Charts of quick change

In 1985, the Malaysian government launched its industrial master plan to transform a country dominated by exports of agricultural commodities and minerals into an industrialised economy within little more than a generation. Recognising the need that this goal would have for investment in human resources development, the government secured funding support from the United Nations Development Programme to examine the implications for restructuring the provision of education, training and employment.

The authors of this book were jointly chief technical advisers on the human resource development plan that was prepared as part of the Sixth Malaysian Plan (1991-95). They have written this review of how Malaysia has actually transformed in the light of their advisory work and subsequent detailed research on the mechanics of structural change.

Robert Lucas and Donald Verry note at the outset that the transformation of a labour-intensive economy to one based on capital-intensive high-technology industries through a large-scale public investment programme yielded a very low rate of economic return. The rate of employment creation did not exceed the growth rate of the labour force. On the other hand, the Bumiputera majority, who were the poorest community in 1970, did witness some improvement in household income relative to Chinese and Indian households. In a review of labour markets, Lucas and Verry highlight the rise in the female labour-force participation. But even so, the male participation rate remains about 85 per cent higher than female rates. No fewer than 29 tables and 15 figures are assembled to examine aspects of migration, ethnic employment and earnings in both the private and public sectors.

The same impressive scrutiny is directed at education and training systems in Malaysia. Once again the authors probe behind the facade of aggregate data to point up relatively low levels of secondary enrolment. They also show falling scientific and technical enrolments even though national policy seeks to encourage the opposite outcome.

In the book's second part, the authors examine in turn agriculture, manufacturing, services and the public sector. Again they approach each sector in a tightly written structure such that their quantitative evidence does not distract from the appraisal of structural change at the micro-level. The analysis in chapter five underlines evidence of pockets of rural poverty that policies thus far have failed to eradicate. In chapter six the effectiveness of capital intensity in the manufacturing sector is questioned. Chapter eight highlights the dramatic growth in civil-service employment between 1977 and 1984, which left a legacy of expectations despite the subsequent freeze on new appointments.

Finally, Lucas and Verry delve deep into the problem of unemployment in terms of job search, mobility and unionisation. The relevance of the rise in unit labour costs is appraised given the ringgit's appreciation in the early 1980s compared with the Korean won and the new Taiwanese dollar. The authors are concerned that there are misleading cost signals that may not correctly reveal Malaysia's comparative advantage in international exchange. They offer a summing-up of Malaysia's achievement in gaining a ranking of 30 when measured by gross national product per capita in 1996 in the World Bank's development indicators. Arguably the most poignant comment here is that within each ethnic community it is the children of the rich who enjoy the benefits of a tertiary education. The authors reaffirm their belief in the importance of raising the quality of basic education, particularly in rural areas, in order to eradicate poverty.

This is a most impressive study of Malaysia's experience. Lucas and Verry have brought their endeavours on behalf of the Malaysian government to a much wider audience. Their review is not eclipsed by the fact that the recent crisis in Asian economies forms no part of their diagnosis.

Peter Maunder is senior lecturer in economics, Loughborough University.