Capital, labour and the state: The West Malaysian case

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Capital, labour and the state:The West Malaysian caseFatimah HalimPublished online: 02 Apr 2008.

To cite this article: Fatimah Halim (1982) Capital, labour and the state: The WestMalaysian case, Journal of Contemporary Asia, 12:3, 259-280

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239

Capital, Labour and the State: The West Malaysian Case'

Fatimah Halim

The rapid expansion of the state stands in sharp contrast to the dearth of meaningful analysis of state behaviour in developing countries. The state is an indispensable subject for analysis because it is the political form of the domination of capital in general over labour and seeks to impose this domination (and not the whims of particular capitals) on labour. The extent to which it can do so - - i.e. the extent to which it can wage a successful struggle against labour - - determines the trajectory of capitalist development, and its failure to do so results in the destruction of capitalism.

For the Malaysian case, there are two major reasons why it is important to understand the nature of the state and the stages through which it has passed. The first stems from the fact that conventional studies of the Malaysian state has almost always been done from the Western liberal capitalist or pluralistic point of view. 2 Very little has been written specifically on the state which effectively challenges the intellectual hold of these interpretations. There exists, therefore, the need for a wide ranging reinterpretation of the major landmarks in Malaysian socio-economic-political developments, based on a rigorous analysis of the struggle between capital and labour. Secondly, Malaysia has frequently been cited as the example par excellence of a society which, though having experienced imperial conquest of a far-reaching nature, is in the process of "breaking out" of the status of "developing country ''3 and embarking on a path of comparatively independent capitalist development. In tile light of such beliefs the central thrust of this paper will bc to assess the role of the state in the achievement of the Malaysian "economic miracle", while locating our analysis in the struggle between capital and labour in the process of capital accumulation.

The failure on the part of orthodox liberal historiography to adopt this position has led the majority to argue that political struggles between various fractions of capital had resulted in one fraction, based primarily on Western- educated Malays, gaining access to state power and using this as a means of determining the form of development of the economy in their own interests. By concentrating the analysis on problems within the power bloc, the dynamic of accumulation comes to be situated not in the conflict between labour and capital, but primarily in the relations of competition within capital itself. Since inter-capitalist relations are situated in the forefront of these analysis, they become the prime movers of history - - the motor of accumulation, while the struggle between capital and labour gets relegated to a subordinate position in the analysis. I argue that an approach which shifts the focus of the analysis

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260 JOURNAL OF CONTEMPORAR Y ASIA

away from the class struggle and towards inter-class and fractional disagreements inevitably leads to a failure to locate the essential character of the whole social formation, fails to give clarity on what requires to be changed and also the prospects for transformation. In particular, class analysis is necessary to indicate on which side different groups and classes are likely to be ranged in specific struggles; it serves also to identify the class alliances that will have to be forged/generated and the approach to be used in the struggle against entrenched interests.

This study will therefore concern itself with the functioning of the state in Malaysia and its relationship to processes of capital accumulation. In such a short paper, our emphasis will be mainly on the post-colonial state and more precisely, with the ruling bourgeoisie presiding over capital accumulation. In line with the work of scholars such as H. Alavi, C. Leys, R. Murray, N. Poulantzas and R. Miliband, this study will attempt to characterise the relationship of the Malaysian state vis-a-vis various sectors of capital and labour in order to understand the significance of the state for the advancement of labour and capital, and the extent to which state power is used to cater to the material interests of the various fractions of the capitalist and labouring classes.

L The Formation o f the National State in" Malaysia

The Malaysian experience demonstrates that the process of reorganisation of the dependent economy under monopoly capital has taken place under a number of different conditions over time. In the period prior to the establishment of colonial rule in 18"/4, the states in Malaya were characterised by internicine wars, the absence of any form of centralised administration or an adequate communication system. Sultans exercised very little power beyond their own royal districts and territorial chiefs had a free hand in appropriating whatever little surplus there was in an economy with a very low level of productivity. Confronted with this chaotic state of affairs, the first task the British advisors set themselves was, in the words of a British resident, to "create the government to be advised". 4 The monarchial institution was strengthened and power centralised in the hands of British "advisors". Members of the ruling class were either pensioned off, given stipends commensurate with the loss of revenue from customary means of supporting themselves such as corvee labour, tribute from trade, poll t a x . . . ; co-opted into State Councils whose role was that of the rubber stamp; or, were relegated to minor roles in the police force and the rural administration. Prudence had dictated that Malays be still associated at least in name if not in the actual process of government. In this way, an autochthonous class of landlords was not created, for control of land would have given the traditional ruling class control over producers on the land. The majority of the Malay masses were however, still confined to the subsistence sector, s

