Industrialization has been an important element in the process of diversifiying the country's economy which was highly dependent on the agricultural and primary sectors (during the early post-independent period). Many incentives were introduced in order to boost the investment in the manufacturing industries (Leong 1990 and Yong, 1988). In general, industrialization has reduced the country's over dependence on agricultural and primary products and at the same time increased the role of manufacturing sector in the Malaysian economy. The share of agriculture, livestock, forestry and fishing in the GDP which was 38% in 1960 had dropped to 16% in 1992 while the share of manufacturing had increased from 9% in 1960 to 29% in 1992. In terms of exports, the manufactured products has accounted for the major portion of the manufacturing exports (68.7% in 1992). It is obvious that the growth of the manufacturing sector has been quite impressive since the 1970's, however, a careful analysis on the data on manufacturing industry reveals that the manufacturing base is quite narrow and concentrated in certain industries. The imbalance performance accross the manufacturing industries can be seen in terms of production, value added, employment, exports as well as capital investment.

 Regarding the production of manufactures, electrical products accounted for 27.2% during the 1988-92 period while agrobased products such as food and beverages, wood products, and rubber products contributed 12.1%, 11.8% and 12% respectively of the total value of manufacturing production. As for the value added, despite the fact that electrical industry is heavily based on imported inputs, it currently accounts for a major portion of the manufacturing value added. In 1990, it contributed 21.5% of the total manufacturing value added while the chemicals and chemicals products industry contributed 10.8%. The share of several agrobased industries were relatively lower (even though these industries are based on local inputs), for instance, food and beverages (8.3%), wood products (6.4%) and rubber products (4.7%). This suggest that the downstream activity which are based on local agricultural resources are still behind the non-resource based industries like electrical. In terms of employment, a large portion of manufacturing employment is in the electrical industry. In 1992, over 40% of the total manufacturing employment was in the electrical and textile alone. During the same year, the percentage of employment in several agrobased industries were as follows: food manufacturing (8.1%), wood and wood products (8.1%),rubber and rubber products (6.2%) and furniture and fixtures (1.1%). In relation with exports, the bulk of manufacturing exports has been accounted for by electrical products. In 1992, it contributed 58.4% of the total manufacturing exports. Agrobased products contribute relatively small portion of the manufacturing exports. The shares of major agrobased industries (in 1992) were as follows; food, beverages and tobacco (3.6%), wood products (3.8%) and rubber products (2.9%). On the rate of investment accross the various manufacturing industries, many of the manufacturing projects approved are involved in the production of electrical products. During 1984 - 1992 period, 18.9% of the total number of approval granted for establishment of manufacturing projects were in the electrical industry alone. For several major agrobased industries the percentages of approved projects are as follows; food (6.3%), beverages and tobacco (0.6%), wood and wood products (7%), furniture and fixtures (3%) and rubber products (9.5%).

 The above evidences indicate that the development of manufacturing industries in the country has been relatively more obvious in the electrical industry. Electrical industry in Malaysia is actually a non-resource based industry and quite heavily dependent on imported inputs. Most of the electronics and electrical appliances plants are owned by multinational corporations (MNCs) which are involved in the assembly process of integrated circuits (ICs) and consumer appliances as well as industrial equipment such as air-conditioner, radios and television sets.
 

 The above evidences also suggest that there is a need to further boost the local agrobased industries in order to diversify and strenghten the country's manufacturing base. It is quite ironic to see that inspite of the country's abundance of agricultural resources, the development of the agrobased industries is relatively less aggressive than certain industries which are based on imported inputs. In addition, it is also important to further promote agrobased industries in order to add more value into our agrobased exports.

 Currently, the country is still exporting a large amount of commodities in their low value added forms. For instance, our rubber industry is currently still dependent to a large extent on the exports of natural rubber. In 1991, the value of exports for natural rubber was RM2689.8 millions while the export value of rubber manufactures (including gloves, tyres, footwear and general rubber goods) was RM2134.6 millions. This means that natural rubber accounted for more than 55% of the rubber industry exports value.

 As for cocoa, in 1991, the export value of cocoa beans was RM406.5 millions while the value of exports of processed cocoa (cocoa pasted, cocoa powder, cocoa butter, chocolate and chocolate preparations in blocks, slabs or bars) was RM313.4 millions. In other words, cocoa beans contributed about 56.5% of the total export value of cocoa and cocoa products. In fact, in 1991 about 65% of our (unprocessed) cocoa beans was exported. Since a large amount of our cocoa beans is marketed abroad, Malaysian cocoa producers are highly subjected to the developments of the international cocoa beans market.

