Industrialization and labour in Malaysia

Abstract

Although increasing globalizations spurred rapid industrialization in Malaysia, this article shows that the lack of significant technological upgrading and structural change has caused the premature plateauing of manufacturing, stemming from failures to coordinate policies, enforce standards, sustain high productivity growth and stimulate transition to higher value-added activities. Manufacturing as a whole has registered slow wage growth since the late 1990s, with labour markets characterized by heavy presence of low-skilled foreign workers, increased contract labour and outsourcing and declining worker organization. The focus on perspiration-based low-skilled foreign labour rather than on expanding professional and skilled labour has driven Malaysia down the low industrialization road. The Malaysian experience reflects a case of manufacturing's importance and direct contribution to the economy contracting before recording high levels of value added and sustained productivity growth, and with labour market practices constraining instead of facilitating positive change.