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Technology Diffusion in theTelecommunications Services Industryof MalaysiaChan-Yuan Wonga, VGR Chandranb & Boon-Kwee Nga

a Department of Science and Technology Studies, Faculty ofScience, University of Malaya, 50603 Kuala Lumpur, Malaysiab Department of Development Studies, Faculty of Economicsand Administration, University of Malaya, 50603 Kuala Lumpur,MalaysiaPublished online: 03 Sep 2014.

To cite this article: Chan-Yuan Wong, VGR Chandran & Boon-Kwee Ng (2014): Technology Diffusionin the Telecommunications Services Industry of Malaysia, Information Technology for Development,DOI: 10.1080/02681102.2014.949611

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Technology Diffusion in the Telecommunications Services Industry ofMalaysia

Chan-Yuan Wonga∗, VGR Chandranb and Boon-Kwee Nga

aDepartment of Science and Technology Studies, Faculty of Science, University of Malaya, 50603 KualaLumpur, Malaysia; bDepartment of Development Studies, Faculty of Economics and Administration,University of Malaya, 50603 Kuala Lumpur, Malaysia

This study empirically models technology diffusion and incorporates a more comprehensiveframework in understanding the diffusion process of telecommunications technology inMalaysia. We inductively assess the government’s conduct in translating the productiverents for upgrading activities. The results show that the proactive role of the governmentwhen intervening in market operations has considerably influenced the technologydiffusion process. The telecommunications services industry of Malaysia achieved acritical mass of entrepreneurs by first engaging business entrepreneurs in contract servicesfrom Malaysian Telecommunications Department, then moved to business diversification atthe end of 1970s and is now developing a market platform to furnish its sustainabletelecommunications system. We highlight positive general macro-meso views of our caseand provide salient normative principles as guides for transformational policy-making. Theprinciples discussed in this paper provide policy lessons, or at least some initial guide, forother developing economies aspiring to follow the path of technology upgrading anddevelopment.

Keywords: rents management; diffusion; normative principles; telecommunications servicesindustry; Malaysia

1. Introduction

Studies on the information society have been the subject of intense scrutiny among scholars and

policy-makers due to its potential implications on the larger society – as well as on industrial

development (Freeman & Soete, 1997; Mansell & Wehn, 1998). Indeed, the explosive growth

and development of telecommunications technology in recent decades has opened up numerous

industrial development opportunities for developing economies, particularly in the East Asian

emerging economies (see Langdale, 1997; Wong, 2002). A number of studies explored and

generalized the industrial development patterns for telecommunications technology and

described the rationale behind the success of production and diffusion of telecommunications

technology (see Ng, Lu, Li, & Chan, 2004; Frieden, 2005; Gao & Rafiq, 2009; Lee & Chan-

Olmsted, 2004; Singh, 2000). Common themes and lessons gained from this set of studies

provide useful clues and guides for those trying to organize production and diffusion of

telecommunications technology. Indeed, contribution to the literature of telecommunications

technology gained additional momentum with the use of other frameworks such as the

model of innovation system conceptualized by Edquist’s (2003) telecommunications system

of innovation (see Mani, 2007), Teece’s (1986) integration strategies for technological inno-

vation (see Krafft, 2010), Rogers’s (2003) diffusion model (see Lim, Choi, & Park, 2003)

# 2014 Commonwealth Secretariat

∗Corresponding author. Email: wongcy111@gmail.comHeinz Weistroffer is the accepting Associate Editor for this article.

Information Technology for Development, 2014

http://dx.doi.org/10.1080/02681102.2014.949611

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and Porter’s (1990) model of competitive advantage (see Lee & Chan-Olmsted, 2004). The

large and growing quantity of literature on telecommunications industrial development indi-

cates the paramount importance of production and diffusion of “information” and “knowledge”

for firms as well as for nations.

However, two missing elements of the previous studies should be recognized as a literature

gap. First, a large number of past studies (for example, Lee & Chan-Olmsted, 2004; Salazar,

2007; Yartey, 2008) focus on the limited aspects of political rent-seeking or political–

institutional environments, and therefore lack a more comprehensive view that allows more sys-

tematic analysis of the process of telecommunications industrial development. For instance, the

analysis of productive rent distribution and effective rent management within the context of indi-

genous industrial development is seldom included – an important element, especially in a devel-

oping country. The term “rent” is used here to describe “the income” which is above the normal

in a competitive market. It includes monopoly profits, legal and illegal transfers through certain

mechanism, profit made by innovators (some label it as Schumpeterian rent) and subsidies for

indigenous entities (learning rent) to attain net social benefit by adopting and assimilating

new technologies (see Khan, 2000). The term “rent-seeking” thus describes the activities that

seek to create or maintain rent. The government plays an important role in creating and distri-

buting progressive-type rents1 that would ultimately benefit the process of socioeconomic

development.

In articulating the significance of a national telecommunications policy for the public adop-

tion of telecommunications technology, we adopt the political–structural–historical analysis

(see Frieden, 2005; Gao & Rafiq, 2009; Painter & Wong, 2005; Salazar, 2007; Singh, 2000;

Wang, 2003), as well as the structure–conduct–performance analysis (see Lee & Chan-

Olmsted, 2004; Mesher & Zajac, 1997; Sambasivan, Wemyss, & Rose, 2010). Building

upon Khan’s (2000) conceptual model on rents, Salazar (2007) studied political–structural–

historical conditions that shape the adoption of strategic reforms of telecommunications indus-

tries in Malaysia and the Philippines. This paper expands Salazar’s findings on Malaysia’s

telecommunications industries by incorporating the scope of rent management and diffusion

cycles in the telecommunications services industry. What we attempt to add to previous

studies is a broadening of the scope of analysis beyond the limited aspect of political and insti-

tutional environments, to include rent distribution cycles in the process of upgrading and

the emergence of conglomerate firms that dominated businesses during the transition to a

knowledge-based economy.

Second, despite the continuous efforts by many countries to advance telecommunications

service industries, in order to boost economic growth and development, literature on the diffu-

sion of telecommunications technology in the Asian economies is still lacking. While the litera-

ture on “telecommunication liberalization” informs us on the generic factors that cause rapid

telecommunications technology adoption, a systematic approach with a dynamic perspective

to understand the impacts of the policy process on diffusion in the context of developing

economy is still severely lacking. For instance, consistent with Fan’s (2005) observation for

the case of Australia, Gutierrez and Berg (2000) argued that sound institutional (political democ-

racy and economic freedom) and regulatory framework (reduction of entry barriers and privati-

zation) and openness (open to trading activities) are the determinants of rapid diffusion of

telecommunications technology. Similarly, building upon the notion of telecommunication lib-

eralization, Shahiduzzaman and Alam (2014) studied the correlation relationship between infor-

mation technology (IT) capital, non-IT capital, as well as labor on growth and productivity in

Australia. They conjecture that favorable environment for business sector to adopt telecommu-

nications technology is shaped by policy reform toward market liberalization for telecommuni-

cations infrastructure in the 1990s. They argued that the reform, in return, contributed to growth

2 C.-Y. Wong et al.

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and productivity in Australia. Nevertheless, the proponents of telecommunication liberalization

appeared to have adopted a static narrative frame. Their stylized framework may have over-

looked the dimensions of evolutionary targeting (Avnimelech & Teubal, 2008) in policy pro-

cesses and its impacts on technology diffusion.

Malaysia is considered particularly relevant to this study, given the prominent transforma-

tional changes that have occurred in its telecommunications services industry (Salazar, 2007).

Thus, this paper attempts to provide a systematic examination on the evolution of telecommu-

nications in Malaysia drawing from anecdotal as well as empirical evidence, and reveal and

understand the institutional dynamics that lead to progress in the existing diffusion of telecom-

munications technology. In order to achieve this objective, the following two main research

questions were addressed: (a) What are the diffusion trends for telecommunications technology

development in Malaysian telecommunications systems? (b) How do rent-management pro-

cesses contribute to the transformation of Malaysian telecommunications systems from an

underdeveloped to a more developed system?

2. Framework and methodology

2.1. Our narrative frame

This section discusses the theoretical framework that broadens the scope of our analysis beyond

the limited aspect of political and institutional environments covered by previous studies in their

examination of the telecommunications industry’s systemic progress. We present a unitary

industrial development dynamics which is used as a narrative to articulate the evolutionary

paths of telecommunications industry of Malaysia in making their systemic changes endogen-

ous. Empirically, we attempt to capture the telecommunications services’ industrial strategies

in shaping the diffusion trajectory based on three distinct stages, in which each stage witnessed

the significant changes in telecommunications policy. The literature on management of rents

(Khan & Jomo, 2000) and diffusion promotion policy framework is used to help our study

rationalize the interaction between the private sector and the state government within the sub-

sector of telecommunications services. As a whole, the governance structure of the industry,

through the lens of rent-seeking behavior and the role of the state, provides a valuable guide

in assessing the development of the telecommunications industry. The aim of this study is to

capture the historical evolution of the telecommunications industry within the context of insti-

tutions, provider and user framework and three stages of technology industrial development that

shape the diffusion of technology. In what follows, we referred to the literature to rationalize the

dynamic interactions in telecommunications industry as shown in Figure 1. The next sub-section

deliberates the details.

Figure 1. Entities and the interacting dynamics in telecommunications industry.Source: Adapted from Gao and Rafiq (2009, Figure 2, p. 312).

Information Technology for Development 3

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2.1.1. Institutions

According to Nelson and Nelson (2002, p. 266), “institutions” is generally defined as “the set of

factors that mold and define human interaction, both within organizations and between them.”

The definition fits Williamson’s (1985) notion of modes of governance. Institutions, in William-

son’s perspective, have the ability to influence any economic activities (both behaviors of pro-

viders and users) and shape market structure of an industry. For Perez (2002), the processes of

institutional change of an economy often lead to new interdependencies among actors in an inno-

vation system. The new form of interdependence is vital in enabling an emergence of new gov-

ernance structure (or new configuration of actors) in response to a new production system in an

economy (Figure 1). However, the literatures discussed above do not capture the complicated

interactions among social identities and informal norms that are involved in creating value-

enhancing or value-reducing rents for industrial development. Khan and Jomo (2000, p. 5)

describe the term “rent” as “incomes that are above normal in a competitive market.” “Rent-

seeking” denotes “activities that seek to create, maintain or change rights and institutions on

which rents are based” (Khan & Jomo, 2000, p. 5). Some rents, for example, monopoly rent

and corruption, may lead to lost welfare and counterproductive in a process of configuring a pro-

ductive structure useful for socioeconomic development. However, we acknowledge that pro-

ductive rents such as subsidies for infant industries, Schumpeterian rent and learning rent

would imply exploitation of growth and development opportunities. Khan and Jomo (2000)

elucidated the process of how institutions and economic phenomena and conditions shape

rent-seeking activities and whether these activities create value-enhancing or value-reducing

outcomes for society. Indeed, the government of an economy can create and manage rent to

enable the national innovation system to create new industries and produce and deliver new pro-

ducts or services. Productive rents such as the government incentives to encourage private

organizations to institute research and development (R&D) routine or the government financial

scheme for high potential young start-up companies may be useful as policy tools to address

market failure problem. The term “market failure” denotes to the incomplete signaling system

resulted from the absence of future markets and “externalities of which information spillovers

are the principle exemplars” (see Dodgson, Hughes, Foster, & Metcalfe, 2011).

According to Chang (2003), the process of structural change of an economy will witness

deterioration of certain groups’ absolute and relative powers and positions in the market as a

result of asset specificity and other sources of factor immobility. The vested-interest groups

will likely resist the change and others who might benefit from the new economic paradigm

may take countermeasures. The economic development dynamism suffers if the government

fails to manage the conflict between these interest groups. This conflicting problem also leads

to potential investors not committing their resources in specific investments such as investments

in specific knowledge or new equipment that embodies the latest technology (see Amsden,

2001). Similarly, studies also proposed Weberian bureaucracies (or catalytic state as some

term it) in state governance to ensure embeddedness and avoid clientelism that hinders develop-

ment. Weberian features include meritocratic recruitment, good salaries, sanctions against vio-

lations of organizational norms and rewards for career-long performance (see Evans, 1996;

Evans & Rauch, 1999). They have administrative capacities and resources to stay autonomous

in decision-making and decisions may inherit a pro-development agenda (see Singh, 1999).

Meanwhile, Evans’ (1995, 1996) notion on “embedded autonomy” is useful to understand the

interaction between the private sector and the state government in industrial development. He

argued that a government not only needs to have roots in the society (embeddedness) but also

the will and authority (autonomy) to implement development policies in order to be effective

in its intervention (see Chang, 2006; Evans, 1995, 1996).

