product, the location of the firm, and the content of the local raw materials.
• Abolished Tariff Advisory Board and replaced with Federal Industrial Authority.
• Gives incentives rather than imposing controls, and measures
• Gives incentives to production for both domestic and export markets.
• Easier to detect effectiveness of export promotion policies because can be easily observed.
• Export promotion gives industries the opportunities to enlarge their markets and achieve greater economies of scale.
• Force industries to compete in the international markets.
• Success of this export oriented policies can be attributed to: 1. industries were simple and light industries. 2. Mainly labor intensive & Malaysia had abundant labor supply. 3. Use simple technology. 4. Use Malaysia abundant natural resources.
• Investment Incentive Act, Free Trade Zone Act,
The foundation of the AEC is the ASEAN Free Trade Area (AFTA), a common external preferential tariff scheme to promote the free flow of goods within ASEAN.
The ASEAN Free Trade Area (AFTA) is an agreement by the member nations of ASEAN concerning local manufacturing in all ASEAN countries. The AFTA agreement was signed on 28 January 1992 in Singapore.
When the AFTA agreement was originally signed, ASEAN had six members, namely, Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. Vietnam joined in 1995, Laos and Myanmar in 1997, and Cambodia in 1999.
The latecomers have not fully met the AFTA's obligations, but they are officially considered part of the AFTA as they were required to sign the agreement upon entry into ASEAN, and were given longer time frames in which to meet AFTA's tariff reduction obligations.
• Industrial Master Plan
• Look East and Privatisation Policy
Look East Policy
• Referred to the emulation of rapidly developing countries of the East- Japan, Korea & Taiwan..
• Important element of the policy: diligence and discipline in work, loyalty to the nation, group orientation, increasing national productivity, quality, upgrading efficiency, cutting cut waste and narrowing the gap between executives and workers.
• Heavy industry was emphasized due to first, the nation needed to reduce its dependence on imports of capital and intermediate goods to sustain the growth process. Second, it would generate a host of ancillary supporting industries which would promote immense forward & backward linkages in the manufacturing sector. Finally, it was vital for economic success.
• Emphasis on four areas:
i. expanding infrastructure facilities.
ii. Upgrading the quality of the workforce.
iii. Improving technology.
iv. Increasing investment in R & D.
Privatization program
In Malaysia, two main policies that are directly associated with privatization of public entities are the Privatization Policy (Dasar Pensawastaan Malaysia) and Malaysia Incorporated Policy (dasar Pensyarikatan Malaysia). Both policies were instituted in 1983.
The privatization policy
• To procure positive changes to the organization, management and the performance of the public enterprises that previously rested with the government.
• To reflect the government‘s commitment to reduce direct engagement in economics activities, reduce the level and the scope of public spending and allow market forces to govern the economy.
• It means the transfer of 3 components, namely government management responsibilities, assets (together with or without liabilities) or right to use the assets, and personnel.
Objectives of privatization
• To relieve the government‘s financial burden.
- the funds saved can be used to finance other economic development projects, concentrate on traditional functions of maintaining law and order.
• To improve work efficiency and productivity
• To facilitate economic growth
• Reduce the size and presence of the public sector in the economy
• To meet the new Economic policy (NEP)
The modes of privatization in Malaysia are as follows.
1. Sale of Equity
This method involves the transfer of three organization-related components, namely management responsibility, assets (together with or without liabilities) and personnel. It can be partial or complete sale of shareholdings in state-owned public company. Examples are Telekom, TNB, Proton.
2. Sale of assets
It involves the transfer of one, two or even all three components. For example, the case of quarries in Selangor, Perak, and Penang.
3. Lease of assets
It involves the transfer of rights to use assets for a specific period of time, for a specific amount of payment. For example, the lease of facilities to Malysiaan Airport Bhd. And Malaysian Railway (KTM)
4. Management Contract
Some government services were contracted out to the private sector. For instance, parking services and garbage disposal.
5. Management-Buy-Out (MBO)
It involves top management personnel of a company taking over the company that they are initially employed in.
6. Build-Operate-Transfer (BOT)
It entails the private sector constructing a facility using its own funds, operating it for a period known as a concession period and transferring it to the government at the end of the period.
7. Build-Operate (BO)
The “BO” is similar to the “BOT” method. However, BO does not involve the transfer of the facility to the government.
8. Build-Transfer
It is to accommodate innovative recommendations and requirements submitted by private sector.
