Under a financialised capitalism regime, after a premature de-industrialisation in the 1990s, consumer income is diverted by debt expansion away from the purchase of new goods and services into FIRES (Finance, Interest, Real Estates and Service) like debt interest on mortgages, car loans, credit card debt, student loan debt. With such a large share of household income spent on debt service, little physical resources is left for driving the economy.
1. INTRODUCTION
With a shortfall to the subsidies – even with a top-up from Petronas – the state of nation is staring at an empty bowl after +60-year of “economic development” with no likely growth path in years ahead (Sudhave 2020), submerged in clientel capitalism (Weiss 2020) to pacific electorates with goodies, directionless with Vision 2020 blinded (Jomo 2020), and the Malay community has lost its conscious soul.
That the IMF has not indicated the country going bankrupt is not reassuring especially when the ratio of debt service payments to revenue accrued had reached 16.3% in 2021, and likely – based on the Budget 2022 – to exceed 18%. This means that for every RM$1 of government revenue, almost 20 sens is used for paying interests on debts. Of that amount is apart from the ability to repay the principal amounts on loans taken by the nation.
The federal government needs to borrow RM$181.49 billion, which is equivalent to 12.6% of gross domestic product (GDP) in 2020 according to the Ministry of Finance’s (MoF) Fiscal Policy Review 2021, of which, RM86.45 billion is allocated for deficit financing in 2020, which is substantially higher than RM51.49 billion in 2019.
2. STATE OF NATION
A nation consciously used to constant and consistent handouts will not survive for long. More so, when the subservient to subsidies has become a national ethos of burden privilege – a dependency to handouts and continuous assistance that not only bleeds the country but drops its growth path into a deepening hole :
A) The seriousness of politico-economic situation is that general government debt jumps to 76.0% of GDP in 2020 from 65.2% of GDP in 2019. The debt figures used by the Fitch Consultancy include officially reported “committed government guarantees” on loans, which are serviced by the government budget, and 1MDB’s net debt, equivalent in September 2020 to 12.6% and 1.3% of GDP, respectively. As at June 2022, RM10.84 billion had been used – from the 1MDB’s asset recovery funds kept in a trust account under the MOF, known as the Asset Recovery Trust Account (ARTA) – to repay 1MDB’s debt of RM$30billion outstanding as on 30th. June 2022; this ARTA fund still has a balance of RM8.83 billion currently, (theedgemarkets, 22/07/2022).
Overall, the debt burden is significantly higher than the medians of 59.2% and 52.7% for other firms in the ‘A’ and ‘BBB’ rating categories, respectively; we have since degraded to BBB by Fitch in 2020. Malaysia debt is close to 400% of revenue, around three times peer median. The ratings were weighed down by Malaysia’s high public debt, a low government revenue base and lingering political uncertainty.
Once downgraded, a national government would likely still be able to secure commercial loans, but at a higher rate – meaning more interest payments due every month.
B) Two years ago, the Federal debt and liabilities had already risen to RM$1.2569 trillion, or 87.3% of GDP, as at end-September 2020 — up 7.5% in the first nine months of the year compared with RM$1.1692 trillion as at end-2019. Indeed, country’s revenue is not rising as fast as the increase in operating expenditure that is more than 95% of revenue since 2008.
C) Indeed, out of the RM$332.1 billion allocated under Budget 2022, RM$233.5 billion or 70.3% have been designated as operating expenditure :
D) With the expenditure for subsidies and assistance projected to reach, by 2023, RM$77.7 billion which is more than double compared with the RM$31 billion given in the Budget 2022, the operational expenditure shall well exceed 90% of the national allocation for the year.
E) At a time of slow growth and surging inflation, where is the bottom 40% of population – the B40 who only get 16.4% of the national income share of wealth as in 2020 – but likely to deteriorate further because 20% of the M20 middle-income earners are now displaced to the B40 category. The wealth disparity gap had not closed much since two decades ago, but instead, more inequality has accentuated :
3. CONCLUSION
The undeniable fact as to why many bumiputera had not attained parity despite +60 years of neo-liberal-enforced economic development is the existence of a new class of compradore capitalist. According to the UNDP 1997 Human Development Report, and the 2004 United Nations Human Development Report, Malaysia has the highest income disparity between the rich and poor in Southeast Asia, greater than that of Philippines, Thailand, Singapore, Vietnam and Indonesia. From past performance, one can safely say that the future capital-led vehicle on an uneven route ahead is going to be calamity in crisis with government direct and statutory debt going up :
Malaysia National Debts; whereas, capital accumulation, averaging 16% annually from 1989 to 1997, fell to around 6% yearly from 1999 to 2019
In addition, the economic downturn challenges emerging countries capacity to service their existing debts. Therefore, despite widespread concerns about the current escalation of public debt and its sustainability, we should not lose sight of the potential risk from possible surges of private debt, too.
