PETRONAS, PERNAS, Peasantry and the Proletariats

 

I] Introduction

The domination of foreign-owned companies during the colonial era of Malaysian history was predominantly Britain. With the discovery of oil in the Southeast Asian region, American multinationals have acquired a beachhead in Singapore to launch its neo-imperialist venture of oil hunting in the hinterland of Southeast Asia. [1]   It is neither something unforeseeable nor inevitable. In his essay “The Economic Basis of Imperialism,” first published in the North American Review in 1898, at the time of the Spanish-American War, Charles A. Conant argued that imperialism was necessary to absorb surplus capital in the face of a shortage of profitable investment outlets – in other words, to relieve what he called the problem of “congested capital”, (as quoted from John Bellamy Foster, in Review of the Month, on reviewing The Rediscovery of Imperialism: Introduction to Harry Magdoff, Essays on Imperialism and Globalization, Monthly Review, Volume 54, Issue 06, November, 2002).

The following is a cursory exploration on the early development in a developing nation like Malaysia after gaining independence – the post-colonial period in Marxist analysis, within the sphere of capitalist influence. As a nation, Malaysia would seek economic independence, and we would say that government enterprises and state actions in such exemplary countries generally represent attempts on the part of the emerging state capitalist class to appropriate for themselves a larger share of locally produced surplus at the expense of the multinational companies.  It is also only natural that such attempts would be resolutely opposed by the multinational companies, (Paul A. Baran and Paul M. Sweezy, Notes on the Theory of Imperialism, Monthly Review, 24th. June, 2010).

To relate Malaysia economic development in its early years whence with the discovery of oil prospects off its shores, local bureaucratic-capitalists shall, under neo-liberalism influence, align with monopoly-capitalism trans-nationals to tighten their respective economic controls. The country then was a case in development of underdevelopment that stripped the nation’s progressive potentialities under the auspice of geo-politics in the coming years, (see Rob Urie, Oil Imperialism and Monetary Policy in http://www.counterpunch.org/2015/03/20/oil-imperialism-and-monetary-policy/).

In a post-colonial society, the capitalist class in charge of the state-directed capitalism is sometimes termed the ‘bureaucratic bourgeoisie’ to represent the ruling section of the petty bourgeoisie, which is noted for its control or proximity to the state apparatus. The new ruling class in post-colonial Malaysia would comprise bureaucrats businessmen, leading politicians and professionals; where membership of such a class is determined by the criteria of occupational status, income status, education and business ownership or control over or closeness with the state apparatus, overtly or covertly, (Ahmad Fauzi Abdul Hamid, “Development in the post-Colonial State: Class, Capitalism and the Islamist Political Alternative in Malaysia“, Kajian Malaysia, Jld. XVIL No.2, Disember 1999).

We shall relate a symbiosis of organizational entities where PETRONAS oil fractures olefins into conglomerate PERNAS fertilizers that ensure FELDA peasantry shall generate surplus value on their produce to support precarious proletariat labor in their industrial and digital economy.

 

II] The first swing

 

I don’t think I am being unkind in saying that they (PETRONAS) would not know the difference between an olefin and a chocolate bar” (a TNC-oilman).

 

By 1973, nine multinationals were prospecting over 156,954 square miles of the Malaysian continental shelf. This area is larger than the total land mass of the Federation of Malaysia (128,727 square miles). The rapacious character of the multinationals can only be equaled by the obscene haste of the national compradors in granting concessions. Of the nine multinationals ravaging the nation’s assets, Esso Exploration (the subsidiary of Exxon) has the Tembungu oil concession off Sabah, east Malaysia, oozing out 2,000 barrel per day, and the 28,000 square-mile concession off Trengganu, east coast of peninsular Malaysia, where it was stated that oil had been discovered in 1970, though Esso made no announcement. [2]

Shell is in the Erb West and Samarang oil fields in Sabah (each with more than 1,800 barrels/day) and the rich Miri field in Sarawak 92,750 barrels/day), almost all its present output comes from offshore wells that started to produce in 1968. Sarawak Shell had spent M$13 million on exploration in the 1000 square-mile mainland and 6750 square-mile continental shelf concessions. [3]

The Ikoku Oil Company (Japan) and Societe Nationale des Petroles D’Aquitaine are also prospecting in Sabah [4]; in fact, Aquitaine which was given a 29,000 square-mile concession in the Sulu Sea, off the east coast of Sabah, relinquished half of its concession to an eight-company Japanese consortium headed by the Sumitomo Shoji group.

The tripartite consortium of Continental Oil (CONOCO) and El Paso (both US companies) and the Broken Hill Pty. of Australia struck oil off Kuantan, east coast of peninsular Malaysia, in June 1973, and are drilling further 6 wells. Four other multinationals: Mobil, Teiseki, Aquitaine and Oceanic are test-drilling, the former along the Straits of Malacca, and the latter three in the South China Sea and the Sulu Sea. Sabah Teiseki Oil Company had been exploring off Tawau since 1966, and a new concession was granted in 1968 to cover 7,230 square miles of land and adjacent shelf around Tawau, Semporna, Lahad Datu and Sandakan. Forex Oil Malaysia, Oceanic Exploration and Development Corporation, LSG Malaysia Inc. and Sabah Offshore Oil Inc. started drilling operations about 75 miles north-east of Kota Kinabalu, Sabah.

III] The oily undercut

When these initial concessions were made, the country granted a 5- 20 years prospecting rights, and only acted as a tax-collector on the oil extracted. An agreement signed with Mobil Malaysia Exploration Company on 25th. January 1971, the ruling regime received an undisclosed sum in bonuses before granting Mobil the rights to explore for oil for 40 years in the Straits of Malacca: 12,500 square miles off the coast of Kedah, Penang and Perak states. The agreement was to provide Malaysia an option to participate in only 15% equity, and a Special Allowance Agreement provisions was an income tax rebate of 9 years for exports of oil. By the time Malaysia fathomed the diminishing resources in the country, and requested the oil multinationals to become “contractors” to the government in return for a percentage of the oil produced, the nation realized too late the subtlety of the imperialism of economic leverage.

Malaysia had requested national participation on a 65% / 35% government and company basis, respectively. In such a product-sharing agreement, for example, with 100,000 barrels of oil output, 40% of production is deducted from exploration and operating expenses, and the remaining 60,000 barrels to be shared on a 65% / 35% basis. Therefore, the actual result of such contract formulation was that 61% of the oil produced during any given month would go to the foreign companies, and only 39% to the country. [5]

Oceanic trans-national agreed to this form of product-sharing scheme, while CONOCO used the economic leverage of enforcing the nation’s approval that the other members in the consortium, El Paso and Broken Hill should also conditionally be taken in as partners in the oil concession. Such tactic was used in Shell’s proposal to take in Mitsubishi as partner in the construction of the then M$250- M$300 million world’s largest liquid natural gas refinery in Bintulu, Sarawak, which will supply 6 million tons of gas per year to Japan for at least the next 20 years. On October 1973, another petroleum production-sharing agreement was signed, this time with Sabah Shell Petroleum Company. Mobil and Exxon had also entered a production-sharing scheme with the ruling regime in the country.

The experience of Pertamina in Indonesia had not been learnt by the ruling regime in Malaysia with its relationship with the trans-national oil. In Indonesia, it was found that the legal differences between production sharing contracts and concession contracts were often devoid of operational significance; the trans-national oil still had retained effective control of natural resources. [6]   In fact, Pertamina is helping the formation of PETRONAS, Petroleum Nasional Berhad, Malaysia’s national oil agency (formerly known as Hidrokarbon Malaysia – HIKMA).

Though Malaysia eventually renegotiated the product-sharing agreements, increasing the ratio to 85:15, whereby the country holds 51% of all production, these pacts are only enforceable in the case of crude oil, and if its price is more than US$ 5 a barrel, and output must exceed 75,000 barrels a day. These product-sharing agreements exclude natural gas production.

The experience of Indonesia indicated that she had allowed oil corporations to extract and export its natural gas without first stripping the olefins, useful in the petroleum industry, thereby losing a considerable amount of tax revenue. Malaysia has less experience, a situation which international oil sums up the exploitation process, “I don’t think I am being unkind in saying that they (PETRONAS) would not know the difference between an olefin and a chocolate bar”. [7]

The insurgent of oil explorations and productions had changed Malaysia from a net importer to a net exporter of oil. At the end of 1972, Malaysia produced 9.4 million tons of oil compared with her consumption of 9.6 million tons annually. [8]  The export of oil – 20% of local production is used for blending with Arabian crude, and 80% is distributed to Japan, Thailand, the Philippines and Australia – are actively encouraged by the trans-national oil in their collaborations with the ruling regime. For example, Burmah Oil Company is building a blending plant in Negeri Sembilan, peninsular Malaysia, where the Stare bureaucratic-capitalist circles have 40% interests in the castol (Malaysia) SB, and Nippon Kokan is constructing three large oil tanks, each of 410,000 barrels holding capacity, for Sabah Shell’s major terminal on Labuan island, off Sarawak.

All these exploitative activities are further enforced by section 84 of the Petroleum (Income Tax) Act of 1969, which states that income derived from petroleum operations and dividends issued are not subjected to tax. [9]   Indeed, the Minister of Primary Industries, Taib Mahmud had assured the capitalist nations that the flow of oil and gas from Malaysia will be unhindered. [10]

Unleashed with a “free enterprise” economic development outlook, but leashed within a neo-liberalism economic entanglement, Petronas in its maiden years was yet extraordinarily happy with the gushing of oil and revenue to support the ruling regime’s development expenditure. At times, the contribution of petroleum-related revenue to the total revenue would be one-fifth of the Federal budget, and could be as high as 30% contribution to the Federal revenue in 2014, but already as far back in 2005, the petroleum-related revenue contribution would constitute only about 18.5% to the national budget according to the various banks analysts and the Malaysian Industrial Development Fund. Indeed, the collection from Petronas dividend, petroleum income tax and petroleum royalty would likely to be reduced from RM$26 billion in 2015 to between RM$16 billion to RM$20 billion in 2016, (Malaysian Reserves, 21st. October, 2015) or about 14% to national contribution.

The fact is that Malaysia’s net exports of crude oil have been on a declining trend in the last 10 years. In 2005, Malaysia produced 60,000 barrels per day (bpd) and between January and November 2014 it was down to 48,000 bpd. Between January and November 2015, the country’s net exports of crude oil totaled RM7.7bil, while net imports of petroleum products stood at RM8.9bil. There were many concerns over the impact of falling oil prices on Malaysia’s economy – intensifying worries over the possibility of the country slipping into the twin deficits of an economy running with both fiscal and current account deficits. This situation is further exacerbated with frantic rush to exit Asia by Europe bankers by selling their Malaysian assets like Royal Bank of Scotland plc (RBS) offloading its assets to Taiwan’s CTBC Financial Holding Co Ltd and Standard Chartered plc selling its US$4.4 billion of assets in Asia, including loans and proprietary bond as well as equity investments in the country, (Malaysian Reserves, 18th. April 2016).

We can have a financialization capitalism articulation, (see monsoonsstorms.wordpress.com on Financialization Capitalism: Penetration of neo-Imperialism in Malaysia) whereby the country as a net exporter of crude oil and natural gas without taking into consideration the impact, and the associated social-economic effects,  of the Trans Pacific Partnership Agreement (TPPA) yet to come into force. The tariffs at present imposed on crude oil and refined fuel exports from Malaysia are at zero or less than 1.0% in most of the TPPA countries. According to a set of Trade Map ICT data, nearly half of Malaysia’s total oil exports are shipped to non-TPP countries, including India and Thailand, which are the country’s second and third largest trade partners in terms of crude oil exports. A similar pattern lies in the gas export segment where nearly 60.0% of the country’s liquefied natural gas exports are sent to Japan with no tariffs. Malaysia’s other export partners include South Korea, Taiwan, and China, which are non-TPP countries., (Asia Monitor South East Asia, Volume 27 Issue 4, April 2016).

However, with local bureaucratic-capitalists and trans-national monopoly-capitalists in collaboration within a financialized capitalism environment that is more conducive to foreign penetrative investment and involvement, the TPPA would likely, once again, lay the pipeline for greater foreign exploitation in the Malaysian oil and gas (O&G) sector, and indeed, to widen investor appetite for upstream investments as part of the imperial global oil market, (John Bellamy Foster, “Peak Oil and Energy Imperialism”, Monthly Review, Volume 60, Issue 03, July-August 2008; see also John Smith, Imperialism in the Twenty-First Century: Globalization, Super-Exploitation, and Capitalism’s Final Crisis, Monthly Review Press, 2016).

To the monopoly-capitalists, this TPP agreement would provide for dynamic changes that would stimulate possibly greater foreign capital flows into the Malaysian upstream sector in the coming year, for instance, in the liberalization of 12 goods and services, including the provision of advanced oilfield services and seismic data acquisition. Further, under the TPPA, Malaysia will no longer be able to impose restrictions on firms that wish to provide such services in the country, which opens up widened penetrative opportunities for foreign companies to carve out niches in the Malaysian upstream, armed with their advance capability. With the TPPA in place, the licensing and registration regime will henceforth be less skewed in favor of local companies.

In 2014, over 70% of the value of upstream contracts awarded was allocated to ethnocratic-kleptocracy bumiputera businesses. However, commitments under the TPPA will thence cap such domestic preferences at 70.0% of the annual contract value for the first year upon signing the agreement that will then gradually decline to 40.0% by the sixth year. The cap for the downstream contracts will remain at 40.0% throughout.

However, there still remain uncertainties with regard to the awarding of these contracts, as the power to make such decisions lies solely with the state-owned oil and gas firm Petronas which has maintained a dominant presence in the Malaysian O&G sector. Despite the “freeing” of certain oilfield service sectors, potential participants in the market, whether local or foreign, will still need to depend on Petronas to secure key contracts as the firm owns all upstream assets in the country. Moreover, Petronas has the ability to bypass the domestic preference cap by distributing contracts on its interpretation of merit. This means that businesses looking to thrive in the Malaysian upstream will still need to appease the national oil company in key negotiations, a potential obstacle – according to monopoly-capitalists – to attracting greater foreign capital into the sector.

However, the surplus value appropriation amongst Malaysian labor would continue:

 SurplusValue_Oil

 

The surplus value is extracted from the farming peasantry and the industrial workers to feed the “smiling smiles” of the trans-national oil with super-profit in oil exploration and extraction on the left, and gainfully, the local bureaucratic-capitalists in their downstream activities on the right, making exploited mass an inverted drooping smile on top.

 

IV] The Pernas punch

To understand the role of PERNAS, we need to indicate the formation of FELDA (Lembaga Kemajuan Tanah Persekutuan) because there is a symbiosis in this pair of organizational species that deepen peasantry exploitation.

In Malaysia’s development of the underdevelopment, there is a dual-economy: the FELDA schemes (the Federal Land Development Authority) with a corridor sanitarian to corral rural Malay communities with modern built-in infrastructure providing subsistence dependence loyalty to the ruling Malay class AND a technological-based FTZs to mop-up precarious labor (see “ Precarious Labor in Industrialization Capitalism in monsoonsstorms.wordpress.com) to prevent a combined Urban-Agrarian Revolution.

FELDA was activated on 1 July 1956 when the Land Development Act came into force with the first FELDA settlement in Air Lanas, Kelantan. The core programs FELDA attempted to resolve were the distribution of the economic benefits between the smallholders, the oil palm field worker, corporate farmer, and the common, but poor and neglected rural folk who live outside this encirclement.

The actual settler intake in 1961-1990 was 122,809 families, equivalent to over 1 million people who previously had a typical field holding of four acres of oil palm crops, enclave into a total of 322 schemes.

 

FELDA as a social project, however, has a high resettlement cost per family topping over RM$ 50,000 by the time the schemes terminated in 1990. Many developmental costs were borne by the state, for example, land was given free to the settlers. The cost of the land and the subsidies to build roads and bridges leading to the settlements, and the provision of social amenities like rural clinics, post offices and schools, were allocated for the settlers:

Cost item FELDA settler Costs, Income and Resources
per Resource:
Per settler cost RM 50,000 (US$19,230) in 1990;
in 1990 settler repays ⅔ over 15 years at 6.25%
interest, mainly for cost of 4 ha. oil
palm holding and house. Cost likely to
be double now with 3% per year cost
inflation.
Settler net 25 year cumulative net income, 1979-
income, 4 ha oil 2004, was RM 276,948 (average
palm plot RM11,078 per year or RM 923 per
month). 2014 total income estimated at
almost RM2,500 (Barlow, 2015b).
Settler gross In 1986 (a year of low prices) net
versus net monthly income for a 4 ha oil palm
income, 4 ha oil plot was RM376 (US$145). Gross
palm plot income, net income plus typical
monthly obligation amount, was RM750
(US$288), for a 50% net income margin.
Settler cost/ RM 5.0 million (US$1.92 million) per
settlement and oil palm settlement and RM6.0 billion
for FELDA project, (US$2.3 billion) for 120,000 settler
based on 1986 families.
cost
Cost of Land  Free; land was alienated from states to
FELDA and not charged to settler.
Cost of basic Roads, water supply, public buildings,
infrastructure etc., may cost 10% of combined project
and social value or RM 0.67 billion for 120,000
amenities settler families
Number of FELDA  Settlements of 300-500 people enjoyed
staff the services of 25-35 onsite staff, over
a third of whom worked on community
development programs.
The staff-settler household ratio
was reduced from 8.1 in 1980 to 5.1 in
1990 (Lee & Bahrin, p. 26 and p. 189).
Note: The total cost of the Johor Tenggara project was RM209.2
million (US$89.8 million) with Government expenditures for
roads, water supply, and public buildings, such as schools and
health centers set at US$10 million (World Bank, 1974).
1986 exchange rate US$=RM2.60.
Unfortunately, FELDA smallholder areas did not expand after 1990 because FELDA tilted from its social enterprise to a corporatized model. The emergence of the new era of corporatization (through listing FELDA Global Venture – FGV) with initial public offering or IPO of the commercial estates on long term land lease meant that financial resources are now invested in ancillary upstream and downstream operations rather than new settlements. It becomes eerily apparent that the plantation acquisitions, FGV operates much like any other public-listed plantation company, without stating adequately goals for achieving whatever defined higher objectives or giving market quarterly market reporting appropriately and adequately.

 

With corporatization, most unfortunately, FELDA’s listed arm FGV is using its cash-generating asset, its commercial estates as its key source of funds for overseas investments in oil palm estates and downstream businesses, including real estate’s acquisition in the United Kingdom, and in the supply-chains of other crops, including sugar.

However, the FGVH’s sugar division registered a 28% decrease in profit from RM$107.4 million in 2015 to RM$66.5 million in 2016 due to lower demand from the export market. Indeed, overall, FELDA Global Ventures Holdings Berhad (FGVH) slipped into the red in the first-quarter ended in March 31st. 2016 registering a net loss of RM$65.54 million compared to RM$3.58 million in net profit a year ago due to lower crude palm oil (CPO) production in the upstream segment according to a report in the Malaysian Reserve, May 25th. 2016.

Also to take note that FELDA schemes had in the past encroached on forest land, comprising both secondary and primary forests, with some minor brownfield projects to rehabilitate state-run projects. The pertinent question to ask is: who gains from these timber rights but Capitalist contractors, State agencies and the state governments and their economic cronies benefiting from the huge regional schemes in peninsular Malaysia: Jengka Triangle and Johor Tenggara, and also Sahabat in Sabah.

 

 

Another key disfigurement from FELDA’s rural regional land use planning approach is that in its attempt to integrate water catchment planning (and riparian reserves), forest reserve (with corridors and fewer small patches), rural towns and settlements and crop area, within its overall spatial plan, many vital forestry is scarred – though it is often termed as “landscape level” planning.

 

 

FELDA settlers are ageing and entering a destabilization stage of their economic livelihood. The full support of FELDA’s commercial arm are not available to them, but to the ethnocratic-kleptocracy and its allies, Malaysia federal and state agencies, and politicians of all stripes; these cohorts are nowadays paying attentively to their needs because FELDA settlers are a rural interest group with wide electoral significance, (an article on FELDA and FTZs – a Marxist spatial geographic analysis, is in preparation).

 

To ensure the healthy growth of their agricultural produces, the rural folks whether the padi farmers or the FELDA settlers, require fertilizers. This is where the Pernas punch knocks in.

 

PERNAS – Perbadapan Nasional Berhad (the National Corporation Limited) a holding company formed in January 1970 with an interest-free government loan – supposedly to encourage indigenous involvement in businesses. However, bureaucratic-capitalist circles in collusion with foreign capitalists deepen the exploitation of national wealth under the PERNAS stable:

i)               Malaysia Offshore Mining (Chartered Consolidated, Tronoh, London Tin Corporation, Rio Tinto, Bethleham Steel)

ii)             Malaysia Timber Corporation (International Timber Corporation,UK)

iii)            PERNAS-Sime Darby  = ( Sime Darby Holding)

iv)            Far Eastern Hotels Development [Kuala Lumpur Hilton Hotel] = (Pan-Am Hotel, Chase Manhattan){Rockefeller}

v)             Other subsidiaries ó(Goodyear Tire and Rubber Company, Plessey, Chemical Company of Malaysia = Imperial Chemical Industry ICI)

vi)            CCM is linked with ESSO which produces nitrogen fertilizer at its M$27 million ammonia plant in Port Dickson from where liquid ammonia is transported via a special PWD-constructed rail to the CCM factory at Padang Jawa. Typically, oil refineries produce olefins and aromatics by fluid catalytic of petroleum fractions as are completed in the Port Dickson plant.

vii)           Also, consequently, the magnesium nutrient in Batu Caves scarred the latter visitors’ attraction; Guthrie Kimia is marketing Dolomite Industries product which are smashed at the foothills to the caves, while Harrisons and Crosfield serves Kenneisen Brothers, the other magnesium fertilizer producer (these neo-colonial economic entities have a leasing stronghold until 1991).

Until 1966, virtually all Malaysian mineral fertilizer requirements (140,000 tons of phosphate yearly) were imported in raw (from the British Phosphate Company, Christmas Island, the British Protectorate, off Australia) or in manufactured form, but with collaborating PERNAS-ICI effort (Chemical Company of Malaysia (CCM) then was controlling 90% of fertilizer distribution), increasingly distributed to FELDA schemes, and as chemical insecticides in padi farms thereby introducing toxicity into the kampong rivers and ponds, causing spinal paralysis of fresh water fish, a daily diet of the farmers and their families.

The high yielding rice strains (Malinja, Mashuri, Ria and Bahagia) are suited to off season planting and cropping, and the average yield per acre – fertilizer adequacy – increased from 2262 pounds per acre (1962/63) to 2296 pounds per acre (1968/69) compared to the main season crop of 2132 pounds per acre to 2236 pounds per acre within the same period. These improvements came with high investment and operational costs because prior to the Muda River and Kemubu (Kelantan) projects, the cost of irrigation works for single and double cropping was only at M$92/acre capital cost during the 1956/57 but accelerated to M$199/acre by 1962/1963 [IBRD, Confidential Report TO-549 (restricted), 1966]

 

V] Peasantry and the Proletariats

 

The role of the peasantry in Malaysia’s economic development cannot be ignored. The peasantry constitutes the main stream of the economically active population, provides the stable food of the population in padi cultivation, and owns 61% of the rubber smallholding acreage. In peninsular Malaysia, rice production contributed 3.7% of GDP and 10.8% of agricultural production in the late 1960s. [11]

However, the plight of the pleasantry has never been clearly presented. Despite the peasantry’s contribution to the economic welfare of the nation, their benefits from the economic system have been minimal.

The tenancy of the peasantry is still entrenched in a feudal-hierarchy structure. In a survey, those tenants who have to be dependent on the landowner constitute 40% of the total. Owner-farmers make up only 13% of the total number of farm households and each of these padi-farmers operates on average less than 2 hectares (about 5 acres). [12]  On a national average, only 3% of the padi farms are 10 acres and above, 78% are below 5 acres, and 10% below an acre. [13]

With these marginal plots of land, domestic rice production had grown only 3.4% per annum in the 1951/2 -1965/66 period, [14] or less than half the rate of increase anticipated in the First Malayan Plan, 1966 – 1970. The minimum size of padi field for a peasant family towards self-sufficiency and as an investment for raising agricultural production is estimated to be at least 7 acres. [15]

The plight of the Malaysian peasant farmers are further exacerbated by the tenant-landlord feudal relationship. The tenant farmer, eking out a living from a small field, has not only to be content with his meager income, but also has to pay a rent to the landlord. In the late 1950’s, the average rent in cash alone amounted to M$ 51 per relong (0.29 hectares); more often the tenant farmer pays rent in kind. [16] By the late 1960’s, the levels of rent in cash had gone up to between RM$80 and RM$100 per relong. [17] The rent constitutes 30% to 50% of the crop value. Whereas, the state stipend for a Sultan budget was RM$ 150,000 per annum. [18]

The exploitation of peasant farmers by the landowning class has deepened with the application of zakat (religious tax), [19] the amount used to be one-twentieth of the crop output, but this has doubled to one-tenth in 1963.

Zakat is only collected from padi farmers, but not rubber or coconut growers; that only tenants and owner-farmers, but NOT landlords, are subject to zakat. Its implementation exposes the class division in the peasantry between the landowning class and the landless peasant-farmers; its operation was in furtherance of promoting feudal oppression in the peasant society.

The Malaysian peasants were further exploited in the transaction of padi between the rural and urban sector by the middlemen. The marketing of rice is under the control of Chinese rice millers, though a Government Gazette notification of August 4th. 1967, had vested the Federal Agricultural Marketing Authority (FAMA) the monopoly entity to buy and sell unmilled rice, (see D. Vengedasalam, M. Harris and G. MacAulay, MALAYSIAN RICE TRADE AND GOVERNMENT INTERVENTIONS, University of Sydney, 2006). The legal loopholes are that the FAMA can also grant licenses to agents (namely, political appointees) to be rice millers, too. Syed Mokhtar Al-Bukhary eventually  to take full control over Bernas which acts as the regulator and distributor for the country’s rice industry through Al-Bukhary’s Tradewinds (M) Bhd., while  its rice imports monopoly would continue till January 2021. It is through these rice millers’ hoarding that the price of this essential commodity shot up by 40% in 1972/1973. [20]  In an effort to lower the price of rice, a subsidy was given to imported rice. The rice import licenses were issued by NAPRA, the National Padi and Rice Authority, of which about 225 rice dealers or about 1.46% of those in the trade are entitled to these permits. In fact, this subsidy benefitted the international compradors: Thai-Chinese rice merchants in the Thai-Malayan border, and the ruling regime who deals exclusively on rice import from China, initially through PERNAS.

Further, government fixed price for padi had remained the same in recent years despite the moderate increase in prices of purchased inputs and consumption goods, for example, in 1965, farmers in the Muda River areas received an average of 9.55 cents per pound for padi, some 20% below the support level. [21] To remedy this situation, an agricultural credit scheme designed to provide credit to about 60% of the farmers in the Muda River area [12], but this special fund benefited the big padi farmers [23].

Also, the Guaranteed Minimum price for local produced rice was RM$ 16 per picul or 11 cents/pound, whereas the retail price of local Kedah Number One rice was 27 cents per pound; wholesaler-middlemen siphoned off the surplus value of peasants’ production. When some farmers tried to take their produce to the towns to fetch the high price for rice, police blockades were enforced; farmers were known to have burnt crops in protest against this restriction by those in high authority.

The infusion of the green revolution – about 19% of total crop acreage, around 225,000 acres – are planted with the new variety seeds, [24] but accentuated income inequality between different classes of farmers, to the feudal landlords who could afford the large chemical material inputs, and poverty has been the fate of tenant farmers who could not. [25]   Indeed, small farmers agree before harvest to give a shopkeeper specific amount of padi in payment for fertilizer purchased on credit; fertilizer purchased on credit costs 32% to 57% higher than the market price. [26]

Further, non-aligned farmers do not have the 30% government subsidy because of political quota allotment. These farmers then have to pay the unsubsidized prices, plus extra charges for handling and transport.