 In the case of forest resources, majority of the products are still being exported in their low value added forms. In 1991, saw logs accounted for 43.6% (RM4.1 billions) while sawn timber accounted for 32.7% (RM3 billions) of the total export earnings of the forestry products. Higher value added products of other woodbased downstream manufacturing activities contributed only small portion of the wood products exports, for instance, veneer sheet (3.2%), plywood (10.6%), wooden moulding (5.8%) and furniture (5%). Note that Japan, Korea and Taiwan have been the major markets for Malaysian exports of saw logs and sawn timber.

 For palm oil, it is true that the industry is no longer dependent on the exports of crude palm oil, however, there is still a lot of potential for further development of the oleo-chemicals sector (such as production of vitamin E from palm fatty acid distillate (PFAD)). Note that from the total export value of palm oil and palm oil products in 1991, 74.6% was represented by palm oil while crude palm oil accounted for only 1.2%, palm stearin (9.5%), palm acid oil (0.3%), and palm kernel and palm cake (12%). Obviously, the local palm oil industry exports is mainly comprised of palm oil. The local palm oil industry need to explore futher into the production of other higher value added downstream products so as to add more value into the industry as well as to reduce the dependence of the industry on the exports of palm oil.

 The above information confirms that there is still room for the promotion of agrobased industries in Malaysia. As mentioned by Iqbal (1981), agrobased industries include the processing of agricultural output or those which are supported by agricultural products. In other words, agrobased industries function very importantly as outlets for many agricultural resources. Thus, a well developed agrobased industries can provide a more stable market for local agricultural products and the same time reduce the dependence on the international market. In expanding the local agrobased industries, there are several challenges that are to be faced. For instance, agrobased industries are mostly ventured by medium and small scale enterpreneurs which are involved mainly in the simple or low value added manufacturing activities. The problems of small scale agrobased industries can be summarized as follows: (1) poor management in one aspect or another because one person has to handle many aspects of management, planning, production, finance, marketing and so forth. (2) lack of access to organise capital market. (3) Lesser access to modern technological knowhow, market information and market facilities. (4) small enterprises may be handicapped in the procurement of more sophisticated machinery and equipment (Fong, 1988).

 Since technology and capital are the two important elements in expanding the local agrobased industries, one alternative would be to encourage  the participation of MNCs into the industries. MNCs are generally more capable of providing a large amount of fund for venturing in capital intensive agrobased industries and for establishing research and development units (R & D). As in the case of electrical and textile industries, participation by MNCs has been an important factor that leads to the success of those industries.

 However, it is important to note that from the past experience, it is not that easy to attract foreign direct investment (FDI) into industries which are highly based on local agricultural or other resources. In the case of electrical and textile industries which are mainly based on imported inputs and local inputs are mainly just labourers for assembly of electrical components, it is relatively easier to get the participation of MNCs since these industries are relatively more mobile and therefore less prone to any political or social instability. In fact, the current pattern of foreign direct investment in Malaysia shows that MNCs are relatively more involved in industries which are basically non-resource based.

 Therefore, it is also important for Malaysia not to be too dependent on the MNCs in the process of further intensifying the local agrobased industries. It is quite timely to gather and strenghten the local capital
and technology in order to boost the agrobased manufacturing. Government policies and incentives should also be designed so as to encourage the involvement of local investors especially the large firms into the industries.

Concluding Remarks

  Industrialization in Malaysia has reduced the country's over dependence on agricultural and primary commodities. The manufacturing sector has been significantly developed and become the major component of GDP and exports. However, an in-depth analysis indicates that there the impact of industrialization on the development of agrobased industries is relatively lower as compared to that of the electrical and textile. The level of downstream activities for most of the agricultural commodities are still quite low and need to be further promoted. Encouraging the participation of MNCs would be one of the ways to further expand the local agrobased industries. However, it is more difficult to attract MNCs into the agrobased industries than into the electrical or textile since agrobased industries are less mobile and therefor more prone to local instability. For this reason, efforts must be made in order to reduce the country's dependence on MNCs in the process of intensifying the local agrobased industries.