In line with Malaysia’s conviction that free trade is ideal, there has also been liberalization
of imports via a progressive reduction of import duties over the years particularly on
consumer products. This has also contributed to the openness of the Malaysian economy.
In theory, trade could either promote or inhibit economic growth. Many countries have
however benefitted from their engagement in international trade (Helpman, 2004). Trade
and assimilation of foreign technologies assumed an integral role in the development of
Japan especially in the post-Meiji era (Lockwood, 1954). Likewise in the case of Malaysia,
foreign direct investment has always been needed more so for the foreign technology.
Similar to other East Asian economies, Malaysia has clearly benefitted from trade. The
presence of foreign-owned export-oriented firms has contributed to job creation for the
rural labor force and has nurtured the emergence of locally-owned firms via backward and
forward linkages and the demonstration effect though not as successful as South Korea and
Taiwan. It is widely acknowledged that East Asian economies have so far prospered by
virtue of their adoption of outward-oriented development strategies since the 1960s that