To pay for this extra expenditure, farmers have to borrow money; the loans, accounting from M$20 to as high as M$1000 must be in cash (pinjam duit) or in kind (ambil hutang). The loans are obtained from money-lending chettiar who often charged exacting interests above 100% and from Co-operative Society (Syarikat Kejasama) mostly run by the wealthier villagers and/or landlords who also deemed security in the form of transfer of title deeds or buffalo deeds.[27]

Indeed, the green revolution has perpetuated the contradictions between peasants’ poverty and the profits of agribusiness companies like ICI’s Chemical Company of Malaysia, which the bureaucratic-capitalist circles have shares in the said entity. CCM controls 90% of local production in fertilizers, and its domination is not incidental in Malaysian history. In 1930, ICI (Malaya) Ltd. had begun to exercise a direct role on agricultural exploitation. It had associated with the then Department of Agriculture and the Rubber research Institute in applying fertilizer to rubber-trees (in fact, European and Asian agriculturists were sent to advise on the rubber estates).

The fertilizers to the peasantry community of rice farmers and FELDA settlers initially comes from the British Phosphate Company on Christmas Island, a British-administered territory, about 140,000 tons of phosphate yearly from the nearest and cheapest source.

It must be noted that there was no tariff on urea because it was regarded as a padi fertilizer, that is, until 1967, when the tariffs were imposed after CCM application was approved towards its local production. CCM is linked with Esso which produces nitrogen fertilizer at its RM$ 27 million ammonia plant in Port Dickson (part of the latter company’s oil refinery complex) from where liquid ammonia is transported via a specially Public Work Department-constructed rail to CCM factory at Padang Jawa, 20 miles south-west of Kuala Lumpur. Since CCM satisfied only half of Malaysia’s fertilizer requirements, the scramble for raw materials has scarred the country’s beautiful landscape. For example, at Batu Caves, a tourist attraction six miles from the Federal capital, the presence of magnesium nutrient in the limestone caves has turned the area into the “dustbowl of Malaysia”. Guthrie Kimia was marketing Dolomite Industries product, while Harrisons and Crosfield served Kenneison Brothers, the other magnesium fertilizer producer; their mining leases were then only to expire in 1991.

Modernization disguised as capitalism had not brought much progress in the rural area; it had retarded development changes and fossilized institutional processes. This is especially as a result of suppression of class struggles in the rural environment. The introduction of green revolution has not induced income growth among the peasantry, but instead introduces feudal capitalism and enslaves the peasantry to persistent poverty.

It also underlines the role of state capitalism where PETRONAS as the national state entity in provision of yearly Federal budgetary allocation, yet in supporting the trans-nationals’ oil corporations that provide the material input to the peasantry – rice farmers and FELDA settlers – who has to feed the urban proletariat:

RuralUrbanLabor

 

The rural mass can be the catalyst for change in the country such as the case of the 1974 Baling peasants protest against poverty which eventually snowballed into a nationwide revolt. When the farmers in Baling, Kedah, decided to rise against the authorities, it was because they were ridden with poverty, coupled with the lack of agrarian lands.

 

 

 

 

List of Reference

[1] Malcolm Calwell, Oil Imperialism in East Asia, AICD Occasional Papers No.1, Sydney, passim.

[2] The Wall Street Journal, September 22nd. 1970.

[3] In the Far East, capital expenditures for oil exploitation have totaled US$11 billion for the 1960-1970 period. Of this total, one half was expended for the refineries and chemical plants, 28% for marketing, and only 15% for production. This has been the patterns in the Far east for this period except for a US$ 400 million increase in refining in 1970. The amount of money spent in 1970 in the production of one barrel of oil is shown as follows:

PRODUCTION COST of ONE BARREL of OIL, 1960 and 1970
1960 US$ / barrel 1970
USA and CANADA 1.49 1.3
VENEZUELA 0.22 0.17
MIDDLE EAST 0.13 0.05
AFRICA 3.53 0.22
FAR EAST 0.33 0.64
Source: OECD Oil Committee, Oil -the Present Statistics and
Future Prospects, Organisation for Economic Co-operation
and Development, Paris 1975, Table 38, p.160.

 

 

[4]  Sabah State Development Plan, 1965-1970

[5] Pacific Rim Project, Pacific Imperialism Notebook, July 1973, No.7, pp.146-147.

[6] C.V. Das and V.P. Pradhan, “Oil Discovery and Technical Change in Southeast Asia – some International Law Problems regarding the Straits of Malacca”. Ed. By Robert Fabrikant, Field Report Series No: 5, Institute of South East Asia Studies, Singapore, April 1973.

[7] Financial Times, 25th. February 1974.

[8] Malaysia, newsletter Number 17, December 18th. 1972, Information Department, Malaysian High Commission, London.

[9] Board of Inland Revenue, Income Tax Outside the United Kingdom, 1972, HMSO, London 1974, Vol. 5, pp. 153-249.

[10] Malaysian Business, the New Straits Time Press (Malaysia) Berhad, July 1974, p.101.

[11] Ministry of Agriculture, Malaysia, Farm Economic Survey of the Muda River Project, Kuala Lumpur 1966.

In this region, the gross income per family member per year was estimated to be MRM$200 (single crop) and RM$400 (double-crop).

[12] Bank Negara Malaysia, “A Production Credit Scheme for the Muda River Irrigation Project”, Quarterly Economic Bulletin, March 1969, and “A Production Credit Scheme for the Muda Irrigation Project”, mimeo, pp2-7.

[13] For instance, credits given to assist big land-owning farmers to merchants in the capital-intensive technology of the Green Revolution include:

Tractors (65hp 4-wheel / 2-wheel drive, replacing 40,000 buffaloes)    RM$ 18.0 m

Fertilizers ( RM$ 20 per acre )                                                                                           7.8 m

Insecticides (RM$ 20 per acre )                                                                                         7.8 m

Large combine harvesters ( 400 required )                                                                  18.0 m

Small combines ( 2000 required )                                                                                     4.0 m

Source:Muda River Project”, World Crop, March/April 1969, Volume 21, p.14.

[14] Kazuo Saito, “On the Green Revolution”, The Developing Economies, Vol. 9 No.1, March 1971, p.20.

[15] Rosemary Barnard, “The Role of capital and Credit in a Malay Rice-Producing Village”, Pacific Viewpoint, Vol. 14 No. 2, November 1973, p.134.

[16] Udhis Narkswasdi and S. Selvadurai, Economic Survey of Padi Production in West Malaysia, Report No.1 (Selangor), Ministry of Agriculture and Co-operatives, Malaysia, Kuala Lumpur 1968, p.1

[17] Rosemary Barnard, ip.cit., p.130.

[18] G.C. Allen and Audrey G, Donnithorne, Western Enterprise in Indonesia and Malaysia, George Allen and Unwin, London 1957, p.242.

[19] Until 1966, virtually all Malaysian mineral fertizer requirements were imported in raw or manufactured form, P. Collenette, “Notes on Fertilizers and Fertilizer raw materials in Malaysia”, ECAFE document 1 and NR/F1/51 in ECAFE, Proceedings of the Seminar on Sources of Mineral Raw Materials for the Fertilizer Industry in Asia and the Far East, Mineral Resource Development Series, No. 32, new York 1968, pp.74-78.

[20] G.A.W. Van de Goor and G.Zijlstra, Report to the Government of Federation of Malaysia on consumption use of water possibilities of double cropping and irrigation requirement, FAO, Rome 1963; see also Randolph Barker’s paper, 13th. Session, FAO Study Group on Rice, manila 20th-29th. March 1969.

Further, though it was announced in the Summary of World Broadcasts, Monitoring Service of the BBC, Part 3, the Far East, Second Series, FE/W731/A/17, that peninsular Malaysia was expected to be self-sufficient in rice before 1975, it is widely acknowledged that rice production would be 80% to 90% of the country’s requirements, see Viraca Arromdee, “Can West Malaysia become Self-Sufficient in Rice by 1975”, Malayan Economic Review, Vol. 14. No.2, October 1969, p.86.

 

Standard

PRECARIOUS LABOUR in INDUSTRIALIZATION CAPITALISM

I] INTRODUCTION

Precarious labor is a cohort of workers who have jobs, but are denied permanent employee rights; they lack ready access to full employment or, if on paid employment, likely need long-term job security and protection from arbitrary retrenchment. Whilst on a job, precarious workers are deprived of long-term not only in work stability but also skill advancement and adequate safety. Globally, these workers are subject to not only to a unstable employment, lower wages and dangerous working condition are often within their scope of employment; they rarely receive social benefits and are often denied the inalienable right to join a union.

Pierre Bourdieu’s early work in Algeria stated that precariousness is present when “existence of a large reserve army (of labor)….helps to give all those in work the sense that they are in no way irreplaceable”. Marx’s contention is these floating, latent, stagnant, and pauperized populations constituting the industrial (inexhaustible) reservoir of disposable labor-power….characterized by a maximum of working time and minimum of wages that “self-reproducing and self-perpetuating element of the working-class”, (R.J. Jonna and J.B. Foster, “Marx’s Theory of Working-Class Precariousness – And its Relevance Today”, Alternate Routes 27 (2016): 21-45, reprinted in Monthly Review, Volume 67, Issue 11, April 2016; see also Jayati Ghosh, “Women, Labor, and Capital Accumulation in Asia”, Monthly Review, Volume 63, issue 08, January 2012; Vicki D. Crinis, “Malaysia: Women, labour activism and unions”, University of Wollongong, 2008; Aihwa Ong, Spirits of Resistance and Capitalist Discipline: Factory Women in Malaysia, State University of New York Press, 1987 ).

Increasingly, as a globalization consequence, precarious labor ranks include, but are not limited to, day laborers, immigrants, domestic workers, young workers, the unemployed and the formerly incarcerated. The challenges facing them have become increasingly common in the labor market and the general economy that core industries such as manufacturing, construction, health care, media and entertainment are included in the growing numbers of workers employed under precarious conditions. Concurrent with the shift from the manufacturing sector to the service sector, predominantly with the spread of information technology, there emerges a digital economy with its resultant phenomenon of exploited labor, too (see monsoonsstorms.wordpress.com on Exploiting Labor in a Digital Economy).

Before the Federation of Malaya gained independence from its British colonial master, the International Bank for Reconstruction and Development (IBRD) Mission of 1954, had already laid down a series of concrete proposal to propel the industrialization program towards a neo-imperialism orbit. Its platform eventually became The Report of the Industrial Development Working Party, Kuala Lumpur, 1957 which eventually binds the ruling regime to monopoly-capital. The promulgation of an act in August 1958 that gave tax incentives to pioneer industries and assurances of permission to remit profits and capital, and against nationalization to foreign investors was passed. The Foreign Investments Guarantee Agreement provides protection against the risk of expropriation without adequate compensation and non-convertibility of profits; this Agreement was signed with USA, Germany, Canada and The Netherlands. Further, double-tax agreements have been signed with the United Kingdom, Japan, Singapore, Sweden, Norway and Denmark.

IBRD is the original World Bank institution where it works closely with the rest of the World Bank Group to help ostensibly developing countries reduce poverty, promote economic growth, and build prosperity. However, there are often ‘conditionalities’ imposed on borrower countries where loans are based on what is termed the ‘Washington Consensus’, focusing on a neo-liberalization thrust in trade, investment and the financial sector and the deregulation and privatization of nationalized industries. Often the conditionalities are attached without due regard for the borrower countries’ individual resulting in the loss of a state’s authority to govern its own economy as national economic policies are predetermined under The World Bank and its International Monetary Fund packages, and where most developing countries hold little voting power. These “packages” have also been associated with negative social outcomes such as reduced investment in public health and education, but still have sufficient capital expenditure beneficial to local compradors and industrial-capitalists as well as monopoly-capitalists globally.

These opaque entities are secretive. The International Bank for Reconstruction and Development (IBRD), International Development Agency (IDA) and International Finance Corporation (IFC), for instance, do not publish data on interests collected from individual loans. The rate of return on IFC investments does not illuminate the possible returns to the IFC from profit participation arrangements, stock option, and equity conversion rights or from similar contractual arrangements which can provide additional returns to the IFC. Also, contingent interest, that is, over and above fixed interest, may also be included in a contract, thereby creating a larger return to the Corporation if the profits of such projects exceed original expectations. Further, such contingent interest may be deferrable, non-cancellable or even be cumulative.

These are the hidden agenda of post-colonial new imperial masters in league with domestic industrial-capitalists, and later the ethnocratic kleptocracy, in looting the country’s wealth. The following is a brief insight to the initialization and early phase of Malaysia industrialization program – its cause, the courses of development and their causation to precariousness of labor – using researched materials not typically exercised nor executed, by contemporary neo-liberal Malaysian political-economists.

 

II] CAPITAL INVESTMENTS, CAPITAL ACCUMULATION

Central to Malaysia’s objectives in industrialization development is a policy to create an atmosphere conducive to capital investment leading to the growth of secondary industry [1]. Since 1957, there is no lack of investments in the manufacturing sector; 60% of share capital is owned by foreign transnational corporations. There is a growth of 12% per annum by value added in manufacturing, but direct employment in the manufacturing sector grows less than 9% annually. The predominantly inward oriented industrialization strategy caters the ruling class consumption and bourgeois middle income consumers. The protection and incentive schemes in the pioneer industry entrenched industrial enclaves and extended monopoly-capitalists exploitation process.

The inflow of foreign investments in the manufacturing sector is accomplished with an influx of capital-intensive technology. Foreign capital-intensive investments have not raise labor intake, instead they ensure high employment rate, especially in the 15-24 age group where one out of five persons was jobless in the mid-60’s [2]. The urban unemployment reflects the drift of landless and unemployed youths from rural areas. The presence of shanty towns, not only in the Federal capital but in other state capitals as well [3], testifies an accumulating evidence of underemployment and unemployment in the country. Meanwhile, hotels and tourist-chalets flourish amidst the poverty of the unemployed: rural migrants and the urban proletariats whose lives are either drastically disrupted or simply ignored [4].

Under the Second Malaysia Plan, 1971-1975, it had proposed that 22% of the 495,000 new jobs to be created in peninsular Malaysia would be in the manufacturing sector. This means a three folds increase in employment in the manufacturing sector from the 1960 figure of 121,000 to 378,000 by 1975. Past performance had shown that the low employment absorption capacity in the manufacturing sector, especially in the pioneer companies [5]; in fact, the manufacturing sector provided only 5,500 new jobs per year during 1966/67.

The tendency is for these industrial groups which had matured quickly in terms of value-added where capital utilization rates were often high. The frequent argument that the textiles, electronics and ship-building industries are labor-intensive needs not necessary  true, as a survey of the 1968 Manufacturing Industries Census revealed that the electrical appliances ranked 22nd, the textile 36th and ship-building 44th in a group totaling of 112 industries in terms of capital-intensity by sector [6]. Even in the much endowed electronic industry, implanted behind free-trade zones [7], employing female workers at US 40 cents per hour, but created only 12,000 new jobs in 1973. Indeed, the labor intake in these run-away factories is reaching its maximum input for productive efficiency compared to other Southeast Asian countries [8].

Further, though it was a policy to disperse industries to the less-developed areas of the country, new companies still concentrated mainly, in 1971, in the developed states of Selangor, Penang, Johor and Perak as they were in 1968 [9]. This owes to the obvious fact that capitalist-industrialists seek comparative low-cost areas for operations, and these were found in the urban centers where there is an abundance of unemployed to be exploited as cheap labor.

The former Minister of Finance, Tan Siew Sin, justified this low wage policy to a group of industrial-capitalists in France by saying, “When industries started seeking low-cost labor markets in Asia, they started in Hong Kong. Then when wages went up in Hong Kong, they went to Taiwan, and later to Singapore. The wages are much lower in Malaysia than in Singapore at the present. If industries come to Malaysia and later move on to a cheaper labor market, we are ready to accept this (specter)”[10]. Implied is that labor would be suppressed, and the industrialization program would represent the face, and underlining, of bureaucratic-capitalism in Malaysia today, and a phase of neo-imperialism in Southeast Asia at its present stage of development.

Capitalist exploitation of surplus production in the manufacturing sector can be empirically demonstrated by the following findings. British firms, for example, which constituted 1% of the manufacturing establishment but 19% of the total sale, hired only 8% of the employees in the manufacturing sector; American firms constituted 0.2% of the manufacturing establishment with 16 firms, took 5% of the sale, but only 1.1% of workers hired [11]. In an analysis of these limited companies’ reinvestment rates, it was found that Japanese firms had a low 10%, American firms reinvestment capital inflow was 11%, British 14% and Singapore 22% [12].

In fact, there were negative rates of reinvestment for at least half of the 20 British pioneer companies since 1966. This is due to the fact that British manufacturers established themselves relatively early in Malaysia, got their market share and are shifting their profits and re-investible funds elsewhere in the transnational systems [13]. The average post-tax profit rate in relation to net operating assets of British manufacturer amounted to 27% per annum during the 1955-1964 periods – a profitability rate which was considered above their average (8.5%) for the world as a whole [14]. With such exploitable assets it is not surprising that Malaysia is regarded as the suitable location for foreign manufacturing subsidiaries serving the Southeast Asia region [15].

Indeed, in 1980, for example, the average profit rates on US direct investment abroad in developing countries were about 30% where the profit equals income plus fees and royalties as percentage of total investment, (as cited from Robin Broad, identifiable as the U.S. Department of Commerce computer print-outs, Unequal Alliance: The World Bank, the International Monetary Fund and the Philippines, University of California Press, 1988).

 

The outflow of profits and capital gushes unceasingly since the implementation of tax exemptions and other favorable pioneer status inducements. For example, the tax reliefs on profit, amounting to 40%, and dividends paid out of profits, under the 1958 Pioneer Industries Ordinance come at a time when the country’s development and social expenditure needs are growing, but the protection and incentive systems have eroded national revenues. The introduction of the Investment Incentives (Amendment) Act in 1971 accelerated the rate of capital exploitation and capital repatriation processes. By this legislation, manufacturers of electronics and electrical components can claim 10 years of tax relief; most companies do not request the maximum period as this entails employing more personnel as a condition under this claim.

Further, companies granted investment tax credits are able to deduct from their taxable incomes a sum not less than 25% of capital expenditure incurred on factory, building or machinery. The contradictions in Malaysia’s industrialization program are clear: on one hand, there is a policy to increase employment through labor-intensive industries, but on the other hand, there is a concurrent incentive scheme which favors a capital-intensive strategy.

There is even a capital allowance scheme for building and plant expenditures incurred, and when incorporated with the accelerated depreciation allowance incentive, companies will virtually have 90% of eligible capital expenditure completely written off within 5 years.

Indeed, the majority of foreign firms do not require this period of time to recoup all their investments. Therefore, through this system of most favorable concessions, the ruling factions assist foreign industrial-capitalists in their domination of the manufacturing sector.

Industrial-capitalists’ domination in the manufacturing economy is confirmed when some foreign investors are allowed to own a majority equity holding in their enterprises. This is in direct contradiction of a policy stipulating that a minimum of 51% of the equity capital in pioneer companies must be reserved for Malaysian participation [16]. Foreign control of the industrial estates is ensured by the words of Jamil Jan, Chairman of the Federal Industrial Development Authority, “To enable foreign investors to look after their investments and interests…..certain key posts could be permanently held by foreign personnel.” [17]

 

III] PRECARIOUS LABOR, PRECOCIOUS LABOR

The domination and control of the industrial sector are completed when the liberty of those who have to make a living is heavily constrained, and restricted, within the working environment. The urban proletariat is silenced in its demands for higher wages and better working conditions by repressive legislations, for instant, The Industrial Relations Act, 1967, forbids go-slow or wide-cat strike [18]. Unjust measures like close supervision/surveillance and fragmentation of trade union organizations are used to perpetuate a neo-colonial law and order, and consequently, the small membership size, splintered nature and different forms in registrations are the deliberate actions by the ruling regime to negate the formation of nation-wide, multi-racial, class-oriented trade unions. The present characteristic of Malaysian trade union is labeled “kachang puteh” (white peanuts), not only for its colonial connotation but also the size of organizational structure.

To a Malaysian worker, seeking a job is already tough-going, but when dissatisfactions arose in a workplace environment and the employer is not supportive for collective agreement or unlawful dismissal, then the road ahead is often potholed to constraint and limits the venue available for precarious labor. If disputes relate to disagreement of proposals for collective agreement, non-compliance of collective agreements and unlawful dismissals of workers, often the settlement of trade disputes since Independence has over the years have even become more  a time-consuming process simply because of the absence of a time-frame in the Malaysian labor laws.

The Malaysian Trade Union Congress has pointed out many instances when some of the Chairmen of the Industrial Court have been sitting on the cases even after the hearing has been completed. It must be emphasized that the vast majority of the workers depend entirely on their wages. They have only their miserable labor to offer for their survival and that of their families. If a dismissed worker has to wait five to seven years before he secures an award directing his re-instatement or compensation, we can well imagine the misery he and his family would have undergone during those long years. Therefore, it is not too pernicious to say that any Chairman who leaves his job without making an award even after the closing of the case deserves to be condemned and punished by the rakyatrakyat.

First and foremost, labor should never be treated as a commodity to barter. An industry consists of capital, management and labor. They should be accepted and treated as equal partners. Che Guevara once said, “Man really attains the state of complete humanity when he produces, without being forced by physical need to sell himself as a commodity.

It must be recognized by all concerned that without labor, there will be no yield, in spite of the highly advanced technology and sophisticated robots. Workers are entitled to workers’ rights that entail the right to work and the freedom of association.

 

The freedom of association means the right in forming unions, that is, trade unions.

The primary function of a trade union is collective bargaining in order to secure fair and just terms and conditions for employment. But in Malaysia there are several legal restrictions with regard to the formation and functions of the trade unions. Over and above that, the employers resort to various tactics including threat of dismissal with a view to discouraging workers from joining or forming unions. As a result, six decades after gaining political independence from the British colonial master, only 11% of the workers in the country have been unionized.

Besides, collective bargaining is restricted by law to only private sector unions. Even these unions are not allowed to include issues such as promotion, transfer, and appointment of employees, terminations, retrenchment and assignment of duties in their proposals for collective bargaining. These are matters pertaining to the conditions of employment. Such prohibitions are not in conformity with workers rights.

As regards public employees, although they are permitted to form unions, their rights to collective bargaining, which had been in existence since the colonial era, was withdrawn by the ruling regime in 1979. Denial of the right to collective bargaining means a trade union becomes merely a club. Public employees in Malaysia can be terminated in the public interest, but their right to challenge in a court of law has been denied by an amendment to article 152 of the Federal Constitution. It is an internationally recognized fact that workers must have the right to strike.
However, according to Malaysian labor laws, private sector unions may decide on resorting to strike and proceed with the necessary steps including balloting but the strike will not proceed if the ruling regime’s minister refers the dispute to the Industrial Court. Strike means withdrawal of labor by which a worker forgoes his/her wages. The workers’ argument is that it is the right of the workers and it is the final weapon in the armoury of trade unions in their pursuit of better terms and conditions of employment and of restoring the dignity of labor.

Under the Industrial Act, there are only two types of industrial action permitted by the law, and these are pickets and strikes. Labor in the country cannot express dissatisfaction on workplace conditions or environment by going on strikes or even instigate a small picket as an industrial action like wearing casual dress while working, mass visit to the doctor, visiting bathrooms far more frequently than usual, performing a boycott or refusing to use or buy a company’s product – all regarded as sabotaging the employer’s capital machinery by labor.

The term “strike” is legislated in a torturous manner to hinder any action to be undertaken as it is defined as “the cessation of work by a body of workmen acting in combination, or a concerted refusal or a refusal under a common understanding of a number of workmen to continue work or to accept employment, and includes any act or omission by a body of workmen acting in combination or under a common understanding, which is intended to or does result in any limitation, restriction, reduction or cessation of dilatoriness in the performance or execution of the whole or any part of the duties connected with their employment.” [Section 2, Industrial Relations Act]

Further, strikes in essential services, labor strikers must give 21 days’ notice to strike to their employer. These essential services cover the banking services, electricity services, fires services, port, harbor and airport services, postal and telecommunication services, prison service, public health service, water service, transport services, broadcasting (both TV and Radio), the petroleum and gas industries, and in the Government departments include the Customs and Excise, immigration, marine, meteorology, and the Government Printing Press. Covering this elaborated hindrance, there is a clause stating that there must be a cooling period, too. Besides, to frustrate labor more, the employer needs to notify the Director-General of the respective government department.

The following is regarded as Illegal Strikes in Malaysia:

Sympathy strike – when a group of workers who are not involved in a trade dispute decide to go on strike to show support and solidarity with another group of workers who are legitimately on strike;

Political/general strike – when a strike aimed not an employer but at the government;

Wildcat strike – when a strike which is called without taking any ballot.

On the other hand, capital-industrialists can call an industrial action as Employers by performing a lock-out. This is the closing of a place of employment, the suspension of work, or the refusal by an employer to continue to employ any number of workers employed by him, in furtherance of a trade dispute, done with a view to compel those workers to accept terms or conditions of work or affecting employment [Industrial Relations Act, Section 2].

If one is to take the number of trade disputes reported to the Department of Industrial Relations Malaysia, in 2008, there were 27 disputes that involved more than 51 thousand workers. From 2009 to 2011, the number of disputes increased, but the number of workers involved was lower than in 2008. One has to exert that while in 2012, the number of disputes was 324, however, the number of workers involved was twice that of 2008. The most common reason for industrial conflict was “disputes overs terms and conditions of contractive terms in collective agreement and other service contracts”. This accounted for 21%-33% of total disputes, and 4%-22% of the total number of workers involved in disputes from 2008 to 2012, (see Paresh Kumar Narayan, “An assessment of the Malaysian financial services sector“, Tables 1 and 2, pages 6 and 7, International Labour Office
Geneva, 29 July 2015).

We can end this section that precarious labor under capitalism is substantively not free, and still is locked in industrial-capitalist’s handcuffs – very much in alignment with the argument advanced in Karl Marx’s Capital. If we are to accept that the vast majority of Malaysian workers in the capitalist system are separated from the means of production, and have no other way to survive, but to sell their labor power to those who own these means, that is, the capitalist class then the thunderous tendency to the polarization of income and wealth in society is very much as glaring evidence daily. The more the social productivity of labor grows the more it serves to promote the wealth and power of private capital, while at the same time increasing the relative poverty and economic dependency of the precarious labor specifically, and the working rakyat-rakyat generally.

The over-arching maintenance of all those post-colonial legislations and ruling regime’s drastic enforcement activities have attracted the foreign firms in the furtherance of neo-imperialism exploitation in the newly-independent nation, and the deepening of capitalist exploitation of the working class [19].

 

IV] FINANCIAL CAPITALISM, CAPITAL RE-FINANCED

Prior to the emergence of financialization of capitalism in Malaysia in the 1980s (see
monsoonsstorms.wordpress.com, “Financialization Capitalism and neo-Imperialism”, 2016) the initial seeding of the new imperialism of globalized monopoly-finance capital had already reared its ugly head protruding from foreign banking institutions and their lending entities as well as other types of international aid givers.

In the penetration of the indigenous economy, foreign capital of a dominated country could form a bridgehead through the manufacturing sector. With proper financialization, the industrial sector could have an early germination. More so, if there is a vehicle, say with a predominance foreign control as a result of promotion and sponsorship of private enterprise, to drive the industrialization program. Thus, there is the Malaysian Industrial Development Finance Berhad (MIDFB), [20] whose ownership was 60% foreign then (10% each in the hands of the International Finance Corporation and the Commonwealth Development Corporation, 39.6% are other foreign shareholders which include the bank of America, Morgan Guaranty Trust Co., Bankers Trust Co., Manufacturers Hanover Trust Co. and the Deutche Bank, Frankfurt).