The Malaysia Incorporated Policy (Dasar Pensyarikatan Malaysia)
It was launched on February 25, 1983. The main aim is to establish and strengthen cooperation that would benefit both the private and public sectors.
Several steps were taken to implement the policy.
• To reduce misunderstanding among private and public sectors.
• Both sectors should have one main goal, which is, to achieve national objectives.
• Both industries are responsible to promote and maintain a good image for the country.
• To change the rules and work procedures which are not appropriate in the public sector. The private sector should take the initiative to recommend suitable work procedures in the public sector.
• To enhance the relationship between government ministries, departments and statutory bodies.
The performance and accomplishments of privatization
• First, easing the government financial burden. For the period 1991 to 1995, the government saved RM51.59 billion on capital expenditure.
• Second, contributing efficiency and productivity of the private sector. Example, Telekom, the return on assets increases from 4.0 before privatization to 9.3 after privatization.
• Third, Malaysian companies that collaborated with foreign equity holders or management contracts will have the opportunities to be exposed to new technologies, expertise and skills that will improve production. Example, North-South Highway where Malaysians learn to adopt and manage new technologies in construction and transportation. The completed highway saves time and cost of transportation, which led to an increase in manufacturing activities.
• Fourth, it reduces the size and presence of the public sector in the economy. Between period 1991 to 1995, there were 204 public entities were privatized, hence, allowing the economy to be increasingly led by private sector.
• Finally, it encouraged Bumiputra participation in the economy, in line with the NEP.
Strategies that have been taken to implement Bumiputra participation are as follows.
• Implementing vendor-developemnt programs to develop SMI. For example, Proton, known as the “anchor company”, has established the Component Scheme program to source automobile parts from 64 SMI vendors.
• Imposing a condition that at least 30% of contract works of privatized projects are reserved for Bumiputra.
Introduction
Strategies for industrialization
Industrialization is characterized by specialization and division of labor, and involving the application of technology and mechanical power to improve production process.
i. import substitution
• It was embarked in 1960s for two main reasons. First, the rapid population growth and second, the need for diversification in the economy.
• Population growth by 3.3%, agriculture sector alone insufficient to absorb the increasing work force.
• Need to diversify to eliminate the total dependence on rubber and tin.
• Tariff advisory board was established to protect domestic market.
• Benefited by resource-based industries such as tobacco, furniture, rubber products, wood products, food, beverages, wearing apparels, printing & publishing, plastics, leather products, and electrical machinery.
• Serious shortcomings. First, the limitation of import substitution lies in the efficiency of the industry and the size of the market. Second, the small domestic market could not sustain the long term requirements of the strategy. Third, the objectives of the strategy were not fully achieved.
ii. Export orientation
• Introduction of Investment Incentives Act in 1968. This Act incorporating tax holidays to firms granted pioneer status, and additional tax holiday based on the nature of the product, the location of the firm, and the content of the local raw materials.
• Abolished Tariff Advisory Board and replaced with Federal Industrial Authority.
• Gives incentives rather than imposing controls, and measures
• Gives incentives to production for both domestic and export markets.
• Easier to detect effectiveness of export promotion policies because can be easily observed.
• Export promotion gives industries the opportunities to enlarge their markets and achieve greater economies of scale.
• Force industries to compete in the international markets.
• Success of this export oriented policies can be attributed to: 1. industries were simple and light industries. 2. Mainly labor intensive & Malaysia had abundant labor supply. 3. Use simple technology. 4. Use Malaysia abundant natural resources.
• Investment Incentive Act, Free Trade Zone Act,
The foundation of the AEC is the ASEAN Free Trade Area (AFTA), a common external preferential tariff scheme to promote the free flow of goods within ASEAN.
The ASEAN Free Trade Area (AFTA) is an agreement by the member nations of ASEAN concerning local manufacturing in all ASEAN countries. The AFTA agreement was signed on 28 January 1992 in Singapore.
When the AFTA agreement was originally signed, ASEAN had six members, namely, Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. Vietnam joined in 1995, Laos and Myanmar in 1997, and Cambodia in 1999.
The latecomers have not fully met the AFTA's obligations, but they are officially considered part of the AFTA as they were required to sign the agreement upon entry into ASEAN, and were given longer time frames in which to meet AFTA's tariff reduction obligations.
• Industrial Master Plan
• Look East and Privatisation Policy
Look East Policy
• Referred to the emulation of rapidly developing countries of the East- Japan, Korea & Taiwan..
