Market, Government and Malaysia's New Economic Policy

Rajah Rasiah and Ishak Shari

Cambridge Journal of Economics, 2001, vol. 25, issue 1, 57-78

Abstract: Leading economic institutions such as the World Bank have argued that liberalisation holds the key to growth, poverty alleviation and redistribution. Even recent efforts to model increasing returns within the framework of new growth theories have not resulted in prescriptions for stronger roles for governments. The fast-growing Southeast Asian economies are still being used to demonstrate causation between liberalisation, and growth, poverty alleviation and redistribution. Using Malaysia as an example, this paper argues that growth, poverty alleviation and redistribution in the country was achieved under circumstances of both interventionist policies as well as market coordination. Throughout the New Economic Policy (NEP) period (1970-90), strong incentives were offered to both the import-substitution and export-oriented manufacturing sectors, and the state made strong forays into the market to redress poverty and inequality. The paper also argues that poorly coordinated government intervention generated substantial unproductive rent seeking. Copyright 2001 by Oxford University Press.

Date: 2001
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