The Malaysian Federal Government Debt and liabilities rose to RM$1.2569 trillion, or 87.3% of GDP, by end-September 2020 – up 7.5% in the first nine months of that year compared with RM$1.1692 trillion as at end-2019. Indeed, country’s revenue is not rising as fast as the increase in operating expenditure that is more than 95% of revenue since 2008. Assuming the economy is set to expand by 7.5% in nominal terms during 2021 to RM$1,521.3bil, Malaysia’s official debt to GDP and total debt to GDP is expected to rise to 64.1% and 77.9%, respectively.
[It is a fact that governments in high-income developing countries are often unable to issue long-term government securities at a sustainable rate of interest, yet they need to be able to pay off or roll over maturing short-term obligations.]
With the national household debt-to-Gross Domestic Product (GDP) ratio had already surged to a new peak of 93.3% as at December 2020 from its previous record high of 87.5% in June 2020, according to Bank Negara Malaysia (BNM), Malaysia’s debt-to-GDP ratio could stabilise at 65.5% in 2022, but the outlook for the country’s fiscal policy is highly conditional upon the growth recovery this year. Though current household debt to GDP is at 89% as at December 2021 as compared to 89.6% in June 2021, it remains on the higher end when compared to regional economies such as Singapore (69.7%); Indonesia (17.2%); Philippines (9.9%).
Moody’s assistant VP and analyst Nishad Majmudar said the outlook for Malaysia’s fiscal policy is highly conditional upon a good growth recovery. The political-economic scenario is not that as fortuitous as projected by the Finance Minister. Research For Social Advancement (Refsa) and the Malaysian Institute of Economic Research (MIER) agreed that any stimulus must be at least over RM$90 billion.
Always remembering that subsidies stimulus is a class war waged against the 99 per cent by the elite 1 per cent. Often the money extracted from the working class through inflation is transferred to the rich as subsidies and tax cuts to promote capital accumulation.
Neoclassical theory premises on individual preferences, resource endowments and technological capability, while Marxian theory begins with class and class processes.
Nicos Poulantzas conceives a concept of class “places” as distinguished from class positions where “places” exist at each of the these levels of society: economic, political, and ideological (or cultural) levels where at the latter, social dominance regards bumiputeras status and on an islamic allegiance, for instance.
By ethnocapital we mean a (malay) bumiputra owned and controlled an entity performing under a rentier or clientel capitalism approach whether it is a public agency, a government-linked company (GLC) or a privatised and or commercial enterprise.
On this exploratory enquiry we are to delve on the power or dominance relations among persons, their subsumed class to entitled positions that enforce political power which defines economic dominance and social status deference.
Between the dominating and the dominated, under capitalism the capitalists are dominant at each level, the proletarians are dominated at each.
2] THE PLACE AND CONTROLLING CLASS
The issues relating to where the economic power emits from could be identified from the stronghold of clientelism and the ensuring political clientel relationship where ruling elites in the United Malay National Organisation (UMNO) [place] had aligned with economic oligarchs [positions] in accepting rentier capitalism to sustain their hold on [power]. They adopt this clientelism as solicitations for votes at the grassroots level, allowing ruling elites [place] the party patronage [position] and political [power] to “effectively partisanizing them and ensuring ground-level officials with whom most voters interacted with ……are political party loyalists” (Weiss, 2020), resulting in the skewed distribution of profits by political stakeholders and the stark inequality of wealth permeating in the country (Khalid):
Bumiputera in the top income groups (the top 1 per cent and the 10 per cent) benefited the most from economic development and its ensuing growth
There is every reason to say that patronage position is never moved from place prescence of ruling elite and the political power that oozes. Indeed, ruling elites are the biggest “owners” of divisional-level of UMNO constituency places with the office-bearing posts that defined political positioning posts with the ensuing power distributing spoils that emit therefrom. This is similar to what in management term that owners and managers if are taken as a whole, are elements of the same class. Their differences on this issue are of degree and not of kind. The ownership of the place loci, by situating in a position, the control of vested power elements is explicit.
3] POSITIONING THE CLASS DOMINATION
The two class processes of capitalism are defined as the extraction and distribution of surplus labour in the form of value. The class positions of the capitalist fundamental class processes are productive workers (performers) and productive capitalists (extractors). Capitalists appropriate surplus value from the consumption of labour power during the production of commodities. The surplus is distributed among occupants of subsumed class positions associated with say the state, merchants, financiers, landlords, managers and monopolies. Therefore, class position is determined by the relationship of the individual to the appropriation and distribution of surplus value.
That positioning presupposes a “place” is already in place or existence.