• Important element of the policy: diligence and discipline in work, loyalty to the nation, group orientation, increasing national productivity, quality, upgrading efficiency, cutting cut waste and narrowing the gap between executives and workers.
• Heavy industry was emphasized due to first, the nation needed to reduce its dependence on imports of capital and intermediate goods to sustain the growth process. Second, it would generate a host of ancillary supporting industries which would promote immense forward & backward linkages in the manufacturing sector. Finally, it was vital for economic success.
• Emphasis on four areas:
i. expanding infrastructure facilities.
ii. Upgrading the quality of the workforce.
iii. Improving technology.
iv. Increasing investment in R & D.
Privatization program
In Malaysia, two main policies that are directly associated with privatization of public entities are the Privatization Policy (Dasar Pensawastaan Malaysia) and Malaysia Incorporated Policy (dasar Pensyarikatan Malaysia). Both policies were instituted in 1983.
The privatization policy
• To procure positive changes to the organization, management and the performance of the public enterprises that previously rested with the government.
• To reflect the government‘s commitment to reduce direct engagement in economics activities, reduce the level and the scope of public spending and allow market forces to govern the economy.
• It means the transfer of 3 components, namely government management responsibilities, assets (together with or without liabilities) or right to use the assets, and personnel.
Objectives of privatization
• To relieve the government‘s financial burden.
- the funds saved can be used to finance other economic development projects, concentrate on traditional functions of maintaining law and order.
• To improve work efficiency and productivity
• To facilitate economic growth
• Reduce the size and presence of the public sector in the economy
• To meet the new Economic policy (NEP)
The modes of privatization in Malaysia are as follows.
1. Sale of Equity
This method involves the transfer of three organization-related components, namely management responsibility, assets (together with or without liabilities) and personnel. It can be partial or complete sale of shareholdings in state-owned public company. Examples are Telekom, TNB, Proton.
2. Sale of assets
It involves the transfer of one, two or even all three components. For example, the case of quarries in Selangor, Perak, and Penang.
3. Lease of assets
It involves the transfer of rights to use assets for a specific period of time, for a specific amount of payment. For example, the lease of facilities to Malysiaan Airport Bhd. And Malaysian Railway (KTM)
4. Management Contract
Some government services were contracted out to the private sector. For instance, parking services and garbage disposal.
5. Management-Buy-Out (MBO)
It involves top management personnel of a company taking over the company that they are initially employed in.
6. Build-Operate-Transfer (BOT)
It entails the private sector constructing a facility using its own funds, operating it for a period known as a concession period and transferring it to the government at the end of the period.
7. Build-Operate (BO)
The “BO” is similar to the “BOT” method. However, BO does not involve the transfer of the facility to the government.
8. Build-Transfer
It is to accommodate innovative recommendations and requirements submitted by private sector.
The Malaysia Incorporated Policy (Dasar Pensyarikatan Malaysia)
It was launched on February 25, 1983. The main aim is to establish and strengthen cooperation that would benefit both the private and public sectors.
Several steps were taken to implement the policy.
• To reduce misunderstanding among private and public sectors.
• Both sectors should have one main goal, which is, to achieve national objectives.
• Both industries are responsible to promote and maintain a good image for the country.
• To change the rules and work procedures which are not appropriate in the public sector. The private sector should take the initiative to recommend suitable work procedures in the public sector.
• To enhance the relationship between government ministries, departments and statutory bodies.
The performance and accomplishments of privatization
• First, easing the government financial burden. For the period 1991 to 1995, the government saved RM51.59 billion on capital expenditure.
• Second, contributing efficiency and productivity of the private sector. Example, Telekom, the return on assets increases from 4.0 before privatization to 9.3 after privatization.
• Third, Malaysian companies that collaborated with foreign equity holders or management contracts will have the opportunities to be exposed to new technologies, expertise and skills that will improve production. Example, North-South Highway where Malaysians learn to adopt and manage new technologies in construction and transportation. The completed highway saves time and cost of transportation, which led to an increase in manufacturing activities.
• Fourth, it reduces the size and presence of the public sector in the economy. Between period 1991 to 1995, there were 204 public entities were privatized, hence, allowing the economy to be increasingly led by private sector.
• Finally, it encouraged Bumiputra participation in the economy, in line with the NEP.
Strategies that have been taken to implement Bumiputra participation are as follows.