4 C.-Y. Wong et al.

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Therefore, strategic regulation and policies for the promotion of technological innovation are

crucial for industrial development of telecommunications, particularly in the imperfect nature of

the markets of developing economies (see Gillwald, 2005). The efforts are directed toward par-

ticular industries, firms, regions and groups in the labor market (Landesmann, 1992). These

efforts provide an avenue for firms or industries to capture learning and Schumpeterian rents

for their own benefit. In this respect, the development of an economy depends on the ability

of the state to build and manage institutional mechanisms of collective entrepreneurship to

exploit growth and development opportunities. In many industrialized economies, industrial

policy was used to drive and incentivize agents in an innovation system to capture productive

rents. The focal point of institutions for industrial development is as follows: an interventionist

state, large diversified business groups, a supply of salaried managers and engineers and

well-educated labor (see Amsden, 1989; Chandler, 1977; Wong, 2011). In this paper, we are par-

ticularly interested in rent-management process that had promoted or constrained the telecom-

munications industry of Malaysia in various ways. We explore the telecommunications-related

policy and regulatory interventions that defined the condition of market competition or liberal-

ized the market composition.

2.1.2. Providers and users

Telecommunications service providers have been playing an important role in driving telecom-

munications industrial change and development. Most of their products or services are driven by

technological innovations. In developing countries, service providers have taken a comprehen-

sive role of being the service and content providers (Gao & Rafiq, 2009). Users, on the other

hand, are the consumers of telecommunications service. They adopt and apply telecommunica-

tions technology and service for both business and leisure means. The consuming behaviors of

users are basically shaped by the market structure. In developing countries, the users are highly

price sensitive. On the other hand, many advanced countries have moved beyond this routine,

witnessing cooperation between providers and users in their market to provide services and

produce contents for new businesses (Choung, Hameed, & Ji, 2012).

Amsden and Chu (2003) stated that many industries in the developing economies (also

recognized as latecomers) of Asia sustained their manufacturing and service industrial compe-

titiveness by upgrading their performance in mid-tech industries and moving toward high-tech

sectors. The upgrading process, or the ability to adapt and adjust production or services in

response to global demand changes, requires an exploitation of different sets of competitive

assets such as production capabilities, project execution and innovation capabilities (see

Amsden, 2001) to become a global player in mid-tech industries and to compete with techno-

logically advanced industries and services. Upscaling and scoping skills for production and

modern services are central in the process of upgrading. Those firms that evolved to dominate

a new product’s life cycle would employ their finances and project execution skills to invest in

or spin off start-ups. Chandler’s (1977) studies on modern industrial enterprises in advanced

and catching-up economies showed that major sectors of technologically advanced market

economies have become dominated by conglomerate firms. Management hierarchies (hierar-

chy of middle- and top-salaried managers who monitor, supervise and coordinate the work

of the units under their control) gained importance in most mid- and hi-tech industries (see

Chandler, 1977). Indeed, Amsden (1989) and Amsden and Chu (2003) highlighted that it is

more within the interests of locally owned organizations (both private and government-

linked entities) than foreign multinationals to invest in these competitive assets. There is

higher opportunity for short-term gains of the foreign-owned entities in developing economies

than for building the competitive assets for long-term development. Therefore, a critical mass

Information Technology for Development 5

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of capable locally owned entities is a precondition for entrepreneurial and high-tech industrial

development.

Many latecomer governments selectively and systematically uphold import substitution cum

export activities (Amsden & Chu, 2003) in order to promote locally owned firms to enter prom-

ising high-technology manufacturing and modern services industries. Government organizations

and fundamental forms of state–society relationship vary across countries (see Evans, 1996).

They play an important role as managers in an institutional matrix, directing the pool of invest-

ments and entrepreneurial talents into productive venues by reducing profitable opportunities in

unproductive areas (Chang, 2003). According to Evans (1996), an egalitarian social structure is

an advantage for the quantity and quality of trust building among the institutions and network,

and is also an important determinant for economic development. The co-evolution between a

state’s coordination that shapes collective entrepreneurship and a market in an economy that

devises new technologies creates new organizational norms and develops new human skills

that in turn reinforce growth and economic development. A virtuous co-evolution policy

process between adaptations of innovation systems (Dodgson et al., 2011) and the impact of

institutions and new policies in response to new opportunities in the market must take place

for sustainable development.

2.1.3. The three stages in telecommunications industrial development

The following discussion elucidates the common stages of development that are germane to tele-

communications service industry of this study. The stages are drawn from literature on catching-

up and development in telecommunications technology and industrial development. We orga-

nized and arrayed previous works on organization, industrialization and development along

the dimensions discussed in the previous sub-sections – first on institutions and then on provi-

ders and users.

The first stage of development in most developing economies has witnessed a managed com-

petition platform for telecommunications industry with frequent political interventions without a

clear regulatory framework in governing the telecommunications market. Many studies (Choung

et al., 2012; Kim, 1997) articulated the reason of such attempt to offer a pre-emergence setting

for industrial development. These studies explain the importance of industrial policy in pursuing

the productive routines, improving existing technologies and markets and achieving critical

mass of entrepreneurs during the early catching-up process. Following the pioneering work of

Amsden (1989) and Kim (1997) on how the early efforts of the Korean government led to a

sequence of structural change in the Korean economy, a number of studies (Choung et al.,

2012; Jun, 2011) have shed light on the operating level of telecommunications industrial

systems, the dynamics of organization routines for technological learning and governing

structure for telecommunications system development. These studies provide positive views

on professionalization of organizational processes and normative principles for learning and

knowledge management, as well as organizational structure to achieve production scale and

scope.

An establishment of productive routines in the pre-emergence stage would eventually lead to

the emergence stage. Many studies (Choung et al., 2012; Edquist, 2003; Mani, 2007) provide

transformation policy lessons for developing economies aspiring to shift their telecommunica-

tions industrial and market landscape from the pre-emergence to the emergence stage. The

lessons basically focus on the specification of the market selection mechanisms. The transition

can be activated by selection sorting of activities and acceleration of market-led selection

through the built-in sunset clause that developed from state-directed change in institutional rou-

tines. In this regard, those supported firms with limited entrepreneurial abilities will undergo a

6 C.-Y. Wong et al.

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withdrawal process of government support. The final stage is generally characterized by many

studies with the commitment of the government to create a competitive telecommunications

market. The competitive market which is functional in promoting the adoption of telecommuni-

cations technology would likely witness an era of exponential growth in terms of the number of

telecommunications service users. Singh (2000), Turk, Blazic, and Trkman (2008) and Krafft

(2010) elucidated a set of contextual developments with topologies of industrial policy frame-

works that were adopted in many economies for telecommunications development of this

stage. They discussed the telecommunications policy initiatives to build a competitive platform

for telecommunications industrial transformation. The competition platform will eventually

create a wave of merger and acquisition (M&A) activities, co-operation between providers

and users for new businesses and strategic alliances between incumbents or local business

groups and multinational corporations. The new wave of M&A activities may facilitate lateco-

mers to acquire technological capabilities. Those who acquired competencies in telecommuni-

cations technology (like many entrepreneurs in South Korea and Taiwan) will attempt to achieve

technological leadership and access to future global market by positioning their focus on poten-

tial technologies and markets (Whang & Hobday, 2011). However, Frieden (2005) argued that

the initiatives for liberalization of the telecommunications market would neglect the benefits of

joint efforts between public and private sectors for universal service and interconnectivity

development.

