The Politics of Industrial Investment Policy Reform in Malaysia and Thailand

Abstract

There is an obvious dissonance in much of the commentary on Southeast Asia’s economic crisis of 1997–8. In explaining the region’s startling turn of fortune, many analysts have pointed to endemic political interference in lending and investment decisions. Prior to the crisis, however, the region’s ‘tiger economies’ were celebrated as exemplars of international openness and market-led growth, often in contrast with the statist and nationalist development models of South Korea and Taiwan (World Bank 1993a). In the late 1980s and early 1990s, Malaysia and Thailand liberalized their domestic economies, shrank the state’s economic reach and embraced foreign direct investment (FDI) and trade as the cornerstone of their development strategies (Bowie and Unger 1997). Did the sudden collapse of the Southeast Asian economic ‘miracle’ expose the region’s earlier liberalization as ersatz and its political economies as state-dominated? Or was the trend towards market-driven growth genuine, with instances of state intervention simply a lingering contradiction of the region’s clientelist political past?

The author gratefully acknowledges the financial support of the HE Fulbright programme, the Malaysian-American Commission on Educational Exchange, the Sumitomo Fund of Princeton University’s Center for International Studies, and for institutional support, the Institute for Strategic and International Studies (ISIS) Malaysia and the Thailand Development Research Institute Foundation. None of these institutions are in any way responsible for the content of this chapter or any errors contained therein.