• Implementing vendor-developemnt programs to develop SMI. For example, Proton, known as the “anchor company”, has established the Component Scheme program to source automobile parts from 64 SMI vendors.
• Imposing a condition that at least 30% of contract works of privatized projects are reserved for Bumiputra.
Strategies for industrialization
Industrialization is characterized by specialization and division of labor, and involving the application of technology and mechanical power to improve production process.
i. import substitution
• It was embarked in 1960s for two main reasons. First, the rapid population growth and second, the need for diversification in the economy.
• Population growth by 3.3%, agriculture sector alone insufficient to absorb the increasing work force.
• Need to diversify to eliminate the total dependence on rubber and tin.
• Tariff advisory board was established to protect domestic market.
• Benefited by resource-based industries such as tobacco, furniture, rubber products, wood products, food, beverages, wearing apparels, printing & publishing, plastics, leather products, and electrical machinery.
• Serious shortcomings. First, the limitation of import substitution lies in the efficiency of the industry and the size of the market. Second, the small domestic market could not sustain the long term requirements of the strategy. Third, the objectives of the strategy were not fully achieved.
ii. Export orientation
• Introduction of Investment Incentives Act in 1968. This Act incorporating tax holidays to firms granted pioneer status, and additional tax holiday based on the nature of the product, the location of the firm, and the content of the local raw materials.
• Abolished Tariff Advisory Board and replaced with Federal Industrial Authority.
• Gives incentives rather than imposing controls, and measures
• Gives incentives to production for both domestic and export markets.
• Easier to detect effectiveness of export promotion policies because can be easily observed.
• Export promotion gives industries the opportunities to enlarge their markets and achieve greater economies of scale.
• Force industries to compete in the international markets.
• Success of this export oriented policies can be attributed to: 1. industries were simple and light industries. 2. Mainly labor intensive & Malaysia had abundant labor supply. 3. Use simple technology. 4. Use Malaysia abundant natural resources.
• Investment Incentive Act, Free Trade Zone Act,
The foundation of the AEC is the ASEAN Free Trade Area (AFTA), a common external preferential tariff scheme to promote the free flow of goods within ASEAN.
The ASEAN Free Trade Area (AFTA) is an agreement by the member nations of ASEAN concerning local manufacturing in all ASEAN countries. The AFTA agreement was signed on 28 January 1992 in Singapore.
When the AFTA agreement was originally signed, ASEAN had six members, namely, Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. Vietnam joined in 1995, Laos and Myanmar in 1997, and Cambodia in 1999.
The latecomers have not fully met the AFTA's obligations, but they are officially considered part of the AFTA as they were required to sign the agreement upon entry into ASEAN, and were given longer time frames in which to meet AFTA's tariff reduction obligations.
• Industrial Master Plan
• Look East and Privatisation Policy
Look East Policy
• Referred to the emulation of rapidly developing countries of the East- Japan, Korea & Taiwan..
• Important element of the policy: diligence and discipline in work, loyalty to the nation, group orientation, increasing national productivity, quality, upgrading efficiency, cutting cut waste and narrowing the gap between executives and workers.
• Heavy industry was emphasized due to first, the nation needed to reduce its dependence on imports of capital and intermediate goods to sustain the growth process. Second, it would generate a host of ancillary supporting industries which would promote immense forward & backward linkages in the manufacturing sector. Finally, it was vital for economic success.
• Emphasis on four areas:
i. expanding infrastructure facilities.
ii. Upgrading the quality of the workforce.
iii. Improving technology.
iv. Increasing investment in R & D.
Privatization program
In Malaysia, two main policies that are directly associated with privatization of public entities are the Privatization Policy (Dasar Pensawastaan Malaysia) and Malaysia Incorporated Policy (dasar Pensyarikatan Malaysia). Both policies were instituted in 1983.
The privatization policy
• To procure positive changes to the organization, management and the performance of the public enterprises that previously rested with the government.
• To reflect the government‘s commitment to reduce direct engagement in economics activities, reduce the level and the scope of public spending and allow market forces to govern the economy.
• It means the transfer of 3 components, namely government management responsibilities, assets (together with or without liabilities) or right to use the assets, and personnel.
Objectives of privatization
• To relieve the government‘s financial burden.
- the funds saved can be used to finance other economic development projects, concentrate on traditional functions of maintaining law and order.
