1 - MNCs and Industrial Upgrading in Singapore, Malaysia and Thailand

Summary

Southeast Asia's relationship with foreign companies go back a long way, at least to the colonial era of the British and the Dutch. In the case of Singapore and Malaysia, the British East India Company played a major economic role in the 1800s. Although Thailand was never colonized, it too had extensive dealings with foreign companies. However, the activities of foreign companies in those days were primarily exploitative, the aim being to source spices and other raw materials for consumers in their home countries. Following independence from the colonial powers in the post-World War II period, governments in the Southeast Asian countries had to draw up their own economic strategies. These strategies, and the circumstances and factors they had to take into account, are well documented. This chapter focuses in particular on the strategies adopted by the ASEAN-3 to promote foreign direct investments (FDI) and woo MNCs to set up export-oriented factories in their countries. It outlines the strategies adopted by each country and the changes they made, and highlights the results achieved. The chapter concludes with an analysis of the impact of these strategies in terms of the growth of manufactured exports and the countries' overall economic performance.

THE ECONOMICS TRATEGIES OF THE ASEAN-3

Singapore: A Pioneer in MNC-led Industrialization

Singapore's blueprint for export-oriented industrialization; drawn up immediately after separation from Malaysia in 1965, called for internationalization of almost all its economic activities. The key strategy was vigorous promotion of foreign direct investments to achieve rapid export-oriented industrialization. This was a bold move at the time, untried elsewhere; its long-term effects could, therefore, not be foretold. Nevertheless, the legal and institutional framework for this policy was quickly laid within the first few years.