Resource Abundance and Economic Development

By R. M. Auty | Go to book overview

9 Competitive Industrialization with Natural Resource Abundance: Malaysia

MAHANI ZAINAL ABIDIN


9.1 INITIAL CONDITIONS

Malaysia is classified in this study as a small resource-abundant country (see Table 1.1). As such, it is one of only a handful of resource-abundant countries (the others comprise Botswana, Chile, Oman, and Thailand) that escaped the low growth staple trap that such countries have commonly experienced in recent decades. Rather than falling into a staple trap, Malaysia systematically diversified its economy from slow-growth commodities to high-growth commodities and then into competitive manufacturing (Table 9.1).

The natural resource endowment of Malaysia is favourably more diversified than the endowments of many small resource-abundant countries. It includes cropland, forests, and minerals whose relative importance has changed over time. The tin industry started in the early nineteenth century when the Dutch commercialized production. Rubber was first cultivated in Malaysia at the end of the nineteenth century and by 1930 it occupied two-thirds of the cultivated area. By the time Malaysia gained independence in 1957 tin and rubber were the two main contributors to GDP, and the combined share of natural resources in GDP was 45 per cent. However, a diversification began into palm oil in the late 1960s in order to reduce dependence on rubber when prices were falling. About the same time, forest resources in the form of sawlogs and sawn timber began to be leading primary commodities. Subsequently, the discovery of crude petroleum in the mid-1970s and then liquefied natural gas (LNG) offset a decline in tin production (that was caused by depletion of deposits, rising costs, and plummeting prices). In this way, the structure of primary exports steadily diversified and helped cushion the impact of individual commodity price shocks (Table 9.2). It thereby sustained an unusually stable and large stream of resource rents whose favourable consequences are discussed in later sections.

If the nature of the natural resource endowment was relatively favourable, however, the presence of ethnic tensions was not, at least on first sight. In 1980 the Bumiputeras 1

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Resource Abundance and Economic Development
Table of contents

Table of contents

  • Unu World Institute for Development Economics Research (Unu/Wider) ii
  • Resource Abundance and Economic Development iii
  • Foreword v
  • Acknowledgements vii
  • Contents ix
  • List of Tables xi
  • List of Figures xiv
  • List of Contributors xv
  • Part I Introduction 2
  • 1: Introduction and Overview 3
  • References 15
  • Part II Critical Parameters in Resource-Based Development Models 18
  • 3: The Sustainability of Extractive Economies 36
  • Appendix 3.1 Deriving Net Income and Genuine Saving 46
  • References 55
  • References 73
  • Part III Long-Term Perspective On, and Models Of, Resource-Based Growth 94
  • References 109
  • 7: Short-Run Models of Contrasting Natural Resource Endowments 113
  • References 124
  • References 142
  • Part IV Development Trajectories of Resource-Abundant Countries 145
  • 9: Competitive Industrialization with Natural Resource Abundance 147
  • References 163
  • 10: A Growth Collapse with Diffuse Resources 165
  • References 177
  • References 191
  • 12: A Growth Collapse with High Rent Point Resources 193
  • References 206
  • 13: Large Resource-Abundant Countries Squander Their Size Advantage 208
  • References 220
  • Part V Lessons for Policy Reform 223
  • References 237
  • 15: Growth, Capital Accumulation, and Economic Reform in South Africa 239
  • Appendix 15.1 257
  • References 258
  • 16: Reforming Resource-Abundant Transition Economies 260
  • References 275
  • References 294
  • 18: A Nordic Perspective on Natural Resource Abundance 296
  • Part VI Conclusions 314
  • 19: Conclusions 315
  • References 327
  • Index 329
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