• To improve work efficiency and productivity
• To facilitate economic growth
• Reduce the size and presence of the public sector in the economy
• To meet the new Economic policy (NEP)
The modes of privatization in Malaysia are as follows.
1. Sale of Equity
This method involves the transfer of three organization-related components, namely management responsibility, assets (together with or without liabilities) and personnel. It can be partial or complete sale of shareholdings in state-owned public company. Examples are Telekom, TNB, Proton.
2. Sale of assets
It involves the transfer of one, two or even all three components. For example, the case of quarries in Selangor, Perak, and Penang.
3. Lease of assets
It involves the transfer of rights to use assets for a specific period of time, for a specific amount of payment. For example, the lease of facilities to Malysiaan Airport Bhd. And Malaysian Railway (KTM)
4. Management Contract
Some government services were contracted out to the private sector. For instance, parking services and garbage disposal.
5. Management-Buy-Out (MBO)
It involves top management personnel of a company taking over the company that they are initially employed in.
6. Build-Operate-Transfer (BOT)
It entails the private sector constructing a facility using its own funds, operating it for a period known as a concession period and transferring it to the government at the end of the period.
7. Build-Operate (BO)
The “BO” is similar to the “BOT” method. However, BO does not involve the transfer of the facility to the government.
8. Build-Transfer
It is to accommodate innovative recommendations and requirements submitted by private sector.
The Malaysia Incorporated Policy (Dasar Pensyarikatan Malaysia)
It was launched on February 25, 1983. The main aim is to establish and strengthen cooperation that would benefit both the private and public sectors.
Several steps were taken to implement the policy.
• To reduce misunderstanding among private and public sectors.
• Both sectors should have one main goal, which is, to achieve national objectives.
• Both industries are responsible to promote and maintain a good image for the country.
• To change the rules and work procedures which are not appropriate in the public sector. The private sector should take the initiative to recommend suitable work procedures in the public sector.
• To enhance the relationship between government ministries, departments and statutory bodies.
The performance and accomplishments of privatization
• First, easing the government financial burden. For the period 1991 to 1995, the government saved RM51.59 billion on capital expenditure.
• Second, contributing efficiency and productivity of the private sector. Example, Telekom, the return on assets increases from 4.0 before privatization to 9.3 after privatization.
• Third, Malaysian companies that collaborated with foreign equity holders or management contracts will have the opportunities to be exposed to new technologies, expertise and skills that will improve production. Example, North-South Highway where Malaysians learn to adopt and manage new technologies in construction and transportation. The completed highway saves time and cost of transportation, which led to an increase in manufacturing activities.
• Fourth, it reduces the size and presence of the public sector in the economy. Between period 1991 to 1995, there were 204 public entities were privatized, hence, allowing the economy to be increasingly led by private sector.
• Finally, it encouraged Bumiputra participation in the economy, in line with the NEP.
Strategies that have been taken to implement Bumiputra participation are as follows.
• Implementing vendor-developemnt programs to develop SMI. For example, Proton, known as the “anchor company”, has established the Component Scheme program to source automobile parts from 64 SMI vendors.
• Imposing a condition that at least 30% of contract works of privatized projects are reserved for Bumiputra.
Introduction
Strategies for industrialization
Industrialization is characterized by specialization and division of labor, and involving the application of technology and mechanical power to improve production process.
i. import substitution
• It was embarked in 1960s for two main reasons. First, the rapid population growth and second, the need for diversification in the economy.
• Population growth by 3.3%, agriculture sector alone insufficient to absorb the increasing work force.
• Need to diversify to eliminate the total dependence on rubber and tin.
• Tariff advisory board was established to protect domestic market.
• Benefited by resource-based industries such as tobacco, furniture, rubber products, wood products, food, beverages, wearing apparels, printing & publishing, plastics, leather products, and electrical machinery.
• Serious shortcomings. First, the limitation of import substitution lies in the efficiency of the industry and the size of the market. Second, the small domestic market could not sustain the long term requirements of the strategy. Third, the objectives of the strategy were not fully achieved.
ii. Export orientation
• Introduction of Investment Incentives Act in 1968. This Act incorporating tax holidays to firms granted pioneer status, and additional tax holiday based on the nature of the product, the location of the firm, and the content of the local raw materials.
• Abolished Tariff Advisory Board and replaced with Federal Industrial Authority.
• Gives incentives rather than imposing controls, and measures
• Gives incentives to production for both domestic and export markets.
• Easier to detect effectiveness of export promotion policies because can be easily observed.
