that one destined to the internal market decreased from 20.3% to 16.9%. Once more, the pattern of industrial transfer discussed above is confirmed.

## Pattern of Trade

The composition of Japanese trade in electronics industry by area and sub-sectors, is showed in table 3.8. Data are referred to 1990, when the trade balance surplus for Japan registered a huge amount of about 9 billion Yen. Electronic parts held the highest share of total exports (44.6%) and of total imports (60.5%), although exports (4,879,772 million Yen) were four times larger than imports (1,233,011 million Yen). The most important regional trade partner for Japan is North America (37.8% of exports and 57.1% of imports), followed by Asia and Europe. In particular, for industrial goods import-export flows are mainly towards North America, consumer goods are primarily exported to North America and imported from Asia, and electronic parts are mainly exported to Asia and imported from North America.

Japan-Malaysia trade figures are presented in table 3.9 and 3.10. The first one shows that after 1985 Malaysian total trade balance with Japan shifted from surplus to deficit (-6,895 million ringgits in 1990). This change is due to the faster increase registered during the 1980s by imports (+3.6%) with respect to exports (+1.9%). Trade in machinery (SITC7) greatly affects this performance, as in 1990 Japanese share of imports was 30% against a smaller 8% share of exports. Nevertheless, Malaysian exports of electrical machinery to Japan have been rapidly increasing during the last decade (15.2 times in value). Although electronics industry covers only a part of SITC7, the increasing and huge trade deficit that Malaysia is experiencing since 1980 with Japan in this sector reflects the massive inflow of FDI in plants and machinery for production activities, which at their initial phase require large amounts of capitals. Typically Japanese companies import this machinery from Japan as they privilege long term relationships formerly established with the suppliers and the local machinery industry is not able to provide the required quality and technology standards. However, as these projects will enter into operation and the rate of growth of FDI will eventually slow down, trade balance for Malaysia in this sector should improve.

Table 3.10 shows the rapid increase of the two-way trade flows in electronics since 1975. During the last five years, Japanese imports are growing faster than exports: in 1985 exports were 7.3 times larger than imports, while in 1990 this value decreased to only 4.2 times. The sub-sector of electronic parts covers the largest share of Japanese total trade, although it is changing over time. In particular the export share is increasing (from 65.3% in 1985 to 82.4% in 1990) while the import share is decreasing (from 94.5% in 1985 to 74.9% in 1990). Accordingly, the trend for consumer goods is opposite. While in 1980 exports of consumer goods were ten times larger than imports, they were only 1.5 times larger in 1990.

### 4. THE ELECTRONICS INDUSTRY IN MALAYSIA

### 4.1 Historical Overview

The electronics industry in Malaysia started in the 1960s and since the beginning relied on investments and technology supplied by foreign companies. The government initially favoured the development of the infant industry by introducing a policy of “import-substitu-