55

Secondary Sector:
Industrial Activities
 LEARNING OUTCOMES

After reading this chapter, you should be able to:

Discuss the phases of industrial development in Malaysia
Discuss the contributions of the industrial sector to the
Malaysian economy, including contributions of heavy
industries and small- and medium-sized entities (SMEs)
Discuss the problems faced by firms in the industrial
sector, including problems specific to heavy industries and
SMEs
Discuss the objectives, strategies and strategic thrusts of
Malaysian industrial master plans

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 PHASES OF INDUSTRIAL
DEVELOPMENT
 Import substitution strategy: initiatives to develop
industries, in order to produce outputs which were
previously imported.

 Export-orientated industrialization strategy: shifts

focus to production geared for exports.

 Heavy industry-based import substitution strategy:

production of heavy industrial products, e.g.
automobiles, steel and iron.

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 CONTRIBUTIONS OF
INDUSTRIAL ACTIVITIES

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 Contributions of Heavy
Industries and SMEs

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 PROBLEMS IN THE INDUSTRIAL
SECTOR

 Weak symbiotic relationship between heavy

industries and SMEs
 Increasing production costs
 Dependence on foreign labour
 Intense competition from low-cost producers in
emerging economies
 Lack of extensive research and development
(R&D)

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 Problems in Heavy Industries

 Lack of linkage between industries

 High production cost
 Small domestic market
 Shortage of investments
 Shortage of skilled labour

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 Problems in SMEs

 Low labour productivity

 Shortage of investments
 Inadequate ICT capabilities

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 INDUSTRIAL MASTER PLANS

 Industrial Master Plan 1 (IMP1) (1986–1995)

 Industrial Master Plan 2 (IMP2) (1996–2005)
 Industrial Master Plan 3 (IMP3) (2006–2020)

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 Industrial Master Plan 1 (IMP1)
(1986–1995)

 Objectives:
– Accelerate growth of the manufacturing sector to
meet the objectives of New Economic Policy
(NEP), National Development Policy (NDP) and
National Vision Plan (NVP).
– Maximize the nation’s abundant natural resources
through value-added manufacturing activities.
– Build the foundation towards an advanced
industrial country.

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 Industrial Master Plan 1 (IMP1)
(1986–1995) (cont.)

 Strategies:

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 Industrial Master Plan 2 (IMP2)
(1996–2005)

 Manufacturing Value Chain: emphasis on

pushing Malaysian manufacturers higher up the
value chain of manufacturing.

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 Industrial Master Plan 2 (IMP2)
(1996–2005) (cont.)

 Development of Industrial Clusters:

– Clustering firms that are in related industries to
reap the benefits of agglomeration economies
– Foster joint ventures and stimulate innovation in
the industry, a phenomenon known as knowledge
spillover by economists

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 Industrial Master Plan 2 (IMP2)
(1996–2005) (cont.)

 Strategic thrusts:

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 Industrial Master Plan 3 (IMP3)
(2006–2020)

 Theme: ‘Malaysia towards global

competitiveness’.

 This is in line with the global manufacturing

landscape which was fast developing on
multiple fronts.

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 Industrial Master Plan 3 (IMP3)
(2006–2020) (cont.)

 Strategies:

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 Industrial Master Plan 3 (IMP3)
(2006–2020) (cont.)

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