Rubber Manufacturing in Malaysia: Resource-based Industrialization in Practice

Rubber Manufacturing in Malaysia: Resource-based Industrialization in Practice examines the growth of rubber manufacturing in Malaysia over the past century by drawing on industrial policy theory along with many years of practical experience. This book is the first comprehensive study dealing with rubber manufacturing in Malaysia, and a valuable contribution on this ground alone. Malaysia is a major rubber-producing country, and the country’s rubber manufacturing sector is a prime example of an industry based on a locally produced agricultural resource. Over the past century, a series of technological discoveries resulted in the worldwide rise of a rubber production industry that manufactures tyres for motor vehicles, engineering components, household gloves and medical products. The author argues that the production of rubber goods has played a significant part in the transformation of the country from a primary commodity producer to a newly industrialized economy, a position he supports by tracing the historical development of rubber-based industrial production and the effects of government policies promoting industrialization.

Around 80 per cent of the country’s rubber manufacturing companies are Malaysian-owned, with foreign investment concentrated in the production of industrial components and tyres. The industry has a dualistic structure, with joint ventures and foreign manufacturers operating in a more capital-intensive way and employing a greater number of workers compared with local companies. Taken as a whole, the rubber industry is vertically integrated, with locally produced natural and synthetic rubbers used by the rubber manufacturing sector to produce latex products and general rubber goods for export markets. 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.

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 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 brings 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 the government through the Malaysian Rubber Board.