During the early period of British rule (1894-1914) it was tin mining supported by indentured immigrant Chinese labour which dominated the economic scene. When tin output began to stabilise at the end of the 19th

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THE WEST MALA YSIAN CASE 261

century, the colonial government decided to diversify into plantation agriculture in order to safeguard their revenues should "mineral resources in the course of the years show signs of depletion". 6 In matters of land use therefore, priority was given to plantation agriculture, 7 though not without protest from a much weakened tin sector as rubber export was fast out- stripping that of tin. s

The first quarter of a century of British rule saw rapid and far-reaching changes in the Malay states. Basic infra-structural network was laid for the export of rubber and tin, and to facilitate food imports for the largely immigrant (indentured) labour force, since the subsistence sector could scarcely cater for its own needs. Government burgeoned administratively into an elaborate bureaucracy with the executive ranks held wholly by Europeans. Once material conditions allowing for free movement of labour had developed i .e . the gradual increase of Malayan born wage-labour not tied to contract0rs, 9 gradual strengthening of security forces able to deal with secret societies monopolising the Chinese labour force; a rapidly expanding economy and a fast developing communication system, the indentured labour system soon proved to be costly and was thus abolished in 1914. With the removal of such restrictive labour practices and the booming conditions of the first decade of the 20th Century, the bargaining power of wage-labour increased tremendously. We thus see the beginnings of labour organisations aimed at improving conditions of work. The form these movements took reflected very much the rising tide of nationalism in Asia at that time.

Serious labour unrest was first manifested among Chinese workers in early 1920's in the face of the first severe price slump in the international market for rubber. I° Such strikes were repeated during the recession of the 1930's. These strikes became increasing|y widespread, coming to a head during the post Second World War depression when rice rations were drastically reduced. That these strikes were confined to one racial group was very much a result of objective circumstances.

To neutralise the threat posed by an over-concentration of Chinese workers in the early tin mines, the colonial administration consciously fostered a scheme to assist the immigration of Indians" into the then rapidly expanding plantation sector. II In 1913 the Malay Reservation Act was passed to forbid the sale of Malay peasant land to non-Malays. This was done after Europeans had already acquired nearly half of the agricultural and mining land (leaving the rest to be nearly equally divided up between the Malays and the non- Malays). 12 The Act was actually aimed at stabilising the Malay agricultural population and succeeded in freezing the process of proletarianisation of the Malay peasantry until one decade after Independence which was granted in 1957.

Thus were the three races confined separately in different sectors of the economy. In the handful of situations where the labour force was multi-racial in character, as in the Batu Arang coal mines, the strikes had involved more than one racial group. For the Vast majority of the Malays however, affiliation with the state apparatus and security forces naturally coloured the way they

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viewed these disturbances, mainly as an insurgency of alien Chinese. It was not surprising that Chinese membership in the Malayan Communist Party (MCP) formed in I~)30, was never below 90 per cent. I~

Because these strikes were confined in the main to the Chinese, they were not widespread enough to engender the industrial chaos that was hoped for by the MCP. However, under the pressure of hysterical commercial groups, n4 the British government responded in an ever more restrictive and authoritarian fashion. "Using the Essential Regulations Proclamation of the former British Military Administration, a number of Emergency measures were taken to give the police extraordinary powers of search, detention (without trial), curfew, the control of movement of persons and traffic, and reintroduced the death penalty for the simple, unlawful carrying of arms", ns The MCP and other " lef t" organisations including Malay nationalist organisations were banned in an indiscriminatory manner driving the militant unionists and left sympathisers underground. Restrictive employment regulations were easily enforced by twice amending the Trade Union Ordinance (an Enactment for the Registration and Control of Trade Unions, 1940). These were supplemented by among others, The Printing Presses Ordinance 0948) for the control of publications for public consumption; and enactments concerning detention, national registration, and deportation of "undesirable" elements. Up till today, the same coercive bureaucratic administrative legal framework set up by the colonialists to protect British interests and to deal with elements "subverting" state power, remains heavily reinforced and strengthened, not only to contain the communist threat but other voices of dissent. State defence took up nearly 25 per cent of the national expenditure budget for 1981-82. n6

