linkages among the electronics sub-sectors.

### 4.2 Growth of Investments

One of the peculiarities of the Malaysian electronics industry is the high dependency on foreign investments. The share of autonomous local firms on the total number of companies is generally very small with a concentration in the production of simple parts and components. Foreign owned capitals control all the main projects and since 1986 especially those from Asian countries have rapidly increased in all the sub-sectors.

Table 4.1 shows the total of received application and approved investment projects in Malaysian manufacturing sector in 1990. These figures are referred to the projects submitted to MIDA (Malaysian Industrial Development Authority) in order to obtain the manufacturing licence and eventually the eligibility to the system of incentives. The real presence of local SMEs is however underestimated because no registration is required for projects involving less than 75 employees or 2.5 million ringgits $ ^{36} $ . In 1990, investments in the manufacturing sector were booming. In particular, the number of received applications (1,862) was more than twice that of approved projects (906), which amounted to more than 28 billion ringgits. The share of electronics on the total manufacturing sector was 23.5% of approved projects (213) and 19.3% of received applications (360). The figures clearly show three main characteristics of this industry. First, the great employment creation effect (around 50% of total employment is in electronics). Second, the relative small size of the projects (an average of 20 million ringgits against 30 million ringgits for the whole manufacturing sector) which, in turn, reflects the growth of projects from SMEs. Third, the dominant presence of foreign companies (198 approved projects and 332 received applications cover more than 90% of the total).

The dramatic increase of FDI inflow experienced since 1986 originated especially from Japan and Taiwan. Table 4.2 shows the inflow of manufacturing FDI by country of origin. The total number of projects increased 2.3 times from 1985 (304 cases) to 1990 (709 cases) and in particular those from Taiwan increased more than 10 times (from 25 in 1985 to 270 in 1990) and those from Japan increased more than 3 times (from 46 in 1985 to 134 in 1990). The relative share on the total amount shifted from 1985 to 1990 according to the following percentages: Japan from 25% to 28.5%, Taiwan from 4.5% to 37%, the other NIEs from 23.5% to 10% and USA from 11% to 3%. Hence, in 1990 Taiwan was the biggest foreign investor in Malaysian manufacturing sector. The largest part of Taiwanese FDI originated from SMEs and were concentrated in traditional sectors like textiles and food processing. Moreover, the growth of investments from Taiwan and the other Asian countries is supported by the tight connection of Malaysian businessmen to the network of overseas Chinese in Asia.

The growth of investments in electronics originated principally from Japan. This can be seen from table 4.3 which presents some figures related to the Japanese FDI share in Malaysian manufacturing sector and electrical and electronics (E&E) industry. In fact in 1990, more than half of FDI in E&E industry came from Japan $ ^{37} $ and also E&E industry covered the largest share on the total of Japanese FDI $ ^{38} $ . Table 4.3 also shows that from 1985 to 1990, the share of E&E industry on the total amount of FDI increased from 8.5% to 26.6%