• Export promotion gives industries the opportunities to enlarge their markets and achieve greater economies of scale.
• Force industries to compete in the international markets.
• Success of this export oriented policies can be attributed to: 1. industries were simple and light industries. 2. Mainly labor intensive & Malaysia had abundant labor supply. 3. Use simple technology. 4. Use Malaysia abundant natural resources.
• Investment Incentive Act, Free Trade Zone Act,
The foundation of the AEC is the ASEAN Free Trade Area (AFTA), a common external preferential tariff scheme to promote the free flow of goods within ASEAN.
The ASEAN Free Trade Area (AFTA) is an agreement by the member nations of ASEAN concerning local manufacturing in all ASEAN countries. The AFTA agreement was signed on 28 January 1992 in Singapore.
When the AFTA agreement was originally signed, ASEAN had six members, namely, Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. Vietnam joined in 1995, Laos and Myanmar in 1997, and Cambodia in 1999.
The latecomers have not fully met the AFTA's obligations, but they are officially considered part of the AFTA as they were required to sign the agreement upon entry into ASEAN, and were given longer time frames in which to meet AFTA's tariff reduction obligations.
• Industrial Master Plan
• Look East and Privatisation Policy
Look East Policy
• Referred to the emulation of rapidly developing countries of the East- Japan, Korea & Taiwan..
• Important element of the policy: diligence and discipline in work, loyalty to the nation, group orientation, increasing national productivity, quality, upgrading efficiency, cutting cut waste and narrowing the gap between executives and workers.
• Heavy industry was emphasized due to first, the nation needed to reduce its dependence on imports of capital and intermediate goods to sustain the growth process. Second, it would generate a host of ancillary supporting industries which would promote immense forward & backward linkages in the manufacturing sector. Finally, it was vital for economic success.
• Emphasis on four areas:
i. expanding infrastructure facilities.
ii. Upgrading the quality of the workforce.
iii. Improving technology.
iv. Increasing investment in R & D.
Privatization program
In Malaysia, two main policies that are directly associated with privatization of public entities are the Privatization Policy (Dasar Pensawastaan Malaysia) and Malaysia Incorporated Policy (dasar Pensyarikatan Malaysia). Both policies were instituted in 1983.
The privatization policy
• To procure positive changes to the organization, management and the performance of the public enterprises that previously rested with the government.
• To reflect the government‘s commitment to reduce direct engagement in economics activities, reduce the level and the scope of public spending and allow market forces to govern the economy.
• It means the transfer of 3 components, namely government management responsibilities, assets (together with or without liabilities) or right to use the assets, and personnel.
Objectives of privatization
• To relieve the government‘s financial burden.
- the funds saved can be used to finance other economic development projects, concentrate on traditional functions of maintaining law and order.
• To improve work efficiency and productivity
• To facilitate economic growth
• Reduce the size and presence of the public sector in the economy
• To meet the new Economic policy (NEP)
The modes of privatization in Malaysia are as follows.
1. Sale of Equity
This method involves the transfer of three organization-related components, namely management responsibility, assets (together with or without liabilities) and personnel. It can be partial or complete sale of shareholdings in state-owned public company. Examples are Telekom, TNB, Proton.
2. Sale of assets
It involves the transfer of one, two or even all three components. For example, the case of quarries in Selangor, Perak, and Penang.
3. Lease of assets
It involves the transfer of rights to use assets for a specific period of time, for a specific amount of payment. For example, the lease of facilities to Malysiaan Airport Bhd. And Malaysian Railway (KTM)
4. Management Contract
Some government services were contracted out to the private sector. For instance, parking services and garbage disposal.
5. Management-Buy-Out (MBO)
It involves top management personnel of a company taking over the company that they are initially employed in.
6. Build-Operate-Transfer (BOT)
It entails the private sector constructing a facility using its own funds, operating it for a period known as a concession period and transferring it to the government at the end of the period.
7. Build-Operate (BO)
The “BO” is similar to the “BOT” method. However, BO does not involve the transfer of the facility to the government.
8. Build-Transfer
It is to accommodate innovative recommendations and requirements submitted by private sector.
The Malaysia Incorporated Policy (Dasar Pensyarikatan Malaysia)
It was launched on February 25, 1983. The main aim is to establish and strengthen cooperation that would benefit both the private and public sectors.
Several steps were taken to implement the policy.
• To reduce misunderstanding among private and public sectors.