Although the MCP's premature efforts to turn the genuine grievances of workers into revolutionary struggle failed, they marked the beginning of Emergency rule which lasted from 1948-1960. Manipulated by "the propaganda of violence and terror" used by the MCP and the legal coercive power of a bureaucratic state, the long-term interests of Malayan workers were totally ignored. ~7 The consequences of harsh government measures has been the almost complete destruction of any form of militant or independent labour movement. By the end of 1948, there remained 162 out of a previous total of 289 registered unions, n8 The composition of union members also changed drastically. From an almost 100 per cent Chinese membership prior to the Emergency, by 1950 trade union membership was made up of roughly 58 per cent Indians and 26 per cent Chinese. In 1947, the number of workers involved in strikes came up to 65,000; by 1960, it was only 4,600. n9 According to the Commissioner for Labour, "There is no doubt, however, that it has been fear of action under the Emergency Regulations which has in many cases prevented more active protest against retrenchment and wage reductions". 2° In 1949 when the World Federation of Trade Unions came under communist control, it was the state itself which encouraged and actively worked towards the building of an institution such as the British Trade Union Congress to combat this threat from international communism. 2n Aided both materially and morally by the state, the Malayan Trade Union Council (MTUC) w~is formed

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by the English educated (mainly Indians from the Civil Service) middle class in 1950. Out of the 107 members represented at the conference on the Trade Union Congress, 63 were from government and semi-government bodies." Thus the gulf between government workers and workers from the private sector which exists up till today has its roots in history. Also from then on, because state policy was aimed strictly at isolating the union movement from politics, trade unions came to play only a negligible role in political developments.

In view of the relative weakness of the colonial military set-up when Emergency was first declared, it is interesting to offer some explanations for the dismal failure of the MCP. Prom the start, the MCP was incapable of pursuing a nationalistic line hut was forced to adopt a China-oriented outlook. Since the Party was founded by immigrant Chinese who constituted the bulk of the early wage-working class, it was "natural" for the Party consistently to speak out in defence of Chinese language and Chinese culture. And in more recent times the Party tended to lean heavily towards China for leadership. The state was of course quick to exploit this situation. By judicious manipulation of data on MCP arrests, the state was very successful in reinforcing the "Chinese" image of the MCP. The practical consequence of this relatively chauvinistic stance was that they failed to win the support of the Malays who constituted about half the population and were also concentrated amongst the poor rural classes. At that time too, the larger majority of the Chinese population were only recently committed to settling in Malaya. Instead of working towards raising their consciousness of Malayan nationalism, the MCP made use of Chinese nationalism and anti-Japanese feelings to further their revolutionary aims. Until today the MCP's propaganda efforts do not systematically aim at correcting the Chinese attitude of cultural superiority nor at wiping out their stereotyped beliefs about the inherent "primitiveness" of Malay culture. A programme aimed at changing existing regimes can never succeed without the correct ideological underpinnings and solid backing of the masses. The MCP threat was not only used by the British to legitimate their protracted stay in Malaya. The MCP was also conveniently used by Western educated Malay elites and aristocrats to turn the initially ideologically diverse waves of Malay nationalism into a movement wholly concerned with fighting and demanding for Malay special rights. Ironically enough it was this "Chineseness" of the MCP which drove the British to accept a pro-Malay policy ~ for independent rule because in the last analysis Malay unrest would be more fatal to the stability of the social formation. In return, the British were able to get the full support and co- operation from the Malay elites in their fight against communism; but only slight liberalisation of non-Malay citizenship rights. The British then sought to organise a more pliable corps of English-speaking Chinese leaders in place of those who had fled to the jungles. It was intended that this group should share power with the English educated Malay and Indian leaders under the Alliance Party (made up of three component ethnic parties) to ensure the smooth running of the capitalist system after Independence.

