Industrialising Malaysia: Policy, Performance, Prospects

By Jomo K. S. | Go to book overview

9

TEXTILES AND CLOTHING: SUNRISE OR SUNSET INDUSTRY?

David O’Connor

Malaysia’s textile industry 1 has come back to life. As recently as the mid-1980s, the primary textile sector was being labelled a ‘sunset’ industry whose days were numbered. Banks did not want to finance investments in expanding productive capacity, and firms were being cannibalised by property companies which needed some manufacturing assets to get listed on the Kuala Lumpur Stock Exchange (KLSE). The real growth rate of the textile sector in Malaysia fell from an annual average of 10.7 per cent in the period 1975-80 to an average of −1.8 per cent in 1980-5 (UNIDO, 1988). The second half of the decade witnessed a dramatic reversal in the fortunes of the industry. From 1986 to 1988, primary textile output rose by 12.4 per cent a year (Department of Statistics, 1989b). It has become fashionable (and profitable) to invest once more in the textile industry. The number of applications received by the Malaysian Industrial Development Authority (MIDA) for the establishment of textile and apparel ventures increased between 1986 and 1989 from 32 to 118. The number of projects approved in 1989 was 102, up from 70 in 1988. The average capital investment per approved project rose from M$3.35 million in 1986 to M$6.58 million in 1989. At the same time, the potential employment in approved projects also increased significantly, from 13,722 in 1988 to 20,169 in 1989 (MIDA, n.d. ).

Perhaps more interesting than the question of why Malaysia’s textile industry has experienced such strong growth in recent years is that of why investors had written it off (in retrospect prematurely). The textile and apparel industries have played a central role in the early stages of industrialisation of many advanced industrial economies as well as newly industrialising economies (NIEs). This is certainly the case with the ‘late industrialisers’ of the twentieth century, first Japan and more recently Korea, Taiwan and Hong Kong. 2 Malaysia differs from those three NIEs in one respect, namely that from an early date a relatively high-technology industry - electronics - assumed a prominent place in the country’s industrial structure. While electronics also constitutes a major industry in Korea and Taiwan, its emergence as a leading sector followed upon the growth of the textile and apparel sectors. Intuitively, this would seem the logical order, since textiles and garments are both more labour intensive and less technology intensive than electronics. Still, in the early days of the electronics industries of the NIEs as well as of Malaysia, the activities performed were also highly labour intensive, consisting largely of assembly of various components, subsystems and equipment. The technologies of electronics assembly have changed more rapidly in recent years than those of textile and, especially, clothing manufacture. As a result, rising labour costs and currency values in the NIEs have affected their competitiveness in these latter activities more drastically than in the former. Pressures to transfer their textile and clothing industries to lower-wage countries have thus intensified. Malaysia has received a considerable influx of such NIE investments in the last few years, as have its neighbours Thailand and Indonesia. The recent upsurge in foreign investments has substantially changed the face of Malaysia’s textile and garment industries. Taiwanese and Hong Kong capital have come to assume an especially prominent place within them.

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