Industrialisation
Several government agencies that had been established prior to the advent of the Second Malaysia Plan increased their participation in the economy during the Second Malaysia Plan. These agencies included the Malaysian Industrial Development Authority (MIDA) and Majlis Amanah Rakyat (MARA). Several more were also established under the plan, including the Perbadanan Nasional (PERNAS, or the National Trading Corporation), State Economic Development Corporation and the Urban Development Authority (UDA).
PERNAS was established to purchase businesses and participate in joint ventures with private companies, as well as to develop nascent industries to be held in trust until the Malays held sufficient capital to take them over. By the end of the plan's tenure, PERNAS owned 100% of eight companies involved in insurance, trading, construction, properties, engineering, securities, and mining. Joint ventures had also been formed with the private sector to develop the mining, containerisation, tourism and consulting industries.
Parliament passed the Industrial Coordination Act during the Second Malaysia Plan, which required all new manufacturing enterprises with M$100,000, or twenty-five or more workers, to be licensed by the Minister of Trade and Industry. To obtain such a licence, each firm had to meet certain conditions set by the Ministry, which could vary. Malaysian Chinese manufacturers were concerned about the act, as they had operated with minimal control from the government before. Nevertheless, the government stated the act was not meant to be detrimental towards any group, and went ahead with its implementation. Under the act, firms were divided into three categories: firms approved after 1 January 1972, firms approved before then, and firms operating without approval from the Ministry. All firms subject to the act were required to submit a proposal to the Ministry stating how they planned to achieve the long-term target of achieving 30% Malay and 70% non-Malay Malaysian ownership in the company. Proposals that were accepted then became the guidelines for how the relevant company would operate.
Until the Second Malaysia Plan, industry was concentrated on the west coast of Peninsular Malaysia. The plan thus moved to establish new industrial estates on the east coast, in order to curb rural-urban migration—the east coast was considerably less urbanised than the west coast.
By 1975, manufacturing activities constituted 16% of the Malaysian Gross Domestic Product (GDP), one per cent short of the target of the Second Malaysia Plan. Manufacturing grew negligibly in 1975, attributed by the government to the global recession that year. This contrasted with the 15% growth achieved in 1974, which well exceeded the target of 12.5% growth per year during the Second Malaysia Plan. Food, wood products, and chemical products made up the majority of the manufacturing sector. The substantial growth in manufacturing during this period has been attributed to the government's establishment of free trade zones, where any goods brought in would not be subject to customs duties, and goods could be freely exported abroad or transferred to another free trade zone. In 1974, such zones were declared in the states of Penang, Selangor, and Malacca. The industries located in these zones were mostly electronics-, rubber product- and textile-based.
Read more about this topic: Second Malaysia Plan