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At Independence, development was carried out within the overall domination of imperial capital, with surplus being drained out of the country and out of the capitalist sectors for the benefit of monopoly enclaves rather than for full industrialisation of the economy, u The Malaysian economy was assured of very limited expansion of productive forces. As late as 1957, the Malaysian economy was still a typical colonial economy with a heavy bias towards primary commodity export. Official colonial policy had persistently discriminated against manufacturing and industrialisation in Malaya as this would pose a threat to British manufacturers (who depended on Malaya for cheap raw materials) and exporters (Malaya also served as a captive market for manufactured exports from the UK). Up till the First Malaya Plan (1956-1960) the primarily British-dominated plantation interests still held sway over the direction of economic planning and implementation, and it was not until the start of the Second Malaya Plan (1961-1965) that the state started "giving every reasonable encouragement to industrial e x p a n s i o n . . . " in the form of tax exemptions to pioneer companies and tariff protection as part of a package of incentives offered under the Investment Incentive Act 1968. 25 Between 1963 and 1968, import substitution was the most important growth source. However, this pro-manufacturing stance of the state had come a little too late, for Malaysia had already begun experiencing a steady worsening of its terms of trade as a result of over-dependence on primary commodity exports.

The moderate rate of expansion of the manufacturing sector was not only inadequate to meet rising demographic pressures but was erratic and swung very much in accordance to the rise and fall of capitalist cycles. Although economic indices recorded healthy growth rates for the whole economy, the trend was towards increasing inequalities and widespread poverty in the rural areas, z6 Due to the inherent class bias of the special rights provisions, pressures towards inequality were much more intensely felt within the Malay community which was also overwhelmingly rural in location. The Malay population therefore suffered doubly from the widening gap between rural and urban sectors 2~ as well as the widening class inequalities emanating from the special rights provisions. 2s

The policies of the state during this early period reflected those of the colonial administration. The state was expected to provide administrative and infrastructural services to promote economic development undertaken largely by British companies, a handful of the Chinese rich, and collaborators from the state. However, this required training and appointment of technically qualified local staff committed to the application of technocratic criteria to the determination of policy making which in time to come brought them into conflict with the dominant comprador fraction of the administration.

The forces of class dissatisfaction were easily realigned into racial hatred and utilised by the new fraction of bureaucratic Malay bourgeoisie in their struggle with their 'traditional' Malay, Chinese and foreign counterparts. Using the "general interests" of all Malays to advance their specific interests, this newly emergent fraction of the Malay bourgeois class was able to put forward its own hegemony as against that of Chinese and foreign capitalists as

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a necessary condition for continued stability of the social formation. The crisis peaked in the May 1969 racial riots, z9 This was the spark which initiated and legitimised the penetration of the state into various sectors of the economy.

Prior to the riots, state programmes were careful to avoid any interference with existing patterns of surplus value production by foreign and Chinese capitalists. For instance when the then Minister of Agriculture, Aziz lshak, proposed the establishment of co-operatives to take over the marketing of rice in the rural areas in order to combat exploitation by Chinese middlemen, he was transferred to the Health Ministry and subsequently resigned. The emphasis then was in appropriating part of the surplus to subsidise peasant agriculture and the special rights progress without interference with the drive for profits. Communal carnage and divestment of both Chinese and foreign capital after the riots saw a dramatic diminution in the role of these bourgeois who till then had dominated the trade, commerce and what little import- substitution industrialisation there was in the country. Even now productive entrepreneurship is still discouraged by the pre-emptive concentration of foreign firms and the availability of more profitable alternatives such as commodity trading and share market speculation. Given the vacuum, the Malaysian state had to play an active role of entrepreneurial support. The state intervened not only to restore economic stability but also to come up with a more viable pattern of accumulation and distribution of surplus to accommodate Malay petty bourgeois aspirations. A precondition for this task was the acquisition and combination of smaller companies to form more competitive and larger conglomerates; this could only be carried out with resources which were at the state's command; the basis for the creation of an internal market was agricultural development which by the way also took care of rural unrest. Hence the state in 'Malaysia in the decade of 1970 was characterised by extensive efforts at acquisitions and agricultural development. The state bureaucrats hope to replace foreign investors and the more successful local capitalists as the organisers of production and of course the appropriators of surplus.

