Author: Jan Kees van Donge.

Kenya and Malaysia embarked on quite similar development trajectories in the 1960s, but economic growth figures started to diverge widely in the 1980s and 1990s. Governance issues are often suggested as the major binding constraint in the Kenyan development trajectory whereas Malaysia scores well on governance indicators; but similar governance problems to those in Kenya can be found in Malaysia. However, Malaysia has the resources to overcome these, whereas access to finance appears to be a binding constraint in Kenya. Essential in the Malaysian development trajectory appear to be islands of efficiency that are relatively isolated from rent-seeking, notably the oil company Petronas. The paper therefore contributes to the debate on the role of institutions in the literature on the resource curse.