• Both sectors should have one main goal, which is, to achieve national objectives.
• Both industries are responsible to promote and maintain a good image for the country.
• To change the rules and work procedures which are not appropriate in the public sector. The private sector should take the initiative to recommend suitable work procedures in the public sector.
• To enhance the relationship between government ministries, departments and statutory bodies.
The performance and accomplishments of privatization
• First, easing the government financial burden. For the period 1991 to 1995, the government saved RM51.59 billion on capital expenditure.
• Second, contributing efficiency and productivity of the private sector. Example, Telekom, the return on assets increases from 4.0 before privatization to 9.3 after privatization.
• Third, Malaysian companies that collaborated with foreign equity holders or management contracts will have the opportunities to be exposed to new technologies, expertise and skills that will improve production. Example, North-South Highway where Malaysians learn to adopt and manage new technologies in construction and transportation. The completed highway saves time and cost of transportation, which led to an increase in manufacturing activities.
• Fourth, it reduces the size and presence of the public sector in the economy. Between period 1991 to 1995, there were 204 public entities were privatized, hence, allowing the economy to be increasingly led by private sector.
• Finally, it encouraged Bumiputra participation in the economy, in line with the NEP.
Strategies that have been taken to implement Bumiputra participation are as follows.
• Implementing vendor-developemnt programs to develop SMI. For example, Proton, known as the “anchor company”, has established the Component Scheme program to source automobile parts from 64 SMI vendors.
• Imposing a condition that at least 30% of contract works of privatized projects are reserved for Bumiputra.
Introduction
Strategies for industrialization
Industrialization is characterized by specialization and division of labor, and involving the application of technology and mechanical power to improve production process.
i. import substitution
• It was embarked in 1960s for two main reasons. First, the rapid population growth and second, the need for diversification in the economy.
• Population growth by 3.3%, agriculture sector alone insufficient to absorb the increasing work force.
• Need to diversify to eliminate the total dependence on rubber and tin.
• Tariff advisory board was established to protect domestic market.
• Benefited by resource-based industries such as tobacco, furniture, rubber products, wood products, food, beverages, wearing apparels, printing & publishing, plastics, leather products, and electrical machinery.
• Serious shortcomings. First, the limitation of import substitution lies in the efficiency of the industry and the size of the market. Second, the small domestic market could not sustain the long term requirements of the strategy. Third, the objectives of the strategy were not fully achieved.
ii. Export orientation
• Introduction of Investment Incentives Act in 1968. This Act incorporating tax holidays to firms granted pioneer status, and additional tax holiday based on the nature of the product, the location of the firm, and the content of the local raw materials.
• Abolished Tariff Advisory Board and replaced with Federal Industrial Authority.
• Gives incentives rather than imposing controls, and measures
• Gives incentives to production for both domestic and export markets.
• Easier to detect effectiveness of export promotion policies because can be easily observed.
• Export promotion gives industries the opportunities to enlarge their markets and achieve greater economies of scale.
• Force industries to compete in the international markets.
• Success of this export oriented policies can be attributed to: 1. industries were simple and light industries. 2. Mainly labor intensive & Malaysia had abundant labor supply. 3. Use simple technology. 4. Use Malaysia abundant natural resources.
• Investment Incentive Act, Free Trade Zone Act,
The foundation of the AEC is the ASEAN Free Trade Area (AFTA), a common external preferential tariff scheme to promote the free flow of goods within ASEAN.
The ASEAN Free Trade Area (AFTA) is an agreement by the member nations of ASEAN concerning local manufacturing in all ASEAN countries. The AFTA agreement was signed on 28 January 1992 in Singapore.
When the AFTA agreement was originally signed, ASEAN had six members, namely, Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand. Vietnam joined in 1995, Laos and Myanmar in 1997, and Cambodia in 1999.
The latecomers have not fully met the AFTA's obligations, but they are officially considered part of the AFTA as they were required to sign the agreement upon entry into ASEAN, and were given longer time frames in which to meet AFTA's tariff reduction obligations.
• Industrial Master Plan
• Look East and Privatisation Policy
Look East Policy
• Referred to the emulation of rapidly developing countries of the East- Japan, Korea & Taiwan..
• Important element of the policy: diligence and discipline in work, loyalty to the nation, group orientation, increasing national productivity, quality, upgrading efficiency, cutting cut waste and narrowing the gap between executives and workers.
