Advantages Of Industrialisation

Since gaining its Independence in 1957, Malaysia has been facing four major stages of industrialisation between 1958 and 2010 (Rasiah,2011). However, the phases are not mutually exclusive to one another and may overlap (Alavi, 1996). Industrial policy is defined as "intervention by a government in order to change the market 's allocation of resources, most often in favour of manufacturing industries" (Nishijima, 2012). According to the author, the government intervention is due to market failure which is contributed by factors such as scale economies, monopolies, problems in income distribution, and externalities.

Malaysia, as a developing country, is adopting import-substitution (IS) strategy mainly to deal with imbalances in external trade

Aside there is not much protection and intervention from the government, tariff protection is not utilised widely between 1957 to the mid-1960s as the Government places high importance on the import duties. At the same time, there is a rising concern in the tin and rubber manufacturers that the increase in import duty leads to increment in raw material cost which and this will build up tension in the workers for higher wages. The current-ruling government at the time seem to be more in favour with the Malays and Bumiputeras hence they refuse to implement any policy as the Chinese entrepreneurs are already dominating the trade and commercial activities. This is further justified to hinder discrimination to the Malay population in rural areas. Nevertheless after the mid-1960s, there is an increase in the use of tariff and non-tariff protection mainly to support the growth of infant industries (Rasiah, 2011). For the second round of IS, it is targeted on heavy industries in the early 1980. The main objectives of IS heavy industrialisation is to diversify the industrial structure and this is achieved by the development of more linkages, growth