and Industrial Development
in Singapore and Malaysia
Leo van Grunsven and August van Westen
Singapore and Malaysia were among the first countries in Southeast Asia to seize the opportunities presented by the internationalization of production. They created an attractive investment climate for foreign investors in search of low-cost production locations. Thus, they became industrial nations through insertion in the globalizing production systems engineered by foreign TNCs (transnational corporations). 1 At the end of the 1970s, however, their industrialization paths began to diverge. After a decade of rapid export-oriented industrialization, Singapore changed its strategy and moved toward more advanced industries and more rewarding segments in cross-border commodity chains. 2 Toward the end of the 1980s, the new strategy began to show results. Singapore has become an international business center with a diversified economy.
Malaysia has been equally affected by globalization. However, here the pace and source of industrial development, rather than its characteristics, have changed. From the mid-1980s on, export-oriented industrialization in Malaysia has been shaped by the regionalization of assembly work by Japanese TNCs. Similar firms from other Asian countries followed Malaysia's lead. As a result, Singapore and Malaysia developed complementary roles. Malaysia became a production platform for lowto middle-value-added final products and components for international markets, especially in electronics and electric consumer goods. Singapore, on the other hand, managed to develop the higher-value-added manufacturing and service industries within the regional economy. In recent years, Malaysia and Singapore have embarked on new economic