It should be noted that the International Finance Corporation, an affiliate of the International Bank for Reconstruction and Development, had contributed a share capital and loan of M$6.6 million in setting up the Tasek Cement Corporation, near Ipoh, state of Perak. The IFC had also given a M$ 7.5 million loan and share capital of M$ 3.11 million to the Malayawata Steel Ltd., situated in Butterworth; the loan participation in this project included the bank of America, bank of Tokyo Trust Co., New York and the Kuwait Investment Co. The Malayawata Steel Ltd. is a joint venture between MIDFB and the Yawata Iron and Steel Co. and other Japanese industrial interests which include Mitsui Trading, Mitsubishi Corporation and Irimaru Co. Ltd. Malayawata Steel was set up because of the availability of cheap fuels: discarded rubber trees and jungle timbers, and raw materials: high grade haematite from states of Kedah and Perak (ferro-manganese and ferro-silicon were imported from India and Japan) [21].

Once the financial base is firmed, dominant countries, often in combined entities, penetrate the industrial enclaves and use them as springboard for economic neo-imperialism. For example, the MIDFB helps to underwrite 90% of the new industrial shares offered to the market, and obtained the financial resources from both the IFC and IBRD – whilst another subsidiary builds and sells the industrial plants to industrial-capitalists. In the United Kingdom, INVESTECO represents FIDA and MIDFB interests.

In the investment-banking operations, there are over 40 foreign banks, excluding offices and sub-branches in Malaysia, of which the Chartered bank is one of the oldest [22]. In one particular case, there is the special and unique agreement between Short Deposits (Malaysia) Ltd. and Bank Negara Malaysia, the national bank, whereby the latter provides funds to Short Deposits to top-up the amount of its portfolio that its customers’ withdrawal of deposits exceed the amount of funds deposited; in other words, Bank Negara acts as “lender-of-last-resort”. Short Deposits, sponsored by the South East Asia Development Corporation [23], a subsidiary of the Development Finance Corporation Ltd (Sydney), operates with its amount of capital invested low, that is, its ration of loans to capital is high.

Prior to establishing itself as a company, the minimum conditions Short Deposits had to fulfill included the provision that it would restrict investments to Malaysian central or state governments’ securities, which would not, however, be examined by any external audit, to maintain a certain minimum amount of capital, and to observe a maximum ratio of loans to capital – a figure which has yet to be made public [24].

Australian enterprises in Malaysia are on fertile ground so far as the repatriation of profits and the safety of such repatriations are concerned. This is so because Australian companies participating in joint ventures are covered by their own Government Export Payments Insurance Corporation (EPIC) which ensures certain types of investment against non-commercial risks: expropriation, damage or destruction of property caused by war, riot, insurrection and similar happenings, and the inability to transfer capital or earnings back to Australia [25].

However, the most important financial dealing is the Basle Agreement of September 1968 in which Malaysia agreed to maintain a minimum proportion of its reserves in sterling: 40% plus a “gentlemen” agreement of 10% (about M$2,800 million) of total foreign reserves). This agreement, incredibly, followed the 1967 devaluation of the pound sterling when Malaysia incurred M$322 million loss, whereas the commercial banks suffered devaluation loss of only M$3 million. In May 1971, Britain failed to react positively to Malaysia’s need of a revised monetary agreement with reference to a gradual running down of the sterling balances and a more equitable exchange rate. It was in March 1972 that the Conservative Chancellor informed Malaysia that he was unable to accede to the country’s request. Meanwhile, Malaysia’s reserves were used to support the floundering pound and other foreign currencies.

Malaysia relations with the International Monetary Fund, on the other hand, on November 11th. 1968 adhered to the obligation of convertibility under Article VIII of IMF Articles of Agreement to “undertake to avoid imposing restrictions on payments for current international transactions or employing multiple exchange rates or discriminating currency practices without obtaining the prior approval of the Fund”. By accepting the obligations of Article VIII, Malaysia, in fact, assures monopoly-capitalists a free transfer of funds for international transactions. This support to maintain neo-imperialist financial link was taken during the Malaysia Consultative Group Meeting of May 17/18 1966 in London where the World Bank then estimated that the external finance required by Malaysia for development purposes would be about M$600 million, and advised that a rapid running-down of Malaysia’s external reserves should be avoided [26]. IBRD further stated that if the objectives of the First Malaysia Plan were to be achieved, a significant increase in aid would be needed. These aids – tied loans – benefit the donor countries through interest amortizations and other contractual agreements [27]. The system of “consultative status” clearly indicates who is to decide and who is to be consulted in the age of neo-imperialism when the application of economic leverage [28] is so vital to the imperialistic strategy of financial domination and developing countries subordination.

Under such restrictive circumstances, the external reserves – M$4090 million – are not utilized for optimal economic development, but the country has to beg for aids and loans when they were so irrelevant in the historical process of economic development in Malaysia. Owing to financial loans, the public debts have quadrupled from the 1964 figure of M$2166 million to M$8073 million in 1973 (see Table A). These loans will tie the country to neo-imperialism strategy in economic exploitation and domination.

Table  A MALAYSIA NATIONAL DEBT 1965 – 1974
1965 1966 1967 1968 1969 1970 1971 1972 1973 1974
Domestic 2188 2516 2997 3490 3906 4271 4999 5835 6712 7544
External 464 502 528 591 747 745 1090 1396 1360 1499
Public
DEBT 2652 3018 3525 4081 4653 5016 6089 7231 8072 9043
Source: Economic Report 1973-1974

 

Foreign investments are greatly assisted by the Inns of Court law graduates who drafted the majority of new legislations as being favorable to industrial-capitalists.
In the service field, Malaysia retains foreign consultancy, for instance, Hunting Technical Services Ltd. (in Jengka Triangle Land scheme), Sir William Harcrow and partners (Muda and Kemubu projects) and the University of East Anglia Overseas Development Group (Johor Tenggara project) assisted by Oxford’s Institute of Forestry.
British financial assistance, are those on a tied-aid basis. For instance, the British Special Aid (1968) fund of 25 million sterling pound was used to offset withdrawal of British forces East of Suez; it was 75% interest-free loan payable over 25 years for capital repayment, while only 25% were outright grant, and even this amount had to buy an old 1959-built cargo vessel from Harland and Wolff. The UK Government even has the audacity to state that the transfer of colonial-acquired land and assets in Malaya be regarded as a “gift” [32].
An example of an interior natural resource exploitation activity is that of the Canadian government-sponsored “natural resources evaluation” program in Pahang. In the contract with the Canadian government on the Pahang Tenggara land Scheme, the agreement stated specifically that the consultants for carrying out the feasibility study must be Canadian nationality; 39 Canadians, but not a single Malaysian, were involved in the study [30]. In this Canadian “aid” program, 2 million acres of timber concessions were alienated to 2 Canadian firms: Contrans Services Ltd, which operates the forestry project while the timber processing is managed by S.G. Gardiner Engineering Ltd. Further, MacMillan Bloedell is in a joint-venture with local Malay capitalists on a timber concession in Pahang. Other Canadian assistance include training Malaysian armed services (national minorities are trained to operate wireless communication) in counter-insurgency warfare (the Tebuan jet trainer – CL41G is Canadian-built). Canada has emerged from its low profile posture in the Pacific: the International Development Research Centre, sited in Singapore, bears to this fact; it is housed in the same building as the Asia Foundation, a CIA-run organization.
Take the case of loans from the World Bank and its affiliates. Nearly two-thirds of the aid allocations to Malaysia during the 1958-1970 periods were devoted to infra-structure implementation which enhances the productivity of foreign investments. The Malaya First Five Year plan 1956-1960 in fact provided substantial expenditure on water supply, sewerage, power, transport and telecommunications – infrastructures of prime importance to industrial-capitalists, and the Second Five Year Plan, 1961-1965, further increased such expenditure. Indeed, the present pattern and future trend in Southeast Asia are toward expanded transport development [29] as a mean to lower industrial-capitalists operational costs and to ease, and widen, interior natural resource exploitation effort.

Meanwhile, Malaysian assistance to United Kingdom comes in the form of 5,000 student nurses serving in the National Health services. To ensure the maintenance of close colonial link, Malaysians are studying the technical and vocational education system in Britain, under the Anglo-Malaysian Educational Collaboration program, financed by the Overseas Development Institute.

American aids, whether in the overt form of donating an annual sum of M$250,000 to the University of Malaya by the US Army Medical research and Development Command for anti-malarial research which is useful for counter-insurgency warfare (in Vietnam during that period) or the covert activity of Huntingdon and Company [33] which presents a subtle penetration into Malaysian institutions, are all geared towards neo-imperial strategy. In the staff of the Economic Planning Unit, Prime Minister Department, for example, economists, political scientists and social anthropologists are seconded from the Development Advisory Service Harvard (DASH). These personnel have access to so-called “confidential information” which is being denied to Malaysian professionals [34].

Consultancy retaining of DASH, as well as those from IBRD, is the result of the initial 1954 IBRD Mission to Malaya. The underlining theme is that since they have access to data and had been writing all these reports, the consultancy role should continue. For example, IBRD and IDA had written a 4-volume Reports on Malaysia’s Development Prospects and Plans, surpassing the government Economic Planning Unit’s effort. Few local professionals have access to “confidential reports”; the Official Secrets Act, modeled after the United Kingdom legislation, has plumbered all discrete leaks, and prevented any constructive opinion local professionals may have.

Further, the Asian Development Bank-financed loan of US$9.3 million in the construction of the Grik-Jeli strategic East-West Highway, from Perak to Kelantan, is another example of neo-imperialistic involvement [35]; the often destruction of construction equipment along the new routes indicated an element of resistance by Malayan progressive movements.

Japan was among the first Malaysia Consultative Group members in 1966 to extend a M$150 million loan to the “Aid Malaysia Club”, and M$330 million was promised for the Second Malaysia plan. Japanese aid-projects include the Kuala Lumpur-Kuantan Microwave Station, radio transmitters and ancillary equipment at Johor Baru Microwave project, besides the Penang and Malacca water supplies, in the latter case, technicians come under the Colombo Plan. Further, local staff at the Malayawata Steel is trained at Yawata Works in Japan under a technical Assistance Agreement. Japan Youth Volunteers – about 350 at present – made their way into public utilities departments.

Though individual country’s aid program varies in amount and deliverance, collectively they merge into a pattern: the application of loans and grants as beachheads in pursuance of neo-imperialism domination. Indeed, there are no longer just capitalist countries relying solely on military force and physical colonialism, but increasingly the dispensing of financial gifts with interests-bearing and service consultancies as means to smoothen the pathways into recipient countries to enable “industrialization as the growth model”. Through this global system of extractive production and unequal exchange that expose capital’s dependence on the exploitation of impoverished labor in the developing countries. In this way, industrial-capitalists are able to extract profits in the Global South through neo-liberalism market mechanism, and by strongly preferring countries like Malaysia with lower wages as part of labor arbitrage to lever upon the precarious labor [36].

 

 

List of Reference 

[1] Federation of Malaysia, Interim Statement of Industrial Development Policy, 1957, a policy which was fervently supported by T.Jayasuria and. M.Osborne, “Malaysia – the State and Foreign Investment” in Roundtable Conference on International Law Problems in Asia, ed. By Vincent Shepherd, University of Hong Kong Press 1969, p.326.

[2] Federation of Malaysia, Socio-Economic Survey of Households: Employment and Unemployment, 1967/68, Department of Statistics, Kuala Lumpur, 1968.

[3] Syed Mansor Barakbah, “The problem of illegal settlers in urban areas of Kedah State, Malaysia”, Journal of Administration Overseas, Vol.10 No.3, July 1971, pp201-209.

For an indictment of the planning services, see Tan Soo Hai, “Planning Administration in West Malaysia – the need for Reform”, Town Planning Review, Vol. 43 No.1, January 1972, pp31-40, and for the social-racial division in housing apparent in the Federal capital, see T,G. McGee, “The Cultural Role of Cities: a case study of Kuala Lumpur”, Journal of Tropical Geography, Vol. 17, 1963, pp.178-196.

[4] The hotels, some owned by elements of the ruling factions with their international life-style, are idolized by the new bureaucratic-capitalist circles. For a critique of tourism on the Third World, see Michael Wolfers, Black Man’s Burden Revisited, Allison and Busby, London 1974, and Patrick Rivers, “Misguided Tours”, New Internationalist, No. 12, February 1974, pp.6-9.

[5] Lo Sum-Yee, The Development Performance of West Malaysia, 1955-1967, with special reference to the industrial sector, Heinemann, Kuala Lumpur, 1972, Chapter 7, pp.66-73 and E.L. Wheelwright, Industrialisation in Malaysia, University of Melbourne Press, 1965, Chapter 4, pp.62-70.

[6] W. Donald McTaggart, Industrialisation in West Malaysia, 1968, Center for Asian Studies, Arizona State University, January 1972, Table 4, p.32.

[7] see John H. Power, “The Structure of protection in West Malaysia”, in Belia Belassa.

[8] On electronic assembly plant, Indonesia leads in cheap off-shore production; labor cost for a 1000-person plant is estimated at US$ 505,000 (assuming a semi-skilled is paid US$25 per month), Thailand at US$561,000 (labor cost US$42/month), and Hong Kong, the most expensive – US$1,815,000 (labor cost US$118 per month), Electronic International, April 4th. 1974, p.66.

[9] W. Donald McTaggart, op.cit., Chapter 4, pp.41-58.

[10] Financial Times, October 3rd, 1972.

[11] Federation of Malaysia, Census of Manufacturing Industries, West Malaysia 1958, p.38.

[12] Charles Hirschman, “Ownership and Control in the Manufacturing Sector in West Malaysia”, UMBC Economic Review, United Malayan Banking Corporation, Kuala Lumpur, Vol.7 No.1, 1971, p.26.

 

For the inflow of direct reinvestment capital in Malaya and Singapore, see Economic Intelligence Unit, Annual Review, Malaysia, Singapore, Brunei, 1970, p.9:

M$ million            1965   1966   1967   1968   1969

[1] Earnings of

Foreign Direct

Investment:            940     978     877     881     1155

[2] Inflow of

Direct Reinvestment

Capital:                   185     230     183     170     150

[3] Percentage of

Reinvestment

[2]/[1]                     20     23.5      21       19       13

 

[13] Mark Lindberg, private communication to AREAS Research Committee; see also V. Kanapathy, “Foreign Investment in Malaysia”, in Multinational corporations and their implications for Southeast Asia, ed. By Lim Poh Tin, Current Issues Seminar Series No.1, Institute of South East Asian Studies, Singapore, February 1973, pp.3-12.

[14] W.B. Reddaway, Effects of UK Direct Investment Overseas – an Interim Report, Cambridge University Press, 1967, p.45.

[15] B.L. Johns, “Import Substitution and Export Potential – the case of Manufacturing Industry in West Malaysia”, Australian Economic Papers, Vo. 12 No.21, December 1973, pp.175-195.

[16] Federal Industrial Development Authority, Malaysian Industrial Digest, Vol.1 No.21, December 1973, pp.127-195.

FIDA requires 50% Malaysian participation in pioneer companies whereas the Economic Planning Unit, Prime Minister Department, demands a minimum of 51%.

For a review of FIDA by its first Director, see Heinz Rudolph, “Der Aufbau und die Arbeitsweise der Bundesbehorde fur Industriplanung und Industrieforderung (FIDA) in Malaysia” (Structure and working method of the Malaysian Federal Industrial Development Authority), Vierteljahresberichte, Nr.40, Juni 1970, pp.189-199 (English summary in pp.200-201).

[17] Malaysian Digest, October 31st. 1973, Vol. 5 No.9, p2.

[18] M. Ali Raza, “Legislative and Public Policy Development in Malaysia’s Industrial Relations”, Journal of Developing Areas, Vo. 3 No.3, April 1969, pp.355-372.

For British planters’ and miners’ negative attitudes towards trade unionism, see Martin Rudner, “Malayan Labor in Transition: Labor Policy and Trade Unionism 1955-63”, Modern Asian Studies, Vol.7 No.1, 1973, p.28.

[19] John Bellamy Foster, Robert W. McChesney and R Jamil Jonna, “The Global Reserve of Labor and the New Imperialism”, Monthly Review, Volume 63, Issue 06 November, 2011; see also monsoonsstorms.wordpress.com, “Continuance of neo-Colonialism”, 2016; see also James Heintz and Robert Pollin, “Informalization, Economic Growth and the Challenge of Creating Viable Labor Standards in Developing Countries”, Political Economic Research Institute, University of Massachusetts-Amherst June 2003 and Dae-oup Chang, “Informalising Labour in Asia’s Global Factory”, Journal of Contemporary Asia, 39:2, 161-179.

[20] The Board of Directors of the Malaysian Industrial Development Finance Berhad reflects the ruling class association with neo-colonial and neo-imperial identities:

 

Ruling Factions National Compradors Foreign Capitalists
Raja M.R. Badiozaman Foo Yin Chew Virgil C. Sullivan
(Sec., Min.of Commerce) (proprietary miner) William Allan Belshaw
(Cmn’wealth Dev.Corp)
Dato Ismail Mohd.Ali Heah Hock Meng
(Gov., Bank Negara) (Director, Cathay Organ.) Desmond M. Brown
(Harper, Gilfillan)
Raja Kamaruddin bin C.C. Tan
Raja Tun Uda (Partners of Tan, Rajah Ichiro Matsudaira
(Personnel Manager – and Cheah) (Managing Director,
Levers’ Brother Bank of Tokyo)
William G. Pullen
(Director,
Eastern Bank)
J.A.H. Saunders
(Chairman, Hong Kong
and Shanghai Bank)
L.J. Mulkern,
(Vice-President,
Bank of America)

Source: A Global Directory of Development Finance Institutions in Developing Countries, The Development Centre of OECD, Paris, 1967, p.229.

[21] P.P. Courtenay, “Malayawata Steel ltd: Southeast Asia’s First Integrated Iron and Steel Works”, Geography, November 1970, pp.444-448.

[22] The Chartered Bank is a subsidiary of the Standard and Chartered Banking Group ltd, England. It controls 41% of the Credit Corporation (Malaya) Bhd., and holds 51% of Chartered merchant bankers Malaysia Bhd.

The Chartered Bank is the bankers to the Sungei Way, Southern Kinta, Southern Malaya, Sungei Besi, Renong Tin and Malaysian Tin mining groups.

[23] Short Deposits is able to operate in such conditions may owe to the fact that the chairman of the South East Asia Corporation is Nik Ahmad Kamil, an element in the bureaucratic-capitalist circles, who was Malaysia’s trade commissioner to Australia in 1956.

In not a dissimilar way, the Asian International Merchant Bankers Bhd. was set with Tan Sri Haji Omar Yoke Lin Ong, who was a former Ambassador to the USA and a former President of the Senate, holding a major minority share, with the National and Grindlay Bank, and its subsidiaries, William Brandt’s Sons and Co. Ltd., Fuji Bank of Japan and the United Malayan Banking Corp. in this joint venture.

[24] Robert F. Emery, The Financial Institutions of Southeast Asia, Praeger, New York 1970, Chapter 6, pp. 265-358’, cf. D.J. Darby, “Banking in Malaysia and Singapore, Part I, Commercial Banking”, The Bankers’ Magazine, March 1968, Vol. CCV No.1488, pp. 165-168.

[25] Growth, Melbourne, June 1967.

[26] IBRD, Press Release, May 1966.

[27] Robin Broad, Unequal Alliance: The World Bank, the International Monetary Fund and the Philippines, University of California Press, Berkeley 1988; see also Sidney Dell, “On Being Grandmotherly: The Evolution of IMF Conditionality”, Essays in International Finance, Department of Economics, Princeton University, 1981; William Clark, “Robert McNamara at the World Bank”, Foreign Affairs, Fall 1981, pp. 167-184; Asian Wall Street Journal, August 16, 1979 and June 20, 1980 issues.

[28] Teresa Hayter, Aid as Imperialism, Penquin Book, London 1971 and Steve Weisman, ed. The Trojan Horse – a radical look at Foreign Aid, Ramparts Press, San Francisco 1974.

[29] Asia Development Bank, Southeast Asian Regional Transport Survey, Book One, prepared by Arthur D. Little Inc., Singapore 1972, cf. William P. Kinney, “The Distortion of Malayan Economic Development”, Journal of Contemporary Asia, Vol.2 No.3, 1972, pp.306-308 in book review of P.P. Courtenay, A Geographical of Trade and Development in Malaya, G. Bell and Sons ltd, London 1972, is a critical on the role of infrastructure “development” in penetrating a dominated country.

[30] David Lim,“The role of the University in the Development Planning in Malaysia”, Minerva, Vol.12 No.1, January 1974, p.30.

[31] South and South East Asia, HMSO, London 1971.

[32] Command Series 3832, November 15th. 1968 and Command Series 3968, March 18th. 1969, Copy of Treasury Minutes, HMSO, London.

[33] ANON, Huntingdon: in search of new pasture, Dissent, Melbourne 1971.

[34] IBRD & IDA, Reports on Malaysia’s Development Prospects and Plans, 4-Volume, embargoed under the Official Secrets Act.

[35] Further details of Japanese economic imperialism in Malaysia and Singapore can be found in Truth, No.7 October 1973, supplement to the New Malayan Youth, September-November 1973, Malaysian and Singaporean Students Movement, London; the former news-pamphlet is edited by Abdul Rahman Haji Embong at the Department of Anthropology and Sociology, Universiti Kebangsaan Malaysia.

[36] John Smith, Imperialism in the Twenty-First Century: Globalization, Super-Exploitation, and Capital’s Final Crisis, Monthly Review Press, 2016.

 

Standard

Exploiting Labor in a Digital Economy

 

I] Introduction

The base of a capitalist society is an encrusted monopoly of the capitalist class over the means of production with the majority of the population left with nothing to offer but its self labor power. Owing to this uneven relationship to appropriate the society’s surplus in the form of financial wealth accumulation that has a rate of return typically growing faster than the income of society as a whole; those in the dominant class tends to become richer both absolutely and relatively, gaining from the upward flow of value that somewhat seldom gurgle down.

Of the 30 million populations, Malaysia’s Labor Force Participation Rate is 68% in November of 2015. The wages in the manufacturing sector averaged RM$2741 (US$685) per month between 2012 and 2016, [1]. There are over 1.3 million civil servants – highest ratio to population in Asia Pacific – whose salary and remuneration were paid amounting to RM$41 billion in 2011 (more than 35% of operating expenditure yearly) or where 1.5 taxpayer supported one civil servant who are aligned as a kleptocratic class to the ruling capitalist regime.

In the country, there are 3 million of documented migrant workers (of whom 40% had no formal education) constituting 30% of the local work force or 1% of international immigrants world-wide, and a similar number of undocumented workers composed of migrants from Indonesia, Bangladesh, Nepal, India, Pakistan, Vietnam, Cambodia, Thailand and the Philippines, the majority of whom earning basic wages of RM$900 (US$225) per month [2].

 

The nine richest men in Malaysia have a net worth of US$42 billion (Forbes 2016).

 

II] The Labor Exploitation Framework

 

Labor exploitation does not just occur in one particular sector of production or within the ethnocratic kleptocracy and plutocratic national economy but also the resultant of total global accumulation process, too.

 If it is human labor that creates value to a product or service then surplus labor shall create the surplus value. The value and the transformation of that value, into market price is the result of social relations between labor and capital, and between different capitals. It is then this transformation from value to the market price that ensures that the capital accumulation process continues on an enlarged, and expanded, scale. This throughput circulation of capital thus involves the transformation of value and surplus value into profit. In a sense, the transfer of value from the developing countries (the South) to the developed countries (the North) is the result of low prices paid to the goods and services produced in the South to be consumed by the North.

 

In Marxist terms, value is the sum of direct and indirect socially necessary labor time that has gone into producing a commodity. Though the market price of a commodity often diverges from its value, it is still ultimately being determined by value.

 

The formation of the market prices for a product is through the production chain illustrated as a “smiling curve” for “value-added” in the diagram from the 10th. Malaysia Plan [3]. The “value-added”, that is, the new added income measured in conventional price terms, is high in the first part of the production chain with highly paid research and development processes, the designing – and financial capital management – located in the North. The curve falls in the middle, with the attendant low-wage labor in the South producing the physical product.

 

SurplusValue

 

The price rises again towards the right end of the curve with branding, marketing, and sales taking place in the North. And, these operational processes continue with upward thrust in capital accumulation as production sustains, symbolized by the pair of uplifting arrow signs.

 

Therefore, if one were to draw the curve for the Marxist concept of value added in the operational management and production chain, it would display the opposite of the smiling curve into the “sour smiley”. The value-price transformation occurs because the price of production of a commodity is equal to the price of the material inputs plus the remuneration of those who were given with a claim on a part of the value of said production. This part is shared accruing to (low) wages and the part accruing to all others (higher) claims like profit, rent, interest, transferred pricing, commissions and under-counter kickbacks.

In neoclassical economics, the final determinant is “the market” subjective to the needs and preferences of the consumer that determine the prices of the final goods which in turn determine wages costs and profit level. In short, prices serve in measuring “consumers’ demand” in the market arose through the exchange between competitive trading forces.

 

By contrast, Marxist value theory situates the determination of prices on the production side of the national economy. The cost of production or cost price is the transition from value to market price. This cost price of a product shall consist of the costs of capital like raw materials and machines (besides fixed plants) and “variable” capital that is wages.

 

Besides the stated cost price, the market price must cover the average rate of profit. This is because commodities need to be produced and reproduced continuously, and if capitalists do not recover the cost of production plus a profit of the product to be sold, (re)production ends.

Therefore, in Marxist economics market price reflects the cost of (re)production.

What is the cost of production, that is, the inputs required producing a commodity? The commonality to all these inputs to a commodity is the human labor. All market prices in a capitalist economy are in the final analysis tied to the instance on the consumption of labor or what Marx called “living labor” or labor-power. Its price – the wage – is determined not only by reproduction costs in getting food, housing, and education but also by political class struggles reflecting the power struggles between classes and groups in society.

 

It is their transformation into market prices that value and surplus value are distributed among capitalists within and between sectors. The uneven distribution of value occurs because of high organic value in the composition of capital, rent extracted through monopolistic extraction. It occurs between capital and labor through the respective shares – profits and wages – each receives as a result of prevailing class relations.

This situation also occurs between nations because of differences between the national market price of labor capacity (the wage) and the market price of those goods which labor consumes.

 

 

III] The Digital Economy

The 21st. millennium has witnessed a big increase, with the relocation of industry in the South (factory-produced and information-serviced), in the transferring of value to the North. Comparing the data for the world’s 2,000 largest multinational corporations – in the years 2004 and 2014 – generated revenues accounted for more than 50% of worldwide Gross Domestic Product; the share of FIRE (finance, insurance, real estate) in total assets was about 74% in 2014, contributing 33.5% in total profits. However, if one is to combine FIRE profits with those shares in the information industries and the telephony mobility industries – which have elements of financialization and digitized capitalism contents – then we have 70% which is absolutely higher than the 18.6% share of total profits in the manufacturing sector [4].

 

The electronics and electrical (E&E) industry is the leading manufacturing sector in Malaysia, contributing 33.4% of country’s export and 23.7% in employment in 2014 with assembling plants spread over 200 industrial estates and 18 free trade zones [5]. It is projected to expected to grow to RM$90 billion in Gross National Income and offering prospective 679,000 jobs by 2020 [6].

The E&E industry in Malaysia is deepening and strengthening the three major ecosystems of semiconductors, solar and LED technologies, (see Appendix A). In Figure 2, it shows the number of projected investments approved in the E&E industry by sub-sector, 2013, to indicate the scope, and scale, of manufacturing in the Malaysian digital economy.

 

Projected Investment

Figure 2: Projected Investments approved in the E&E Industry
M
alaysia Industrial Development Authority, Invest Byte No:4 2014, April 2014.

 

Applied onto the Malaysian economy landscape, during the 1970s’ industrialization program whereas its capital accumulation and consequential repatriation of surplus value with unequal exchange of products embodying different quantities of value through repatriated profits and transfer-pricing by transnational corporations, however, by the 1980 period onwards, there is an emergence of financialization capitalism, with the intense FIRE burning into the ICT segmented furnaces, taken a stronghold in the country domination, and thus deepening the overall capital accumulation process (see “Financialization Capitalism and neo-Imperialism”, monsoonsstorms.wordpress.com), besides widening the exploiting of labor in the electronic and electrical industrial digital economy.

 

The world renowned electronics multinational companies such as IBM, General Electric, Hewlett Packard, Sharp Electronics, Siemens, and NEC Infrontia have established their operational headquarters (OHQ) in Malaysia. Indeed, more than 70 percent of US investment in Malaysia goes to the electronics and electrical goods sectors. However, if including foreign-direct investment (FDI) in the services and oil and gas sectors, they would make total U.S. FDI significantly higher – perhaps more than $30 billion, (Department of State, 2014 Investment Climate Statement, June 2014).  For the European Union, electronics and electrical products constitute more than 60 percent of Malaysian exports to these countries.

Concurrent with this physical digital superstructure is the bridging of digital labor exploitation as exemplified since the introduction of the Multimedia Super Corridor (MSC) in 1996, creating more than 128,000 employment in MSC Malaysia-status companies and 65,000 employees in the Shared Services and Outsourcing (SSO) sector [7].

The furtherance in exploiting labor is accentuated through the key telecommunications network represented by technologies like a fibre-optic backbone with up to 10 gigabits per second capacity and high-speed switching, and multiple protocols including Asynchronous Transfer Mode (ATM), the MSC was supported by intellectual property protection with cyber laws like The Digital Signature Act 1997 that allows for the development of, amongst others, e-commerce by providing an avenue for secure on-line transactions through the use of digital signatures, The Communications and Multimedia Act 1998 that provides a regulatory framework to cater for the convergence of the telecommunications, broadcasting and computing industries, The Copyright (Amendment) Act 1997 to make unauthorized transmission of copyright works over the Internet an infringement of copyright, The Computer Crimes Act 1997 deals with unauthorized access to computer material, unauthorized access with intent to commit other offences and unauthorized modification of computer contents.

Sustaining these exploitative exploits are the blue collars and gray collars of the digital economy where the labor bottom-dredging would scavenge upon the country more than 500 universities and colleges to leverage the technical backbone besides those 50,000 college students studying abroad towards a neo-liberalism capitalism platform.

 

What was the consequential politico-economic resultant is that the North-based transnational corporations and financial institutions have established, and dominated, the vast South’s economies has become socially disarticulated export dependencies [8]. This is ardently in evidence with the promotion of the electronic and electrical industry in the 1970s that ushered the successful progress of a digital economy in the country, [9].

 

 

IV] The Digital Labor

Migrant worker is generally confined to lower-wage fields, and is defined as a person who is to be engaged or has been engaged in a remunerated activity in a State of which he or she is not a national. Typically, at any one time, migrant workers would constitute nearly one-third of migrant workers in the manufacturing sector, [10].

Under a digital economy, labor is still being exploited. Though the Minister of Human Resources and Manpower has enacted the Minimum Wages Order 2012 to promote a fair wage structure, and further, to provide a minimum acceptable standard of living which could eventually alleviate poverty, the key concerns of labor today still revolve around the restrictive framework for the exercise of freedom of association, the right to organize and bargain collectively and the right to strike, to name a few issues. Unionization remains low with less than 10% of labor that is covered by Collective Agreements. The organization of workers is tightly regulated, and the average Malaysian worker generally does not see the benefits of belonging to a trade union. Workers are constrained by non-democratic laws which allow for detention without trial, restricted freedom of speech, publication or assembly.

Even though in the Chong Wah Plastics Sdn. Bhd. & Ors v Idris Ali & Ors 2009 case, the Industrial Court stated inter alia, that ‘if the country has to employ foreign workers both the law and equity, and good conscience demand that they be given their legal rights and this includes the payment of same wages as local workers’, yet 183 Nepalese migrant workers in Malaysia had died due to illness, occupational accidents and suicide. The three-day protest by the JYC employees resulted in a partial victory for the workers with the employer finally agreeing to provide RM10,000 in compensation to the family of the death man and a pay rise for the workers from RM428 (US$106) a month to RM546 (US$135) a month.

Our argument is that the exploited labor, and the associated capital accumulation, is predicated upon the miserably low wage rates within the South’s economies imposed by their exports competitively fighting for limited shares of the largely North’s consumer markets. The labor exploitation is that, according to the International Labor Organization, the world’s 2010 three-billion workforces, about 942 million were classified as “working poor”, that is, almost one-in-three workers world-wide live on under US$2 per day, [11].

 

Secondly, there was the continuation in the extraction of natural resources and the siphoning of value that could possibly otherwise be used to construct productive forces of the national economy.  In 1964, seven years after gaining independence from her colonial master, there were about forty British companies having local registrations in Malaysia, and the rubber and tin industries had accounted for 60% of the stock exchange capitalization. Extractive mineral activities, like illegal mining of bauxite for fabrication of electronic casings, are still being practiced in the state of Pahang.

 

Lastly, with the strong encouragement by transnational corporation and local businesses, and constant movement of workers from more depressed South’s countries in Asia into the country had meant there is no equalization of returns to labor, but the consistent exploitation of labor towards enlarging capital accumulation.

 

The spread of the digital economy that produces information and communication technologies (ICT) and information itself, has encouraged, and encompassed a wider spread than the mere physical production of information technologies like computers and mobile phones in various free trade zones in the country. The digital ecosystem covers the creation of digital contents like music, movies, video and graphic images of a multimedia nature. The technologies, the physical constructs or the soft elements are nowadays dialectically interconnected so that the digital economy is at once physical as well as non-physical.

Indeed, the digital economy is a re-organization of productive forces that have cut across the base-superstructure laying bare the interconnection between global supply chain systems, and in between these sub-systems that are supportive in the continuance of exploited labor, whether local nationals or migrant workers:

 

DigitalLaborDivision

 

 

The production processes that are in the digital economy would involve a production stage consisting of human subjects (S) using technologies of labor (T) on objects of labor (O), creating a new product (see Figure 3). The base in this production process may have begun in the rural-agricultural-labor segment by which miners extract minerals. These minerals shall then become the objects in the next production stage when the raw materials are processed into ICT components with industrial-assembly-labor constructing finished digital media. Throughout this process chain, this human subject (S) = labor who shall manage the production, distribution, circulation, and consumption of diverse types of information.

“Digital labor,” therefore, does not only denote the production of digital content. Its wide connotative spectrum encompasses the whole mode of digital production, a network of agricultural, industrial and informational labor that enables the existence and use of digital media. The human subjects (S) involved in the digital mode of production, that is, miners, processors, assemblers, and information workers have specific stand in the dedicated relations of production. There is a relation between the rural folks (the miners) and the urban workers (industrial assemblers) as well as the final information creators (in Silicon Valley).

 

Today most of these digital relations of production are shaped by wage labor, slave labor, unpaid labor, precarious labor, and freelance labor, making the international division of digital labor a vast and complex network of interconnected, global processes of exploitation. These could probably range from the Congolese slave miners excavating columbite-tantalite or FELDA settlers digging for bauxite to extract minerals for use in ICT components, those super-exploited wage-workers in Foxconn factories in China, and the lowly paid software engineers in India to highly paid, highly stressed software engineers at Google and other Western corporations, precarious digital freelancers who create and disseminate culture, and e-waste workers who disassemble ICTs probably in the slums surrounding Delhi and Accra where women and children make a living dismantling motherboards with hammers and blowtorches, thus exposing themselves to toxic materials (Fuchs, op. cit.).

 

In short, Marx terms this whole system the productive forces as a “dialectical triangle” where human subjects have labor power that in this laboring process interacts with the means of production (object). The means of production shall consist of the object of labor (like natural resources and/or raw materials) and the instruments of labor (in the form of technologies).

 

In the labor process, humans transform the object of labor (nature) by making use labor power with the help of instruments of labor that can be mechanized equipments like jigs, excavators and lorries or electronic devices like soldering pens or oscilloscopes. The result is a product of labor, that is, a Hegelian subject-object or as Marx would say, a product in which labor is bound to its object in that labor is thence objectified in the product and the object is henceforth transformed into a use-value that serves human needs.

 

 

V] Exploiting Workers in a Digital Economy

On and between these production processes, however, there are many other, and various, differentiated facets in the exploitation of labor.

For example: nearly one-third of migrant workers in the Malaysian electronics industry, which produces goods for some of the world’s best-known brands, are trapped in forced labor, a form of modern-day slavery, according to a documentation by Verite.

  • Modern day Slavery

Verité  researching on the electronic industry supply chain had found that forced labor is present in a wide cross-section of household electronics brands from US, Europe, Japan, Taiwan and South Korean multinational companies that use Malaysian factories to produce exceeding 1.6 billion of sterling pounds worth of goods every year.

The researchers had interviewed more than 500 workers, and concluded that debt bondage and the illegal confiscation of passports and documents were the main drivers of this “systemic” forced labor, which traps workers in low-paid jobs in preventing them from returning home. Many of the electronics workers interviewed by Verité said they had been detained, harassed, blackmailed or threatened by immigration officials, police or the much-feared RELA – Malaysia’s voluntary citizen security corps – which is charged with rooting out illegal migrants.

It was documented that in the workplace, such digital labor often faces further exploitation and abuse. Verité investigations found that workers were forced to live in cramped and dangerous accommodation; that female workers experienced sexual abuse by their supervisors; and that migrants were forced to work excessive overtime under the threat of losing their jobs; that such labor is often saddled with large debts.

Thousands of people from Bangladesh, India, Indonesia, Nepal, Vietnam and other countries travel to Malaysia every year for work. According to a 2010 Amnesty International Report, many enter the digital workplace with at least US$1,000 in debt, after being charged high fees by recruitment agents.

Verité’s investigation revealed that 77% of migrant workers had to borrow money for recruitment fees. Some 95% of those interviewed said they could not leave the digital economy until the debts are paid. Their situation was made worse after a 2013 change in Malaysian law made it possible for employers to pass on the cost of a per-capita levy the government charges on the use of foreign labor to the workers themselves, thereby increasing their debt by almost another RM$400 (US$100).

Verité documentation has been supported by a US agency. The US State Department downgraded Malaysia to the lowest tier of its Trafficking in Persons Report http://www.state.gov/j/tip/rls/tiprpt/countries/2014/226770.htm that ranks countries on efforts to end modern-day slavery. In this report, the State Department criticized Malaysia for widespread abuse of its 6 million migrant work-forces, also evidently agreed by the Organization for European Development in its Structural Policy Country Notes: Malaysia, 2008 Report, besides the articles by Miyamoto, “The Labor Market of Malaysia : A Case Study of the Kuala Lumpur Metropolitan District”, Economic Journal of Hokkaido University, 37: 1-28 and R.A. Rahim, M. A. Ahmad Tajuddin, K.A. Bakar and M.N. Rahim, “Migrant Labour and Issues on Outsourcing System in Malaysia”.

These facts and figures are supported by the 2016 Global Slavery Index, a research report by the Walk free Foundation, whereby compiled information from 167 countries had indicated that 45 million men, women and children globally are trapped in modern slavery with two-thirds in the Asia-Pacific. Modern slavery means situations of exploitation that a person cannot leave because of threats, violence, coercion, abuse of power or deception; these people are held in debt bondage on fishing boats, against their will as domestic servants or trapped in brothels; these 124 countries have criminalised human trafficking in line with the UN Trafficking Protocol.

Under the recent signing of the Malaysia – United States Labor Consistency Plan, a bilateral instrument in accordance with Chapter 19 of the Trans Pacific Partnership Agreement on Forced Labor regarding the Protections against the withholding of passports, Malaysia shall, inter alia,

 

(a) amend the implementing regulations to the Passport Act 1966 (Act 150) to reinforce that retaining a worker’s passport by his or her employer is illegal. Such regulations shall include requiring that foreign workers are fully informed of their right to retain their own passports and informing workers that they retain the right to access their passports at any time, without delay or approval of any other individual and without consequence to their status and relationship with their employer or recruitment agency;

(b) amend the implementing regulations to Act 150 to require that private employers that utilize foreign workers in their operations (either through a direct employment relationship or through an employment agency) provide to each foreign worker a notice informing workers of their right to retain their passport and information on how to report violations of this right. Private employers with more than 10 foreign workers and recruitment agencies also shall post a notice to this effect.

 

  • Child Labor

Though there is no reliable recent estimate of the number of child workers (US Department of State, Country Reports on the Human Rights Practices – 1999), recent figures from the International Labor Organisation (ILO) show that globally, 1 in 6 children work, and that 218 million children aged 5 – 17 are involved in child labor worldwide with 126 million children work in hazardous conditions, and that the highest numbers of child laborers are in the Asia/Pacific region, where there are 122 million working children, though the highest proportion of child laborers is in Sub Saharan Africa, where 26% of children (49 million) are involved in work.

How are the above figures relevant in Malaysia’s context? Are there really working children in our country? A stroll around major towns will reveal a number of babies and young children who are being used to beg along five-foot pavements, pedestrian bridges and bus stops. A news report from Star Metro (24/08/2010) observed that about 20 children were foraging for junk around the landfill of Bukit Beruntung near to the Federal capital while their family members labor in electronic-making firms in some free trade zones miles away.

Indeed, the Malaysian Census Report estimated there were 40,000 child workers in 1990; past estimates had ranged from 70,000 to 200,000 [12]. In 1995, there were 75,000 economically active children between the ages of 10-14, representing 3.16% of this age group; of these, 33,000 were girls and 42,000 were boys, [13]. Definitely, forced child and trafficked labor in the palm oil industry that provides lubricants to the electrical and electronic firms had been identified by the World Vision Action group, and other migrant issues had also been amplified by local scholars, too (Rahim et al, op.cit).

 

A study had indicated the important role in the real output of the E&E sub-sector in the long run as well as short run when the former model reveals that the availability of more labor is associated with an increase in output while any real wage increase can adversely affect the real output firming Marx contention that surplus value is always expropriated in the fulfillment of capital accumulation as realistically seen in the  specific E&E segment of our industrialization process, [14].

 

  • Female Labor Activism

Under the New Economic Policy that was launched in 1970, a large numbers of women, especially Malay women, entered the workforce for the first time. Between the years of 1975 and 2000, the numbers of women in paid employment increased from 37 per cent to 44.5 per cent (Eighth Malaysian Plan, 2001-2005). The ruling regime enticed manufacturers – with cheap industrial land, tax-free incentives, corporate tax rebates and liberal profit repatriations – to employ unemployed females from the towns and recruit young Malay women from kampung (villages)  to work for transnational corporations in the free trade zones (FTZ). By the late 1970s, it was estimated that about 80,000 kampong girls between the ages of 16 years and 24 years worked in these electronics factories. There was an emergence of a proletarianized Malay workforce.

As more Malays moved into the workforce numerous workers’ unions increased the numbers of Malays in the trade union movement, causing a rise in the percentage of Malay trade union members from 21 in 1960 to 50 in 1980 to over 70 by 2000. For the first time also, middle-class Malay women began to join trade unions in the white collar sectors of the workforce. These women often lobbied for women’s rights through political channels as well as contesting wages and labor conditions through the trade union. The middle-class female labor succeeded in gaining some limited results such as equal pay, maternity and retirement benefits, but unfortunately the working class women have not attained the same results.

 

However, the freedom for women workers to join trade unions in secondary manufacturing was often undermined by government agreements that have granted special privileges to multinational companies, especially those set-ups in the newly established export processing zones (EPZs). Women workers in these industries were denied the right to form a trade union. Furthermore, government restrictions on national union organizing, membership and strike action were introduced under the Industrial Relations Act in 1967 to widen foreign direct investment (FDI) in the newly-established export-oriented industries. As a consequence of this amended legislation, women workers in the electronic industry, especially workers in electronics factories in the EPZs did not had the opportunity to protest on labor equality nor to unionize wholly.

 

It must be noted that many married women work in the home so they can care for young children. They rarely have a contract with their employer and are paid on a piece rate system. Trade unionists face extreme difficulties in their struggle to represent home-based workers in major towns. As a result, the working conditions of female workers in the home-based industry are below the minimum standards in the formal sector of the industry. It was also noted that ‘sweatshop’ employers often utilize undocumented foreign workers; estimates suggest that 3 million undocumented foreign workers are active in Malaysia’s economy. Undocumented, exploited labor is usually found in garment sweatshops operating in and around the federal capital of  Kuala Lumpur, around the Pudu and Loke Yew communities (read the interviews with the Secretary, Selangor Textile Trade Union by Crinis in Malaysia:Women, Labor Activism and Unions, University of Wollonggong, 2008; see also N. Yamada, “Migrant Workers as a Peripherality – Advocacy and organizaing Activities in Malaysia”, ILERA 2015 World Congress in Cape Town, South Africa, and Audrey Seah and Grace Lee, “Female Labour Force Participation, Infant Mortality and Fertility in Malaysia”, Journal of Asia Pacific Economy, Vol: 20, issue 4, 2015).

 

  • Inconvenient Labor Policy

With the highly profitable and vested interest businesses that process incoming migrant workers a glaring question to ask is whether migrant labor policy is being driven by the profit-maximizing interests of those who pocket lucrative gains from service fees, visa processing and medical check-up charges and other migrant entry procedural fees rather than to meet the national labor market needs.

Malaysia’s policies toward migrant labor are in conflict with a national economic development initiative. The country’s latest five-year development plan, unveiled in May 2015, set a goal of reducing dependency on foreign migrant labor. It targets of reducing the share of foreigners in the workforce to 15%; presently accounting for 25-35%, a range that reflects varying estimates of the number of undocumented workers.

Yet after the 11th. Malaysia Plan presentation in the Parliament, the Minister of Home Affairs Zahid Hamidi proposed to bring in 1.5 million Bangladeshi workers over three years. The plan was widely denounced by organized labor, civil society and even employers as undermining long-term labor policy objectives and negating measures to register and formalize undocumented workers. Information on the exact number of workers to be imported and the sectors demanding such labor was however left opaque. It must be noted that there are more than 10 different ministries, and departments within these ministries, directly engaged in the approval of immigrant labor (Malaysian Economic Monitor, “Immigrant Labour”, December 19th. 2015).

Indeed, even the United Nations had expressed concern in October 2015 that thousands of North Koreans are being sent to work in other countries, including in the copper mines in Sarawak, Malaysia, in conditions that amount to forced labor to circumvent U.N. sanctions to earn foreign currency for the country, amounting to between US$1.2 billion and US$2.3 billion annually by one estimate, according to U.N. investigator, Marzuki Darusman, the special rapporteur on human rights in North Korea.

 

World Bank senior economist Rafael Munoz Moreno said that the one step that needed to be taken by the Malaysian government is to phase out third-party agents in bringing in the migrants. “Low-skilled immigrants fill workforce gaps, reduce production costs and expand output and exports….and as a result, unskilled employment increases and profits rise, which increases investment and the demand for higher-skilled Malaysians.” Malaysia has a total of 14.3 million local workers, according to government data; there are also – to repeat – six million migrant workers, about half of them working in the country illegally.

 

  • Shattering the Glass Screen

Therefore, it is imperative that employer and worker organizations in the electronics industry should promote equitable treatment for all workers, regardless of their employment status, raise awareness and build capacity on fundamental principles and rights at work and to promote respect of these principles and rights throughout the supply chains, jointly explore options in addition to temporary or other forms of employment to respond to fluctuating demands, and to promote long-lasting employment relationships. The World Conference on ICT Electrical and Electronics, in June 2015 held a World Conference on ICT Electrical and Electronics in Malaysia. In addition to topics on organizing and fighting precarious work, the conference focused on how to create a safer and healthier working environment, and on forming stronger trade union networks with Chinese workers at MNCs such as Samsung and Foxconn.

Jyrki Raina, general secretary of IndustriALL, says: “Many electronics companies are purely in pursuit of profits and treat workers as a commodity or a production cost. Brutal attempts to bust unions stink of company arrogance. We must fight back by harnessing our global union power just as we did in defeating the union busting…..”

 

VI] Conclusion: A post-Financial Capitalism digital economy

In 1970, according to the Malaysian government, about three-quarters of the corporate sector of agriculture and mining, almost 60 per cent of corporate manufacturing and commerce, and about half of banking and insurance were still owned by foreigners. Though policies were initiated to formulate and modify the degree of foreign ownership, there was no definitive direction to completely eliminate the controlling entities, but to encourage and collude with foreign enterprises that often regarded the country as a beachhead for the global market [15].

Repressive successive, and continuous, regimes in comprador governance that accept, and implemented, neoliberal policies had meant that wage rises were never granted for fear of spurring workers’ and rakyat demand for greater political power. The ownership and control have not changed substantially, though through the local capitalists and intermediaries are not necessarily those of Chinese middlemen or Indian compradors nowadays, but kleptocrats that serve as the most obvious link in an exploitative economic system. Owing to the imposed ethnocentric nature of economic activities, an economic discourse has tended to deflect rakyat-rakyat attention and hostility away from those more powerful and central actors that are looting the country’s tills, (see STORM, Illicit Capital, Illegal Trade and Inequality – Kleptocracy in Malaysia, monsoonsstorms.wordpress.com).

The third issue on an oversupply of labor, and the tagged unresolved land question, was eliminated with an affirmative initiative, though ethnocratically-centred, with the introduction of the New Economic Policy and the engagement of the Federal Land Development Authority (FELDA) thus nipping the notion of an “Agrarian Question” as Marx and Lenin had propounded for the elimination of rural exploitation and dominance of a landlord class. With provision of land and ensured employment in the FELDA schemes, schools and clinics infrastructure built-in, any rural uprising was not forthcoming nor fomenting.

 

Aside from economic exploitation, colonial rule had also produced a highly unequal and socially distant multicultural society, whose multifaceted divisions kept the colonial rulers in supreme authority. After independence, Britain ensured that Malaysia became a staunch western ally by structuring in a capitalist system specifically helmed by western-educated elites through what appeared to be “formal” democratic institutions. In such a system, the Malaysian ruling elites have been able to “manage” the country’s democratic processes to its advantage as well as preempt or suppress serious internal challenges to its power, often in the name of national stability. As a result, an increasingly unpopular (Barisan National) National Front political coalition has remained in power in the country since 1957.

Meanwhile, Malaysia’s marginal position in the world economy, which has maintained its economic subordination to the developed countries of the west and Japan, has reproduced the internal social inequities inherited from colonial rule and channeled the largest returns of economic growths into the hands of the country’s foreign investors as well as local oligarchy-capitalists and comprador elites associated with the ruling ethnocratic-centric machinery. Over the years however, the state has lost some of its political legitimacy in the face of widening social disparities, increased ethnic polarization, and prevalent corruption. This has been made possible by extensive exposures of these issues via new social media and communications technology. Hence, informational globalization may have begun to empower Malaysians in a new struggle for political reform, thereby reconfiguring the balance of power between the state and civil society.

Capitalism is a system that is based on private ownership of the means of production; an ownership which, by definition, is that of a privileged minority. This private ownership (aside from land ownership) has taken the form of exclusive rights over important equipment associated with modern production technologies, from the first industrial revolution at the close of the eighteenth century to the present day. The majority of non-owners are thus obliged to sell their labor power: capital employs labor; labor has no free use of the means of production.

The extracted and capital accumulation by an oligopoly of trans-national corporations can be distinctly shown in Figure 4 where the exploitation of labor is highest amongst Apple and its fabrication manufacturer in Foxconn:

Firms_SurplusValue

 

It is indicative too that top management from the leading electronics companies is ranked among the richest people in the world. Samsung’s chairman, Lee Kun-hee, has an estimated net worth of US$12.6 billion; Apple CEO Tim Cook took home a salary of more than US $9 million. Hewlett-Packard CEO Meg Whitman, got a pay package of US$19.6 million in 2014, and the CEO of Hon Hai Precision (Foxconn), Terry Gou, has a net fortune estimated at US$6.1 billion.

Lest we forget again, the nine richest men in Malaysia have a net worth of US$42 billion (Forbes 2016).

This stands in contrast to standard Foxconn workers in China assembling products for Apple and HP. They are paid on average US$5,000 dollar per year, which means Foxconn’s CEO is worth more money than the combined annual salary of all the company’s one million blue-collar workers, (see Appendix CShattering the Glass Screen” on related industrial issues regarding Foxconn operations management and Apple’s management leadership style).

 

List of Reference

[1] Department of Statistics Malaysia 2015 & 2016, Labor Force Participation Rate in Malaysia and Wages in Manufacturing in Malaysia

[2] National Council of Professors (MPN) Conference, “National Dilemma: Issues and Challenges of Foreign Workers in Malaysia”, December 2014; see also: “Migrant Workers in Malaysia – Issues, Concerns and Points for Action”, Fair Labor Association, 2008.

[3] Economic Planning Unit, Prime Minister Department, Malaysia; available here: A Summary of the 10th. Malaysia Plan, http://www.rsmi.com.my/WebLITE/Applications/productcatalog/uploaded/Docs/The%2010th%20Malaysia%20Plan%202.pdf

4] Christian Fuchs, “Digital Labor and Imperialism”, Monthly Review, Vol:67, Issue 08, January 2016, Table 1.

[5] N. Piper, “Migrant Labor in Southeast Asia – Country Study: Malaysia”, Asia Research Institute, National University of Singapore.

[6] Malaysian American Electronic Industry, MAEI Position on International Labor Standards and Practices, Jan 2015.

[7] M.Vicziany and M.Puteh, “Vision 2020, the Multimedia Supercorridor and Malaysian Universities”, Monash Asia Institute, Monash University.

[8] Torkil Lauesen and Zak Cope, “Imperialism and the Transformation of Values into Prices”, Monthly Review, July 1st. 2015.

[9].Parinduri, R. A. and S. M. Thangavelu (2011), ‘ASEAN+1 FTAs and Global Value Chains in East Asia: The Case of the Electronics Industry in Malaysia’, in Findlay, C.(ed.), ASEAN+1 FTAs and Global Value Chains in East Asia, ERIA Research Project Report 2010-29, Jakarta: ERIA. pp.185-231; see also Appendix B on a typical a choice of factory location; and  The Malaysian Semiconductor Cluster in Microeconomics of Competitiveness, May 8, 2015).

[10]  Sri Wulandari, “Malaysia’s Free Industrial Zones: Reconfiguration on the electronic production space”, Asia Monitor Resource Centre (AMRC).

[11] Benjamin Selwyn, “Twenty-First-Century International Economy: A Class-Relational Perspective”, European Journal of International Relations (December 3, 2014) pp 1-25.

[12] B. Sinniah, Working Children in the Commercial Sector in Malaysia

[13] International Labor Office – Bureau of Statistics, Economically Active Population 1950-2010, STAT Working Paper, ILO 1997.

[14] Z.Yusop, S.H. Law, N.M. Nor, “Relationships Among Output, Wages, Productivity and Employment in the Malaysian Electronic and Electrical Sub-sector”, Department of Economics, Universiti Putra Malaysia.

[15] Lim Mah Hui, Globalization, Export-led growth and inequality: The East Asian Story, South Centre, November 2014.

 

 

APPENDIX A

The growth of semiconductor will continue to spearhead the growth of the E&E industry in Malaysia and has benefited from the global demand in the usage of mobile devices (smartphones, tablets), storage devices (cloud computing, data centers), and optoelectronics (photonics, fibre optics, LEDs) and embedded technology integrated circuits, PCBs, LEDs.

The E&E manufacturers in the country have continued to move-up the value chain to produce higher value-added products. These include intensification of research and development efforts and outsource non-core activities domestically.

The E&E industry in Malaysia can be categorized into four sub-sectors:

  1. a) Consumer Electronics

This sub-sector includes the manufacture of LED television receivers, audio visual products such as blu-ray disc players/recorders, digital home theater systems, mini disc, electronics games consoles and digital cameras.

The sector is represented by many renowned Japanese and Korean companies which have contributed significantly towards the rapid growth of the sector.

The leading companies are now undertaking R&D activities in the country to support their global and Asian markets.

  1. b)Electronic Components

Products/activities which fall under this sub-sector include semiconductor devices, passive components, printed circuits and other components such as media, substrates and connectors.

Within the electronic components sub-sector, the semiconductor devices have been the leading contributor in the performance of exports for the E&E industry. In 2014, the electronic components sub-sector became the largest sub-sector with approved investments of RM 5.8 bil.

The presence of major (MNCs) such as Intel, AMD, Freescale Semiconductor, ASE, Infineon, STMicroelectronics, Texas Instruments, Renesas and major Malaysian-owned companies such as Silterra, Globetronics, Unisem and Inari have contributed to the steady growth of the semiconductor industry in Malaysia. To date, there are more than 50 companies, largely MNCs producing semiconductors devices.

The presence of IC design firms strengthens the semiconductor ecosystem by providing IC design services for their own products or outsourced. Today, IC design firms have added more value to their capabilities. Companies such as MyMs and Symmid have diversified their product base to feed the needs of the financial, Halal and LED markets. More IC design firms and fabless companies are needed to create a wider set-up of new technology and products.

  1. c)Industrial Electronics

This sub-sector consists of multimedia and information technology products such as computers, computer peripherals, telecommunication products and office equipment. The industrial electronics sub-sector is the second largest sub-sector, comprising 28%of the total investments approved in the E&E sector for 2014.

  1. d) Electrical

The major electrical products produced under this sub-sector are lightings, solar related products and household appliances such as air-conditioners, refrigerators, washing machines and vacuum cleaners.

 

A brief outline on the construct of E&E :

The electronics industry is generally comprised of three groups of firms: brand firms, contract manufacturers and component suppliers. Brand firms subcontract and outsource a considerable amount of their manufacturing activities and use a range of suppliers for parts and components. In many ways, they organize global supply chains by determining how production is organized, which suppliers are able to participate and under what conditions, such as price, quality and delivery requirements.

 

Electronics companies from developed countries first relocated to Malaysia, Singapore, Taiwan (China) and Thailand during the 1970s and early 1980s, 13 followed by China, Indonesia and the Philippines, and more recently India and Eastern European countries, such as the Czech Republic, Hungary, Poland and Romania. The signing of the North American Free Trade Agreement also led to the development of large manufacturing facilities in Mexico in the 1990s. 15 The majority of subcontracted and outsourced electronics manufacturing continues to be done in Asia, mainly due to its low labour and other costs, established supply base and proximity to key final markets. Today, China is the world’s largest producer of computer hardware and occupies 80 per cent of the basic E&E.

Adopted and adapted from:

G. van Liemt: Recent developments on Corporate Social Responsibility (CSR) in Information and Communications Technology (ICT) Hardware Manufacturing, Multinational Enterprises Programme, Working Paper No.103, ILO, Geneva, 2007.

 

In the 1970s, there were five Free Trade Zones (FTZ): Bayan Lepas in Penang, Prai and Prai Wharf in then Butterworth opposite Penang island, Sungai Way in Selangor and Batu Berendam in Malacca that would later have other FTZs developed in Pulau Jerejak (Penang), Ulu Kelang (Selangor), Tanjung Keling (Malacca), Pasir Gudang and Tanjung Agas (both in Johore).

It must be stated that FTZ facilities – in bonded factories – are also nowadays available to all export industries regardless of their location.

Some of the earlier pioneer Foreign Electronic-Firms in FTZ:

BAYAN LEPAS

National Semiconductor Corp.                      (USA)

Litronix Inc.                                                      (USA)

ITT Transelectronics                                        (USA)

Micro-Systems International                        (Canada)

Robert  Bosch Photokino                                  (Germany)

SUNGAI WAY

Motorola Inc.                                                     (USA)

Monsanto  Co.                                                  (USA)

Teledyne Inc.                                                      (USA)

Matsushita Electric Industrial Co.                   (JAPAN)

ULU KELANG

Texas Instruments Inc.                                       (USA)

Nippon Electric Corp.                                           (JAPAN)

 

 

 

 

 

 

 

APPENDIX B  Facility Location and Capacity Planning in Supply Chain Linkages

                        Example case-firm: Canon Opto Malaysia

Canon

 

 

APPENDIX C

Shattering the Glass Screen

 

Prolog

 

In 2007, a month before the iPhone was production scheduled, the late Steven Jobs took some of his staff to an office. He had been carrying a prototype of the device in his pocket daily for weeks.

Mr. Jobs angrily held up his iPhone so that everyone could see the dozens of tiny scratches marring its plastic screen. He then pulled his keys from his jeans.

People will carry this phone in their pocket, he was quoted to say.

People also carry their keys in their pocket.

“I won’t sell a product that gets scratched,” he said tensely.

The only solution was to use unscratchable glass instead.

“I want a glass screen, and I want it perfect in six weeks.”

(read Duhigg, C and Bradsher, K. “How the U.S. Lost Out on iPhone Work

in The New York Times, published January 21st., 2012).

 

An executive left that meeting and booked a flight to Shenzhen, China. If Mr. Jobs wanted a perfection, there was nowhere else to go, (see Malik, Y, Niemeyer, A. and Ruwadi,B. “Building the supply chain of the future”, McKinsey Quarterly, January 2011; see also Aminpour, S. and Woetzel, “Applying lean manufacturing in China”, The McKinsey Quarterly 2006 Special Edition, pp. 106-115). To compare the underlying leadership philosophy in operations management, see Kim, M.(2012), “Samsung’s crisis culture: a driver and a drawback”, Sep. 2, 2012 (Reuters).

It was often argued that such material production like the glass panels could make in the USA, and then ship it by boat, but that would take 35 days. “Or, we could ship it by air, but that’s 10 times as expensive. So we build our glass factories next door to assembly factories, and those are overseas.” (see Wingfield, N and Duhigg, C. “Apple Lists Its Suppliers for 1st Time” in The New York Times, published January 13th, 2012).

 

Operations Management

A former executive had described how the company depended upon a Chinese factory to revamp the iPhone manufacturing just weeks before the device was due to be marketed. Apple had redesigned the iPhone’s screen at the last minute thereby enforcing an assembly line overhaul. New screens began arriving at the plant close to midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

The focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” (also to read Bruce Constantine, Brian D. Ruwadi, and Joshua Wine article on “Management practices that drive supply chain success”  in McKinsey Quarterly, February 2009).

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.” (to compare this statement with Stefan Knupfer and Glenn Mercer article on  “Can US auto suppliers stay ahead of Chinese rivals?McKinsey Quarterly, September 2005).

When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory. It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.

“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

The dynamic change in the electronic and electrical supply chain is also a reflection on innovative technologies that enable, and enhance, the digital production, and the enhancement of a digital economy. Look at the pre-iTune environment and the cutting off with sub-contracting intermediaries in subsequent operational management:

Pre iTune

 

 

iTune

 

Foxconn City

Foxconn, the world’s largest Apple subcontractor, once had more than 200,000 workers in one facility in Longhua, a factory district of Shenzhen in south China also known as “iPod City” (Webster, Nick. 2006. “Welcome to iPod City: The ‘Robot’ Workers on 15-hour Days”). In a few years, the Longhua factory grew to about a 400,000 population and the total number of Foxconn employees in China exceeded 1 million in 2012.

An eight-hour drive from that glass factory we mentioned above, is a complex, known informally as Foxconn City, where the iPhone is assembled. To Apple executives, Foxconn City was further evidence that China could deliver hard-working workers — and diligence — that could and would outpace their American counterparts.

Nothing like Foxconn City ever exists in the United States.

The facility has 230,000 employees, many working six days a week 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks; many workers earn less than US$17 a day. When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. “The scale is unimaginable,” he was quoted to utter.

(It was reported that Foxconn employs nearly 300 guards to direct foot traffic so workers are not crushed in doorway bottlenecks. The facility’s central kitchen was stated to be to cook an average of three tons of pork and boiled 13 tons of rice daily).

Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. In fact, Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.

In China, it took 15 days.

 

Labor Disputes

That was in some places and at a time not too long ago.

For those of you who had recently visited Jiuzhaigou, Chengdu, this latter city in southwest China is a pulsating IT hub, with all the imperfect ramifications of capitalism expansiveness powering the largest, fastest and most sophisticated manufacturing system on earth, (within seven months last year, two explosions at iPad factories, including in Chengdu, killed four people and injured 77; refer Duhigg and Barboza article on “Human Costs Are Built Into an iPad”, published in The New York Times, January 25th; [cleaning iPad screens with n-hexane, a toxic chemical that can cause nerve damage and paralysis]; other negative reports include the Taiyun assembly plant rioting (Reuter, Sep 2012; ENGADGET.com, Oct 6th. 2012).

That system has made it possible for Apple, and hundreds of other transnational companies, to build devices almost as quickly as they can be dreamed up.

Foxconn has a notorious “military-style” management system, which abused workers and caused at least 17 workers attempting suicide in the first eight months of 2010, an unprecedented tragedy in the history of electronics manufacture, (Chan and Pun 2010); see also Pun, Ngai., Huilin Lu, Yuhua Guo and Yuan Shen, edits.,  Suicides behind the Glory of Foxconn. Hong Kong: Commercial Press, 2011, (in Chinese).

For instance, during the worker uprising at Foxconn’s Taiyuan plant in September 2012, police and guards reportedly targeted workers who tried to record the event with their mobile phones (Mozur 2012b), showing that the short circuits move in both directions and Foxconn was significantly concerned about the consequences of these circulating video “rumours”.

In May 2014, one of Apple’s most important suppliers, NXP Semiconductors, dismissed all 24 elected union officials from IndustriALL affiliate MWAP at its plant in a special economic zone in Cabuyao, Philippines. NXP claimed the union’s peaceful industrial actions were illegal. It was clear that the company’s persistent acts of intimidation and harassment were aimed at weakening the bargaining power of the union.

According to local labour activists, Foxconn was once responsible for about half of all finger-related work injuries in key hospitals of Shenzhen’s factory zones in Longhua and Guanlan. To contextualize this datum, in Shenzhen and the surrounding Pearl River Delta of south China, factory workers lose or break about 40,000 fingers on the job each year, (nytimes.comIn Many Chinese Factories, Loss of Fingers and Low Pay

http://www.nytimes.com/2008/01/05/business/worldbusiness/05sweatshop.html?pagewanted=all&_r=0  Accessed April 7, 2014).

Foxconn resolved many of the injury or suicide cases through extra-legal means, including several cases that we followed closely (Pun et al. 2011; Qiu 2012). Since 2010, it has also used large number of “student interns”, including child labour, to generate more profit by evading China’s labor contract law, thus offering yet another illustration for the informalization process: formal circuits cannot be sustained for long without tapping into informal circuits, (Ngai Pun and Jenny Chan, “Global Capital, the State, and Chinese Workers: The Foxconn Experience, Modern China 38, number 4, 2013, pp. 383-410).

 

The Surplus Value

Some notable aspects of the iPhone are expected here. It is uniquely American. The device’s software, for instance, and its innovative marketing campaigns were largely created in the United States. Apple recently built a $500 million data center in North Carolina. Crucial semiconductors inside the iPhone 4 and 4S are manufactured in an Austin, Tex., factory by Samsung, of South Korea.

However, when the California plant is compared with overseas factories, the fact is that the cost, excluding the materials, of building a $1,500 computer in Elk Grove was US$22 a machine. In Singapore, it was US$6; in Taiwan, US$4.85, see figure below on costs of production, capital accumulation and the surplus value extracted from such operations management:

 

iPad

 

Wages were not the only reason for the disparities. Rather it was costs like inventory and how long it took workers to finish a task. The pace of innovation, say executives from a variety of industries, has been quickened by businessmen like Mr. Jobs whereas General Motors went as long as half a decade between major automobile redesigns. Apple, by comparison, has released five iPhones in four years, doubling the devices’ speed and memory while dropping the price that some consumers pay.

 

And in the relentless pursuit towards perfection, shrinking the supply chain, and ultimately the standardization of components, Apple is scouring new technological advancement like requesting Japanese liquid-crystal-display makers like Sharp Corporation and Japan Display Inc. as well as South Korea’s LG’s Display Co. in mass producing panels for the next iPhone using so-called in-cell technology, the people said.

This new technology integrates touch sensors into the LCD, making it unnecessary to have a separate touch-screen layer. The absence of the layer, usually about half-a-millimeter thick, not only makes the whole screen thinner, but improves the quality of displayed images, said DisplaySearch analyst Hiroshi Hayase, (Jessica E. Vascellaro, Wall Street Journal 2012;

see also http://tech.malaysia.msn.com/article.aspx?cp-documentid=250847860).

By June 2012, Foxconn had expressed an interest, and  planning, to build a factory in Indonesia. The Jakarta Globe (June 28th. 2012) was reported to state that Indonesia Industry Minister M.S. Hidayat spoke about Foxconn’s intentions to enter Indonesia  “bringing along technology, and [needing] some 1 million workers…….and if they do so, I will give them incentives of tax holiday, tax allowance and other facilities,” he said”. The investment is estimated to be worth more than US$1 billion, the minister added. With an expression into perspective is that Apple’s iPhones and iPads now commands for nearly three-quarter of its revenue-generation, (The Star, 21st. January 2013). However, that plant in Indonesia remains in a limbo due to political snags.

Now, the iPhones are rolling off an assembly line near Sao Paulo, Brazil, the only Apple manufacturing plant in the world made outside China. Foxconn ramped up the assembly of iPhones and iPads during late 2012, with an initial investment of 1 billion reais (US$325 million) to anchor an industrial park producing components locally.

The Itu site, situated in the sleepy tourist town in Sao Paulo stated – nicknamed “The City of Exaggeration” – remains an empty expanse of dirt where bulldozers have been leveling the land since late last year. The City Council that had donated the 100-acre of land to Foxconn, has since turned against the project. “People are really frustrated, “ said Givanildo Soares da Silva the City councilor. “We were expecting all these jobs by now and it is still just empty promises.”

Foxconn had prepared a statement indicating the facility should be operational by the end of this year, (Reuters, 13th. April 2015), bringing its Brazilian workforce to more than 10,000.

Apple’s official list of its top 200 suppliers, accounting for 97 per cent of materials and manufacturing costs, includes just two companies in Brazil: Foxconn and fellow Taiwanese electronics company Lite-On Technology Corp.

Foxconn currently have five facilities in the country that make products under contract for various technology companies, including just one unit producing Apple devices in Jundiai, about 30 miles east of Itu.

A worker testing iPhones earn about US$80 per week, just US$15 above the minimum wage. A fourth strike in as many years was brewing.

However, Terry Guo, the founder and chairman of Foxconn, had discussed Brazilian labor rather witheringly, “….as soon as they hear ‘soccer’, they stop working. And there’s all the dancing. It’s crazy,” he had once told the Wall Street Journal in 2010.

The steep cost of consumer goods in Brazil, along with high tariffs and interest rates, has contributed to the low productivity, too. The iPhones rolling off the assembly line in Sao Paulo carry a retail price tag of nearly US$1000 for a 32-gigabyte iPhone 5S without a contract – among the highest prices in the world and about twice what they sell in the U.S.

 

Epilog

Terry Guo, Foxconn owner and CEO once publicly stated, “as human beings are also animals, to manage one million animals gives me a headache” Calling workers “animals” is a candid reflection that the factory only values the bodily input of its labor force, not other aspects of its humanity, (Markoff, John. 2012. “Skilled Work, Without the Worker”, The New York Times.

http://www.nytimes.com/2012/08/19/business/new-wave-of-adept-robots-is-changing-globalindustry.html?pagewanted=all Accessed April 7, 2014).

 

Bibliography

Chan, Pun and Selden, “The Politics of Global Production: Apple, Foxconn and China’s new working class”, New Technology, Work and Employment, Volume 28, Issue 2, pp. 100-115, July 2013.

Christian Fuchs, “Digital Labor and Imperialism”, Monthly Review, Volume:67, Issue 08, January 2016.

Foster and McChesney, “The Endless Crisis”, Monthly Review, Volume 64, issue 01, May 1, 2012.

Torkil Lauesen and Zak Cope, “Imperialism and the Transformation of Values into Prices”, Monthly Review, July 1st. 2015.

Marisol Sandoval, “Foxconned: labor as the Dark Side of the Information Age”, tripleC, 11, number 2 (2013); 318-47.

Jack L. Qiu, Goodbye iSlave: Rethinking Labor, Capitalism, and Digital Media (University of Illinois press, 2016).

ChineseBook

 

This Appendix  article

– based on a MBA Discussion Paper on Operations Management –

is extracted, and adapted with new materials, from a contribution to

the STORM collective by a lecturer at a private digital university, Malaysia.

Standard

Amirul

neo-marxist-novelette on the making of financialization capitalism in malaysia

One day, my pak was telling me that at the time of independence, Malaya was a poor country with a per capita household income of only RM$760.

I was thinking that this sum of ringgit definitely could not support our family of six in a month. Just as I was going to ask pak how many rakyat is in a similar situation, he had continued.

In 1970, the Malay community formed the majority of poor, accounting for 74% of all poor households in Peninsular Malaysia. Bending his neck, and looking closely to my eyes, pak said that even sixty years after independence, Malaysia still lacks good  national economic policies to serve the rakyat but rather those in power serving the interests of domestic corporate capitalists and transnational corporations [1].

My pak spoke slowly, as he flicked an ant crawling up his checkered and tattered sarong, “capitalists” own the factories, land and buildings that the workers have to work in and also own all of the tools the workers have to use. He was saying that someone by the name of Marx had called Capitalists the “Ruling Class” because they live off on the work of all the workers. In Marxist views, Capital is the “means of production” and money which the Capitalist can invest in different places of business so that they can “profit” or gain more Capital.

Who are the workers, I softly asked.

Pak explained that people in the world are organized into different groups or classes based on their relationship to how things are made. Many people are known as “workers” because they work in factories or offices or farms for money; these people belong to the “working class” or, as he lowered his voice, often known as “the proletariat”.

I was awed. Fleeting through my head was this question on why this poverty is here.

Pak took a long breath, and said to me that the reasons are many: from a neo-colonialism regime to the stronghold of state capitalism that transformed itself into financialization capitalism that invites neo-imperialism penetration onto this land with the final control and infinite domination of a nation that prevent the rise of the poor.

Across this political economy landscape, we have feudal lords that had become mercantilist-entrepreneurs who later morphed into a capitalist class to suppress the working destitute, and at another time, either colluding with other capitals and compradors or collaborating with an emerging kleptocratic class that collectively crushes the poor.

He was relating how the British colonialists when they entered into Malaya had intervened into the livelihood of the Malay community and finally colonized the society-at-large. In 1913, pak seemed to say knowingly, the British had introduced the Malay Reservation Enactment as a “protection for Malays”, prohibiting non-Malays from holding mortgages on Malay Reservation land. Consequently, the value of Malay Reservation Land is depressed as it was not acceptable as collateral by financial entities. This law was also unjustifiable as it did not protect the poor Malay land from being acquired by richer Malay feudal landlords, too.

He was referring to this man Marx who had said something to the fact that that the economic structure, based on the relations of production in any society, that is, which class owns the economy, is the real foundation of any society.

Marx, according to my pak, was saying something like since on dunia kita is like this, the way it is, there is an intrinsic contradiction or antagonism between capitalists and workers.  The interests of these two groups are entirely different and are at odds with one another, like we as farmers in this small piece of agricultural land compared to those big abang-abang in the Felda Global Ventures Holding headquarter.

You see, pak was intoning aloud rather angrily, the British colonial government knew that the fringe jungle lands registered as the Malay Reserved Land had no minerals; all the rich-mineral lands had already taken over by the colonialist businesses. To prevent going against British plantation interests, the colonial government had also introduced a Rice Land Act which prohibited your grandparents and other Malay peasants from cultivating any cash crop like rubber and coffee other than rice; commercial cultivation had also seen the demise of local sugarcane farms.

Occasionally looking at the gathering dark clouds over the horizon in the South China Sea, pak continues with his story of a capitalist who makes money through money.  Capitalists are people who invest money in the labor of others, properties that they rent out, stocks, factories, goods that they sell, and so on. It is through these investments of the capitalists’ money that they make more duit-duit.

Whereas a worker, if you sell a thing or commodity according to Marx, your labor on that money is used to buy other barang-barang to live on.  Unlike the capitalist that uses his money for investments, workers have to use their money to buy Kedai Rakyat 1Malaysia food, baju and other clothing, to pay higher Tenaga electricity bills, pay our Suzuki motor-cycles’ hire purchase loans and now increasingly to pay the MBSB and CIMB Bank mortgages for your brothers’ flats and sisters’ apartments, and so many other things as a result of financialization capitalism. Before I could further ask my pak what is financialization capitalism, [3] he had continued, momentarily paused and said that he would explained in greater details later what the transformation of the global financial system and the asymmetric growth of finance had created new sources of profit for industrial capitalism in an autumn hegemony of monopoly, because he wanted to emphasized that a worker is anyone or someone who sells his or her labor in order to make a living and who has no choice but to sell this labor in order to make a living.

It’s most unjust. I was troubled, but pak had more to say.

The interest of the capitalist is to maximize profit.  The interest of the worker is to maximize wages and benefits, while also would like to shorten the working week.  At a certain point, the capitalist can only maximize profit by reducing the costs of production.  Capitalists can minimise the cost of production through the automation of factories (which could likely lead to less jobs being made available), outsourcing to other countries where people will work for lower wages and fewer benefits, and using the threat of outsourcing and mechanization to compel workers to accept cuts to wages and benefits [4].

I was remembering that one of my teachers had mentioned about a certain Puthucheary who wrote a classic book on Ownership and Control of the Malaysian Economy [2] where the three major conditions as mentioned by my pa are still presently in existence. These instances are the mass of subsistence workers, whether working in the Federal Land Development Authority schemes (FELDA) or as multinationals’ industrial workers in the various free-trade zones, the trading agencies network of pervasive intermediaries and their rent-seeking cohorts, and the owners/managers of the plantation, mining and commercial sectors.

Another searching question came upon me as to what about a capitalist who pays a wage to the worker in exchange for the worker’s time. What happens afterward? I was thinking about the capitalist having bought a period of time from the worker then what happens to the worker’s labor for the Capitalist.

According again to this Marx man, pak was patiently explaining while picking a black ant from the folds of the sarong and flicked it away, an economic activity is the only process that can create value in a commodity, and then exploits the time of the worker as much as is possible during this production process. The capitalist amasses capital by paying the worker less wealth than they would have made for the Capitalist. Marx says that commodities (pieces of merchandise or barang-barang) have a twofold nature; on the one hand, they are “use-value”. By “use-value”, my pak was intoning rather deeply as he saw a cluster of ants darting along the rubber-plank floor, means that these barang-barang are useful, that is, they have the capacity of satisfying a human need. On the other hand, as pak gestured upward to the darkened sky, they have an “exchange-value” because someone could possibly trade a quantity of them for a determined quantity of another commodity.

That value is created by adding work to something. In our case, as pak was emphasizing further, a product’s value is determined by the average work needed to create the product for the market. Value can be described as the amount of labor time used to create a commodity.

Just when I was reflecting upon what pak had uttered, he looked intensely to me with those brown eyes, and raised another question – do you know that we never, ever, have a nationalistic economic policy?

Before I could even say a word, my pak was to answer to this question by him, and to me, and maybe addressing aloud to the looming clouds and those scuttling ants:

That even the “mode of production” did not change much after independence, despite the fact that the colonial and independent government implemented various “economic development” policies. Indeed, after the 1957 independence, the British still continued to assist in writing economic policy one of which was known as the Draft Development Plan that would eventually surfaced as the Malaya Plans (1955-60); also implemented was those economic programs in the Second Malaya Plan 1961-65. According to my pa, with some bitterness in the tone he expressed was that there seems to be a greater deference to foreign economic advisers who not only represent the interests of international economic agencies but also enhancing the foreign business interests that inevitably success in penetrating further inroads to our national economy.

He was saying to the effect that even the first three Malaysia Plans that followed were said to be masterminded and crafty scribed by foreigners from the United States of America; at the back of my mind was the images of my MARA college friends now in Ohio State University – what are they doing there to study but, I was beginning to grasp, collaborating with the capitalists. In fact, it seemed that the earliest Malaysia Plan was drafted with the advice of Warren Hansberger from USA; even the the second plan, according to my pa, was completed by Prof. V.M. Bernett, Dr. D. Snodgrass and Prof. H.J. Bruton, all from the USA. He was also saying that though Snodgrass had pointedly admitted that these programs were crafted more to gain “support from the rural Malays, if not indeed for the leadership of UMNO itself” rather than as a wholesome beneficiary to the rakyat-rakyat. The third plan had the advice of Prof. B. Higgins, also from the USA.

Therefore, as my pak stood up, tucked up his sarong, looked at the distant darkened sky, a trait indicating that he was rather tired, and wanted to end this afternoon discourse soon with the eminent thunderstorm forming and the rain that is to come, that the early Malaysia Plans were keeping and entrenching foreign interests which are concurrently unashamedly and boldly using the national economic platform as a springboard to merge with other transnational corporations’ global market economies rather than solving the national economic imbalances and inequality, with the rakyat having to sustain, and suffer, impoverishment that was created, and had persisted, as a neo-colonial economy.

I was to remember that even after the New Economic Policy (NEP) was implemented post-1970s the policies of supposedly in “protecting Malay special rights as the indigenous people of Malaysia” were more intended to limit, or even prevent, bold and modern economic activities in rural society [5].

Indeed, today as I do away with my lunch, just like in 1973 when the farmers in Baling went on hunger strikes owing to under-development in rural regions, our present ruling regime is more than ever following the colonial practice of divide and rule, and by enforcing repressive laws against the rakyat. Indeed, the nation’s bullies are destroying, and had eradicated one and many, our important institutions such as the judiciary and free press. They collectively as kleptocrats had fostered cronyism which has impoverished, and impaired, our economy and national well-being, and undermined, and continuing to, many of our basic rights and freedoms.

I was unsettled, like the changing weather of a monsoon rain, but there are other things more darkening than the imminent thunderstorm that I still want to know why we are now in such troubled time – in what ways have (what were those words) financialization of capitalism changes the whole dynamics of political economy of Malaysia.

Beginning to understand that the tendency of capitalism is to reduce wages and benefits is a structural feature of capitalism itself, and that this dynamic of competition between capitalists, not individual greed, that drives wage and benefit reduction.  I am also beginning to understand that Capitalists have little to no choice but to cut production costs so as to stay in business. Under such instances, there are three things that shall follow from this line of thinking.

Firstly, from my own summation, it follows that over time wages for workers will necessarily stagnate or drop.

Secondly, and more importantly, it follows that in capitalist systems, money will gradually come to be concentrated in the hands of a few.

Thirdly, the reduction of profit costs is an intrinsic element to capitalism.  Costs are reduced not only by reducing wages and benefits, but also by reducing the quality of materials and workmanship.  Over time, commodities produced under capitalism will thus cease to have as much quality as they once did.  At this point, capitalists have begun to rely extensively on branding trade-mark recognition and loyalty, rather than the quality needs of their product.

It also dawns upon me that, however, because capitalism, in its pursuit of ever expanding profit, tends towards the concentration of wealth in the hands of a few and a decrease of wages and benefits for workers, it creates a situation in which there shall be no longer consumers to buy commodities.  As a consequence, under capitalism there is this drive to find ever new markets which means finding not new products and/or services, but new approaches, to exploiting ever more by the way of global and systemic capital accumulation.

If I were to remember clearly, when I was in the second year at a sekolah rendah kampong (village primary school) in Kemaman, the 1997-1998 financial crisis – or as my pak used to call it krisis kewangan – started a new direction in the socio-economic transformation of the Malaysian economy when the then Prime Minister Mahathir Mohamad undertook a privatization policy that represented a complete reversal of previous distributive New Economic Policy (NEP) ideological preferences to a neoliberal economy founded on a capital market-based financial system. It led to the emergence to, and the pervasion of, financialization of capitalism in Malaysia, changing the mode of production, and on hindsight, changed the outlook and mentality of our village communities, and even the morality of a lot of my friends’ kawan-kawan daily lives in the towns of Kuala Terengganu, Kuantan and Kuala Lumpur.

By financialization capitalism my pak was saying to mean an emerging form of capitalism that increasingly uses finance, and apply financial tools and means, in the operations of capitalism or simply as the financialization of the accumulation of capital process [6]. He further defined that the process of accumulation in financial capital would often involve the investment of money or any financial asset to increase the initial monetary value of said asset as a financial return whether in the form of profit, rent, interest, royalties or capital gains.

I remembered looking in awe as he uttered those determined phrases, and my thought wandered as to what are the many aspects, and derivatives, of exploitative returns to these extractive investments through financialization capitalism.

This shift in economic activity from production, and in the service sector, to financial activities that generate such high private rewards disproportionate to their social productivity is one central theme whereby the surplus value, that is, the added value created by workers in excess of their own labor-cost is being appropriated by the new financial capitalists as profits [7]. This surplus value as the source of society’s accumulation of fund or investment of fund, part of is re-invested, but part of it appropriated as personal income, and used for consumption purposes by the owners of capital assets. I was saying to myself that under such an instance then the workers cannot capture this benefit directly because they have no claim to the means of financial creation or its final production.

It is often said, nowadays even amongst my buddy kawan-kawan in the big towns would agree on this certainty, that the introduction of neoliberalism into our country is no more than the hegemonic economic ideology of the Thatcher and Reagan regimes reflecting the new imperatives of capital – advancing an IT-spurred financial globalization whilst igniting in our midst the main engine of a financialization of capitalism model that assists socio-economically neoliberal geopolitical neo-imperialism [8].

To my knowledge, by 2003, the corporate bond market has reached an unprecedented size of RM$190 billion, while similarly since 1999 the total private sector bonds outstanding have surpassed that of public sector bonds. By end of 2015, Malaysia’s capital markets is RM$2.82 trillion; the equity market is worth RM$1.7 trillion, while the bond market stands at RM$1.13 trillion [9]. This expansion of bond finance favors bigger corporations linked to the government – much to the disadvantage of the Chinese and Indian capitals’ small scale enterprises that do not have the sizeable funding resources. This is when the country’s economic initiative was to usher a new politico-economic alliance with the public sector in collaboration with Chinese capitals towards the privatization of state assets or another blunt word to say is in asset-stripping.

The ensuing financialization of Malaysian capitalism led to the emergence of a new politics of debts, and it also coincides with rising levels of household indebtedness. It reconfigures society where share ownership and shareholder value take more importance than the actual grinding of physical production. There is a growing influence from capital market-based financial system, the further entrenchment of the political renter class power as well as the polarization of wealth and income, and the explosion of financial innovation and trading that led an economy more towards “speculation” than the engenderment of production to be equally shared by rakyat  as my pak would often attributed affectionately these consequential facts to his University of London School of Oriental and African Studies professor Costas Lapavitsas article on The financialization of capitalism.

What subsequently happened, if I have not forgotten vividly reading of the past politico-economic events, was the forging of more Sino-Indo-Malay corporations, that is, a co-opetition strategy whereby Chinese and Indian capitals would compete as well as co-operate with Malay interests, and also whereby these Chinese capitals and Indian compradors would form joint ventures with Malay capitals to tap upon the vast capital resources of State agencies such as Pernas, PNB and Peremba Berhad, UMNO-controlled corporations like the Fleet Group and Media Prima, Institutional funds such as Lembaga Urusan Tabung Haji (LUTH or Islamic Pilgrims Management and Funds Board) and Lembaga Tabung Angkatan Tentera (Armed Forces Funds Board), and even private sector capital held by new class of Malay millionaires such as Tun Daim Zainuddin, Tun Sri Azman Hashim, Tan Sri Wan Hamzah and Tun Sri Rashid Hussein as well as royal entrepreneurs like Tunku Imran ibni Tuanku Ja’afar of Negeri Sembilan [10] .

Post 1980, the introduction of new suites of investment-capital vehicles led, of course, by a political business class horning on the introduction of high-end securisation as well as a thrusting introduction to the general public of a mass investment in Malaysia’s state-led unit trust industry.

Those details were still threshing in my head a few days later after that thunderstorm-struck afternoon.

The ensuing story in this financialization of capitalism narrative was the financial disintermediation process leading to a new politics of debt with banks lending for private consumption, property and the purchase of securities. There was a vast amount of local surplus that was pitted into the FIRE (finance, investment and real estate) furnace just as was evidently present in developed countries [11]. Indeed, firms were choosing to invest in real estate and other forms of financial assets rather than in productive capital, and would even migrate to other places wherever the unit of labor cost is lower. The manufacturing sector, which used to be the primary pillar of Malaysia’s economy, would merely contribute only a quarter to the GDP by 2014; other major economic activities are financialization capitalism-based.

More glaringly are the perceivable creeping of a social mass phenomenon with wage reduction for workers giving raise to household indebtedness like paying interest on mortgages. There was also a higher cost-of-living due to consumption borrowings mostly by heighten medical fees and charges on pension funds and insurance. Further, it is becoming clear that many depositors are being redefined as fee-paying consumers of financial products such as car and motorcycle hire-purchase loans and credit cards payment to consumer products.

Thus, in 2005, the ratio of total household debt to GDP amounted to 72.6%, of which nearly 85% was provided by banks according to the Bank Negara Annual Report 2006 and that between 1999 and 2006, total Malaysian household debt grew at an annualized rate of 15%. From a base in 2000 over RM$160 billion in household debt, this amount had risen over a short period to nearly RM$400 billion by 2006. According to the Institute of Chartered Accountants in England and Wales (ICAEW) Economic Insight, the debt/disposable income ratio in Malaysia is close to 150% presently (The Edge, 15th March 2016).

What is happening compared to the NEP period, between 1970-1980, the bank-based development state model relying on the consumption needs of households had been subordinated to the financing needs of the industrial sector as well as the ethnic-based distributive policy, whereas post-economic downturn 1980s had seen private consumption (and thus household borrowing) is increasingly seen as the important driver of domestic growth. This also means that bank lending is much about sustaining consumption than that of production; much financial activities were in a regime of accumulation through investable surplus.

The final point is with the “individualization of risk” had meant a high incidence of household debts that by April 2006 the Credit Counseling and Debt Management Agency (AKPK) has to be established as part of the government approach to confront the ever increasing consumer debt that was primary affecting many in the Malay community. Unfortunately, AKPK had often portrayed these debts to my brothers and sisters besides my kawan-kawan as “victims of circumstances” or as “hapless” or even being “bodoh” or foolish whereas the main underlying and real reason is that the rising household debt owes too much on the kleptocratic capitalistic instinct to empower capitalism, and more definitively the financialization of capitalism in extracting wealth from the mass.

I was also beginning to read and see that public interest rates were driven to very low rate to enable such banks to make secure guaranteed profits by lending to their customers and households at much higher rates. In short, the financialization of Malaysian capitalism had only encouraged public funds being injected into private and kleptocratic banks to boost capital and enlarge capital formation, and further where this public liquidity was to enable these banks to sustain their continuous siphoning of rakyat wealth through financial operations.

With the encroachment of capitals’ neoliberalism, I also beginning to see that the State is becoming the gatekeeper of Malaysian financialization capitalism.

It is an unadulterated fact that the State investment vehicles were used as conduits in the promotion of financialization capitalism as can be seen in such entities like Pernas (Perbadanan Nasional Berhad – the National Corporation set up in 1969) and PNB (Permodalan Nasional Berhad – National Equity Corporation established in 1978), the former to buy Chinese and foreign (mainly British) owned companies, the latter is to transfer shares held by government to individual bumiputera shareholders. PNB become eventually the second biggest institutional investor after state-run Employees Provident Fund (EPF) and has accumulated deposits, by April 2008, of RM120 billion (25% of GNP). The other key point is that the rise of a ‘mass investment culture’ has strengthened the ‘dominance of finance capital’ [12], and is a contributing trend in the financialization of capitalism in Malaysia today. Take as an example, PNB has also nowadays invests in bonds and structured instruments like futures, options, derivatives and other hedge funds, thus assisting in the reproduction of a sustainable capital market-based financial system – a collateral vulnerabilities of increasing individual exposure to the capital market whereby inevitably “households had become financialized, too”. [13]

Financialization capitalism in Malaysia has witnessed a new business phenomenon where the industrial and commercial enterprises rather than simply becoming more reliant on bank finance they have taken their own retained profits and begun to behave like financial companies. Rather than plowing back profits into investment into their core businesses, they have instead funding different categories of business. Sime Darby Berhad started as plantation estates, but went into real estates and the construction of medical centers and their management.

I am also engrossed to note that large state entities being engendered with the introduction, formation and solidification of financialization capitalism. The consolidation through another policy in the New Economic Model (NEM) 2010, and subsequently re-enforced with the Bumiputera Economic Empowerment Plan (BEEP) 2013 not only has a congregation of players empowered by tremendous riches which they employ, and deploy rather ruthlessly, in collusion with political ethnocrats who are powerful not because of wealth, but because of their office and status positioning thereby widening financialization capitalism, and in the process intensifying the inherent contradictions of poverty and inequality within society.

It hurts me most profoundly when in 2008, Deloitte’s Public Leadership Institute in collaboration with The Ash Institute for Democratic Governance and Innovation at Harvard Kennedy School hosted a series of dialogues entitled Government reform’s next wave: Redesigning government to meet the challenges of the 21st century with senior US government and business executives to discuss and re-define the major national goal in the New Economic Model (NEM) – another intrusive neo-imperialistic muddling on our national economic directions, similar to what was once practised in Brazil [14].

The creation of 1Malaysia Development Bhd (1MDB) epitomizes the serigala (“wolf”) of financialization capitalism at its widest spread in monetary expropriation and deepest penetration between global financial intra-flows. This entity was given birth as a sovereign wealth fund from the Terengganu Investment Authority in 2009, where typically sovereign wealth funds are usually set up from a country’s budgetary surplus, giving a government the chance to invest rather than let cash sit in a central bank. This entity, however, was not based on any surpluses, but financially constructed by kleptocratic capitalists on raising debt to acquire assets, through bond issues, in power plants and other fictitious financing joint ventures with international partners in Abu Dhabi and Saudi Arabia. Its debt servicing had already skyrocketed to US$11bn (£7.7bn) by March 2014 and fears had been expressed, and later grew and became a reality, over how interest would be paid on these loans. The three changes on the auditors since its inception – the other two were KPMG and Ernest & Young – was considered widely as suspicious, yet Deloitte signed off 1MDB’s 2013 and 2014 accounts without qualification [15].

If the Adviser to 1MDB is designated, as reported on March 12th. 2016 by Wall Street Journal, to be the new Governor of Bank Negara Malaysia (Malaysia Central Bank) – then the financialization of capitalism in Malaysia is complete with more than a capital-financed fiction.

It is becoming clear to me that human progression has been based on genetic evolution and social evolution, that human society has always been based on the economic forces that human beings can control, more so towards a more caring society. For Marxism, this means that the “mode of production” dictates the form each society will take. This idea brings a new dawn to believe that alternative processes, and capacity, to produce serving fellow mankind, means human beings cannot move beyond the conflicts of Class society.

In a dialectical materialism, we understand a history of conflict between classes, and where different classes with different interests shall argue or would fight each other out. Social change has to the resultant outcome.

An extensive academic exploration – by the STORM collective – on financialization capitalism can be found in monsoonsstorms.wordpress.com under the title Financialization Capitalism – Penetration of neo-Imperialism in Malaysia

List of References

[1] Mohamed Amin; Malcolm Caldwell; Bertrand Russell Peace Foundation (1977). Malaya: The Making of a Neo-colony

see also: Boon, B., “Malaysia: 50 years of independence (Part I & Part II) – Colonialism at the root of the national question”, 31st. August 2007.

[2]  Charles Hirschman, “Ownership and Control of the Malaysian Economy Revisited: A Review of Research in the 25 Years Since the Publication of J.J. Puthucheary’s Classic”.

[3] Costas Lapavitsas, “The financialization of capitalism”, SOAS and The Era of Financialization, Part 3, Triple Crisis.

[4]  Lim Mah Hui, Globalization, Export-led growth and inequality: The East Asian Story, South Centre, November 2014.

[5] Kenzo Horii, “Disintegration of the Colonial Economic Legacies and Social Restructuring in Malaysia”, The Developing Economies, Vol:29, Issue 4, pp. 281-313, December 1991.

[6] John Bellamy Foster, The Financialization of Accumulation , Monthly Review vol:62, issue 05 October 2010; see also Paul Sweezy, “More (or Less) on Globalization,” Monthly Review 49, no: 4 (September 1997).

[7] Marx, The Capital, chapter 8.

[8] Lena Rethel, Malaysian Capitalism, Rents, and Financialisation, University of Southampton, 2010. To read also: John Smith’s Imperialism in the Twenty-First Century: Globalization, Super-Exploitation, and Capitalism’s Final Crisis where the author pointed out that capitalist countries need not solely rely on militarisation adventures but can increasingly have the ability to extract profits from workers in the Global South through market mechanisms and, by aggressively favoring places with lower wages through the phenomenon known as labor arbitrage.

[9] Bank Negara, 2007; Securities Commission of Malaysia, Annual Report 2015; see also Maxine Yong, “Malaysia’s capital markets expand 2.1%” in The Edge, March 14, 2016.

[10] Heng Pek Koon, The New Economic Policy and the Chinese Community in Peninsular Malaysia, The Developing Economics, 1997; see also Samir Amin’s THE IMPLOSION OF CONTEMPORARY CAPITALISM, Monthly Review Press, where if applied locally, small and medium-sized enterprises (SMEs ) can be totally dependent on these state monopolies like PNB and Khazanah.

[11] Foster, The Financialisation of Capitalism, Monthly Review, Vol:58, issue 11, April 2007.

[12] Harmes 2001, Mass investment culture?, New Left Review, 9, pp 103-24.

[13] Costa Lapavitsas, Financialised Capitalism: Crisis and Financial Expropriation, Historical Materialism 17 (2009), School of Oriental and African Studies, London.

[14]  Ignacio Ramonet, “Disarming the Market”, Le Monde Diplomatique, December 1997.

[15] International Business Times, “Malaysian 1MDB scandal: What you need to know about corruption probe rocking global finance”, February 17, 2016.

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Continuance of neo-Colonialism

I] Introduction

At the time of independence, Malaya was a poor country. This is evidently clear from an economic indicator that shown per capita household income was only US$180 per year in 1957/58 and per capita gross national product (GNP) was about US$270 in 1960. By 1970, Malays formed the majority of poor, accounting for 74% of all poor households in Peninsular Malaysia (The Second Outline Perspective Plan, 1991-2000, p.32). Sixty years after independence, Malaysia still lacks consistently sustained nationalistic economic policies to serve the rakyat but rather those in power representing the interests of transnational corporations and domestic corporate capitalists, (Mohamed Amin; Malcolm Caldwell; Bertrand Russell Peace Foundation (1977), Malaya: The Making of a Neo-colony).

II] Continuance of neo-colonial exploitation

We shall say that neo-colonialism is the practice of using capital, trans-border trading activities and cultural influence to dominate a country. Neo-colonialism is being revisited because the survival and revival of British business in a post-independence Malaya was critical in the pursuit of a sphere-of-influence empire in Asia, both economically and geo-politically (see C.S. Loh, British Withdrawal East of Suez, unpublished manuscript, 1971; and P.L. Pham, Ending ‘East of Suez’ – The British Decision to Withdraw from Malaysia and Singapore, 1964–1968, Oxford University Press 2010).

In 1926, exports from British Malaya were worth more than the exports from all the other British dependencies combined and in the period from 1946/47 to 1951, Malayan rubber exports earned more US dollars for the United Kingdom than all the industries and trades of the metropolitan country. Even as late as 1967, as much as one-fifth of the value of tin output and almost one-quarter of the value of rubber estate output were directed to foreign accounts. Indeed, with the advent of commercial exploitation in the rubber and coffee plantations, the existing Chinese sugar cane estates especially in Province Wellesley and Malacca were slowly being demised.

In 1964, seven years after gaining independence from her colonial master, there were about forty British companies having local registrations in Malaysia, and the rubber and tin industries had accounted for 60% of the stock exchange capitalization. Even the British Guthrie concern was that ultimate control should reside London with 49% of the Malaysian ownership to be shared only locally. This agency house had re-invested less than M$100 million (about 12 million sterling pounds) since 1946. Such economic situations would only drive then finance minister Tan Siew Sin to declare that complete control of local agency houses by local capitalists “owning a substantial stake, if not the overwhelming stake in our industrial complex” a definitive posturing.

Therefore, it is not surprising that certain British business interests did appreciated the importance of alliance of the emerging new Malayan capitalists under a post-colonial regime. Before merdeka (independence), Anglo-Oriental/LTC mining group in Malaya Sir Douglas Waring had already developed a close relation with local capitalist H.S. Lee; Waring had “cultivated Colonel H.S. Lee at every opportunity and they were in each other’s pockets”.

Another type of neo-colonial affiliation can be seen in the case of Kelantan’s aristocrat Nik Kamil who, after leaving diplomatic service in 1960s, joined the boards of British mining associates especially those concerning Dato W.M. MacCleod, besides being onboard the directorship of  Rothmans, STC, Metal Box, Boustead and Shell Refining. Such politicians-cum-bureaucrats had became “functional directors” providing “mediation between private enterprises and the state” thereby enabling firms to secure contracts, tenders, concessions and licenses, (Lim Mah Hui, Ownership and Control of the One Hundred Largest Corporations in Malaysia, Oxford University Press, Kuala Lumpur, 1981).

In Sarawak, the Ling Beng Siew families patronized and partnered with BCL in the Rejang River system, operating a number of sawmills which relied on loans and buying contracts from the British business group.

Sabah – the former British protectorate in North Borneo was once under the sovereign of the North Borneo Chartered Company from 1882 to 1941; from 1946 to 1963, this state was turned into a Crown Colony of Great Britain that was regarded as the British North Borneo Crown, too.

In 1865, Charles Lee Moses (US Consul to Brunei) obtained a 10-year lease on some parts of North Borneo from the Sultan of Brunei, but later sold his rights to the Hong Kong-based American Trading Company of Borneo owned by foreign capitalists and Chinese mercantilists like one Tat Cheong.

However, the rakyat-rakyat was against the colonial taxes and the loss of land to European plantation landlords, and a resistance war (1894-1900) was mounted by Mat Salleh. There was even the Rundum Uprising by the Murut community in 1915.

III] Ownership and Control of the Malaysian Economy

By revisiting Puthucheary’s analysis (Ownership and Control in the Malayan Economy), the three major segments he identified are still presently in existence, consisting of the mass of subsistence workers, whether working in the Federal Land Development Authority schemes (FELDA) or as multinationals’ industrial workers in the various free-trade zones, the trading agencies with their pervasive middlemen and the networks of rent-seeking cohorts, and the owners/managers of the plantation/mining/commerce sectors the latter whether in the financial or hospitality or medical service and manufacturing industries. The ownership and control have not changed substantially, though with local capitalists and the intermediaries are not necessarily those of Chinese middlemen or Indian compradors nowadays, but kleptocrats that serve as the most obvious link in an exploitative economic system. Owing to the imposed ethnocentric nature of economic activities, any present economic discourse has often tended to deflect rakyat-rakyat attention and hostility away from those more powerful and central actors that are looting the country’s tills, (see STORM, Illicit Capital, Illegal Trade and Inequality – Kleptocracy in Malaysia, monsoonsstorms.wordpress.com).

Though there was a shift in the late 1970s and early 1980s with the Malaysian government taking control (via “public purchase” of shares) of major segments in the economy, the state of the economy has remained neo-colonial in structure. Even as late as 1970, foreign – still predominantly British – interest dominated the Malaysian economy, owning as high as 63% of corporate equity (Third Malaysia Plan, 1976-1980, p.184).

In 1970, according to the Malaysian government, about three-quarters of the corporate sector of agriculture and mining, almost 60 per cent of corporate manufacturing and commerce, and about half of banking and insurance were still owned by foreigners. These facts though widely known, and policies were initiated to formulate and modify the degree of foreign ownership, there was no definitive direction to completely eliminate the controlling entities, but to encourage and collude with foreign enterprises that often regarded the country as a beachhead for the global market (Lim Mah Hui, Globalization, Export-led growth and inequality: The East Asian Story, South Centre, November 2014).

Therefore, although subsequent affirmative policies of the government were targeted to reduce poverty amongst the rural poor, they are most unfortunately being exploited by the rich instead. Many bumiputera directors in large Chinese firms are former bureaucrats or members of the nine royal households; a few are even former cabinet ministers or relatives of former or serving ministers, (see Gomez’s Chinese Business in Malaysia: Accumulation, Accommodation and Ascendance), and many of them collaborated with former colonial trading house agencies to maintain the neo-colonial favors and close capitalist relationship.

Even the economic under-development planning by our colonial masters did not change much after independence, despite the fact that the colonial and independent government had implemented various economic programs. Indeed, after the 1957 independence, the British still continued to assist in scripting economic policy known as the Draft Development Plan that would eventually surfaced as the Malaya Plans (1955-60); also implemented was the economic programs in the Second Malaya Plan 1961-65. There seems to be a greater deference to foreign economic advisers who not only represent the interests of international economic agencies but also enhancing the foreign business interests that inevitably success in penetrating wholesomely the national economy.

Even the first three Malaysia Plans that followed were said to be crafty masterminded by foreigners from the United States of America. In fact, the earliest Malaysia Plan was drafted with the advice of Warren Hansbuger from USA; the second plan was completed by Prof. V.M. Bernett, Dr. D. Snodgrass and Prof. H.J. Bruton, all from the USA; though Snodgrass had pointedly admitted that these programmes were to gain “support from the rural Malays, if not indeed for the leadership of UMNO itself” rather than as a wholesome beneficiary to the rakyat-rakyat. The third plan had the advice of Prof. B. Higgins, also from the USA.

The 1997 currency crisis, and the eventual financial meltdown in 1998, the Malaysian government initial response was to rely on the International Monetary Fund consultancy response requiring expenditure reduction policies, that is, tighter fiscal and monetary control, which most unfortunately exacerbated the recessionary situation within the country concurrent with sharp portfolio capital outflow (see Athukorala 2000, “Capital Accounts Regime, Crisis, and Adjustments in Malaysia”, Asian Development Review 18, No:1 ,pp:17-48 and Bird & Rajan 2000, besides Kaplan and Rodrik 2001, “Did the Malaysian Capital Controls Work?”, NBER Working Paper No:8142).

Consequently, asset price collapsed and many commercial banks were adversely affected to not only cronyism capitals because of the unsound external advice on industrial programs (relying on foreign direct investments which were not forthcoming then) and the NEP welfare introduction (a domestic debt-driven investment initiative gnawing at economic fundamentals) but impact immensely upon common rakyat as a consequence (Jomo 2001, Malaysian Eclipse: Economy Crisis and Recovery, Zed Books).

As late as 2010, the government think-tank – Performance Management on Delivery Units (Pemandu) – even had allocated RM66 on “external consultants”, including American consultancy firm McKinsey and Co, which took the lion’s share of an estimated RM36 million; other foreign consultants included the Hay Group (which was paid RM11 million), Ethos & Co (RM1.5 million) and Alpha Platform (M) Sdn Bhd (RM1.5 million); an undisclosed “external consultant” named “Tarmidzi” had also received RM3 million for work done in setting up Pemandu as part of a neo-colonialist collaboration.

Pemandu was set up on Sept 16, 2009 to oversee the implementation of the Economic Transformation Programme (ETP) and the Government Transformation Programme (GTP), the two primary pillars of the government’s New Economic Model (NEM). A critique of Pemandu’s ETP can be found in Research for Social Advancement (REFSA), A Critique of the ETP, Part I and Part II, January 2012.

Other documents show that the ETP unit of the think-tank has gobbled up RM$ 7.2 billion million of government funds between 2012 and 2014; this amount could easily allocated for government-led Bantuan Rakyat 1Malaysia (BR1M) handouts to benefit a whopping and sizeable beneficially 13.1 million people.

Therefore it is proper to say that the early Malaysia Plans were wholly safe-keeping and entrenching foreign interests which are concurrently unashamedly and bluntly using the national economic platform as a springboard to merge with other trans-national corporations global market economy rather than solving the national economic imbalances and inequality, with the rakyat having to sustain, and suffer, impoverishment that was created, and had persisted, as a neo-colonial economy.

We shall point out that legacy growth models offered to the national economy had always justified upon a central argument whereby political instability can have a negative impact upon capital accumulation by disrupting, and thus hindering education and physical capital investment, and following Adam Smith’s expression that “firms place a premium on risks…. always at hand to carry (capital stock) to some place of safety, in case of being threatened with any of those disasters to which they consider themselves as at all times exposed”.

It had been stated that post-Malayan independence, an emphasis was mainly on the need to introduce capital and technology, thereby ignoring the real problem of poverty in the rural sector. There was also a tendency to divide modern from the traditional sectors when in reality both sectors had strong structural links with one another. It was obvious that under British rule, the traditional sector was the supplier of raw materials to the British industry leading to the transition from subsistence to commercial economy, yet nothing substantial had been executed lately to give the legal land status and ownership to existing poor rural folks.

The Second Malaysia Plan had identified poverty among farmers to uneconomic use of land and continued application of traditional techniques/methods to cultivate the crops, whereas the real reason for the continuing poverty was singularly more due to the exploitation by middle-men; and land ownership by capitalists who exploited farmers working for them (see Mediterranean Journal of Social Sciences, MCSER Publishing, Rome-Italy Vol 6 No 2 S1 March 2015).

Always remembering that in 1913, the British had introduced the Malay Reservation Enactment as a “protection for Malays”, prohibiting non-Malays from holding mortgages on Malay Reservation land. Consequently, the value of Malay Reservation Land is depressed as it was not acceptable as collateral by financial entities. This law also did not protect the poor Malay land from being acquired by richer Malay landlords.

The British colonial government knew that the lands approved as Malay Reserved Land were mostly in jungle fringes where there were no minerals; all the rich-mineral lands were acquired by British businesses. To avoid competition against British plantation interests, the colonial government had introduced the Rice Land Act which prohibited Malay peasants from cultivating any cash crop like rubber and coffee other than rice. Though the rural impoverishment could be traced to colonial rule the continued lopsided development of the country is but a reflection of a larger tendency towards concentration of a central power with an authoritarian and dominant group of power wielders over the rest of society that are gouging the productions of laboring workers and farmers.

IV] Conclusion

In short, the various Malayan Plans and the subsequent Malaysia Plans have failed to include the people of all races in need of assistance, (Gomez, and Saravanamuttu The New Economic Policy in Malaysia Affirmative Action, Ethnic Inequalities and Social Justice, ISEAS 2013). In fact, spatial disparities had worsened after the New Economic Policy (NEP) was implemented because the preferences designed to encourage Bumiputera entrepreneurship were sadly disproportionately utilized by members of the targeted group in urban and the more prosperous rural areas. The present policies of protecting Malay special rights are often regarded as a mere pretence intended to prevent bold and modern economic activities in rural society, by a ruling regime following the colonial practice of divide and rule.

It is not surprising that in 1973, the farmers in Baling were in hunger owing to under-development in rural regions, and that intra-Malay inequality remains high despite the NEP (Hwok-Aun Lee and Muhammad Abdul Khalid, Is inequality in Malaysia really going down?, Faculty of Economics Administration Working paper 2014/09, University of Malaya; Jomo, The New Economic Policy and Interethnic Relations in Malaya, UNRISD 2004).

That the Trans Pacific Partnership Agreement (TPPA) recently signed shall once again leave Malaysia’s economic future not on her own hands, but those of multinational investors and monopolist-capitals.  Again, through the past pervasion of neo-colonialism to present imperialism penetration, the TPPA is set to degrade the national economy and consequently the economic health of the rakyat and the political direction of this nation (Stiglitz and Hersh, “Don’t let TPP jeopardize Malaysia’s future”, themalaysianinsider.com, 2nd.October 2015).

Though neo-liberalism economic policies continue, these are but a linkage from a growth model that is to be hinged onto financialization capitalism by late 1980s, (see STORM, Financialization Capitalism and Penetration of neo-Imperialism in Malaysia, monsoonsstorms.wordpress.com), following this article.

 

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Financialization Capitalism: Penetration of neo-Imperialism in Malaysia

1] Introduction

Aftermath of the 1997-1998 financial crisis began with a new dimension in the socio-economic transformation of the Malaysian economy when in 1983 Prime Minister Mahathir Mohamad brought forth a privatization policy that represented a drastic reversal of previous distributive New Economic Policy (NEP) ideological, and the 1975 Industrial Coordination Act’s industrialization, preferences to a neo-liberalism economy founded on a capital market-based financial system (Jomo K.S. & Tan Wooi Syn 2005, Privatization and re-nationalization in Malaysia – a Survey, an unpublished working paper). It leads to the emergence to, and the pervasion of, financialization capitalism in Malaysia.

By financialization capitalism we shall mean an emerging form of capitalism that increasingly uses finance, and apply financial tools and means, in the operations of capitalism (John Bellamy Foster, The Financialization of Accumulation , Monthly Review vol:62, issue 05 October 2010), or simply as the financialization of the accumulation of capital process (Paul Sweezy, “More (or Less) on Globalization,” Monthly Review 49, no: 4 (September 1997).  The defining process of accumulation in financial capital would involve the investment of money or any financial asset to increase the initial monetary value of said asset as a financial return whether in the form of profit, rent, interest, royalties or capital gains.

This shift in economic activity from production, and in the service sector, to financial activities that generate high private rewards disproportionate to their social productivity (James Tobin, Nobel Prize in Economics 1981) is one central aspect whereby the surplus value, that is the added value created by workers in excess of their own labor-cost is being appropriated by the new financial capitalists as profits, (Marx, The Capital, chapter 8). This surplus value as the source of society’s accumulation of fund or investment of fund, part of is re-invested, but part of it appropriated as personal income, and used for consumption purposes by the owners of capital assets. The workers cannot capture this benefit directly because they have no claim to the means of financial creation or its final production.

2] The Beginning of Financialisation Capitalism

That foreign consultancy persisted in promoting a neoliberals economy is no more clearly evidenced than the creation of monopoly-finance capitals in the neoliberalism economy of Malaysia. Neoliberalism is no more than the hegemonic economic ideology of the Thatcher and Reagan regimes reflecting the new imperatives of capital – advancing IT-geared financial globalization planted in Malaysia as the engine of financialization capitalism model (Lena Rethel, Malaysian Capitalism, Rents, and Financialisation, University of Southampton, 2010).

In the early 1990s, Malaysia corporations sought funds from the domestic equity market while non-financial enterprises relied on bank debt and the issuance of bonds abroad. Since 2003, however, the corporate bond market has reached an unprecedented size of RM$190 billion, while similarly since 1999 the total private sector bonds outstanding have surpassed that of public sector bonds (Bank Negara, 2007). This expansion of bond finance favors bigger corporation linked to the government – much to the disadvantage of the Chinese and Indian capitals’ SMEs that do not have the sizeable funding resources.

The ensuing financialization of Malaysian capitalism led to the emergence of a new politics of debts, and it also coincides with rising levels of household indebtedness. It reconfigures society where share ownership and shareholder value take preeminence, a growing influence from capital market-based financial system, the further entrenchment of the political renter class power as well as the polarization of wealth and income, and the explosion of financial innovation and trading that led an economy more towards “speculation” than the engenderment of production to be equally shared by rakyat (Costa Lapavitsas, “The financialization of capitalism”, SOAS).

All the above processes occurred when the existing relationship between the various forms of capital rent-seekers collude. Under the NEP with state capitalism this process only accentuated with increased financialization, reinforcing the existing strand of an ethnically divided capitalism (Searle 1999, Riddle of Malaysian Capitalism, Asian Studies Association of Australia). The country’s economic initiative was to be in alliance with the private sector, especially while in collaboration with Chinese capitals during the early 1980s, was also evidently prominent in the collusion of the privatization of state assets at that period, (Heng Pek Koon, The New Economic Policy and the Chinese Community in Peninsular Malaysia, The Developing Economics, 1997).

Whereas the majority of businesses built during the prewar period were found in the tin and rubber industries that comprised illustrious family firms built by Low Yat, Loke Yew, Chong Yoke Choy, H.S, Lee, Tan Chay Yan and Lau Pak Khuan who collude with imperial British plantation interests to build their empires, the “new money-capital” entities like YTL Corp’s Yeoh Tiong Lay, Berjaya’s Vincent Tan, Genting’s Lim Goh Tong, Sunway’s Jeffrey Cheah, Lion’s William Cheng and the Ananda Krishnan groups and business stables attempted the forging of more Sino-Indo-Malay corporations, that is, a co-opetition strategy whereby Chinese and Indian capitals can compete as well as co-operate with Malay interests, (see Neo Yee Pan “The Role of Chinese Business in the Context of Our National Objective” paper delivered at the MCA Economic Congress, March 3rd. 1974; Jesudason 1989, Ethnicity and the Economy: the State, Chinese Business, and Multinationals in Malaysia, Oxford University Press, Singapore; Heng, op.cit.).

Those Chinese capitals and Indian compradors by forming joint ventures with Malay capitals would tap upon the vast capital resources of State agencies such as Pernas, PNB and Peremba Bhd, besides

  1. UMNO-controlled corporations like the Fleet Group and Media Prima
  2. Institutional funds such as Lembaga Urusan Tabung Haji (LUTH or Islamic Pilgrims Management and Funds Board) and Lembaga Tabung Angkatan Tentera (Armed Forces Funds Board)
  3. Private sector capital held by new class of Malay millionaires such as Tun Daim Zainuddin, Tun Sri Azman Hashim, Tan Sri Wan Hamzah and Tun Sri Rashid Hussein as well as royal entrepreneurs like Tunku Imran ibni Tuanku Ja’afar of Negeri Sembilan

3] The Consequence of Financialisation Capitalism

These suites of investment-capital vehicles, of course, led to the persistence of a political business class horning on the introduction of high-end securisation as well as an emergence of a mass investment in Malaysia’s state-led unit trust industry. Deliberating in the thrust of broadening the capital base were corporations targeting the development of capital markets for both debt and equity (Zainal et al 1996, Financial Reform in Malaysia).

The ensuing follow up is the financial disintermediation process leading to a new politics of debt with banks lending for private consumption, property and the purchase of securities (Wong Sook Ching et al 2005, Malaysian ‘Bail-out’? Capital Controls, Restructuring and Recovery, Singapore University Press). There was a vast amount of local surplus that was pitted into FIRE (finance, investment and real estate) just as was evidently present in developed countries (Foster, The Financialisation of Capitalism, Monthly Review, Vol:58, issue 11, April 2007).

Indeed, firms were choosing to invest in real estate and other forms of financial assets rather than in productive capital, and would even migrate to other places wherever the unit of labor cost is lower (Lim Mah Hui, Globalization, Export-led growth and inequality: The East Asian Story, South Centre, November 2014). This is an instance when multinational corporations will seek to lower and suppress the wage worldwide and thereby increase their profits by upholding a system of trans-border competitiveness among workers. The eventual consequence is an increase in the rate of workers’ exploitation, globally (see Foster and McChesney, The Endless Crisis, Monthly Review Press, 2012). The manufacturing sector, which used to be the primary pillar of Malaysia’s economy, would contribute only 24.6% to GDP in 2014; other major economic activities are financialization capitalism-based.

More glaring problems are the perceivable creeping of a social mass phenomenon with wage reduction for workers giving raise to household indebtedness (paying interest on mortgages) and higher cost-of-living due to consumption borrowings (mostly by heighten medical fees and charges on pension funds and insurance; and also where depositors are redefined as fee-paying consumers of financial products such as car and motor-cycle hire-purchase loans and credit cards payment to consumer products besides those remitting housing mortgages).

Thus, in 2005, the ratio of total household debt to GDP amounted to 72.6%, of which nearly 85% was provided by banks (Bank Negara Annual Report 2006), and that between 1999 and 2006, total Malaysian household debt grew at an annualized rate of 15%. From a base in 2000 over RM$160 billion in household debt, this amount had risen over a short period to nearly RM$400 billion by 2006.

What is beginning to happen is that compared to the NEP period, between 1970-1980, the bank-based development state model was that the consumption needs of households had been subordinated to the financing needs of the industrial sector as well as the ethnic-based distributive policy, whereas post-economic downturn 1980s had seen private consumption (and thus household borrowing) is increasingly seen as the important driver of domestic growth. This also means that bank lending is much about sustaining consumption than that of production.

The fifth point is that the passing of the buck-ringgit so to say is the “individualization of risk” had meant a high incidence of household debts arising from marketed consumption patterns that in April 2006 the Credit Counseling and Debt Management Agency (AKPK) has to be established as part of the government approach – to develop a personalised debt repayment plan in consultation with financial service providers – to confront the ever increasing consumer debt that was primary affecting many in the Malay community. Unfortunately, AKPK had often portrayed these debtors as “innocent victims of circumstances” or as “hapless” or being “foolish” whereas the main underlying and real reason is that the rising household debt owes too much kleptocratic capitalistic instinct to empower capitalism, and more recently the financialization of capitalism.

As of March 2016, more than 148,000 borrowers have joined the debt management programme conducted by AKPK (Malaysian Reserve, May 25th. 2016).

Finally, public interest rates were driven to very low rate to enable such banks to make secure guaranteed profits by lending to their customers and households at higher rates. In short, the financialization of Malaysian capitalism had only encouraged public funds being injected into private and kleptocratic banks to boost capital and enlarge capital formation, and further where this public liquidity was to enable these banks to sustain their continuous siphoning operations.

 

4] The Implications of Financialisation Capitalism

With the encroachment of capitals’ neoliberalism, the State remains the gatekeeper of Malaysian financialization capitalism.

It has to be restated that the ethnic economic restructuring under the NEP was in the increment of Malay corporate ownership to 30%. Along with this aspiration, companies are mandated to make special share allocations to bumiputra investors (Jesudason 1989, Ethnicity and the Economy: the State, Chinese Business, and Multinationals in Malaysia, Oxford University Press, Singapore). However, many has began to agree that direct selling of shares to bumiputera did not inevitably fulfill the stated expectations (Dwight Heald Perkins and Wing Thye Woo, Malaysia in Turmoil: Growth Prospects and Future Competitiveness, Harvard University and University of California at Davis, December 23, 1998 semester paper).

State investment vehicles used as conduits in the promotion of financialization capitalism can be seen in such entities like Pernas (Perbadanan Nasional Berhad – the National Corporation set up in 1969) and PNB (Permodalan Nasional Berhad – National Equity Corporation established in 1978), the former to buy Chinese and foreign (mainly British) owned companies, the latter is to transfer shares held by government to individual bumiputera shareholders. PNB become eventually the second biggest institutional investor after state-run Employees Provident Fund (EPF) and has accumulated deposits, by April 2008, of RM120 billion (25% of GNP).

It should also be noted that the bumiputra corporate equity ownership could be as high as 45% and not 18.9% as stated in government statistics (Lim Teck Ghee, Corporate Equity Distribution: Past Trends and Future Policy, Asian Strategy and Leadership Institute, 2006). Indeed, large state entities have engendered the introduction, formation and solidification of financialization capitalism especially since Mahathir’s deviation from the stated NEP objectives in 1983. The consolidation through another policy in the New Economic Model (NEM) 2010, and subsequently re-enforced with the Bumiputera Economic Empowerment Plan (BEEP) 2013 not only has a congregation of players empowered by tremendous riches which they employ, and deploy rather ruthlessly, in collusion with political ethnocrats who are powerful not because of wealth, but because of their office and status positioning thereby widening financialization capitalism, and in the process intensifying the inherent contradictions of poverty and inequality within society.

The second key point is that the rise of a ‘mass investment culture’ has strengthened the ‘dominance of finance capital’ (Harmes 2001, Mass investment culture?, New Left Review, 9, pp 103-24), and is a contributing trend in the financialization of capitalism in Malaysia today. Take as an example, PNB has also nowadays invests in bonds and structured instruments, thus assisting in the reproduction of a sustainable capital market-based financial system – a collateral vulnerabilities of increasing individual exposure to the capital market whereby inevitably “households had become financialized, too” (Costas Lapavitsas, Financialised Capitalism: Crisis and Financial Expropriation, Historical Materialism 17 (2009), School of Oriental and African Studies, London).

In effect, the evolution of unit trust investment, on one side though deviating from NEP redistributive schemes, has on the other hand, turns the capital markets as part of social policymaking, too. By October 2008, the ruling regime borrowed RM$5 billion to shore up the credit-crunch-affected equity market, with the money provided by EPF but disbursed by Khazanah jointly owned by EPF, PNB and Khazanah itself.

Thirdly, this shore up of government interests (not dissimilar to crony capitalism in the early stage of the NEP implementation during the 1970s) that only act as a political behaviour to protect the up-and-coming Malay middle class (Embong, State-led Modernisation and the New Middle Class in Malaysia) and the Barisan Nasional clientele, but also as a conduit on preserving the wellbeing of the capital market so as to be used to bail out Malaysian corporations and favoured individual capitalists.

As the state’s role was being transformed to meet the new imperatives of financialization, the kleptocratic governance had to assume as lender of last resort –bailing out crony capitalists like Malaysian Airline System’s  Tajudin and Halim Saad’s United Engineers Malaysia (UEM) and the Renong Group (the largest bumiputera-owned conglomerate then) when in August 2001, Syarikat Danasaham – the wholly subsidiary of state-owned investment house Khazanah Nasional – made a conditional voluntary offer to purchase the entire shares and warrants of UEM, including Renong’s stake.

Lastly, PNB evolution from changing state investment practices to assume increasingly a role as ‘market players’ where the investment strategy has become more neoliberal following financial considerations on return-oriented basis, there is a competitive stance in maintaining, and retaining, share of the market than that of a distributive expression as articulated within the 1970s’ NEP objectives. It started as a state investment vehicle to strip off government assets for private Bumiputera interest. Using these ill-gotten funds, by 1981 PNB became one of the leading Bumiputera investment institutions acquiring RM$487 million shares in 60-odd companies.

With this expanded capital base, the 1980s economic development revisionism only contributed to the seedling of fund that eventually induced the introduction of financialization capitalism in the country. For example, PNB has together with Khazanah, implicated in the launch of the “transformation programme for government-linked companies”. For instance, Pemandu (Performance Management Delivery Unit) was set up under the Prime Minister Department on Sept 16, 2009 to oversee the implementation of the Economic Transformation Programme (ETP) and the Government Transformation Programme (GTP), the two key pillars of the government’s New Economic Model (NEM) introduced in 2010.

The reforms heralded by Prime Minister Najib in 2009 and implemented by Idris Jala, Minister in the PM’s Department heading the Performance Management and Delivery Unit (Pemandu) have been lackluster, and not as successful in their implementation as often propogated (Research for Social Advancement (REFSA), A Critique of the ETP, Part I and Part II, January 2012). According to other analyses of the 12 national key economic areas that Pemandu targeted upon, they averaged lower gross national income growth than non-key sectors between 2011 and 2014 at 4.99 percent against a national average at 8.77 percent.

These state-funded vehicles, instead of overseeing the New Economic Model progress, have willingly driven public funds being routed into the banking system to boost capital. With the availability of ready liquidity of public fund, the consolidated domestic banks nowadays are able to more than sustain their profitable operations. The third pointer is that public interest rates – by which the central bank in hoarding  dollar reserves, Bank Negara is able to “sterilize the reserves” – are being driven down to enable the banking system to make secured profits by lending to their clienteles at higher rates.

 

5] The Emergence and Penetration of neo-Imperialism

By early 2000, the social model underpinning Malaysian kleptocratic capitalism has shifted concern with socio-economic distribution and the economic empowerment of the Malay political majority towards the transition from state capitalism to an increasingly financialized variety of quasi-market capitalism that are linked to the neo-imperialism of perpetual penetration not only in collaborating Five Power Defence Arrangement (FPDA) military exercises and TNCs’ manufacturing endeavors, but in aggrandizing financialization capitalism as well.

Fifty years after independence, Malaysia still lacks consistently sustained nationalistic economic policies to serve the rakyat but rather those in power representing the interests of transnational corporations and domestic corporate capitalists, (Mohamed Amin & Malcolm Caldwell, Malaya: The Making of a Neo-colony, Bertrand Russell Peace Foundation, 1977).

The first three Malaysia Plans that followed were said to be crafty masterminded by foreigners from the United States of America. In fact, the earliest Malaysia Plan was drafted with the advice of Warren Hansbuger from USA; the second plan was completed by Prof. V.M. Bernett, Dr. D. Snodgrass and Prof. H.J. Bruton, all from the USA; though Snodgrass had pointedly admitted that these programmes were to gain “support from the rural Malays, if not indeed for the leadership of UMNO itself” rather than as a wholesome beneficiary to the rakyat-rakyat. The third plan had the advice of Prof. B. Higgins, also from the USA.

The 1997 currency crisis, and the eventual financial meltdown in 1998, Malaysian government initial response was to rely on the International Monetary Fund consultancy response requiring expenditure reduction policies, that is, tighter fiscal and monetary control, which most unfortunately exacerbated the recessionary situation within the country concurrent with sharp portfolio capital outflow (see Athukorala 2000, “Capital Accounts Regime, Crisis, and Adjustments in Malaysia”, Asian Development Review 18, No:1 ,pp:17-48 and Bird & Rajan 2000, besides Kaplan and Rodrik 2001, “Did the Malaysian Capital Controls Work?”, NBER Working Paper No:8142). Consequently, asset price collapsed and many commercial banks were adversely affected to not only cronyism capitals because of the unsound external advice on industrial programs (relying on foreign direct investments which were not forthcoming then) and the NEP welfare introduction (domestic debt-driven investment gnawing at economic fundamentals) but impact upon common rakyat as well (Jomo 2001, Malaysian Eclipse: Economy Crisis and Recovery, Zed Books).

As late as 2010, the government think-tank Pemandu even had allocated RM66 on “external consultants”, including the American consultancy firm of McKinsey and Co, which took the lion’s share of an estimated RM36 million; other foreign consultants included the Hay Group (which was paid RM11 million), Ethos & Co (RM1.5 million) and Alpha Platform (M) Sdn Bhd (RM1.5 million); an undisclosed “external consultant” named “Tarmidzi” had also received RM3 million for work done in setting up Pemandu.

From drafting colonial planned under-development to steering post-Merdeka Malaysia neoliberalism planning with foreign agencies, neo-imperialistic financial globalization has established a separate supranational state, with no base within our national society, but answerable to the financial markets and the mammoth business undertakings that are its masters (Ignacio Ramonet, “Disarming the Market”, Le Monde Diplomatique, December 1997). Thus, entities like the International Monetary Fund (IMF), the World Bank, the Organization of Economic Cooperation and Development (OECD), the World Trade Organization (WTO) and the recent set-up of China-led Asian Infrastructure Investment Bank (AIIB) are under the control of leading imperial states and their grand economic interests.

A third instance in the growth of financialization of the world economy lies in the deeper imperial penetration into underdeveloped economies with wider financial dependence, (see Magdoff 1978, Imperialism: From the Colonial Age to the Present  and Magdoff, 1969, The Age of Imperialism; also refer to FosterThe New Imperialism of Globalized Monopoly-Finance Capital – An Introduction”, Monthly Review, Vol:67, Issue 03), like in Brazil where the domination of global monopoly-finance capital has attracted portfolio investment, and to pay off its external debts to international capital, including the IMF that accrued high interest rates, de-industrialization, a slow growth in its economy, and the continuance vulnerability to the often rapid movements of global finance (IMF, World Economic Outlook, 2015).

The daily average volume of foreign exchange transactions, even from old data set had indicated the magnitude the seriousness and depth of neo-imperial financialization penetration: US$570 billion (1989) had risen to US$2.7 trillion by 2006, and US$5.7 trillion in 2013 (Bank of International Settlements, various reports). Therefore, the agglomeration of wealth, and its continuous transferring across the globe, had pointed to the increasingly related to finance transactions than the physical material mode of production. It also indicative in some ways through transfer-pricing by trans-national corporations that there is a constant leaking of investment fund from Malaysia, and there is consultancy advisory on how to minimize it (see Juliana Tan Ming Qing, Malaysia: Transfer pricing aspects of restructuring, KPMG 2014; Bob Kee and Mei Seen Chang, Malaysia: Malaysia’s evolving transfer pricing landscape, KPMG 2014).

The financial superstructure’s demand for new cash infusions to keep speculative financial derivatives expanding (see Foster “The Financialization of Capitalism”, op.cit.), has meant that it encourages homeowners to maintain their lifestyles even with stagnant real wages that are causing the Malaysia’s household debts being the highest in Asia – as at August 2015, the country’s household debt-to-GDP ratio stood as high as 88.1% (The Edge 22/02/2016; by March 2016, the total household debt in Malaysia stood at 89% of the Gross Domestic Product or RM$1 trillion, consisting 80% from the banking system, with 20% from non-banking financial institutions, Malaysian Reserve, 26th. May 2016); whereas, collectively, the 9 richest men in Malaysia have a total capital asset of RM$175 billion (Forbes 2016).

Existing data have also signified that the rapid increase in inequality have become built-in necessities of the monopoly-finance capital phase in the neo-imperialism system. The wealth gap among Malay Malaysians has grown larger significantly with the Gini Coefficient among the bumiputeras having the highest inequality (Hwok-Aun Lee and Muhammad Abdul Khalid, Is inequality in Malaysia really going down?, Faculty of Economics Administration Working paper 2014/09, University of Malaya).

6] TPPA neo-Imperialism imperatives

TPPA is a neo-imperial design. TPPA is the lynch pin of a geo-political pivot initiative whereby the USA intends to retain and remain an Asian imperialistic power – now demanding domination and control of the “free trade” of Malaysia. TPPA is a called a Partnership ‘perkongsian’ rather than just a free trade agreement as it requires member countries to share commercial detailed aspects (Malaysia Critique January 2016).

Nothing is more insidious than Malaysia’s signing of the Trans Pacific Partnership Agreement (TPPA). With its implementation the country may lose RM$5 billion in trade (SM Mohamed Idris, “Malaysia may lose RM5bil from trade in the TPPA”, malaysiakini October 2014), and directly affecting all rakyat livelihood.

With the TPPA, it shall imply that if Malaysia’s exports to US are to increase by US$100, only US$42 will be retained within Malaysia, and the rest will trickle out of the country as part of the conduit in pursuing subsequent financialization capitalism process. Therefore, only US$42 will be added to the total production, and only that amount generated as the surplus value belonging to production employment (Rashmi Banga, Trans Pacific Partnership Agreement (TPPA): Implications for Malaysia’s Domestic Value-Added Trade, Centre for WT Studies, Unit of Economic Cooperation and Integration among Developing Countries (EDIDC), UNCTAD, Geneva January 2015).

Even from a first-world trade relationship, ten years after the Australia–United States free trade agreement (AUSFTA) came into force, fresh analysis had shown that the agreement diverted trade away from the lowest cost sources. In fact, Australia and the United States have reduced their trade by US$53 billion with rest of the world and are worse off than they would have been without the agreement, (Shiro Armstrong, “The costs of Australia’s ‘free trade’ agreement with America”, East Asia Forum, Australia National University, 8th. February 2015).

The TPPA chapters cover on government procurement, intellectual property, competition and state-owned enterprises and their investments; the latter component shall indirectly embraces financialization capitalism residence in the country with far-reaching ramification on state-owned entities as well as non-bumi capitals in their operations and management of financial products (Business Circle, 27 May 2014).

TPPA as a component in neo-imperialism, it is also related to the critical social mass issue stated with lowered workers’ wages but higher borrowings owing to costly healthcare that is increasingly being privatized through financialization capitalism investment funding. The cost of healthcare in the country rises about 15% annually or in other words, the cost of medical treatment doubles every 6 years.

The question to ask now is in what manner would TPPA be pushing up medicine prices and allows companies to sue our government for protecting its citizens? A draft of the intellectual property rights chapter had suggested that a proposal has been tabled to compel TPPA countries to compensate patent applicants with patent extensions for “unnecessary delays” in the granting of the patent (Wikileaks 2013, “Secret TPP treaty: Advanced Intellectual Property chapter for all 12 nations with negotiating positions”). This could delay Malaysia’s access to cheaper generic drugs as generic manufacturers could not produce and the drugs before these patents expire.

In a way, the health system in our country mirrors the society’s class structure through control over health institutions and their professions (see Howard Waitzkin, A Marxist View of Medical Care, Ann Intern Med, August 1978), with increasing financialization capitalism (funded by medical insurance coverage) contributing to the growth of medical centers and involving financial penetration by large corporations like the Sime Darby conglomerate and KPJ Healthcare Berhad, part of Johor Corporation (JCorp) or Perbadanan Johor, and the “medical-industrial complex” (Pharmaniaga Berhad – the largest pharmaceutical company in Malaysia with a paid capital of RM$130 million). In a way, the privatization in health care in the country, with state investment-fund and local Chinese “new money-capitals”, only protect the capitalist economic system and the privatized medical sector with a neoliberalism medical ideology that helps to maintain existing class structure and paternalistic patterns in domination that shall be greatly assisted by TPPA once implemented.

Financialization capitalism in Malaysia has witnessed a business cycle phenomenon where the industrial and commercial enterprises rather than simply becoming more reliant on bank finance they have taken their own retained profits and begun to behave like financial companies (Costas Lapavitsas, The Era of Financialization, Part 3, TripleCrisis). Rather than plowing back profits into investment onto their core businesses, they have instead funding different categories of business. Sime Darby Berhad started as plantation estates, but went into real estates and the construction of medical centers and their management.

Financialization capitalism has facilitated big businesses in the country to become more independent of banks. This is because the less one borrows from the bank, you become more independent. This new business situation encourages banking system to create innovative finance products to entice consumers. The borrowing of funds towards privatization is one area. However, privatization since late 1980s had little evidence in demonstrating that it has enhanced economic growth, but on the other hand, the provision of financialization capitalism has captured new productive capacities where financial resources were diverted to buy over assets from the government at discounted prices, that is, at the expense of the state and the public.

In conclusion, with a neoliberal “growth” policy regime, stressing unshackled profit-making as the driving force in capitalist expansion – and exploitation of Malaysian workers – redirecting an economy towards consumption but with underlying household debts. The continuance of a neo-liberalism economic management shall mean that financialization capitalism would continue to exist, and supranational states with neo-imperialism behavior shall continue to intrude, and eventually penetrate, into the daily lives of our rakyat.

