Economic nationalism directs the returning of foreign resource ownership to national control means that many Western firms over-staying in “developing” nations during the colonial era have had to readjust and adapt the way they had been handling their colonial business empires overseas. Some of the companies that have not adapted to new realities of local economic nationalism and national politics have learned to bear the bad experience encountered. An example is Guthrie, a rubber and palm-oil conglomerate in Malaysia that was once the pillar of Britain’s overseas commercial empire together with Sime Darby and Golden Hope.
British Guthrie had ultimate control over then Malaya, Sarawak and the British North Borneo even though this entity resided in London with 49% of its Malaysian ownership shared only locally; this agency house had re-invested less than M$100 million to these states (about 12 million sterling pounds then) since 1946.
Guthrie was founded in Singapore in 1821 by Alexander Guthrie, as the first British trading company in Southeast Asia. Guthrie introduced rubber and oil palm in Malaysia in 1896 and 1924, respectively.
Shakila Yacob and Nicholas White, Decolonisation: the Origins of the Guthrie ‘Dawn Raid’, Modern Asian Studies, 2010. The premiere British rubber and oil palm conglomerate in Malaysia, the Guthrie Corporation Limited, was taken into local control in less than four hours. This was the most dramatic Malaysian acquisition of a foreign company during the restructuring of the country’s post-colonial economy during the 1970s and 1980s.
The Guthrie Group subsequently became a public company in 1987 and was listed on the Kuala Lumpur Stock Exchange (KLSE) in 1989 in the then largest public issue in Malaysia until the 2012 FELDA Global Venture US$3.2 billion IPO which was the second biggest initial public offering in the world next to Facebook during that year.
The GUTHRIE Dawn Raid allowed the country in Sept 7, 1981 an ownership of some 200,000 acres (800 km²) of agricultural land returned back to Malaysians. Khalid Ibrahim, CEO of Permodalan Nasional Berhad later became the CEO of the Guthrie which was later known as the Kumpulan Guthrie Bhd, from 1995 to 2003.
With the government investment company Pemodalan Nasional Berhad being the largest single shareholder, the government merged Guthrie with Sime Darby and Golden Hope plantation to form a new entity named Synergy Drive, later renamed Sime Darby. All Guthrie shares were de-listed on 1 November 2007 and re-listed on 30 November 2007. By November 2007, Sime Darby was to be the largest company in Malaysia by market capitalisation and also the largest plantation operator in the world with a land bank of over 542,000 ha of which with oil palm planted area of 299,350 ha.
MALAYSIANISATION AND ECONOMIC NATIONALISM
Low Kam Yoke in her thesis differentiated between the two stages of acquisitions: the Malaysianisation stage involving the transfer of control and the relocation of headquarters from London to Kuala Lumpur of target companies and the bumitisation stage which necessitated conforming to the requirement of equity ownership and corporate control as outlined by the (Nation Economic Policy) NEP which was announced in 1970 as part of a package of measures introduced after the political crisis of May 1969. It sought to ‘eradicate poverty‘ and ‘restructure society to eliminate the identification of race with economic function‘ in order to create the conditions for national unity: see Low Kam Yoke’s, ‘Political Economy’, 94–95, paper. Bumitisation refers to the process whereby bumiputeras (sons of the soil) are given preference in the control and participation of the Malaysian economy. This may take the form of equity ownership or employment opportunities at the managerial level.
Malaysianisation involved, and entailed, two prime aspects: firstly, the accumulation of capital on behalf of bumiputeras; secondly, the appointment of bumiputeras at the decision-making and managerial levels, thus structuring and managing economic nationalism as an ethnocratic economy destiny.
Malaysia’s affirmative action policy differs from those of other countries in one crucial respect — it is “the politically dominant majority group which introduces preferential policies to raise its economic status as against that of an economically more advanced minorities“
(see Puthucheary seminal work, written while in a prison, on the Ownership and Control of the Malaysian Economy, and the continuous in-depth studies by Gomez, with Jomo and Lim Mah Hui – collectively critical of selective privatisation and bumiputera equity quotas, and in the promotion of money politics that are detrimental to national economic development.
The First and subsequently Second Bumiputera Economic Congress, in 1965 and 1968 respectively, enabled the ethnocratic nationalists to draw upon, and demonstrate a political support from the Malay businesses for immediate governmental action. Indeed, core of the policies of the NEP – a pivotal dimension in Malaysian economic history – marked a tremendous shift in direction towards state-sponsored capitalism. These political-indulged policies were actually inspired by, and derived from, the various proposals and many resolutions at the Bumiputera Economic Congresses (Baharuddin, From British to Bumiputra rule: local politics and rural development in Peninsular Malaysia, 1986).
