Energizing the Manufacturing Sector: Can Malaysia Move Forward?

The paper reviews and assesses the performance of the manufacturing sector in general, as well as the catalytic industries identified in the Eleventh Malaysia Plan (1 IMP), to ascertain whether the initiatives and targets proposed in the Plan are adequate to energize and move the sector forward. In doing so, the paper uses industrial policy arguments -- market and government failures -- to explain the slow progress of the sector. The findings suggest that market failures -- in terms of lagging industrial capabilities and economies of scale, market frictions, lack of support for self-discovery by firms and diversification -- require government intervention. Nevertheless, defying comparative advantage and identifying frontier products that show lacklustre performance to spearhead the sector under the Plan certainly require substantial improvements in institutioncd capabilities, coordination and institutional learning, while maintaining respect for markets and incentives. The paper concludes that lack of recognition to address government failures limited the success of policies implemented. [ABSTRACT FROM AUTHOR]