The economic downturn in 1997 was less severe in Malaysia compared to other countries in the region. However, as the manufacturing sector, in particular the high tech industries, lacks a strong national technological base and depends on exports, structural problems remain. The first part of the paper briefly provides key indicators of the economic recession. The second part describes the origin and structure of the high tech sector in Malaysia. Impressive growth has been achieved only as accompanied by a deepening dependency on trends in the global computer industry. The absence of innovative capacity makes it difficult to escape production segments, in which labour cost remains a key parameter. Thus, the competitive position of Malaysia is unstable and may erode. In the third part, the pattern of interests of the major stakeholders: authorities, corporate managers, workers, trade unions and NGOs, is described. Within an investment climate facilitating continuous restructuring of the electronic industry, the weaker party, the employees, stand to loose out, in particular in times of economic recession. The legal framework and enforcement practices is the subject of the fourth part of the paper. Not surprisingly, priorities in government policies and inadequate efforts of monitoring reflect the asymmetrical power relations. However, major foreign owned subsidiaries do perform systems of self-regulation, either on their own initiative or as instructed by their corporate headquarter. The fifth part contains three sections, as the issue of social impact on workers is dealt with in terms of employment conditions, environmental problems and occupational health and safety problems. The social impact on production workers concerns conditions at work, the household economy, and resources at community level. The paper brings together key social indicators from public statistics. The picture neither is systematic nor complete, one reason being the insufficient recording by authorities. However, the fact that workers and their families have to cope themselves, as social security options are almost absent, does stand out. While the options for intervention in favour of improving labour standards currently seem narrow, the final sixth part of the paper does call for workers’ education and dialogues between labour and management to facilitate transparency and negotiated measures to remove hazards and build corporate responsibility towards local labour. The paper also concludes that there is a need for a re-orientation of development policies integrating concerns about the globalisation of firms, industrial and regional development objectives, and the welfare of local workers. However, social actors in civil society need to join their efforts in public debate, campaigns and community action to achieve such change of priorities.