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[Excerpt] Malaysia is one of the fastest-growing economies in the world and is in many ways, a Third World success story. Twenty years of sustained growth and diversification have reduced the economy’s reliance on primary products like tin and rubber. Malaysia is still the world’s largest exporter of tin, rubber, and palm oil, and a significant producer of oil, natural gas, and timber. More recently it has become one of the largest manufacturers of semiconductors, and a sizeable producer of electronic and electrical products and textiles. Exports account for about 61 per cent of GNP, making the economy very dependent on the external economic climate.

Although recessions in 1982 and 1985-6 caused by falling prices in commodities slowed growth, Malaysia has since sustained an economic recovery via its booming export trade in manufacturing, primarily driven by foreign investment. Industry has supplanted agriculture as the major contributor to Gross Domestic Product (GDP), accounting for 42 per cent of GDP, and low-cost labour-intensive manufacturing accounts for about 48 per cent of export earnings. Since 1988,

Malaysia’s GDP growth rate (average annual 8.7 per cent) has been among the highest in the world and manufacturing has grown at about 15 per cent annually. National and per capita income are increasing at the rate of 7 per cent annually, and per capita income of about US$2,000 puts Malaysia well above most Third World economies.

Foreign investment in Malaysia continues to increase, attracted by favourable investment policies, relatively cheap and docile labour and a well-developed infrastructure (the country has 30,000 km of paved roads, reliable and efficient telecommunications, cheap and abundant electricity, and efficient transportation systems). Notably, the structure of foreign investment is still dominated by low-cost labour-intensive industries, although a small shift to higher-technology production is apparent. Japan is the largest investor, closely followed by Taiwan. Taiwan alone accounts for 25 per cent of the total foreign direct investment and the largest number of projects. Industrial relations in Malaysia have been recently characterized as becoming highly repressive, with trade unions being weak, excluded by the government from decision-making at national levels and having very little influence at the workplace (Frenkel 1993).


Required Publisher Statement
© Routledge. Final version published as: Kuruvilla, S., & Arudsothy, P. (1995). Economic development strategy, government labour policy and firm-level industrial relations practices in Malaysia. In A. Verma, T. A. Kochan, & R. D. Lansbury (Eds.), Employment relations in the growing Asian economies, (pp. 158-193). New York, NY: Routledge. Reprinted with permission. All rights reserved.

Suggested Citation
Kuruvilla, S., & Arudsothy, P. (1995). Economic development strategy, government labour policy and firm-level industrial relations practices in Malaysia [Electronic version]. Retrieved [insert date], from Cornell University, ILR School site: