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The roles of small and medium‐scale industries (SMIs) are well‐documented (see Ragayah Haji Mat Zin, 1996). SMIs not only continue to be the majority of enterprises everywhere and exist side‐by‐side with large industries in developed countries such as Japan, Germany, Italy and the United States of America, they are also regarded as the engine of growth in the Newly Industrializing Economies (NEEs). In the developed countries, SMIs are said to be able to generate more employment relative to large firms as well as plying a complementary role to the latter. In Japan, for example, of the 430,393 enterprises in the Japanese manufacturing sector at the end of 1991, 99.1%, or 436,455, were small businesses, which also accounted for 72.1% of the employees and 51.8% of the value of shipment in this sector (JFS, 1993). They are seen to play a wider role in developing countries. In addition to the above, many studies (see for example Chee, 1985, 1990; Levy, 1993; and Rahmah Ismail, 1995) have shown that SMI entrepreneurs can mobilize savings, SMIs can act as seedling beds for entrepreneurial training, as well as improve income distribution.

Oil palm, natural rubber and cocoa are the three major plantation crops planted accounting for about 4.5 million hectares of cultivated land in 1995 (4.41 million hectares in 1993 (Table 1)). These crops are grown mainly for exports. But with resource‐based industrialization, a rising proportion of output is processed domestically in the manufacture of food and industrial products. Smallholder participation in the production of these crops, mainly from rural areas, is significant. Small‐holdings accounted for 83.5% of natural rubber planted area, 51% of oil palm area, and 53% of cocoa planted area. The estate sector's shares in total area and production of the three crops are declining because estates are moving out of agriculture. Estates are diversifying their output mix, in particular replacing rubber with oil palm. The shift is induced by the downtrend in rubber prices in the 1980s except for the recovery in 1988, and the observed better returns from oil palm production. On the other hand, the area of small‐holdings planted with rubber has remained relatively stable. Both cocoa and oil palm area under small‐holdings have increased.

The Asian crisis, which exploded in Thailand in July 1997 initially, spilled to the other ASEAN countries (Indonesia, Malaysia, and Philippines) and later it spreads to Korea and even crossing the continent to Russia and Brazil. The chronological pattern seems to indicate the contagious behaviour of the crisis. However, the sequential economic down‐turns that occurred in the Asia Pacific do look like a contagion effect. The idea that currency speculators contributed to the depth of the crisis is agreeable but to conclude that they are the roots of the problem would be misleading. This paper argued that the roots of the problems lie in current account deficit and loss of competitiveness, and moral hazard and over‐investment This paper also argued that the currency crisis is a symptom and not the cause of the Asian crisis.