2.2. Methodology

This study attempts to examine the process of scaling up the critical mass of capable locally

owned entities in order to create organizations that would pursue development goals through

industrial development. Past literature informs our exploratory approach to unfold development

processes, including the process of change within the telecommunications industry system. We

follow the empirical method adopted by Dodgson, Mathews, Kastelle, and Hu (2008) and

Dodgson et al. (2011) to explore the role of rents in the diffusion of telecommunications tech-

nology and how rents were translated into productive activities. Our narration of the case is built

upon the three stages of telecommunications industrial development. The process expounded in

Section 2.1.3 is used to explain the development stages, thus providing clear guidelines to stylize

a normative direction for our case study. They stages are the following:

(1) Pre-emergence: Achieving a critical mass of entrepreneurs to develop a pool of invest-

ment in order to venture into new industries.

(2) Emergence: Matching supply–demand forces in the economy is essential in providing a

platform for the emergence of new industries.

(3) Virtuous cycle development: Building a new institutional routine that allows the trajec-

tory of industrial development to reinforce itself with positive feedback that enhances

growth and development.

This study thus aims to shed essential light on the ways that institutions, producers and users

navigate and perform strategic interventions in the evolving development processes, which

eventually lead to a successful diffusion of technological innovations. In this aspect, the

success of diffusion of technological innovations is assessed by employing the logistic growth

function. The “S-curve” growth pattern (Figure 2) that exhibits the characteristic of diffusion

of technological innovation is used to examine the diffusion trajectories of telecommunications

technology (Rogers, 2003; Teubal, 1996; Wong & Goh, 2010). Rogers (2003) highlighted that

the S-curve consists of three stages: incubation, rapid growth and maturity length. As shown in

Figure 2, the incubation period characterizes the slow growth in adoption of technology that is

Information Technology for Development 7

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usually lengthy and that implies a mismatch of technology with the market demand. Once the

technology is gradually accepted and perceived as providing high economic value of pro-

ducts/services to the market, the adoption of technology rises rapidly until it approaches the car-

rying capacity (see Rogers, 2003, pp. 136–167). In this paper, the pattern and feature of the

growth curve will enable us to assess the impacts of certain policy framework. It will also

allow us to study the cycle of technological substitution by depicting the orderly substitution

of one phase of telecommunications technology by another.

Data for this study come from voluminous secondary sources on Malaysian industrial and

telecommunications policies as well as fieldwork (on-site interviews, see Appendix for

guiding questions). Industrial policies specifically related to telecommunications are examined

to assess the state’s influence on its development. The study collects evidence that locates the

specific state’s policies and societal responses in an institutional context that would define inter-

ests, aspirations and strategies of telecommunications’ stakeholders. The study further gathers

government documents, regulatory agencies’ and firms’ reports and data, the International Tele-

communication Union’s (ITU) data on information and communication technologies (ICTs), and

statistical evidence to assess the diffusion-related activities. We then sought to cross-check our

findings with fieldwork through on-site interviews. The interviewee-instigated discussions pro-

vided us deep insights and reflections that are consistent with our grounded theoretical

perspectives.

Our research visits included multiple interviews conducted at Telekom Malaysia Bhd. (the

main telecommunications service provider), Malaysian Institute of Microelectronic Systems

(MIMOS – a national ICT research agency), Multimedia Development Corporation (MDEC

– an agency advising the government on telecommunications policy) and four mobile telecom-

munications service providers in Malaysia. Interviewees and meetings at these organizations

ranged from senior government officers to sectional directors were carried out from 2010 to

2012. Information was acquired on the process of policy designs and development, as well as

the history and the role of specific organizations in diffusing telecommunications technology.

3. The evolution of Malaysia’s telecommunications industry

Our review of various literatures on the role of rents in the process of industrial change and dif-

fusion framework enables us to understand how state policies are executed and translated into

productive activities – and ultimately lead to development. Drawing on the synthesis of the

Figure 2. The S-curve of diffusion of technology.

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literatures, this section reports these change processes by narrating the management of rents and

the role of diffusion promotion policy in carrying out strategic interventions for productive

activities.

3.1. Pre-emergence (1970–1980s): market intervention to achieve critical mass

The implementation of the New Economic Policy (NEP) by the Malaysian government in the

early 1970s had a profound effect on the development of the telecommunications industry of

Malaysia (Kennedy, 1995). The NEP was implemented to eradicate poverty as well as to

redress the economic imbalance between the major ethnic groups in the country. In the latter

case, specific targets were set for ownership ratios in the commercial and industrial sectors.

This was achieved through various means, ranging from outright equity purchases by trustee

companies (representing the interests of Bumiputera – literally means “prince of the soil” in

Malay, that is, the Malays and other indigenous ethnic groups in Malaysia), to licensing,

quotas and government procurements (Jomo et al., 2003; Lee, 2004). In other words, the NEP

reaffirmed the role of the state as “protector” of the indigenous people, thereby creating a ration-

ale for a burgeoning government bureaucracy to oversee and promote the process of restructur-

ing (Kennedy, 1995).

The overall telecommunications services in Malaysia in the decade of the 1970s were ren-

dered almost exclusively by the government through Malaysian Department of Telecommunica-

tions or better known as Jabatan Telekom Malaysia (JTM) (Adam & Cavendish, 1995). The

immediate effect of the NEP on this organization was felt in its procurement system. The gov-

ernment attempted to ensure that local firms built up their workforce and trained technicians

through a process of localization. The process was designed to favor local businesses by disbur-

sing certain manufacturing and servicing activities that were formerly procured from foreign tel-

ecommunication giants to locally owned firms. As a consequence of these rents, several local

firms such as Sapura Holdings, Uniphone and Binafon began to invest in the manufacturing

capability and production of equipment such as telephone handsets (Kennedy, 1995). These

firms were the few players who were bidding for the so-called civil service jobs such as

digging trenches for cables. According to Kennedy (1995), JTM’s contracts were often issued

on a “round-robin basis” to these firms. By the end of the 1970s, these firms had become estab-

lished and became essential partners for foreign firms seeking to do business in the Malaysian

market (Kennedy, 1995). Although the main reason for the establishment of JTM was to

improve the infrastructure and services of the nation’s telecommunications industry, JTM

seemed to assume more of the role of a job provider (Kennedy, 1995). JTM’s workforce bal-

looned in the 1970s and became inefficient in managing the growth of telecommunications.