II. The State and the Bourgeoisie

The policy of state acquisition of foreign and Chinese enterprise was at the forefront of nationalist agitations. This was embodied in the NEP (New Economic Policy) which seeks to create a viable Malay middle class and to ensure 30 per cent Malay participation in equity and employment in all sectors of the economy by 1990. More importantly the NEP should be viewed as a desperate attempt by the state effectively to neutralise the threat posed by the Malay masses and petty bourgeoisie. The NEP was the primary tool employed to solve two crucial problems: (l) the problem of rural poverty and the reproduction of labour power in rural areas and (2) the exclusion of the Malay masses from the capitalist sector. New job opportunities had to be found and quickly, for the increasingly large number of Malays forced out of stagnating rural areas and those trained under special rights schemes. The reason for this interventionist policy is quite obvious. As proved by the 1969 riots,

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unemployed Malays concentrated into cities and towns clearly constituted a threat to the stability of the social formation. In intevening to solve this problem the state was essentially helping to secure the conditions for the reproduction of capital against labour. The NEP, therefore, presented a solution to the crisis of the 1960's in this double sense.

Due to a combination of fortuitous circumstances, firstly, good commodity prices during the early 1970's and then the discovery of petroleum, the state was able to embark on an aggressive course of acquisition. Whereas in 1951 there were only 10 public agencies, by 1979 the number stood at 7013° Through these public agencies the state was able to acquire a major stake in all sectors of the Malaysian economy? j It was recently reported that the state had by 1981 already invested M$2.1 billion (US$954 million) in 674 companies. This represented 8.2 per cent of corporate equity) 2 By the end of 1980, the state had become the dominant investor in the private sector. Compared to the immediate post-colonial period, the power bloc had also been transformed, from the once largely British-owned tin mining and plantation interests to that of a more diversified sharing of interests amongst Japanese, Singaporean, American and local interests, including the state) 3 in the manufacturing sector which is now spearheading the rapid growth of the economy. The question that concerns us now is whether there is a substantial level of accumulation and independent industrialisation and the growth of some kind of initiative not dictated by international capitalists and whether this involves mobilisation among the local bourgeois class. It can be said that the proletarianisation of the Malay peasantry is now going full steam ahead although the processes of primitive accumulation have yet to be completed. Incorporation of the peasantry can only be undertaken within social formations where national industrial capitalism has become entrenched, so we can only say that in the Malaysian case, national capital has by now attained more leverage than previously. As would be shown in discussions below, a clear structure of hegemony by national capital cannot be said to have emerged yet.

The main legal weapons used to penetrate the private sector were the ICA (Industrial Co-ordination Act, May 1976) and the PDAA (Petroleum Development Amendment Act, 1974). ~s It would be instructive to follow the passage of these two enactments to understand the different interests of international capitalism and the politically powerful groups among the Malaysian petty bourgeoisie; the conflicting and complementary relations among them and to compare the specific policies of successive group dominating the state apparatus.

Petronas (The National Petroleum Corporation) was established in 1974 as the institutional means for securing state participation in the oil industry. It was headed by a hardtine nationalist ~who masterminded the takeover of Malaysia's largest corporations and tin mines. In 1974, the Petroleum Development (Amendment) Act was introduced to provide Petronas with powers to acquire broad control (through management shares, each to carry voting rights equivalent to that of 500 ordinary shares) of all companies in the downstream and marketing ends of the oil industry for very little outlay. To

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THE WESTMALA YSIAN CASE 267

register their opposition to these interventionist policies, EXXON the major US oil producing company in West Malaysia decided to suspend exploration and development activities, despite the bright outlook for oil discoveries. The deadlock lasted for a year and it took the personal intervention of the Prime Minister to reactivate the stalled oil negotiation. It became clear that the position taken by Petronas was not that of the dominant fraction in the government.

Malaysia had drastically to revise her national oil policy away from an emphasis on control, over future earnings. The most obnoxious section of the Act, the management shares clause was finally repealed in 1976. The multinationals won several other major concessions. The production-sharing ratio after cost recovery was changed from 80:20 to 70:30 in favour of the state. Malaysia's total share of oil production was decreased from 81.2 per cent to 68.4 per cent. The usual 50 per cent corporate tax was reduced to 45 per cent.

