This paper offers an institutional economic analysis of industrial development and equity distribution in Malaysia, with particular reference to the shift in Malaysia's redistribution regime in the mid-1980s. The regime gravitated from manufacturing licensing toward a more liberalised investment environment. I set out an institutional framework for politicaleconomic analysis, which significantly incorporates concepts of legal institutions and the role of the state, with emphasis on those that are more relevant to the Malaysian context. An overview of Malaysian investment policy is presented, taking note of trends in equity distribution. This is followed by analysis of the mid-1980s investment liberalisation measures, with reference to: (1) the increased emphasis on industrial development, instead of equity redistribution, in the manufacturing sector, and (2) the concomitant shift from a redistribution-centred to a growth-centred development policy in the wider institutional economic framework. I examine empirical data, mainly comprising equity distribution of approved manufacturing licenses, and analyse the motivations for and implications of the shift in redistribution regime. This paper concludes with discussion of the continuing dynamics of and tensions between distributive and productive activities in the Malaysian economy.


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