Rubber, palm oil, and tin form the basis of Malaysian exports. The largest trading partners are Britain, Japan, and the United States. The economy is subject to fluctuations in international commodities markets. British investors develop and control most of the country's rubber production. Trade is facilitated by infrastructure built during the colonial period.
Deprived of its busiest port with Singapore's defection, Malaysia institutes tariffs to protect local import-substitution industry, including textiles, light manufactures, fertilizers, and industrial chemicals. The first five-year plan aggressively courts foreign investment. The NEP increases public infrastructure investment. Malaysia imports rice and other basic foodstuffs to meet local demand.
The OPEC oil crisis is offset by the discovery of offshore oil reserves, and Malaysia begins to export oil. The economic boom turns Malaysia into a leading exporter of electronic equipment and light manufactured goods. Trade surpluses are common.
Malaysia seeks to broaden and diversify from a labor-intensive to a capital-intensive economy. The Heavy Industry Commission of Malaysia (HICOM) is founded in 1980 to spur steel and iron manufacturing. The first Malaysian auto, the Proton, begins production for the export market in 1985. Malaysia encourages regional trade by supporting the ASEAN Free Trade Area (AFTA).
In 1988 Prime Minister Mahathir calls for economic cooperation between developing nations. In 1991 he promotes the East Asian Economic Caucus (EAEC), a trading bloc for Asian nations. The EAEC attempts to secure the regional Southeast Asian market against foreign competitors while easing trade barriers among member states. Malaysia begins to cut import tariffs in 1993.
Mahathir expresses apprehension at the 1994 Asia-Pacific Economic Cooperation (APEC) meeting over the fast pace of trade liberalization. He fears that free trade will allow Western economies an inequitable advantage over developing countries. Manufactured goods reach 77.4 percent of all Malaysian exports in 1994. Malaysia joins the World Trade Organization (WTO).
Malaysia maintains a trade surplus despite the Asian financial crisis. In 1998 Malaysia reaffirms its commitment to liberalization of its financial industries under WTO rules. Currency fluctuations affect competitiveness, but Malaysia's generally sound recovery from crisis contributes to renewed growth. In 2002 Thailand and Malaysia hold a joint Cabinet meeting in which they emphasize trade ties.
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