Daily Tao – How Asia Works – 4

Unfortunately, there were to be fundamental policy differences in Malaysia when compared with Japan, Korea and Taiwan. Compounded by an already lacklustre performance in unreformed agriculture, these differences were more than enough to derail Mahathir’s industrial ambitions. The new leader failed to grasp the need for export discipline, and on trips to north-east Asia his Korean and Japanese hosts did not explain the dirty secrets of protectionism to him. This was hardly surprising when the self-interest of these states was now in selling turnkey industrial plants and construction services to countries like Malaysia. In fairness to Mahathir, however, when it came to implementing effective industrial policy, he had no appropriate regional example to follow; all the countries around Malaysia in south-east Asia were making bad development policy choices. Mahathir could have read the first of the great academic analyses of Japanese industrial policy, Chalmers Johnson’s MITI and the Japanese Miracle , which was published in 1982 just as Look East was being launched. Unfortunately, he did not. Nor did Mahathir read Park Chung Hee’s books about development policy in Korea. 145 Instead, he would later read – and tell his underlings to read – a fashionable, pro-globalisation book that was wholly irrelevant to his country’s needs: Kenichi Ohmae’s 1990 tome The Borderless World . Mahathir was mercurial. He launched his biggest industrialisation projects, and then began to sour on Japanese joint venture partners, even before Malaysian bureaucrats had completed a detailed Industrial Master Plan.

1. Protectionism can be useful but must be coupled with export discipline, i.e forcing your domestic firms to face global competition rather than allowing them to be complacent.

2. Do not select winners in your industries, this breeds complacency and leads to less competitive companies and will hence affect your industrialisation efforts.

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