In fact, after the Second World War, it is said that many UMNO grassroots members were to articulate a narrative that there was an influx of then capital value of USD50 million from mainland China to the Malay Peninsula; that this amount gave a comparative edge to local Chinese businesses to solidify their economic dominance, ‘Submission by Abdul Majid Haji Mohamed in O/C Economic Affairs, Penang UMNO to Tuan Haji Abdul Wahab, Dato Panglima Bukit Gantang, Ipoh, 19 September 1946’, UMNO Papers, UMNO/SG, 82/1946, Arkib Negara Malaysia (hereafter ANM).
On a historical reflection, in 9th. September 2020 Reuters was to report that Malaysia had plan to use Chinese money to bail out the scandal-infected 1MDB loans. In fact, around August 2018, the Malaysian police had filed criminal charges against Jho Low and his father Larry Low over money laundering of US$457 million, which was allegedly stolen from 1MDB, and most of the cash used was for purchasing the superyacht Equanimity.
[Meanwhile, the decolonisation in Indonesia is studied by Lindblad, Bridges to New Business, which contains extensive analysis of Indonesia’s economic metamorphosis up to the height of its national indigenisation programme that shall be a comparative study later.]
THE POST-COLONIAL PERIOD
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).
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 directorships 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.
PRESENTLY, there is a massive 17.1% gross domestic product (GDP) contraction in the second quarter 2020 (2Q20) that has made Malaysia economy the worst-performing in ASEAN. This figure is the worst double-digit quarterly contraction in 22 years following a lockdown to stem spreading of the Covid-19. Bank Negara Malaysia (BNM) has to revise down the country’s 2020 GDP forecast to -3.5% to -5.5% from -2% to 0.5% previously because the initial assumption was based on a lockdown of only four weeks instead of seven weeks. In fact, MALAYSIA’S OFFICIAL GDP is a GROWTH FORECAST AT -3.5% to -5.5% in 2020, see
https://nyti.ms/3iHNrWG
Now with national debt liabilities reaching RM1.264 trillion by year end 2020, there are serious politico-economic issues ahead. Though empirical results have revealed that the accumulation of external debt is typically associated with an increase in Malaysia’s economic growth up to an optimal level, however, any additional increase of external indebtedness beyond that specific level would inversely contributed to a detrimental national economy. It is, therefore, not surprising that the ■income disparity■ issue in Malaysia is becoming more acute amid the rising cost of living and stagnating wage growth where the gaps exist glaringly between wealthy rich and immersirably poor; it is definitely related to differentiated social class as the main problem: Alatas ● Soong ● Jomo ● Charles Hirchman[◇pdf◇ to download] – whether as consequential byproduct of British colonialism or the ensuing post-independence neo-colonialism.
Further, our External Debt had increased to 1002956 MYR Million in the second quarter of 2020 from 975907 MYR Million in the first quarter of 2020 (trendingeconomics.com) and together with a 2019 report which found that 0.2% or only 43,646 adults living in Malaysia were placed in the over US$1 million wealth band, while the majority of the adult population (that is, 96.1% or 20.97 million people) were categorised as having wealth at or below US$100,000, it is not an enviable nor justifiable situation after over six decades of economic nationalism development under an ethnocratic economy environment, made worst by the performance of PETRONAS first quarterly loss in five years and that its full year performance would severely be affected, not only to the corporation but the nation, too, which depends on Petronas’ dividends for governmental operations expenditure.
There were some official Petronas estimates in 2005 that assessed that Malaysia’s petroleum and natural gas reserves stood at some 3.4 billion barrels and 84.4 trillion standard cubic feet respectively. It was further evaluated that at the 1998 levels of production of 630,000 barrels per day for petroleum and 5261 million standard cubic feet per day for natural gas, petroleum reserves are expected to be exhausted in 14.8 years and natural gas in 44 years. To note however, that these levels of production might be outdated and are likely to have been increased. Thus, Malaysia is certain to run out of oil reserves before 2020 (only that, we’re here already – on top of a pandemic and under a low oil price regime:(
CRITICAL ANALYSES OF ETHNOCRATIC ECONOMICS
The ethnocratic economic policies of the NEP has often been criticised as being an inefficient system that promotes a laid-back, if not an abundant laziness, attitude among the Malay bumiputras; it is, first and foremost racial-based and not deprivation based. Several policies of the NEP give economic advantages to the rich Bumiputras, such as Bumiputra quotas in ownership of public company stock, and housing being sold exclusively to Bumiputras, are viewed as discriminatory. It has to be said again that when NEP was announced its goals was to have 30% of all equity in Bumiputra hands.