Kennedy (1995) highlighted that staff members in JTM increased by 211% (from 8000 to

21,000 people) over the decade which has led to swelling unskilled workforce. Moreover,

budget for training was limited and virtually no improvements were observed in the operation.

Meanwhile, many influential Malay entrepreneurs lobbied and pressured the government to pri-

vatize telecommunications in order to meet the demand for telecommunications services, while

also achieving the NEP goal of increasing Malay corporate ownership.

3.2. Emergence (end of 1980s–1990s): new platform for the emergence of mobilecellular phones

The more aggressive process of the liberalization of Malaysian telecommunications markets

began with the announcement that telephones and teleprinters in the country would be provided

by both JTM and the private sector in June 1983 (Kennedy, 1995; Painter & Wong, 2005).

Information Technology for Development 9

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Adopting a more liberal industrial policy with regard to telecommunications, the government

considered privatization and liberalization to be ways to relieve their administrative and finan-

cial burdens and at the same time improve the efficiency in service delivery (Lee, 2003). Many

contracts were opened to Malay-owned firms to service all urban pay phones and to supply

phone sets to JTM. Thus, there was an immediate rush among the existing as well as newly oper-

ating establishments to enter the telecommunications markets, namely Sapura Holding, Elect-

coms, Sime Darby, etc. Numerous foreign firms from Australia, the USA, the Netherlands,

Sweden, Germany, Italy, France and Denmark also entered into and expanded their presence

in the Malaysian market by forming partnerships with the local firms.

In 1987, JTM was rebadged as a regulatory authority and corporatized its operational arm

into Telekom Malaysia and later became a public-listed company in 1990. However, this liberal-

ization process has been influenced by political consideration (see Kennedy, 1995). Painter and

Wong (2005) stated that the early phase of liberalization of the telecommunications industry in

Malaysia was about dividing up the spoils and positioning the winners, with all of them being

well-connected individuals to the political elite. Most of the JTM employees were transferred

to join the staff of Telekom Malaysia. Telekom Malaysia was granted a 20-year license with

a monopoly over telecommunications services (Kennedy, 1995; Painter & Wong, 2005). The

corporatization of the JTM operational arm saw some improvement in services such as better

counter services, a better billing system and better responses to applications for telephone

lines. This improvement led to a further boom in the late 1980s (Figure 3(a)). However, there

was an increase of 30% in basic telephone charges. Telekom Malaysia captured an enhanced

monopoly rent from the private position it enjoyed (Goh & Jomo, 1995).

Figure 3. Diffusion of telecommunications technology in Malaysia (per 100 people). (a) Telephone lines(fixed), (b) mobile cellular subscriptions, (c) fixed broadband Internet subscriptions and (d) mobile broad-band Internet subscriptions.Source: Calculation based on ITU data available on World Data Atlas.

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Figure 3 illustrates the different levels of telecommunications subscriptions in Malaysia. It

compares the fit of the logistic growth functions for the diffusion of different telecommunica-

tions services in Malaysia. The number of telephone lines has noticeably increased since the

early 1970s (Figure 3(a)).

The diffusion of fixed telephone lines reached its peak in the late 1990s, achieving only about

20 subscriptions per 100 people. By the end of 2008, Telekom Malaysia held 90% of the market

share of fixed telephone lines. Malaysia witnessed a dramatic decrease thereafter and this implies

that the diffusion of fixed telephone lines is entering the border of its maturity stage. The domain

of innovation in fixed telephone lines is expected to be substituted by mobile cellular technology

in the next two decades (Figure 3).

Similar to the regulatory states in advanced economies, the government of Malaysia influ-

enced cellular phone services through its rules and regulations related to licensing and

pricing. The Malaysian government, with its rules, was particularly renowned for acting as a cus-

todian for locally owned businesses. It was preoccupied with preventing foreign capital from

engaging in telecommunications services and with promoting new local entrepreneurial

groups into this lucrative industry. Telekom Malaysia was granted a license to offer cellular

communications services at 450 MHz in the mid-1980s. Celcom, originally created as a subsidi-

ary of Telekom Malaysia in 1988, obtained 882–900 MHz to operate cellular communications

services. Binariang, a local privately owned multimedia conglomerate, launched Maxis in 1995

offering cellular communications at 900 MHz. Mutiara Telecommunications partnered with a

large locally owned diversified group (Berjaya Group) and launched Digi in 1995. Digi is

majority-owned (49%) by Telenor ASA of Norway. All ramp-ups and start-ups were extremely

quick in building up their operating systems (within a year) and entered a field of fierce price

competition. Its long involvement in the fixed-line telephone industry provided Telekom Malay-

sia with operational and organizational skills to compete with private firms. A systematic dereg-

ulation of the telecommunications industry (through relaxing temporary restrictions on foreign

ownership) and a conscious establishment of a competition platform over the decades had led to

a rapidly decreasing price level for mobile cellular services, which in turn promotes adoption of

mobile cellular technology. The number of cellular subscriptions has noticeably increased since

the mid-1990s. It reached its peak and mobile cellular technology had generally diffused to the

entire population in 2009 (Figure 4).

Figure 4. The full waves of diffusion of telecommunications services in Malaysia (per 100 people).Source: Calculation based on ITU data available on World Data Atlas.

Information Technology for Development 11

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Starting from the late 1980s, telecommunications revenue continued to increase despite the

capital investment in the industry remaining constant over the years (Figure 5). The share of

mobile telecoms revenue reached 71.2% in 2008 due to the significant diffusion of mobile tech-

nology from 69% to 91%. In the mid-1990s, there were seven firms offering cellular phone ser-

vices (Mesher & Zajac, 1997). As competition grew fierce, Malaysia’s cellular phone services

reached an overcrowded situation, and with players who were then exposed to debts in the

1997 financial crisis, the impetus for consolidation among firms emerged via alliances strategies.

