domestic economy benefited from the process of production relocation especially in terms of employment creation, GDP growth and foreign exchange earnings. However, only modest linkage effects were created. Malaysian authorities did not request for any particular condition on local content or minimum shares for local ownership. As a consequence, the process of technology transfer was lagging behind and local firms did not easily succeed in entering the industry.

After 1985, the currencies adjustment caused a dramatic inflow of FDI especially from Japan and the NIEs. The situation has been starting to shift towards a more balanced pattern in terms of sub-sectors, as the upgrading of the industrial structure induced the internal market for industrial equipment goods to grow, and in turn the transfer of more technology intensive productions, like parts for computers and telecommunication apparatus. Furthermore, the growth of GNP per-capita and that of the domestic demand are inducing the transfer of new projects aiming to serve the internal market for consumption goods. The massive relocation process which started after the second half of the 1980s reinforced the heavy dependency from foreign capitals. Furthermore, the lack of local firms induced many projects of SMEs especially from Asian countries to be transferred together with those of the MNEs.

#### 5. TRANSMISSION OF INDUSTRIAL DEVELOPMENT : WHICH PATTERN? 5.1 Some Theoretical Reconsiderations

From the analysis of the previous sections, we can now try to outline the process of industrial development transmission occurring in electronics from Japan to Malaysia. We will first discuss the suitableness of the PC and the CPC's analytical frameworks and, in order to evaluate the likelihood of the explanation they offer, we will later attempt a comparison between the two theories. Finally, in paragraph 5.3 we will discuss some policy implications and the future prospects for electronics industry in Malaysian economic development process.

With regard to the suitableness of the two analytical frameworks a first difficulty concerns the proper level of disaggregation to be chosen. In fact, while data availability limits the quantitative appraisal to the sub-sectors of consumer goods, industrial equipment and electronic parts, for a more qualitative analysis which takes into adequate consideration the characteristics of the markets and the production function's technology, we need to follow the sub-industry classification, as proposed in section 2 $ ^{39} $ . At first consideration, the PC hypothesis would better fit the case for microelectronics, where production was started by and continued to grow on the inflow of foreign capitals, destined to export markets. On the contrary, the pattern of industrial transfer occurred in electrical and electronic equipments (particularly in Home appliances) seems closer to the explanation offered by the CPC theory, since after an import-substitution phase, there has been a shift towards export-expansion.

These observations are, however, only partially correct. In fact, if we try to reconsider the matter from a more general point of view, it seems that neither the PC nor the CPC theory provide a satisfactory explanation to the real nature of the industrial development transmission pattern under analysis. The point is that “electronics in Malaysia” is the case of an innovative and technology intensive industry in a developing country. This possibility