Structural Change and its Impact on Traditional Agricultural Sectors of Rapidly Developing Countries: The Case of Natural Rubber

Rapid structural change is now a major feature of several Southeast Asian economies. It generally involves greatly expanded exports of certain commodities and manufactures accompanied by a large growth in services, and poses serious difficulties for traditional labour‐intensive sectors. One important sector affected in this way is that producing natural rubber in Malaysia, Indonesia and Thailand. The difficulties mentioned occur through both “resource pull” effects ‐ which are especially important in raising real wages, and “spending” effects ‐ which tend to lead to an appreciation of the real exchange rate. These effects, and the problems arising from them, are examined and compared for each of the rubber sectors above. While changes of this nature call for diminution in the size of traditional sectors, there is also a need to improve economic efficiency, notably by adopting new technology more appropriate to the emerging resource price configuration, and by moving to an agriculture where off‐farm employment and other linkages are increasingly significant. Such adjustment may be both helped and constrained by institutional factors and official policies, which accordingly require careful review. These crucial policy issues, and the degree to which necessary adjustments have been made, are investigated for the rather different contexts in each of the three natural rubber‐producing countries. The analysis is thought to have wider relevance for other developing countries with traditional agricultural sectors.