Maxis, Celcom Axiata (a member of Axiata group, which is the mobile and international oper-

ations arm of Telekom Malaysia), Digi and U Mobile business groups (in which their main

shareholders are foreign firms) are now the only providers for cellular phone services.

Locally owned firms captured a higher share of fixed and cellular phone services (Table 1).

3.3. Virtuous cycle development (end of 1980s to early 2010s): a new institutional routinediffusion of broadband technology

In the 1990s, there was a range of policies and institutions to encourage diffusion-based firm for-

mation and growth. Broadband telecommunications network infrastructure development became

Figure 5. Capital investment and total revenues, Malaysia.Source: Euro Monitor.

Table 1. Market share (%) for fixed and cellular phone services.

Business group Market share in 2008 Market share in 2009

Celcom Axiata 32 36.9Maxis 29 24.2Telekom 24.4 24.2Time 0.8 0.8Digi 13.6 13.8U Mobile 0.2 –

Source: MCMC (2009).

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a priority in the national infrastructure development plan of Malaysia. The “ICT as enabler in

socioeconomic development” arguments built a strong basis for the government to legitimize

the diffusion policy in the market. The Malaysian government had organized a cohesive strategy

and plan to stimulate capital investment to deploy broadband telecommunications since the early

1990s. These efforts contributed a significant amount of capital investment in broadband tech-

nologies, particularly from the private sector. Many projects were embarked on in order to

advance broadband telecommunications technology and transform Malaysia into a knowl-

edge-based society. Figure 6 exhibits the evolution of broadband telecommunications develop-

ment in Malaysia.

The Multimedia Super Corridor (MSC) program launched in 1996 to develop an “infor-

mation superhighway” and transform Malaysia into a modern state by the year 2020 provided

the Malaysian government with an overarching vision and policy platform for the national

broadband industrial transformation (see Ramasamy, Chakrabarty, & Cheah, 2004). Malaysian

Communications and Multimedia Commission (MCMC) was established in 1998 to take over

from JTM in the role of industrial regulator (Painter & Wong, 2005). MCMC forms the state

policies and regulations related to communications and multimedia services. As a government

research institution, MIMOS was established to be the Internet Service Provider (ISP) for

research networks in the early 1990s. Their service, known as Jaring, then expanded into the

commercial sector and general public usage (Mesher & Zajac, 1997).

In July 1996, the commercial arm of Jaring’s operations was taken over by a group of Jaring

Access Service Providers which involved multiple media firms, including Time Media, the New

Straits Times Press, Utusan Malaysia Press, Binariang and Silicon Communications. MIMOS,

which was mandated as the research institution to facilitate the diffusion-oriented operation in

Malaysia, has limited its services to the operation of a backbone network. At the same time,

an ISP license was granted to Telekom Malaysia to offer Internet services to the general

public. Telekom launched its Internet service, called TMnet, in November 1996. The number

of Internet users has taken off since 1997. It can be observed that the user population grew

rapidly from 0.1 users per 100 people in 1994, to 65.9 users per 100 people in 2012

Figure 6. Malaysian broadband telecommunications transformation.Source: Adapted from Gao and Rafiq (2009, Figure 3, p. 313) and MDEC (2012).

Information Technology for Development 13

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(Figure 7). Malaysia emerged to have achieved a level above the world average in the number of

Internet users since 1998. The trend implies a positive sign that the growth and number of users

in Malaysia are converging to that of advanced economies.

Given the high risk of failure and non-trivial investment threshold of telecommunications

services, most providers tended to become involved in business consortia. There are only a

few business groups operating in the telecommunications market of Malaysia. For example,

Telekom Malaysia, Time Dot Com and Maxis are the main operators for backbone and last

mile networks. Many ISPs are subsidiaries of locally owned business groups, such as YTL

(one of Malaysia’s leading integrated infrastructure conglomerates) and Maxis. These groups

benefit from the presence of scale and scope economies to develop their telecommunications ser-

vices. For Amsden and Chu (2003), this type of business group has enjoyed economic advan-

tages in the form of reputation namely in acquiring a large consumer base and the option for

joint venture partners, accumulating capital from previous investments and gaining multiple

product marketing (lower unit distribution costs). However, the dominance of government-

linked companies in the market limits the active participation of the private sector in financing

infrastructure cost, inducing the government to finance the cost.

Although there was positive growth in the number of Internet users, the household adoption

of broadband Internet was low and the diffusion of broadband technology was weak. Only 0.1%

of national households had adopted broadband technology and subscribed to Internet services.

The adoption of fixed broadband technology (Digital Subscriber Line, DSL) reached the matur-

ity stage in 1997; growth became saturated at 9 per 100 people. The low household adoption of

DSL technology was largely due to the costly installation, poor Internet signal and high rate of

connection failures.

Malaysia launched its Malaysian Information, Communications and Multimedia Services

(MyICMS) 886 blueprint in the December 2006 which aimed to create a catalytic cycle by

Figure 7. The number of internet users (per 100 people) of Malaysia, the world average and the advancedeconomies.Source: Calculation based on ITU data available on World Data Atlas (World Bank, 2014).

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enhancing the existing investment in Information, Communications and Multimedia Services

(ICMS) infrastructure that will support the future growth of ICMS services in the country.

Indeed, the acronym MyICMS 886 is derived from MyICMS in 8 service areas, 8 infrastructures

areas and 6 growth areas. It is a private sector-driven initiative that provides the necessary

policy, regulatory and institutional support in its implementation (KTAK, 2006; MCMC,

2007a). In line with MyICMS 886, the National Broadband Plan (NBP) announced in 2004

and revised in 2006 relies on the theory of “critical mass” whereby if government sustains

the initial deployment of broadband infrastructure using public funding for the public sector,

it will subsequently create enough momentum whereupon the private sector will leap onto the

bandwagon to continue deployment among the masses. The NBP sets an ambitious target, broad-

band penetration of 5% of the population, in order to develop a critical mass of demand

(especially in increasing the demand for wireless broadband technology among the middle

income working class) that would provide incentives for related industries to provide required

infrastructures and services. In this regard, the NBP suggests that a concerted, closely collabo-

rated effort by both the government and private sectors toward achieving the common goal of

delivering high speed broadband (HSBB) services for the masses can be established in three

forms, namely financial support managed by MCMC; regulatory and technical assistance; and

promotion activities (KTAK, 2006). Both MyICMS and the NBP focus on providing accessible

and affordable quality broadband services, and eventually an internationally competitive

business environment.