Thus, when AMMB Holdings Bhd agreed to pay RM2.83 billion to the Malaysian government as settlement on all outstanding claims and actions in relation to the AmBank Group’s involvement in the 1Malaysia Development Bhd (1MDB) corruption scandal where
The settlement amount is nearly 30% of AMMB’s current market capitalisation of RM9.52 billion,
what, the amount, according to the Ministry of Finance in the statement, is on top of the RM53.7 million penalty already imposed by Bank Negara Malaysia and paid by AmBank Group,
and when AMMB Holdings Bhd (AmBank) was only given “a few days” to negotiate the recently announced RM2.83 billion settlement to the Malaysian government for its involvement in the 1Malaysia Development Bhd (1MDB) fiasco, the banking group is in the capital domination power category within the underlying class positioning of clientel capitalism that was involved in an oligarchically-placed venture.
Also of concern is about the timing of AMMB Holdings Berhad’s (Ambank Group) plan to raise RM810 million via a proposed private placement exercise with a fixed issue price at RM2.75, that is at a 10.7% discount to current trading price of RM3.08.
It is incredible at a time when there is a dysfunctional ruling regime amid income disparity :
According to the UNDP 1997 Human Development Report, and the 2004 United Nations Human Development Report, Malaysia has the highest income disparity between the rich and poor in Southeast Asia, greater than that of Philippines, Thailand, Singapore, Vietnam and Indonesia.
and how a former premier’s younger brother made a plea on change of governance approach to reset Malaysia and guide the country into the future when he is part of the place, position and power of the ruling class that has vested interests in protecting the rentier capitalists pervading in the country since their father initiated the NEP that brought so much political discord and community disharmony as nation is losing the best talents with an underperforming economy:
That private placement is said to be offered to institutional funds and some high net-worth individuals; it was oversubscribed. That 1MDB case target Najib Razak’s brother, former CIMB CEO, Datuk Seri Nazir Razak‘s private equity fund, Ikhlas Capital Singapore Ptd Ltd, is acknowledged among those who are keen on taking up the shares; thus, placing an involved individual to a property positioning class with a corporate ownership to power-share control of a banking entity.
The bankers control corporations because they are simultaneously in the class position of functioning capitalists, (E. Thomas Kuh, Toward a Class Analysis of the Relationship between Corporations and Banks, Association for Economic and Social Analysis, Discussion Paper #7 November 1983).
4] POWER WITHIN A RULING CLASS
Bukit Aman Commercial Criminal Investigation Department (CID) director Datuk Zainuddin Yaacob announced that it has begun investigations into Datuk Dr Tawfiq Ayman for allegedly receiving funds linked to 1Malaysia Development Berhad (1MDB) in a Singapore bank account under his name.
Bukit Aman indicated that they are investigating Tawfiq under Section 4(1)(a) of the Anti-Money Laundering and Anti-Terrorism Financing Act 2001.
[Aside from the above dealings between Tawfiq Ayman and Jho Low, the two were also believed to be partners in a company that Jho Low set up in July 2007, called Abu Dhabi Kuwait Malaysia Investment Corp (ADKMIC) (seeThe Edge Malaysia, issue 1071, June 15 to 21, 2015: “Jho Low plays puppet master to 1MDB to get billions for his deals”.)]
The CID is investigating the matter under the Mutual Assistance in Criminal Matters Act 2002 in relation to the funds deposited in Singapore because the Act will enable witnesses abroad being interviewed.
Tawfiq is the husband of Tan Seri Zeti Akhtar Aziz, a former Bank Negara Malaysia (BNM) governor who retired in April 2016. Zeti Akhtar Aziz is currently the Group Chairman of Permodalan Nasional Berhad as well as the chairman of Amanah Saham Nasional Bhd. and chairman of Sime Darby Property Bhd until May 2021. She was the 7th Governor of Bank Negara Malaysia, Malaysia’s central bank from 2000 to 2016 -the first woman in that position – but retired in April 2016 when the Barisan Nasional government was still in power.
The investigation comes amid a report by The Edge Weekly which stated that the Commercial Affairs Department (CAD) of the Singapore Police Force had informed BNM of suspicious transactions involving a UBS bank account belonging to Iron Rhapsody Ltd.
The report said Iron Rhapsody – whose beneficial owners are Tawfiq and Ayman, according to the CAD – had received US$16.22 million (RM65.71 million) from companies/bank accounts of fugitive financier Low Taek Jho, a central figure in the 1MDB scandal, in five separate transactions.
The inflows of money into the account that occurred in 2008 and 2009 triggered suspicious transaction report (STR) alerts.
However, Bank Negara was informed much, much later in 2015 and 2016. In follow-ups, investigators in Malaysia, Switzerland and the US then began looking into the theft and laundering of billions of dollars that belonged to 1MDB.
“The probes were triggered by exposés published from March 2015 by The Edge, Sarawak Report and The Wall Street Journal,” The Edge Weekly continued.
The report added that the source of four of the transactions involved over RM600 million in profits made by Jho Low and his associates after flipping the RM5 billion 1MDB/TIA (Terengganu Investment Authority) bonds that were arranged by Ambank in May 2009.
Discovery documents had indicated that ex-BSI banker Yak Yew Chee had told CAD that when ADKMIC was incorporated, there were six to seven shareholders, including Low and Tawfiq.
At this juncture, public has a right to know whether Bank Negara Malaysua (BNM) – an independent institution guarding against financial fraud – was in the know but failed to act, falling prey to corruption and abuse of power. There seems to be a lingering of conspiracy air to protect Zeti as no action has been taken despite numerous police reports lodged.
It has to be said that Zeti, BNM and the Malaysian Anti-Corruption Commission are duty bound to disclose their positions regarding to the allegations levelled against the former BNM governor Zeti and her family members or at least, to come clean over allegations that her family had received money linked to the controversial 1Malaysia Development Bhd (1MDB) case.
Taking the most unfavourable point, the former BNM governor should disclose if she and or her family are planning to take any legal action against the accusations made against her and family members.
There is also the question as to: did the prosecution team from former Prime Minister Datuk Seri Najib Tun Razak’s case mention this outstanding matter to the latter’s defence counsel as Zeti is a key witness to the present ongoing Najib’s 1MDB trial?
The fact that present BNM governor Datuk Nor Shamsiah Mohd Yunus has yet to step forward and rebut the allegations and announce legal action against the Singapore CAD report is troubling as she was once part of the inhouse special task force to investigate a RM2.6 billion money trail into then prime minister Datuk Seri Najib Razak’s bank account.
Not only is BNM’s good name is at stake, it looks like the 1MDB case is getting even more scandalous by the day with the Malaysian Anti-Corruption Commission (MACC) has yet to inform the public, as on 1st. March 2021, whether they have opened an investigation on the present Tawfiq-Low case.
Upon retirement, Zeti handed over the post to Tan Sri Muhammad Ibrahim – the most senior of her three deputy governors at the time – who assumed the position on May 1, 2016. However, his five-year term was cut short after he voluntarily resigned in June 2018, a month after the Pakatan Harapan government came to power.
Muhammad’s resignation was over Bank Negara’s controversial purchase of a 22.5ha piece of land from the Ministry of Finance for RM2.066 billion in December 2017. This amount was confirmed to have been used by the previous ruling regime to pay an interest on 1MDB’s debts in a bailout of the fund.
During the time of the land purchase, deputy governor Sukudhew (Sukhdave) Singh, a highly respected, long-serving employee, resigned unexpectedly from the bank. In a cryptic farewell email message to colleagues that went viral, he hinted that there was friction among the bank’s high-ranking officials. He said he was leaving as certain professional standards that he deemed important were not being met.
Sudhave had since wrote two papers critical of the country’s politico-economy and the privileged culture of ethnocracy that accentuated the class cleavage within clientel capitalism.
5] ETHNOCAPITALISMCLASS CLEAVAGE
To continue impoverishing the poors in order for capitalism, specifically clientel ethnocratic capital– with political fabrication and economic entrenchment of the NEP construct (James Chin, 2016), though clearly divisive to the nation’s unity and sense of belonging (Lim Teck Ghee, 2021), is consistent in giving rentier capitalism a place in ethnocracy domain.
Capitalism is, after all, a system that pursues accumulation for its own sake, whatever the consequences. It is driven by the single-minded goal of business for ever-greater accumulation of capital.
Through the accumulation of capital, there is an increase in assets from investments or profits. The goal is to increase the value of an initial investment to a return on that investment, whether through appreciation, rent, capital gains or interest.
For capitalists – whether compradore or merchantile – profit is an end in itself. It does not matter to them whether the commodities they produce will satisfy fundamental human needs — such as food, clothing, shelter — or are devoted to meaningless or ostentatious consumption, or are even destructive to human beings and the planet. A dollar is a ringgit dollar whether it comes from a kati of padi, a Lamborghini or a share dividend.
The positioning of capitalism is such that:
First, it is the increasing accumulation of wealth [capital] by a relatively small section of the population at the top of the country’s social-class pyramid; it is a mere 1% of the 20 million bumiputera population or 200,000 malays – only about 40,000 households that may even be genealogically connected. This is the core of political elites, their administrative enablers and front-runners that benefited, and still, gorging from the surplus wealth of nation.
Secondly, there is a long-term movement of workers away from self-employment and into wage jobs that are supposedly subjected on the continuous expansion of production which had not happened owing to constant locked downs during a Covid19 pandemic, and the emergence of an army of reserve exploited Gig-economy labour being continously underemployed;
Thirdly, the competitive struggle between businesses necessitates, to prevent extinction of enterprise, the allocation of accumulated wealth to new, revolutionary technologies (like digital infrastructural platform) that favoured bumiputra capitalists in clientele capitalism.
The power of capitalism lies in the circuitry of capital that encourages concentration and centralization of capital giving rise to:
(1) Monopolistic organization that gives capital an advantage in its struggle with labour through raising the rate of surplus value and by the possibility of a higher rate of capital accumulation.
(2) With monopoly (or oligopoly) prices replacing competitive prices, a uniform rate of profit gives way to a hierarchy of profit rate – highest in the most concentrated industries, lowest in the most competitive. This means that the distribution of surplus value is skewed in favour of the larger units of capital which characteristically accumulate a greater proportion of their profits than smaller units of capital, once again making possible a higher rate of accumulation, like in the case of ethnocapitalised Pharmaniaga and TelekomMalaysia.
The consequences of ethnocapitalism mean that the profitability potential of the rentier relationship is increased with opportunities for higher capital accumulation for those having political power positioning in the right place at the expense of labour surplus value exploited.
This article attempts to analyse the ownership and control of Malaysia’s banks with merger and acquisitions (M&A) through the affirmative New Economic Policy (NEP) and the forces of globalisation with monopoly-capital catalysing financialization capitalism that induced changes in mainly Chinese-owned entrepreneurship enterprises to state-owned and corporate clientel capital dominating the banking sector. While the NEP enables the formation of an enthnocapital Malay class, the resultant outcome is corporate capital stamping greater domination – with consequential corruptive mismanagement accompanying stagnation – in the national economy.
HilferdingDas Finanzkapital in 1910 attempted to define the contours of early twentieth century Europe from a Marxist angle on the relationship between a few large banks and the largest concentrations of industrial capital. It was maintained that finance capital evolves when,
to an increasing degree the bank is being transformed into an industrial capitalist. This bank capital, that is, capital in money from which is thus really transformed into industrial capital, I call “finance capital” …..Finance capital is capital controlled by banks and employed by industrialists.¹
A later view of Berle and Mean in The Modern Corporation and Private Property expresses that corporation is a collective form of ownership in which the public participates……the relationship of claims of real property vis-a-vis the power to determine its disposition: concentration of economic power and the skewed distribution of wealth and profits. The property relations are without doubt an important aspect of class relations.
Therefore, a main discourse of the corporate control shall include the class analysis framework where the class process and individuals occupying the subsumed class positions or institution locations correspond to their financial conditions of existence. This analysis of control shall be explored in the context of the formation and ownership, production, appropriation and distribution of surplus value of such corporate entity like the banks in the country.
Ownership shall refer to the purchase of securities (loans, debt notes, treasury bills, bonds, collateral documents, etc) that shall claim on present or future value, but not to the ownership of real capital. Since such class payment to stocks and bonds is the conduit mechanism for providing money capital, owning these financial instruments is an extreme entitlement to the particular class.
2] BANKING SECTOR TRANSFORMATION
In 1970, Chinese ownership of the Malaysian banking sector was 24.3 per cent, the Malays (3.3%) and the foreign ownership constituting 52.2%. Those Chinese businessmen who made their fortunes in the rubber and tin industries diversified into the financial sector and facilitated the industrial and property development activities. During an era with a Chinese Finance Minister, it was relatively easy for the Chinese compradore capitalists to obtain banking license. Several Chinese banks were incorporated such as the United Malayan Banking Corporation (1960), Malayan Banking (1960), Hock Hua Bank (1961) in Sabah, Southern Bank (1962), Development and Commercial Banking (1965), Kong Ming Bank (1965) and Public Bank (1966). By the 1960s, they were some merger and acquisitions, for instance, in 1964, the OCBC Bank of Singapore acquired a 52% majority stake in Kwong Lee Bank.
With the NEP, systematically clientel ethnocapitalism shaped the country’s banking sector as part of restructuring, ostensibly in terms of wealth distribution for the Malaysian societies. Bank Negara Malaysia (BNM) in December 1966 took controlled of the Malayan Banking Berhad (MBB) through discretionary power when the banking institution was faced with management problems and in danger of an eminent entity collapse. Presently, MBB has remained a government-owned company (GLC) as Malaysia’s largest state-owned bank in terms of capitalisation.
Following the central bank’s takeover of MBB, the Bumiputera capital ownership, including trust agencies collectively owned 60.0 per cent of overall equity share in the domestic banking and finance companies. A study by Fujio Hara shows that bumiputera ownership had increased to 77.0 per cent for the whole Malaysian banking industry by early 1982 whereby the Chinese lost permanently many of Chinese-controlled banks and banking identity synonymous to the Chinese community. ²
The 1970s and late 1980s debt crisis and financial sector liberalization, respectively pushed the Malaysian banking institutions through a consolidation process to meet the requirements of BNM that aimed to improve the banking industry’s competitiveness and encouraging the emergence of more professional management through the dilution of individual ownership. The central bank’s view was that small Malaysia banks would not be able to survive once the financial market was liberalized following the commitment under the General Agreement on Trade in Service (GATS) under WTO (the World Trade Organisation) rules and procedures.
