The political economy of moving up in global value chains: how Malaysia added value to its natural resources through industrial policy

Amir Lebdioui

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This article investigates the role of industrial policy in promoting upgrading in commodity sectors by examining the case of the petroleum, rubber, and palm oil industries in Malaysia. By doing so, it aims to contribute to an emerging scholarship that bridges the developmental state and the global value chains literature. Several findings emerge from this study. First, linkages do not unfold through market forces alone. Commodity value addition processes can be hindered by a range of barriers, including power dynamics alongside global commodity chains. The existence of high barriers for linkage development in developing nations justifies the need of state interventions. Second, successful government interventions for commodity value addition in Malaysia have gone far beyond fixing market failures and a ‘facilitative’ role of the state. Instead, the productive capabilities necessary for value addition were accumulated through coherent industrial policies and the strategic orientation of rents towards achieving productivity gains and learning. Third, political considerations, such the base of the ruling coalition, the regime type (marked by both executive dominance and political competition), and the influence of the regional intellectual climate, are essential to understanding both the policy will and ability to pursue a developmental approach towards commodity value addition.

Keywords: global value chains; heterodox economics; industrial policy; macroeconomic analyses of economic development; natural resources (search for similar items in EconPapers)
JEL-codes: O11 O13 O14 O53 Q17 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2022
New Economics Papers: this item is included in nep-env, nep-hme, nep-int and nep-sea
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Citations: View citations in EconPapers (2)

Published in Review of International Political Economy, 2022, 29(3), pp. 870 - 903. ISSN: 0969-2290

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