• Heavy industry was emphasized due to first, the nation needed to reduce its dependence on imports of capital and intermediate goods to sustain the growth process. Second, it would generate a host of ancillary supporting industries which would promote immense forward & backward linkages in the manufacturing sector. Finally, it was vital for economic success.
• Emphasis on four areas:
i. expanding infrastructure facilities.
ii. Upgrading the quality of the workforce.
iii. Improving technology.
iv. Increasing investment in R & D.
Privatization program
In Malaysia, two main policies that are directly associated with privatization of public entities are the Privatization Policy (Dasar Pensawastaan Malaysia) and Malaysia Incorporated Policy (dasar Pensyarikatan Malaysia). Both policies were instituted in 1983.
The privatization policy
• To procure positive changes to the organization, management and the performance of the public enterprises that previously rested with the government.
• To reflect the government‘s commitment to reduce direct engagement in economics activities, reduce the level and the scope of public spending and allow market forces to govern the economy.
• It means the transfer of 3 components, namely government management responsibilities, assets (together with or without liabilities) or right to use the assets, and personnel.
Objectives of privatization
• To relieve the government‘s financial burden.
- the funds saved can be used to finance other economic development projects, concentrate on traditional functions of maintaining law and order.
• To improve work efficiency and productivity
• To facilitate economic growth
• Reduce the size and presence of the public sector in the economy
• To meet the new Economic policy (NEP)
The modes of privatization in Malaysia are as follows.
1. Sale of Equity
This method involves the transfer of three organization-related components, namely management responsibility, assets (together with or without liabilities) and personnel. It can be partial or complete sale of shareholdings in state-owned public company. Examples are Telekom, TNB, Proton.
2. Sale of assets
It involves the transfer of one, two or even all three components. For example, the case of quarries in Selangor, Perak, and Penang.
3. Lease of assets
It involves the transfer of rights to use assets for a specific period of time, for a specific amount of payment. For example, the lease of facilities to Malysiaan Airport Bhd. And Malaysian Railway (KTM)
4. Management Contract
Some government services were contracted out to the private sector. For instance, parking services and garbage disposal.
5. Management-Buy-Out (MBO)
It involves top management personnel of a company taking over the company that they are initially employed in.
6. Build-Operate-Transfer (BOT)
It entails the private sector constructing a facility using its own funds, operating it for a period known as a concession period and transferring it to the government at the end of the period.
7. Build-Operate (BO)
The “BO” is similar to the “BOT” method. However, BO does not involve the transfer of the facility to the government.
8. Build-Transfer
It is to accommodate innovative recommendations and requirements submitted by private sector.
The Malaysia Incorporated Policy (Dasar Pensyarikatan Malaysia)
It was launched on February 25, 1983. The main aim is to establish and strengthen cooperation that would benefit both the private and public sectors.
Several steps were taken to implement the policy.
• To reduce misunderstanding among private and public sectors.
• Both sectors should have one main goal, which is, to achieve national objectives.
• Both industries are responsible to promote and maintain a good image for the country.
• To change the rules and work procedures which are not appropriate in the public sector. The private sector should take the initiative to recommend suitable work procedures in the public sector.
• To enhance the relationship between government ministries, departments and statutory bodies.
The performance and accomplishments of privatization
• First, easing the government financial burden. For the period 1991 to 1995, the government saved RM51.59 billion on capital expenditure.
• Second, contributing efficiency and productivity of the private sector. Example, Telekom, the return on assets increases from 4.0 before privatization to 9.3 after privatization.
• Third, Malaysian companies that collaborated with foreign equity holders or management contracts will have the opportunities to be exposed to new technologies, expertise and skills that will improve production. Example, North-South Highway where Malaysians learn to adopt and manage new technologies in construction and transportation. The completed highway saves time and cost of transportation, which led to an increase in manufacturing activities.
• Fourth, it reduces the size and presence of the public sector in the economy. Between period 1991 to 1995, there were 204 public entities were privatized, hence, allowing the economy to be increasingly led by private sector.
• Finally, it encouraged Bumiputra participation in the economy, in line with the NEP.
Strategies that have been taken to implement Bumiputra participation are as follows.
• Implementing vendor-developemnt programs to develop SMI. For example, Proton, known as the “anchor company”, has established the Component Scheme program to source automobile parts from 64 SMI vendors.
• Imposing a condition that at least 30% of contract works of privatized projects are reserved for Bumiputra.
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