This institutional setting has influenced the behavior of the providers and users as well as

shaped the market structure of the industry. In 2006, Maxis, a leading mobile operator, was

granted a license to offer mobile broadband to the general public. Maxis launched Wireless

Broadband (3.5G-HSDPA) mobile service providing households and businesses with wireless

broadband connection. Many other mobile operators also upgraded their service to 3G, provid-

ing wireless broadband connection. This new competition platform led to a rapidly decreasing

price level of Internet services and stimulated a greater integration of broadband services in

underserved markets. The adoption of mobile broadband technology has overtaken fixed broad-

band since 2007 (Figure 4). In 2009, Telekom’s fixed broadband market share declined to 58%, a

significant drop in a span of two years. However, the diffusion of mobile broadband is expected

to reach its peak at only 40 per 100 people in 2012.

The adoption of broadband technology for household Internet access is low compared to the

diffusion of mobile cellular technology. In addition, broadband telecommunications and services

tend to be established in major urban areas rather than in non-urban areas. The development of

regional broadband services is biased toward high population densities and economic impact

areas such as Selangor and Kuala Lumpur (MCMC, 2009). Besides, the cost of broadband Inter-

net service remained a barrier for diffusion. The Malaysia consumer paid around US$6.67 per

100 kbps of broadband access compared to US$0.07 in Japan, US$0.08 in South Korea and

US$0.18 in Taiwan (MCMC, 2007b). The demand for broadband technologies in non-urban

areas is low and broadband services would be very expensive to those living in rural areas.

Therefore, our analysis modeled in Figure 3(d) and Figure 4 shows that if the present trend con-

tinues, broadband service will not reach 100% penetration in the near future.

In 2007, the government of Malaysia launched the National Broadband Initiative (NBI) to

accelerate the diffusion of broadband technology. The Malaysian government signed a

Public–Private Partnership agreement with Telekom Malaysia Bhd. to jointly implement an

HSBB project to upgrade the existing broadband services in selected urban areas and roll out

broadband services to general population with speeds of up to 2 Mbps (NBI, 2011). The

second quarter of 2012 witnessed a new wave of household broadband penetration where an out-

standing 13.3% above the target value of the NBI was achieved. The government has set a new

Information Technology for Development 15

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ambitious target of 75% household broadband penetration by the end of 2015, suggesting a new

gap to close.

4. Discussion and policy implications

The findings generally suggest that the Malaysian telecommunications system has succeeded in

developing virtuous circle diffusion trajectories. Although Malaysia has yet to match some devel-

oped and developing economies in the pace of broadband diffusion, there are positive signs that

the diffusion trajectories of broadband technologies of Malaysia are converging to that of newly

industrialized economies. The evidence of the formation of telecommunications systems and the

evolution of the organizations for telecommunications services provides us the normative prin-

ciples for industrial development and upgrading (Table 2). The virtue of institutional setting

and establishment of rents in the early 1970s was vital for triggering domestically owned business

growth momentum. The telecommunications services industry appears to be developed gradually

by the cautious targeting policy. It achieved a critical mass of entrepreneurs by first engaging the

Bumiputera business entrepreneurs in contract services from JTM, then moved to business diver-

sification at the end of the 1970s, and is now developing a market platform to furnish its sustain-

able telecommunications system. The government played an important supporting role in

distributing productive rents to entrepreneurs and creating competitive platforms for entrepre-

neurs to advance their activities. The emergence process was activated by market-led variety;

cautious acceleration of market-led selection and reproduction processes that were developed

from as a base; and state-directed change in institutional routines. The prioritization of telecoms

infrastructure with systematic deregulation of telecoms industry by consciously establishing a

competition platform and adopting judicious mix market intervention policies develops signifi-

cant capability, skills, as well as rate of adoption of telecommunications services by users.

There are basically few important operating values orchestrating Malaysia’s industrial

change that accelerated the rapid diffusion of telecommunications technology during the three

stages of development. The operating values can be considered as a useful guide to other devel-

oping economies aspiring to systematically develop and upgrade telecommunications industries.

Table 2. Normative principles for telecommunications industrial development.

Orientation Rent managementGovernance of

transition

Conditions/regulationto ensure effectiveimplementation of

policy Outcomes

Diffusion oftechnology

Prioritization oftelecomsinfrastructures.Navigation andcontent provisionthrough MSCprograms

Systematicderegulation oftelecoms industry.Transfer ofenterpriseownership frompublic entities to aselected fewduring adoptionof privatization

Consciousestablishment ofcompetitionplatform andadoption of ajudicious mix ofinterventions formarket policy(guidedcompetition)

Many business groupsin Malaysiacapitalizedorganizationalcapabilities andproject executionskills over asequential businessdiversification.Significant increasedrate of adoption oftelecoms services

Source: Authors’ observation.

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While many transformation practices in developing economies prioritize “privatization” of

many incumbent assets which are often being perceived as the key mechanism that would “auto-

matically” improve the provision of telecommunications services, this study maintains the need

of deploying a “hands-on” experimental approach by first targeting and nurturing locally owned

entities and then gradually opening up the telecommunications market for foreign entities (Gill-

wald, 2005). Many developing economies, like Mexico and South Africa, adopted the “inter-

national reform model” which in practice tended to favor the privatization of incumbent

assets and have ultimately witnessed the lack of endogenous capacity development in their

locally owned firms. The aspirations to have a high level of household broadband penetration

through the improvement of the reformed incumbents and efficient resources allocation

through market competition did not materialize (Gillwald, 2005; Gallagher & Shafaeddin,

2010). Our reading of literature informed us that even the most highly renowned economies

for neo-liberal reforms in telecommunications industries are cautious in deploying their so

called hands-off policy. Australia, for example, adopted a mixed mode approach, on one

hand, allowing private sector to dominate the investment for broadband infrastructure upgrad-

ing, and on the other hand deploying public investment to support R&D and education in ICT

and roll out broadband services in rural areas (Falch & Henten, 2010). The allocation of

public investment of Australia for telecommunications technology is basically oriented

toward addressing the market failure problem resulted from the pursuit of “free-market”

reform in telecommunications industry. However, the short time horizon of private sector

might lead to undersupply of funding for R&D activities and underdevelopment of infrastructure

in rural areas. This problem is recognized by some as “information asymmetry.”

