Abstract
This study considers the effects of government intervention on the economic development in Malaysia from the late 1950s to 1997. While an increasing number of studies use descriptive analyses to examine the impact the Malaysian Government has had on the economic growth of Malaysia, they are rarely supported by evidence from regression analysis. Therefore, this study employs both qualitative and regression analysis to gain a deeper understanding of the relationship between government intervention and economic growth. Particular attention is given to Malaysia's economic progress and how closely the performance of government policy conformed to its planning. A multivariate regression model is used to investigate the statistical relation between the growth of government consumption (the proxy for government activity) and the growth of nominal gross domestic product. The other variables in the model are growth of exports, imports, investment, private consumption and inflation rates. The findings show that the growth of exports, investment and private consumption had a positive, simultaneous and significant relationship with the economic growth. The growth of government consumption, however, had a significant, positive and lagged two-year correlation with the economic growth. Meanwhile, the descriptive (qualitative) analysis showed that the Malaysian Government might have played an important role in the country's economic development as a catalyst. This study therefore concludes that the intervention of the Malaysian Government in the economic development from 1958 to 1997 had been beneficial to the economy, although to a lesser extent than the impact from exports and private investment. The lagged impact of the government reflects the delay in the government programme delivery system and suggests there are rooms for improvement. In addition, the distortions induced by various government policies and the lack of transparency in government decision-making had reduced, at least to some extent, the effectiveness of government policy implementation.