The deepening financial and capital crisis of
the early 1980s further bifurcated the Malaysian
economy. A combination of dwindling foreign
loans and the sudden expansion of
available investment capital due to the Plaza
Accord yen revaluation encouraged the government
to intensify reform efforts to attract FDI.
Virtually overnight, the government relaxed all
restrictions on capital flows and ownership,
resulting in a tremendous upsurge of FDIinto
Malaysia (see Table 2). The economy responded,
averaging over 6.4% growth per year
during 1980–92. 51 Yet despite this rapid
growth, entrenched institutional legacies and
preferences impeded more comprehensive economic
reform and in turn technological
upgrading. The exception to this pattern was
Penang.