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The Ascendancy of Ethnocracy and Rise of Political Islam in Malaysia

I]   The Consensus 1957-1969 Period

1The Secular State

After Malaya gained Independence in 1957, the underlying agreement was that safeguards for the interest of other communities are to be offsetting Malay privileges within the understanding, too. That the spirit inspiring the Federal Constitution within a “social contract” shall that be of a society with moderation, compassion and a compromising culture permeating throughout the nation.

The Federal Constitution was a carefully thought out and negotiated document that evolved after much debate and discussion. When, in 1956, Tunku Abdul Rahman headed a Merdeka Mission to London to negotiate for independence, these negotiations were conducted by 4 representatives of the Malay Rulers, 4 representatives of the then Alliance Government and representatives of the British Government. The Reid Commission was then appointed to draft a constitution for independent Malaya, holding 118 meetings in Malaya, besides meeting a broad cross-section of people and organisations, and in the process receiving 131 memoranda.

In the Alliance memorandum (the unequivocal original intention of UMNO, MCA and MIC) to the Reid Commission on September 27, 1956 stated that:

The religion of Malaysia shall be Islam. The observance of this principle shall not impose any disability on non-Muslim nationals professing and practising their own religion, and shall not imply the State is not a secular state.”

Another supportive statement with this reference is the Colonial Office statement dated May 23, 1957 at the London Conference Talks which said: “The members of the Alliance delegation stressed that they had no intention of creating a Muslim theocracy and that Malaya would be a secular state”.

Consequently, the key features of the Reid Commission report and the Federal Constitution is the inter-communal compromises whereby the issue of religion is expressed as follows:

The religion of Malaya shall be Islam. The observance of this principle shall not impose any disability on non-Muslim nationals professing and practicing their own religion, and shall not imply that the State is not a secular State.” (Emphasis added)

Subsequent to the issuance of the Reid Report, more reviews were undertaken by a Working Party consisting of representatives from the Malay rulers, the Alliance party and the British Government. The Alliance party set up its own sub-committee chaired by its then deputy president, Datuk Abdul Razak. At that time, the Alliance party had maintained its position that they had no intention of creating a Muslim theocracy and that Malaya would be a secular State. A white paper subsequently issued by the British Government in June 1957 confirmed this by stating “This will in no way affect the present position of the Federation as a secular State”.

It must be reiterated that the Alliance’s memorandum to the Reid Commission, at the initial stage of the Federal Constitution drafting, did not propose Islam as the official religion nor was it even suggested in the Draft Constitution. However, it was the Pakistan member of the Reid Commission, Abdul Hamid, in a separate memo, attached a suggestion that was eventually taken up by the UMNO ethnocratic elites to be later successfully included in the Constitution, (Joseph M. Fernando, 2006).

Justice Sheik Abdul Hamid, the member of the Reid Commission from Pakistan who initially agreed with the other members to omit any provision for an official religion in the draft constitution, later proposed in his Notes of Dissent that the Alliance proposal be adopted as it was “innocuous”, pointing out that at least 15 other countries had similar provisions in their constitutions.

The Federation of Malaya government, in a White Paper published in 1957, explaining the changes to the recommendations of the Reid Commission, stated:

There has been included in the proposed Federation Constitution a declaration that Islam is the religion of the Federation. This will in no way affect the present position of the Federation as a secular State, and every person will have the right to profess and practise his own religion and the right to propagate his religion, though this last right is subject to any restrictions imposed by State law relating to the propagation of any religious doctrine or belief among persons professing the Muslim religion.”

As a consequence, an express provision was then made in Article 3(1), the terms of which have remained unchanged since:

Islam is the religion of the Federation but other religions may be practised in peace and harmony in any part of the Federation.”

That the Federation was to be a secular nation was reiterated by the first premier,Tunku Abdul Rahman in a speech before the legislative council:

I would like to make it clear that this country is not an Islamic state as it is generally understood, we merely provided that Islam shall be the official religion of the State.”

Prior to the formation of Malaysia, a commission of inquiry chaired by Lord Cobbold was appointed to ascertain the views of the people of North Borneo and Sarawak, and upon assessment of those views, to make recommendations on the inclusion of North Borneo and Sarawak in the proposed Federation of Malaysia and issued a report in 1962.

Although the British member of the Cobbold Commission recommended that the Federal provision on religion should not be extended to Borneo territories which have a non-Muslim majority, the Malayan members recommended otherwise:

“… we are agreed that Islam should be the national religion for the Federation. We are satisfied that the proposal in no way jeopardises freedom of religion in the Federation, which in effect would be secular.”

In 1963, the Federal Constitution was amended upon the admission of Singapore and the North Borneo states of Sabah and Sarawak to the Federation.

Article 3 of the Federal Constitution has remained unchanged.

Today, Malaysia is regarded as neither a full-fledged Islamic state nor wholly secular, but still maintaining Islam as a state religion. Malaysia is an Islamic state in that the Malaysian constitution confers a particular legal status on Islam which is distinct from other religions. That can be changed only through an amendment to the Malaysian constitution. Malaysia is a constitutional monarchy where Islam is the official religion. It is neither a secular state nor a state where law is ultimately derived from Islam (Tom Pepinsky, 2012; Tommy Thomas, 2005); basically, supremacy of the Constitution is to be the rule of the legal system walking the middle path of tolerance and accommodation.

The politics of secularism, and the ensuing secular governance, are outstanding issues in Malaysia since both the ruling party UMNO (United Malays National Organisation) and the opposition Islamic party, PAS (Parti Islam se-Malaysia), have staked their electoral fortunes and political legitimacy on their capacity to deliver a structure of Islamic governance, (Amanda J. Whiting,  2010).

In this piety-political and Islamization race, (Joseph Liow, 2009) then requires them to appeal to Malay nationalist and Muslim voters, yet without alienating significantly the non-Muslim minorities in the country.

Even with the formation of Malaysia in 1963, the core matter lies with the primary and cardinal clause of Article 3, namely clause 1:

Islam is the religion of the federation; but other religions may be practised in peace and harmony in any part of the Federation.”

In other words, the stated principle is that “while the religion of Malaya shall be Islam…… no way jeopardises freedom of religion in the Federation, which in effect would be secular” (The Cobbold Commission).

Towards a secular democratic state, it is to be argued then that the best state for Muslims is still a secular state that embraces democracy and will allow people to be Muslim by conviction and free choice, which is the only way one can be a Muslim. Under such a system of governance, it is foreseen to respect the fundamental rights of everyone irrespective of race and religion or social status – without discrimination and without any commitment to religious frames of reference, (Ahmad Farouk Musa, 2012).  

Under such a foundation of secularism, there shall be space to provide for pluralism environment and a reasonable degree of coexistence. Muslims shall be envisaged to live favourably in the majority with non-Muslim as that secular revolution will liberate the state from the hegemony of the religiosity.

Therefore, the value of the constitution being secular is that it protects everyone, and since the Malaysian constitution was also founded on the plurality of religious and ethnic communities, it is already on the way to liberalism. Otherwise one needs to tear up the constitution and begin knocking down the very foundation of what the society is about (Professor Ebrahim E.I. Moosa, 2014).

In short then, a secular state is whereby a country is officially neutral in matters of religion. A secular state treats all its citizens equally regardless of religion. A secular state avoids preferential treatment for a citizen from a particular religion over other religions. A secular state maintains national governance without influence from religious factions. With a secular state, secular law shall govern contracts, commerce, international relations and trade and every aspect of lives of a citizen.

2) The Islamic Law

 Increasingly, the voice of liberalism has been articulating that Malaysia’s constitution is secular and it is not an Islamic state or Negara Islam (as was proclaimed by then Prime Minister, Mahathir Mohamad, in September 2001) in response to recent attempts to give Muslim law a bigger presence in the country’s legal system. In a piece entitled “Kembalikan Kegemilangan Undang Islam,” (Utusan Malaysia Feb 27, 2014), Zainul Rijal Abu Bakar had attempted to made an argument that “Islamic law” is a “grundnorm” or the “primary norm” in Malaysian law and politics. Basing on the Kelsen’s theory of legality, law is deemed to be neutral about the ethical identity of the state, and as such Islamic Law cannot be the Constitutional Norm (R. Rueban Balasubramaniam, 2014; see also Appendix I.1).

However, even though the 1957 Federal Constitution had outlined a limited role for the states to administer “Muslim law”, since 1976 a constitutional amendment had amended “Muslim courts” to read “Syariah courts.” The change in wording soon appeared in statutory law: the Muslim Family Law Act became the Islamic Family Law Act; the Administration of Muslim Law Act became the Administration of Islamic Law Act; the Muslim Criminal Law Offenses Act became the Syariah Criminal Offenses Act; the Muslim Criminal Procedure Act became the Syariah Criminal Procedure Act, and so forth, giving rise to increasing political Islamism in the country.

Already the role of Islam is manifested in many ways:

  • Funding of mosques and other Islamic places of worship from various sources
  • Government funding in support of an Islamic religious establishment
  • Government policy to “infuse Islamic values” into state administration
  • Religious Affairs Department receives zakat from Muslims
  • Zakat through enrichment programs funded Muslim children extra education
  • Mosque or surau must be in every new property development

It was estimated that there are some 3000 mosques having built throughout the country by 1970. However, there is no provision for houses of worship of other religions, and when an Indian temple was to be built in a prominent ethnically Shah Alam township, there was a Muslim fundamentalist hue and cry objecting to it confrontationally.

In March 2015, through the Malaysian Islamic Development Department (JAKIM), an allocation of RM468 million was being disbursed towards the allowances of religious teachers, imams and district mosque administration coordinators throughout the country where the ruling regime is increasingly envisaging the roles played by Kafa teachers, imams, Takmir teachers and mosque committees in propagating Islam.

Thus, with political Islam on the rise, the certainty and exactness of specific clauses in the Federal Constitution, like Article 3(1), is also under raising tendency to rephrase and interpret to mean something else. What do the words “may be practised in peace and harmony” mean in this sub-section Article?

Do they really to mean that other religions may only be practiced so long as this nation is in a condition of peace and harmony or should it be that followers of Islam are prepared to provide other citizens with the peace and harmony so that they might enjoy the practice of their respective faiths?

It has been affirmed by the Federal Court on this matter. However, there has been a re-interpretation to say that “other religions may be practiced in peace and harmony” means that members of other minority religions and faith communities are and shall categorically be entitled to practise their religions and to do so “in peace and harmony”.

It must be emphatically stated that those words “peace and harmony” are intended there not as a condition or a limitation upon their enjoyment and practice of religious freedom, namely: “without let or hindrance”, meaning without obstruction or constraint or arbitrary limitation, (Kessler, 2014).

This was, and in effect, is the intended meaning of the wording of article 3(1).

Peace and harmony could easily be broken because as in May 20014, Premier Najib had branded humanism, secularism and liberalism as “deviant” and a threat to Islam and the state and had declared the country would not allow any Muslims the right to apostasy, (themalaysianinsider, 10 December 2014). Malaysia has been given a “grave violations” rating by the International Humanist and Ethical Union (IHEU) for its treatment of secularists as well as its fraying race relations which has ratcheted up tensions. In its latest Freedom of Thought report, the global umbrella body for humanist values criticized the cited Prime Minister’s speech in May as that against secularism and liberalism as well as a threat towards Islam and the state.

On the other hand, Borders Bookstore manager Nik Raina Nik Abdul Aziz said her legal battle with Islamic authorities over a charge of selling and distributing a book deemed to be against Islam had changed her and made her realized her larger role to ensure other Muslims are not harassed for doing their jobs.

Given a discharge not amounting to an acquittal by the Shariah High Court said she had been a shy and reserved person before the raid on May 23, 2012 on the bookstore where she worked, but her ordeal had turned her into a more outspoken person.

Nik Raina had been charged with selling and distributing the book titled Allah, Kebebasan dan Cinta, a Malay translation Allah, Liberty and Love by the Canadian Muslim author Irshad Manji.

The Borders employee said she drew comfort from the company’s top management, adding that Berjaya Group founder Tan Sri Vincent Tan would always tell her when they met at company events, “Do not be afraid”, (themalaysianinsider, 26 February 2015).

Both the High Court and the Court of Appeal later held that the act of enforcement by JAWI was unlawful and illegal, primarily on the grounds that the books were in fact not subject to any prohibition order at the material time.

The Court of Appeal was of the view that any law, be it Federal or State, that breached the Federal Constitution must be struck down and any Federal or any State Government and its agencies that apply the law wrongfully must be corrected.

3) The Ethnocratic State

It had been stated many times, “Let us make no mistake – the political system in Malaysia is based on Malay dominance. That is the premise from which we should start.” The UMNO ruling elites thus construct, manipulate and employ nationalist ideologies to answer the national identity question in attempting to legitimize their political power. After the country had gained Independence in 1957, the exclusiveness nationalism of “Malaya for the Malays” community is an ideology invented and employed by the new political elites aspiring to maintain and dominate power as an alternative source of legitimacy to replace the colonial mandate. The ethno-cultural nationalist state is thus not only biased towards the ethnic group that dominates the state, but at the same time, promotes cultural assimilation of the minorities into the dominant majority ethno-culture. Thus, UMNO had increasingly become more assertive in promoting an ethnically Malay dominance.

Two main compositions blares the emergence of ethno-culture nationalism in 1969 that eventually raise the Political Islam octave in the ensuing years. On one side, the “UMNO ultras” like Syed Jaafar Albar (UMNO Secretary-General), Syed Nasir Ismail (director of Dewan Bahasa dan Pustaka), Harun Idris (Selangor Mentri Besar), Mahathir Mohamad (UMNO Central Committee member), Musa Hitam (Assistant Minister to Deputy Prime Minister), Razaleigh Hamzah (appointed member of the UMNO Supreme Council) and Abdullah Ahmad (political adviser to Abdul Razak) confronted Prime Minister Abdul Rahman that “immigrant votes” could and should be written off, but the Malay voters to be wooed to the fullest.

This is the political thrust.

The National Operations Council (NOC), under the Deputy Prime Minister leadership, which had temporarily replaced the functions of the government and Parliament during the emergency rule following the 1969 May riots, ran the government until Abdul Rahman resigned in September1970.

In the context of the 1969 political upheaval, the ensuing direction of the new government pointed towards an ethno-cultural Malay nationalist direction, with ethno-cultural reforms like the Rukunnegara, constitutional amendments and the New Cultural Policy, the New Economic Policy, and the enrolment of emerging Malay capitalist elites into UMNO.

Although appearing neutral in context, there clearly was an ethnic bias emphasizing that ‘Islam is the official religion of the Federation’. The NOC amended the Sedition Act in 1970 with the Emergency Ordinance No: 45 which read: ‘to question any matter, right, status, position, privilege, sovereignty or prerogative established or protected by the provisions of Part III of the Federal Constitution or Article 152. 153 or 181 of the Federal Constitution‘ is a ‘seditious tendency’ and is applicable to Sedition Act, focusing on Malay as the national language, the special position (not rights) of the Malays and the sovereignty of the ruler respectively.

The Rukunnegara or “National Principles” though was instituted in 1970, a few months after the riots in 1969 while the country was being ruled under Emergency decree by the National Operations Council from 1969 to 1971. In other words, these “National Principles” were not legislated by a democratically elected government then.

Secondly, the preamble in “Belief in God” is presumptuous and can hardly be considered inclusive when we take into account the numbers of Malaysians who are pantheists or atheists. For instance, Buddhists and Hindus can express their views on this principle but as a pantheistic animist whose rituals include ancestor worship. There is even the debate whether it is linguistically unnecessary and questionable to change words “belief in God” to “belief in Allah” for the English version of the Rukun Negara; there is no need to substitute the universally acceptable term ‘God’ in the English language.

The third item in the Rukunnegara is “Keluhuran Perlembagaan”. In the Malaysian Constitution, Article 11, every person has the right to profess and to practice his or her religion and to propagate it. So, where is the enforcement of this constitutional right? Christians are just using the word “Allah” and it instantly has became a threat to Muslims in this country?

Indeed, what has the national leadership done to “operationalise” the Rukunnegara so that it becomes a meaningful aspiration and experience for citizens? Several efforts from Rukunnegara, Bangsa Malaysia and the latest, 1Malaysia have been, and are being, made by the ruling regime in realizing the national unity prospect but had failed miserably. The question on how the Malaysian-style of racial accommodation is able to survive when the overall nation-building program had been attempting to look at the three main angles of ideology, race and ethnicity as the nation-building, but without any definitive vision of national goal.

Contrast with Indonesia where her children are taught early about the diversity of their home country, the archipelago is a home to countless ethnicities, cultures and languages. The national symbol, the Garuda Pancasila, proudly displays the motto Bhinneka Tunggal Ika under its wings, affirming that despite many differences they are one. Diversity is seen as one of Indonesia’s defining characteristics: a precious heirloom from her rich history of seafaring traders and trailblazing religious missionaries from all corners of the world.

The second thrust of ethnocratic nationalism was the introduction of the New Economic Policy which had been heavily promoted years ago by the new ruling class during the First Bumiputera Economic Congress (1965) and the Second Bumiputera Economic Congress (1968) where there were clamors for a widening expansion of state capital to benefit the Malay emerging capitalists with the state promoting and energizing this new class in the national economy.

If the eradication of poverty “irrespective of race” is evenly handed from the ethnic point of view, the second goal of restructuring economy is unmistakably ethno-cultural Malay nationalist.

The Mid-Term Review of the Third Malaysia Plan indicated a government action to create a Malay business class consisting of four sectors in credit assistance, training and technical assistance, administrative support, and direct government participants, besides on behalf of the Malay community, directly participated in acquiring corporate shares as part of “wealth re-distribution” argument rather than as equal opportunity for every Malaysian.

 

 

 

Bibliography

The Cobbold Commission, Report of the Commission of Enquiry, North Borneo and Sarawak, 1962

Rueban Balasubramaniam, Is Islamic Law a Constitutional Norm?

http://juristmalaya.com/; last access 20 February 2015.

John L. Esposito and John O. Voll,  The Makers of Contemporary Islam (New York: Oxford University Press, 2001), pg.181.

Joseph M. Fernando, “The Position of Islam in the Constitution of Malaysia”, Journal of Southeast Asian Studies, Vol. 37, 2006, pp.249-266.

Clive Kessler, “Daulat, kedaulatan and sovereignty: Authority, legitimacy, constitutionalism and modernity in the Malay world.”  New Mandala, asiapacific.anu.edu.au, 2014; last access 20 February 2015.

Joseph Chiyong Liow, Piety and Politics: Islamism in Contemporary Malaysia, Oxford University Press, 2009.

Ibrahim E.I. Moosa, “Developing a Philosophy of Pluralism” forum, organised by the Penang Institute, December 10, 2014.

Ahmad Farouk Musa, (2012)  Malaysia – revisiting the secular state debate, New Mandala, http://asiapacific.anu.edu.au/newmandala/2012/11/03/malaysia-revisiting-the-secular-state-debate/

Posted 3 November, 2012; last access 20 February2015

Tommy Thomas, Is Malaysia an Islamic State?

http://www.malaysianbar.org.my/constitutional_law/is_malaysia_an_islamic_state_.html

Posted on 17 November, 2005; last access February 20, 2015.

Tom Pepinsky, Is Malaysia an Islamic State?

http://tompepinsky.com/2012/10/26/is-malaysia-an-islamic-state/

Amanda J. Whiting,  “Secularism, the Islamic State and the Malaysian Legal Profession“, Asian Journal of Comparative Law: Vol. 5 : Issue 1, Article 10, 2010.

 

  

APPENDIX  I.1

 

Is Islamic Law a Constitutional Norm?

 Dr R. Rueban Balasubramaniam

[ re-posted from www.juristmalaya.com ]

MARCH 10 2014— In his piece entitled “Kembalikan Kegemilangan Undang Islam,” (Utusan Malaysia Feb 27, 2014), Zainul Rijal Abu Bakar makes a very radical argument that draws from the thought of Hans Kelsen, a German legal philosopher. Bakar argues that “Islamic law” is a “grundnorm” or the “primary norm” in Malaysian law and politics.

The argument is radical because Kelsen is thought to argue that within a legitimate legal order, the meaning and validity of all claims about what law requires must be traceable to an ultimate norm. This norm, the “grundnorm”, is a transcendental epistemological postulate.

This is a fancy way of saying that the “grundnorm” is a conceptual assumption that determines the validity and meaning of specific claims of legal obligation so that in order for any claim of legal validity to be true for the system of law to be capable of legitimizing the use of state power in law’s name, all judgments about the meaning and validity of law must be traced back to the “grundnorm” of that legal order.

I do not know how familiar Abu Bakar happens to be with Kelsen’s legal theory. However, I suspect that he is embracing the standard view taken within the study of legal theory that Kelsen is a legal positivist who thinks that the concept of the rule of law or legality is a morally and ethically neutral concept such that the morality of law will depend on the moral character of a society, especially its officials.

This is the main way that his “pure theory” of law has been understood: as an ideologically pure theory of law, as a mere instrument capable of serving any value or goal. Therefore, the “grundnorm”, as the ultimate basis to all judgments of legal validity, can reflect any value including, presumably, Islamic values embraced by Malaysia’s predominantly Malay-Muslim populace.

In this regard, it is important to note that this standard view of Kelsen’s theory is wrong. Lars Vinx (Hans Kelsen’s Pure theory of law: Legality and Legitimacy, Oxford University Press, 2007), an expert on Kelsen, has shown that he is not a legal positivist.

Rather, he turns out to be an anti-positivist who advocates a view of “democratic legality.” Vinx draws on Kelsen’s previously untranslated writings in political theory to show that he sought to build an adequate theory of the rule of law capable of serving an ideal of constitutional democracy.

He was motivated to produce a theory of law adequate to serving a view of politics that guarantees equal political participation to all citizens that is capable of promoting social co-operation despite their deep disagreements about the ethical identity of the state.

The precise context that worried Kelsen was a disagreement between socialists and capitalists about the ethical identity of the German state. Kelsen grew concerned that the former had grown impatient with a democratic means of acquiring power and were thus moving towards Fascism.

This was of course the impetus for the rise of Nazi totalitarianism, the horrors of which need not be stated. Kelsen sought to defend a view of law and the Constitution that serves the ideal of constitutional democracy as the best basis upon which socialists and capitalists could co-operate, given their disagreement.

To deal with this challenge, Kelsen articulates an ideologically pure theory of legality in which law is deemed to be neutral to the debate between socialists and capitalists about the ethical identity of the state.

The formation and interpretation of legal content is not to draw on these competing visions about the ethical identity of the state. Rather, they must answer to principles of legal legitimacy internal to the ideal of the rule of law or legality itself.

These principles work to sustain democratic political arrangement where there is majority rule but where the majority must be systematically responsive to the interests of a political minority. The very idea of a democratic majority requires the idea of a democratic minority as having a systematic role in the formation and interpretation of legal content.

Hence, Abu Bakar cannot claim that Islamic law is a “grundnorm” in the Malaysian context.  That would be to misappropriate and misuse Kelsen’s theory because that theory is neutral to questions about the ethical identity of the state.

The “grundnorm” may dictate the status and meaning of judgments of legal validity but nothing about the “grundnorm” will tell us anything about the ethical identity of the state as that question arises between socialists and capitalists; it will not determine of it is socialist or capitalist (though it will most certainly rule out a totalitarian view of any sort).

To make this observation is not merely to engage in a pedantic academic exercise about how to understand Kelsen’s work, which is likely of little concern to readers of this new portal. Rather, its importance lies in the fact that Kelsen’s work is crucial to combating precisely the type or kind of argument that Abu Bakar wants to make.

Abu Bakar draws his conclusion that Islamic law is the highest law in Malaysia from the fact that all other constitutional provisions, especially those that protect rights of all citizens, may be limited or suspended, especially in times of emergency.

But because those provisions protecting the status and priority of Islam and other provisions affirming the special position of the Malays, Malay language and related matters are immune from limitation or suspension in a time of emergency, he reasons that these provisions are of utmost importance.

In essence, he is arguing that there is a prior ethno-Islamist political constitution that survives the formal legal Constitution. In an emergency, when the law recedes, this political Islamist Constitution emerges to the surface, in reflecting the ethical identity of the state as a Malay-Muslim state.

This is a political truism that finds formal expression in the Constitution but does not itself depend on the Constitution for its truth; it is a pre-legal political truth that is superior to and prior to the law itself.

This line of argument echoes the type of arguments made by Carl Schmitt, the legal philosopher of the Nazis. I have written about Schmitt before. He thinks that the aspiration of the rule of law to tame political power is a myth, a myth that is revealed in the moment of “exception” or emergency.

In an emergency, a situation where the physical and existential identity of society is under threat, the political Constitution rises to the surface when a sovereign or dictator emerges to invoke the distinction between the “friend” and the “enemy.”

He, the sovereign, should exercise absolute and legally unlimited power to vanquish the enemy, any group that threatens the physical and existential identity of the friend. In so doing, the dictator defines and defends the ethical identity of the state as prior to and immune from challenge. For Schmitt, only authoritarianism and totalitarianism can be considered a coherent and attractive form of political rule.

Schmitt’s view stands in stark contrast to Kelsen’s position. On the one hand, for Schmitt, all politics is ultimately about violent conflict, a fight to the death where there is both a battle of values and a physical battle. There is no space within Schmitt’s thinking for social cooperation on peaceful terms even where parties deeply disagree.

On the other hand, for Kelsen, politics is ultimately about the achievement of social peace through respect for democratic legality as the basis to social cooperation between disagreeing parties. Kelsen was especially keen to resist Schmittian thinking because such resistance to democracy could only end terribly, as the horrible history of Nazism during World War II confirms.

For all of these reasons, Abu Bakar’s actual argument is very far removed from Kelsen’s position. Kelsen is a believer in the ideal of legality as tied to democracy and resists the notion that the law should reflect this or that view of the ethical identity of the state.

Kelsen is also committed to protecting the fundamental rights of all citizens and groups as central to a healthy majoritarian democracy where the majority must work with a political minority. Perhaps most importantly, Kelsen anticipates a political culture where there is deep political disagreement and debate; he does not expect the law to put an end to such disagreement and debate.

I hope that Abu Bakar will be receptive to this argument for his final paragraph suggests that his principal concern is the quest for truth. So he says:

“Apa yang lebih penting sebenarnya ialah kita mengenepikan emosi dan mengkaji Undang-undang Islam dengan hati yang ikhlas bagi mencari kebenaran. Sudah pasti jalan yang lurus akan ditemui. Undang-undang Islam sudah menjadi grundnorm atau norma utama di Malaysia.”

If he and we are serious about the quest for truth when interpreting the Malaysian Constitution, then one has to answer to appropriate standards of constitutional interpretation where it is also to pay attention to the conceptual soundness of fundamental ideals that inform such interpretation, especially the ideal of the rule of law or legality.

So I hope it is not out of place for me to correct him not only of his understanding of Kelsen’s work but also to identify the ways in which Kelsen would have resisted the line of argument that Abu Bakar sets out in his article.

Rather, if there is any lesson to draw from Kelsen’s work is that in a society marked by deep pluralism, disagreements about ethics, morality, religion, and politics, social co-operation depends on respect for legality and democracy.

These values are more important than specific debates about the ethical identity of the state to the extent that these values work to ensure social co-operation because in a context where no party can be completely confident of winning a political battle forever, then all parties have a rational and reasonable interest in ensuring that they will not be oppressed. Kelsen’s work supplies vital resources to developing this view of the Malaysian Constitution.

Dr R. Rueban Balasubramaniam is an associate Professor of Law, Carleton University, Canada and principal founder of the Jurist Malaya Initiative for the Rule of Law (www.juristmalaya.com).

 

 

 

 

 

 

 

 

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