Our evolutionary-oriented analysis of the Malaysian case allows the observation of a number

of important operational values at each stage of development to serve as a policy lesson for other

developing economies. Table 3 exhibits our observations. The values created through specific

features in the government programs which can be relevant for other developing economies

are as follows:

. Pro-indigenous growth in the pre-emergence stage for emergence of critical mass of entre-

preneurs. Government can design a set of selective interventions in the telecommunica-

tions market (e.g. government procurement, reservation of markets and special credit

schemes for indigenous-owned business entities).. Pro-diffusion growth in the emergence stage for market-led selection. A systematic dereg-

ulation of the telecommunications market and an establishment of a competition platform

for selected firms are crucial in this stage for rapid diffusion of telecommunications tech-

nology/service. Both selective (reservation and promotion of market for selected local

firms) and functional (gradually relaxing temporary restrictions on foreign ownership)

interventions are useful for pro-diffusion growth in this stage.. Establishment of specific platforms and institutions are vital in promoting virtuous cycle

development. Specific government programs, on one hand, disseminating national vision

(such as achieving information society and knowledge-based economy) and providing

general digital education and training to society to create market demand forces for new

(broadband) technology. On the other hand, creating a conducive environment for entre-

preneurs to innovate and create supply forces for new technology.

We acknowledge that the values may be vulnerable to different types of government failure.

Nonetheless, it can be a useful guide for transformational policy-making and developing an

eclectic model for policy orientation.

Information Technology for Development 17

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In this study, we acknowledge that the broadband technologies diffusion in Malaysia has yet

to achieve a comparable level with that of many developing and developed economies. The cost

to users for broadband Internet service emerged to be the core barrier for diffusion. Nevertheless,

the rents are important, at least at the beginning stage of development, to motivate active private

sectors’ involvement and investment in the industry. This barrier has indeed led to low demand

for broadband technologies in non-urban areas. Some specific enabling strategies that were suc-

cessfully addressing this barrier in many economies (Frieden, 2005; Lee & Chan-Olmsted, 2004;

Preston, Cawley, & Metykova, 2007) can be used as policy lessons for Malaysia’s broadband

policy-makers. These include the following:

. Increase broadband infrastructure investment, particularly in wireless technology for rural

broadband access. Government can provide tax incentives and special credit schemes for

service providers who wish to venture their wireless broadband businesses into non-urban

areas.. Government can increase awareness of the importance of the digital literacy in rural popu-

lations and provide them general digital education and training to create demand forces in

the non-urban areas.. The government and the broadband service providers can cooperate to stimulate demand

forces by offering rural populations various Internet applications, services and contents.

Table 3. Salient policy orientations for telecommunications industry development.

Stage Policy ObjectivesTactical plans for government

intervention

Pre-emergence Pro-indigenous growth Building a critical massof entrepreneurs

Creating rents to incentivizebusiness entrepreneurs to investin modern services

Emergence Pro-diffusion growth Market building,market-led selection

Creating demand for targetedtechnologies, supporting jointventures with foreignmultinationals for knowledgetransfer, open market policy andproviding guided competitionplatforms for market players

Virtuous cycledevelopment

Platforms andinstitutionssupporting newtechnology/market-led variety

New market building,entrepreneurs engagein new industries

“Invent” new institutions or“reengineer” the old ones toblend the unique social–economic structure with newroutines in order to achievetransformation/new marketdemand, supporting jointventures with foreignmultinationals for newknowledge transfer, public–private ownership to buildadvanced infrastructures,creating new demand fortargeted technologies andsupporting businesses in targetedindustries

Source: Authors’ observation.

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5. Conclusion

This paper examined the diffusion process of the telecommunications services industry of

Malaysia using the rents perspective and diffusion policy framework. We assessed inductively

the conduct of the government in translating the value-enhancing rents for upgrading activities.

As a whole, the telecommunications services industry in Malaysia is shaped by the government

creating adequate rents throughout its progress. The proactive role of diffusion policy and the

rent-seeking behavior have been important. The diffusion of fixed-line phones reached its

peak in the mid-1990s and mobile cellular services generally diffused to the entire population

in 2009. There has been a process of consolidation among the players since. Upgrading in broad-

band Internet services shared many strategic contents and decisions that were based on the rou-

tines in tandem with the upgrading of telephone lines and mobile cellular technology.

We have framed and highlighted positive general views of our case and provided salient nor-

mative principles as guides for transformational policy-making. Our findings inform the litera-

ture the role of institutions and rents in shaping telecommunications services growth trajectories.

Indeed, the salient policy orientations and the conduct as well as the features of the government

programs can be used as policy lessons for other developing economies, where necessary, taking

into consideration the country context in which it fits.

Acknowledgement

The authors are grateful to anonymous referees for their helpful comments and suggestions that

led to improvement of the paper. Funding from the University Malaya in supporting the Malay-

sian Business History Project (FL025/2012) is gratefully acknowledged.

Note

1. Many studies (see various chapters in Khan & Jomo, 2000) have highlighted the impact of differentforms of rent distribution (e.g. public sector employment and subsidies for certain goods or products)mechanism on socio-economic structure.

Notes on contributors

Chan-Yuan Wong is presently a senior lecturer at the department of Science and Technology Studies, Uni-versity of Malaya. He has published in several international journals on industrial and innovation policiesand growth models for production of science and technology. His current research interests are economicsof catching-up, socio-economic transition processes and transformation policy and evolutionary scienceand technology policy.

VGR Chandran is an Associate Professor at the Department of Development Studies, Faculty of Economicsand Administration, University of Malaya. He has also worked as a Principal Analyst of Economic andPolicy Studies with Malaysian Industry-Government Group for High Technology (MIGHT), PrimeMinister’s Department, Malaysia. He holds a PhD in Economics and has held positions as a consultantand research associate with several international institutions.

Boon-Kwee, Ng is a senior lecturer at the Department of Science and Technology Studies, University ofMalaya. His current research interests are policy and management of science and technology; industrialcluster innovation; and innovation for inclusive development.

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Appendix. General interview questions

With government agencies

(1) Can you please brief us the history and the role of your agency?(2) What types of the programs or activities was administrated?(3) How are activities coordinated?(4) What sort of investment your agency involved in the process of infrastructure building?(5) What sort of interaction do you have with the service providers and users?(6) In your opinion what transformed the rapid diffusion of telecommunications technology? In what

ways your policy played a role?

With service providers

(1) Can you please brief us the history and the business operations of your organization?(2) How your organizations adapt itself in the process of transition?(3) What sort of investment your organization involved in the process of upgrading and industrial

development?(4) What sort of interactions your organization has with the government agencies and users?(5) In your opinion what transformed the rapid diffusion of telecommunications technology?(6) In what ways the government initiatives and policies helped your organization?

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