However, NEP critics have argued that setting a target of 30% of Bumiputras trained and certified to run companies would represent a better equality in terms of opportunity.
The NEP is also criticised for not dealing directly with issues of wealth distribution and economic inequality; that it no longer helps the poor but is instead an institutionalised system of handouts for the largest ethnic community in Malaysia as the NEP does not discriminate based on economic class.
Then, recently there was the setting up of a Bumiputera Prosperity Council (MKB) to empower the development of Bumiputera socio-economy, said Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed, in line with the Shared Prosperity Vision 2030 (SPV 2030).
However, we need to ask what is “shared” : when it’s an ethnocratic collusion in social engineering on affirmative-actions – from NEP to NEM to ETP – that have morphed into cronyism. Whereas the Malay Economic Action Council (MTEM) has demanded SPV2030 to address the income disparity among Malaysians, especially that the bumiputra community cannot be sidelined, however, through the years, an oligarchy had transferred wealth to a small pool of politically well-connected businessmen instead.
“The problem is that the whole policy has been abused by politicians for vested interests,” said Terrence Gomez, a professor at the University of Malaya who has written extensively on the NEP program. “There was no transparency in the way contracts were awarded”.
The statistical problems of categorising wealthy and disadvantaged Bumiputras in one group also meant that the NEP’s goal of having 30% of the national wealth held by Bumiputras was not indicative of a median 60% of Bumiputras holding 28% of the national wealth, but could theoretically translate into one Bumiputra holding 29% of the national wealth, with the remaining Bumiputras sharing 1%. Some have alleged that because of this imbalance, some Malays remain economically marginalised.
In 2006, a major dispute arose when the Asian Strategic and Leadership Institute (ASLI) issued a report calculating Bumiputra-held equity at 45% already; see https://m.malaysiakini.com/letters/58050
This suite of figures is in fact on track with the 1997 University of Malaya study that had calculated the Bumiputra share of equity to stand at 33.7%, using par value with the bumi equity reaching the NEP target 19 years ago! (Malaysiakini 1st. November 2006 by reporter Beh Lih Yi).
Abang Bennet with a piece in
Aliran Monthly Vol 25 (2005): Issue 7 entitled UMNO: A threat to prosperity
“Umnoputeras are deeply addicted to their ethnic privileges and subsidies – but what happens when the petroleum runs out?“
As previously stated, it is definitely associated to the differentiated social classes within the nation populace as the main problem: Alatas , Soong , Jomo
Abang Bennet also argued that Martin Jalleh in the previous month issue of Aliran has provided us an astonishing account of expensive government bailouts of bungled privatisations mainly involving the crème de la crème of the crony Malay-Bumiputera community.
http://www.malaysia-today.net/guest-columnists/2005/10/umno-threat-to-national-prosperity.html
It is not a good testimony to a nation economic development when Malaysia is not only having a Malay Dilemma, but a dilemma over the continuance of an economic nationalism resting on mere ethnocratic economics.
BIBLIOGRAPHY
Gomez and Saravanamuttu, The New Economic Policy in Malaysia Affirmative Action, Ethnic Inequalities and Social Justice, (ISEAS 2013), and KS Jomo, The New Economic Policy and Interethnic Relations in Malaya, (UNRISD 2004), and Lee Hock Guan, Affirmative Action in Malaysia, Southeast Asian Affairs (2005).
R. Thillainathan and Kee-Cheok Cheong, Malaysia’s New Economic Policy, Growth and Distribution: Revisiting the Debate, Journal of Economic Studies 53(1): 51 – 68, 2016 ISSN 1511-R.
CIA, Malaysia’s Unfulfilled Promise: the New Economic Policy in Arrears, October 1985; sanitized copy approved for release on 2011/01/04.
Jomo‘s The Edge 8/01/2020 piece:
https://www.theedgemarkets.com/article/my-say-poverty-inequality-and-expectations Malay Mail: https://www.malaymail.com/news/malaysia/2015/09/13/economist-nep-has-outlived-its-relevance-malaysia-must-end-it-to-progress/968981 NST 14/07/20; a critique of similar model, the Pemandu's Economic Transformation Plan (ETP) can be found in Research for Social Advancement (REFSA), A Critique of the ETP, Part I and Part II, 25/01/2012.
STORM, Illicit Capital, Illegal Trade and Inequality – Kleptocracy in Malaysia, monsoonsstorms.wordpress.com).
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