Rubber Manufacturing in Malaysia: Resource-Based Industrialization in Practice by C.C. Goldthorpe (review)

Emerging from an unspecified “research study” at the University of Bradford, this little book is resolutely practical, factual, and sometimes quite technical, but it has fascinating wider implications for economic historians and economists. The author uses the case of Malaysian rubber, examined through a thorough reading of secondary sources, to investigate the viability of “resource-based industrialization”. The question is whether a region that produces a particular raw material should seek to transform it into semi-finished or finished goods. Goldthorpe further explores M.E. Porter’s notion that a government may need to nudge manufacturers to take advantage of a local resource. Readers interested in these wider themes might want to skip Chapter 2 which reviews the development of the production of rubber goods in modern times, although any budding manufacturer should study it attentively.

In Chapters 3 and 4, there follows a synthesis of the overall growth of manufacturing in Malaysia since independence, which is rather too lengthy for this book. For economic historians, the most important aspect of Goldthorpe’s story lies in his querying of the standard notion of colonial deindustrialization. Malaysia was not a classical colonial economy at independence, structured to supply the West with raw materials. Much secondary industry had already developed in colonial times, as well as an infrastructure well suited for the rapid further growth of manufacturing. This crucial point is not stressed as much as it might be, however, and the main emphasis of these two chapters is on industrial policy since independence. While the proportion of manufacturing in GDP undoubtedly increased, Import Substitution Industrialization with few barriers to foreign inward investment, which was adopted initially, proved unsatisfactory. The policy led to tariff hopping, imports of raw materials, poor linkages to other sectors of the economy, low value-added, large remitted profits, high relative prices of finished goods, and the saturation of a small local market. From the “race riots” of 1969, or in reality from the previous year, policy shifted to Export Substitution Industrialization. This was knocked off course by a brief and impractical push to establish heavy industry in the early 1980s. Only from the mid-1980s was there at last some clear planning for resource-based manufacturing.

The author turns to rubber manufacturing in Chapter 5, which is in many ways the best chapter in the book. Goldthorpe elaborates on the already well-developed colonial manufacturing sector with a wealth of fascinating detail, challenging much lazy and stereotypical thinking about colonial economic history. This early industrialization involved both upstream manufacturing, notably by pioneers of the production of machinery to process natural rubber, and downstream manufacturing, involving the production of a wide range of rubber goods. Both types of industry resulted in exports, and both owed much to the flair and capacities of Chinese entrepreneurs. That said, Bata, the Czech firm (which is urgently in need of a good company history) also made a further substantial contribution by producing and exporting rubber footwear from the 1930s. This kind of manufacturing continued to grow after independence, albeit receiving precious little recognition or support from the government.

It was only from the mid-1980s, following recommendations from the United Nations Industrial Development Organization (UNIDO), that resource-based industrialization became part of official policy, with rubber goods as one of its most prominent branches. Foreign investment grew in significance, notably for tires and dipped products, although there was much subcontracting to local, largely Chinese, firms. Dipped goods became particularly important in exports due to the AIDS epidemic, as both surgical gloves and condoms needed to be made with natural rubber. However, Goldthorpe seems unaware of the problem of allergies to proteins in Hevea brasiliensis rubber, leading to a partial resurgence in the growing of guayule rubber (Parthenium argentatum) in temperate lands.

That resource-based industrialization was truly a panacea was called into question as Malaysia quickly ceased to be able to produce sufficient rubber for these booming industries. This resulted...