As of 1990, only eight of the 14 Chinese-controlled banks were left, six Chinese- controlled banks had been taken over by the state or for the bumiputera corporate capital class interests. Chinese ownership of Malaysia’s banking sector has declined from 24.3 percent in 1970 to 10.2 percent in 2004. Simultaneously, more and larger state-owned banks and bumiputera ethnocapital-controlled cooperative depositing outlets are expanding their present, the former categories, in the domestic markets and beyond.
Consequently, the depletion to ten anchor banks from a total of 54 financial institutions as at end of 2001. The corporate capital was purportedly to streamline the banking industry to withstand competition from the large Global North financial institutions in the process of liberalizing the domestic financial sector. In this context, small Chinese-controlled banks were absorbed into bigger banks and vanished from the corporate scene. The ten anchor banks are Malayan Banking, Bumiputra-Commerce Bank, Public Bank, RHB Bank, Arab-Malaysian Bank, EON Bank, Multi-Purpose Bank, Hong Leong Bank, Affin Bank, and Southern Bank. Under a government-initiated banking consolidation plan, on 1 July 2000, completed an entire reform in the Malaysian banking sector. As of today, there are only two Chinese-controlled or family-owned banks left in Malaysia namely, Public Bank and Hong Leong Bank, the latter which is chaired by the Singapore’s Quek families.
During 2014 there was an attempt by corporate capital and clientele capital, led by CIMB Group Holdings Bhd. (CIMB), Malaysia’s second-biggest bank to merge with RHB Capital Bhd. and Malaysia Building Society Bhd. (MBSB) to create Malaysia’s largest bank by assets of RM629 billion that would surpass Malaysia’s largest lender, Malayan Banking Bhd.’s RM583 billion by assets (Bloomberg 10 October 2014). Given the history of CIMB (controlled by UMNO politicians) and RHB (controlled by well-connected corporate capital businessmen), that struggle for control over Malaysia’s financial sector was perceived as no more a consolidation of a bank and corporate capital to tightly entwine the interests of political and business elites in the banking sector (KiniBiz 22 July 2014) as part of clientele capitalism.
The Asian Financial Crisis (AFC1997) and the Global Financial Crisis (GFC2008) external economic disruptions clearly shown the increased of global financial capitalism forces exerting great pressure on Malaysia’s financial sector reform that shaped Malaysia’ banks identities, ownership and control. These two external shocks not only exposed the ruling regime’s strong arms that favoured bumiputera oligarchs and the ethnocapital class interests in the national banking sector but the Global North monopoly-capital financial capitalists who had also perceived the 2008 global economic crisis as a global economic power shifts to the region, and they seized competitive opportunities to capture strategic M&A valuable deals in the Southeast Asia region – with the presentation and implementation of financial capital treasury tools – to local compradore capitalists.
3] ETHNOCAPITAL BANKS OWNERSHIP AND CONTROL
CIMB Bank Group is Malaysia’s second largest bank, the largest Asia Pacific investment bank (excluding Japan), and is the fifth largest banking group in ASEAN. It has strong Chinese heritage in banking that can be traced to the establishments of Bian Chiang Bank (BCB), Ban Hin Lee Bank (BHLB), and Southern Bank.
CIMB also has a Malay root and tradition that can be traced to the establishment of Bank Bumiputera Malaysia Berhad (BBMB). BBMB has a ‘Chinese touch’. In its formative years, prominent Chinese businessmen, Robert Kuok and Khoo Kay Peng were appointed directors of BBMB in 1966 to assist the bank³. CIMB’s early changed of ownership and identity was when the Wee family who founded BCB sold their 36 per cent stake to the ruling political entity UMNO-owned Fleet Group in 1975. Four years later (1979), the Fleet Group completed its acquisition of BCB and led to the formation of Bank of Commerce Bhd and retain the acronym band name of BCB.⁴
By the 1980s, BBMB becomes the largest bank in the country in terms of assets and was the first Malaysian bank to have operations in New York, London, Tokyo, Bahrain and Hong Kong.
In October 1999, BBMB recovered from the Asian financial crisis and other financial problems to merge with Bank of Commerce Behad, resulting in the formation of Bumiputra-Commerce Bank (BCB), which was the biggest merger in Malaysia’s banking history under the control of Commerce Asset Holdings Berhad (CAHB).
In 2005, CAHB announced its decision to create a universal bank by combining its commercial and investment banks. Through an aggressive M&A, in March 2006, CIMB launched a hostile takeover of Southern Bank, which was one of the ten anchor banks announced in 1999.
Southern Bank is an enlarged Chinese-controlled bank with strong fundamental after it merged with Ban Hin Lee Bank in 2001, in the post-Asian financial crisis banking consolidation process. CIMB Group recognized Southern Bank as an important player in wealth management products, credit cards and small manufacturing enterprises (SME) lending that are Chinese dominant. Southern Bank was the first in the country to set up the MEPS/ATM system used throughout Malaysia today.
