Rubber Manufacturing in Malaysia: Resource-based Industrialization in Practice

This excellent book portrays the history and present scope of Malaysian rubber manufacturing. It analyses the broad historical and political background against which this now substantial sector developed. It also examines dualistic and other structural features of the sector, along with key policy issues as it grew to major status within Malaysian manufacturing. The book is the first comprehensive study dealing with rubber manufacturing in Malaysia, and a valuable contribution on this ground alone.

The developments portrayed exemplify successful downstream development from a local raw material resource, with useful lessons for other agricultural producers at earlier stages of economic growth. The rubber manufacturing industry in Malaysia today has annual exports of over RM14 billion (US$3.5 billion), with substantial imports of natural rubber from Thailand in particular. By far the most valuable products of the industry are latex goods including gloves and condoms, with lower revenues from general rubber goods and tyres. Imports of natural rubber from surrounding countries are substantial, and likely to rise much further as Malaysian rubber manufacturing expands and domestic rubber production declines. Malaysia is accordingly set to become an increasingly significant processing hub for rubber from surrounding countries.

Following a general introduction (Chapter 1), the book provides background information on world rubber, types of natural rubber products and technologies of rubber manufacturing (Chapter 2). It then chronicles Malaysia’s progress from pre-colonial years to the mid-nineteenth century, when Britain gained control of the peninsula and promoted basically laissez-faire development for almost 100 years. The book scrutinizes the Malaysian government’s general economic and development policies from Independence in 1957 to the present time (Chapter 3). It examines the dualistic development of rubber manufacturing, and government policies to encourage its growth and expansion (Chapters 4 and 5).

The book next reviews the broad scope of Malaysian rubber manufacturing in the 2000s, classifying the industry into eight production subsectors based on technologies and end-products (Chapter 6). It examines the mixes of international and Malaysian companies engaged in the eight subsectors, looking at detailed structures, export sales, backward and forward linkages, technology transfer, and sources of technical help (Chapters 7 and 8). It moves to explicitly considering structural dualism and technology transfers in rubber manufacturing as a whole (Chapter 9), finally addressing wider policy issues in industrialization with particular respect to rubber (Chapter 10).

The book reflects the author’s 45 years of involvement in the Malaysian rubber industry, with key insights and a good practical grasp of evolving circumstances and the intricacies of constituent enterprises. It addresses the generally positive impacts of post-colonial government policies of active intervention, focusing on export-oriented industrialization, encouragement of foreign investment and support with research and training, all within an open economy. The same elements also underpin the theory of Michael Porter in his classic, The Competitive Advantage of Nations (1990), which the author uses as a guide. While some government policies, such as affirmative action components of the New Economic Policy and most constituents of Heavy Industry Promotion, barely helped rubber manufacturing, they did not appear to impact it adversely.

The book also, interestingly, compares the characteristics of the 73 big foreign and joint venture enterprises and 267 small and largely Malaysian Chinese-owned local companies making up rubber manufacturing today. Here the former bring in much-needed capital, technology, and skills, also acting to some extent as role models for smaller local enterprises. The latter, in contrast, tend to source more local materials and services for their initiatives and, while also primarily geared to exports, better serve niches in local markets such as those for retreading materials. The small companies are also far more reliant on technologies and technical services provided by government through the Malaysian Rubber Board. There are, however, exceptions to this characterization; for instance, a Malaysian company producing gloves dominates that subsector and has massive foreign investment. The contrasting situations of individual rubber manufacturers are highlighted through the detailed information about big and small companies in Chapters 7 and 8...