Making State Projects: Malaysia, the IMF, and the Puzzle of Self-Imposed Structural Adjustment

How do IOs contribute to policy diffusion in the absence of crises, uncertainty, and coercive mechanisms? What explains their ability to push countries into institutional restructuring, without an imperative to do so? This article investigates these questions by looking at the relationship between the IMF and Malaysia from 1969 to 1986, a period when the country enjoyed a constructive relationship with the Fund. Malaysia represents a puzzling case: in the absence of a crisis, they abruptly ended a decade-long, unfulfilled, government program of socioeconomic redistribution and replaced it with liberalisation policies with adverse distributional outcomes. Offering evidence from archival material, the article shows how the IMF slowly pushed Malaysian authorities to abandon their distributional goals through the non-coercive mechanisms of Technical Assistance and Surveillance. Theoretically, it proposes a new processual-relational framework (State Projects) to study these interactions not as policy transfers but rather as a restructuring of the entire relationship between the state and the economy. The article also highlights the importance of changing global macroeconomic conditions, and their interpretation, in providing domestic groups leverage to overhaul the economic priorities of the state by manipulating their relationship with the IMF against their domestic opponents. The article contributes to the literature on IPEs on global drivers of domestic policies, and connects these findings to the emerging work on IOs as non-coercive agents of policy diffusion.