After enlarging its consumer banking sector, Bumiputra-Commerce Bank was rebranded to its current name, CIMB in 2006. The takeover of Southern Bank added a valued nichè player in consumer banking to the Group. The merger combined the extensive resources and reach of Bumiputra-Commerce Bank with the expertise and agility of Southern Bank. The CIMB chief felt that CIMB needed to proceed with the takeover of Southern Bank to compliment the banking franchise it was trying to build. It was a hostile takeover because Southern Bank has been an important ingredient to help effect the turnaround in CIMB’s consumer franchise.
Mohamed Nazir bin Tun Abdul Razak served as CEO of the group from 1999 to 2014, the latter year since as Chairman of the corporation. He is the younger brother of former premier Najib Razak of the 1MDB disrepute, and youngest son of Abdul Razak who was the second Prime Minister of Malaysia that initiated the NEP in 1970.
4] CORPORATE OWNERSHIP AND THE CONTROLLING CLASS
There is no reason to state that management is divorced from ownership in general. Quite the contrary, managers are among the biggest owners. This is similar to what Zeitlin who had stated that owners and managers “taken as a whole, are elements of the same……class”⁵. Their differences on this issue are of degree and not of kind. By ownership, the control of vested property elements is explicit.
Berle and Means had seeked to express that there was no growing division between corporate ownership and control. Indeed, there are issues relating to the concentration of economic power (as driven by a stronghold of clientelism and the ensuring political clientel relationship where ruling elites in the United Malay National Organisation (UMNO) had aligned with economic oligarchs in accepting rentier capitalism to sustain their hold on power. They adopt this clientelism as solicitations for votes at the grassroots level, allowing ruling elites the party patronage and political power to “effectively partisanizing them and ensuring ground-level officials with whom most voters interacted with ……are political party loyalists” (Weiss, 2020), resulting in the skewed distribution of profits by political stakeholders and the stark inequality of wealth permeating in the country (Khalid):
Bumiputera in the top income groups (the top 1 per cent and the 10 per cent) benefited the most from economic growth
That neo-classical economic theory could not simply grapple with these underlying issues, but to hold on to a rationale analysis that corporations are essentially self-financing and management controlled. Capitalism in this view is that of a set of property relations mediated by market interactions, that is, it is fundamentally dictated by property ownership and rights. This formation of the class-property is one important aspect of class relationships. It shall be summarized as:
The translation of perhaps two-thirds of the industrial wealth of the country from individual ownership to ownership by the large, publicly financed corporations vitally changes the lives of property owners, the lives of workers, and the method of property tenure. The divorce of ownership from control consequent on that process almost necessarily involves a new form of economic organisation of society. Of this revolution, the corporation has proved vital (albeit neutral) instrument and vehicle…. It is in great measure emancipated from dependence on individual savings and “capital” markets ⁶
There is general agreement that property determines class status and class interests. Capitalists own; workers do not. As property defines class status, the control issue lies on to the locus of ownership. According to Baran and Sweezy
the fact is that managerial stratum is the most active and influential part of the properties class….They constitute in reality the leading echelon of the property-owning class ⁷
Fitch, Oppenheimer and Kotz did stated that ownership of stocks and bonds by banks trust departments is the avenue through which financial capital “controls” industrial capital.
Both Fitch and Oppenheimer opinionate that financial control is merely the outcome of the process of capitalist reproduction. On the one hand, the gradual concentration and centralization of capital forces corporations to rely, over time, on the large pools of capital made available by financial institutions. On the other, the ups and downs of the business cycle force the corporation to rely on external capital at critical conjectures in its development. ⁸
The relations of control are reinforced by interlocking directories and other interconnections between financial and non financial companies. This transition from “individual” to “social” capital embodied in corporate capitalist development has resulted in control by financial entities which profit at the expense of individual corporations by exercising their control.
In Monopoly Capital (1966), Baran and Sweezy define corporations as management controlled. Management by the board of directors and top execurives, is self-perpetuating group which aims at maintaining continuous “inside” control of corporations. Given a “large” corporation’s ability to reap monopoly profits, the behaviour of these “giant” corporations is the centrepiece of their theory of monopoly-capital.
5] CORPORATIONS, CAPITAL AND CLASS DOMINATION
The two class processes of capitalism are defined as the extraction and distribution of surplus labour in the form of value. The class positions of the capitalist fundamental class processes are productive workers (performers) and productive capitalists (extractors). Capitalists appropriate surplus value from the consumption of labour power during the production of commodities. The surplus is distributed among occupants of subsumed class positions associated with say the state, merchants, financiers, landlords, managers and monopolies. Therefore, class position is determined by the relationship of the individual to the appropriation and distribution of surplus value.
Thus, when AMMB Holdings Bhd agreed to pay RM2.83 billion to the Malaysian government as settlement on all outstanding claims and actions in relation to the AmBank Group’s involvement in the 1Malaysia Development Bhd (1MDB) corruption scandal where
The settlement amount is nearly 30% of AMMB’s current market capitalisation of RM9.52 billion,
what, the amount, according to the Ministry of Finance in the statement, is on top of the RM53.7 million penalty already imposed by Bank Negara Malaysia and paid by AmBank Group,
and when AMMB Holdings Bhd (AmBank) was only given “a few days” to negotiate the recently announced RM2.83 billion settlement to the Malaysian government for its involvement in the 1Malaysia Development Bhd (1MDB) fiasco, the banking group is in the capital domination category within the underlying class classification of clientel capitalism that was involved in an oligarchically-owned venture.
In this financial affair, the short negotiation period came as a surprise, given such a sizeable settlement, which is equivalent to just below 30% of AmBank’s market capitalisation of RM9.52 billion.
Prior to the briefing, some observers had already questioned why AmBank did not warn that there was a risk of a material development that could conclude with such a settlement.
Even the Australia and New Zealand Banking Group (ANZ) had indicated that it would write down the value of its investment in AMMB Holdings Bhd (AmBank) after the latter bank settled a claim linked to the 1MDB scandal. The Australia’s fourth-largest lender will take a A$212 million (US$163.41 million) haircut in the carrying value of its 24% stake in AmBank that will lower its half-year earnings result for fiscal 2021.
Also of concern is about the timing of AMMB Holdings Berhad’s (Ambank Group) plan to raise RM810 million via a proposed private placement exercise with a fixed issue price at RM2.75, that is at a 10.7% discount to current trading price of RM3.08.
The private placement is said to be offered to institutional funds and some high net-worth individuals; it was oversubscribed. That 1MDB case target Najib Razak’s brother, former CIMB CEO, Datuk Seri Nazir Razak‘s private equity fund, Ikhlas Capital Singapore Ptd Ltd, is acknowledged among those who are keen on taking up the shares; thus, connecting an involved individual to a property class with a corporate ownership to share control of a banking entity.
6] THE CLASS PROCESSES OF CAPITALISM AND CORPORATE CAPITAL DOMINATION
Lenin wrote on the “convalescence of banking with industry” with close “personal union” that comprised of bank ownership of stock ⁹, that relationship is whereby one person occupies the fundamental extracting position, and the subsumed positions of owners and provider of capital. This underlying concept of finance capital – if as drawn out in Nazir’s case – covers the subsumed class position associated with monopoly. Therefore, this specific correlation whereby bankers become corporate capitalists and capitalists bankers produces a qualitatively new alignment of class forces and institutional arrangements within the capitalist class process.
Therefore, capitalism is qualitatively transformed when these class positions come under the aegis of productive capital, that is, when these positions are occupied by the individual as the functioning capitalist. Thus, ownership assumes surplus value production and its surplus value realization so that the ultimate distribution becomes the function of productive capital – and the provision of that money capital by these security purchasers (owners) becomes a necessity for a corporation to exist. Baran and Sweezy reinforced this thread of arguments by designating monopoly profits in the internalizing role of providing the fund necessary for corporations to be self-financing.
Herman in Corporate Control, Corporate Power (1981)¹⁰, provides an explanation that the autonomy for an entity to be considered management controlled as an established truth when the capitalist extracts unpaid labour directly from the labourers…..the first appropriate, but by no means the ultimate owner of surplus-value ¹¹.
The bankers control corporations because they are simultaneously in the class position of functioning capitalists.¹²
LIST OF REFERENCES
1.I.Lenin (1974l, p.47.
2.Hara, Fujio 1991. ‘Malaysia’s New Economic Policy and the Chinese Business Community’. The Developing Economies 29(4): 350–70.
3.Gomez, Edmund Terence (1999). Chinese Business in Malaysia: Accumulation, Accommodation and Ascendance. Surrey: Curzon.
4.Gomez, Edmund Terence (1990). Politics in Business: UMNO’s Corporate Investments. Kuala Lumpur: FORUM.
5.see C.B. Macpherson (1973).
6.A.A. Berle and G. Means (1967), p. xlc and p. xxv.
7.P. Baran and P. Sweezy (1966), pp. 34-5.
8.R. Fitch and M. Oppenheimer, Socialist Revolution (1971), p. 43.
9.Lenin (ibid), pp. 41-42.
10. E. Herman (1981) p. 14.
11. K. Marx (1974), Vol. III, p. 436.
12. E. Thomas Kuh, Toward a Class Analysis of the Relationship between Corporations and Banks, Association for Economic and Social Analysis, Discussion Paper #7 November 1983.
BIBLIOGRAPHY
Chin Yee Whah, Changes of Ownership and Identities of Malaysian Banks: Ethnicity, State and Globalization, Asia Research Centre, Copenhagen Business School, 2015.
Towards The Malaysia Narrative 
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