Although the Act was repugnant to international capitalism, for political reasons, it could not be repealed altogether. The nationalist stance could not be sustained any longer for a number of reasons, all stemming from the weakness and dependence of the Malaysian economy on outside sources for generation of internal developments. Petro-dollars were urgently needed to implement the NEP. This was especially true for poorer states such as Trengganu, which had already signed away their rights to Petronas 18 months earlier and were eager to get their share (5 per cent) of the proceeds from the oil profits. The states were understandably jealous of the power and control wielded by Petronas over mining issues which traditionally had been under state control. They would naturally have preferred to deal directly with foreign companies)S

The delay had also held up the natural gas liquefaction project (LNG) which was the cornerstone of Malaysia's petroleum development program. This would result in enormous losses to Petronas and its two foreign partners, Mitsubishi Corporation and Shell Gas B.V. (holding 65 per cent, 17.5 per cent and 17.5 per cent respectively of Malaysia LNG Sdn. Bhd.) At that time the national shipping line had ordered six LNG carriers with delivery date starting in 1979 in expectation of the LNG project and increased oil production. Further delays in negotiations would only mean laying up charges for the vessels since they could not readily be deployed elsewhere because of the current tanker glut. The amendments thus represented the result of a balance of interests of various groups, including various foreign capitalists, fractions of local bureaucrats and pressures from below.

At about the same time the business community was also presented with another controversial piece of legislation concerning the ICA which further aroused fears of intervention. The Act in the original form introduced in May 1976 sought to give the Minister of Trade unquestioned authority to grant, consider, or revoke manufacturing licences which would be mandatory for those intending to invest in manufacturing. It effectively meant that bureaucratic approval had to be obtained with regards to the nature, size and

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management of virtually all existing or proposed manufacturing enterprises/projects. The reaction of foreign and local Chinese capitalists can he gauged from the drastic drop in the rate of investments in subsequent years? 6 About 60 per cent of the decline in investment was traced to domestic investors, mainly the Chinese. The current world recession aggravated the downturn in investment. The state was caught in a bind. On the one hand it was impossible to repeal the Act without wrecking its credibility with its Malay electorate. On the other, the state was also worried about the consequences of not changing the Act. Following submissions by the private sector, the Act was amended twice.

Initially, all manufacturing projects had to win approval from the state but the Act now exempts from its provisions projects with shareholders' funds of less than M$250,000 (US$106,000) and those employing less than 25 full-time employees. Certain activities involving initial stages of processing (for example, natural rubber and palm oil) were also exempted. Whereas initially all companies were required to have Bumiputra participation, the ICA after amendments, exempts small companies with less than $500,000 in fixed assets from the need to comply. In view of the fact that the majority of our manufacturing enterprises are of small to medium size, this meant that in effect the state had taken the teeth out of the ICA, for almost 94 per cent of manufacturing industries would be out of its purview as of 1976. 37 This time it was the Deputy Prime Minister and his coterie who were bending over backwards to woo foreign and Chinese investors, assuring them that "the Government had taken another look at the Industrial Co-ordination Act and worked towards a more pragmatic and flexible approach to the NEP. In the meantime, it had also created additional investment opportunities". Foreign investors who contributed about one-fifth of the total authorised capital from 1970-78 were given a similar assurance when he became the Prime Minister in 1981, especially with regards to "the area of joint marketing and manufacture".3s

Moves to take majority ownership does not really constitute a challenge to continued Western access to national resources nor to continued high profits for them. In fact, most foreign companies had come in asking for minority participation in order to take advantage of government financing and our low interest rate. Although corporate capital had expressed its displeasure at Malaysia's initial burst of nationalistic tendencies, firms finally responded with alacrity to the government's policy of import-substitution industrialisation. Malaysia is attractive to transnationals basically because of higher returns to capital than obtainable on investment elsewhere, with low return to labour as a basic source of that profitability) 9

The Malaysian state has, in fact, become the entry point for these development projects. Many government policies run parallel to the plans of imperial capitalism. Expansion of ports, road, power telecommunications and industrial complexes all contribute to strengthen and stabilise the private sector. Moreover, development of such projects not only create demands for machinery plant equipment and agro-chemicals, they also increase Malaysia's

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orientation to Western standards. The state also plays an important ideological role in cloaking such investment projects with rhetoric about the need for aid and technological assistance based on shortages of capital and lack of technology.

Although the state had stressed that foreign participation was welcomed and only foreign domination was to be constrained, there was seemingly no concern about the technical and management contracts remaining with the minority shareholders. For instance, Pernas owns 71.4 per cent in Malaysia Mining Corporation (MCC) but has a smaller share of the company managing the MMC group. Similarly, Petronas has a certain amount of control over the oil industry but only on paper. As proved recently, due to the lack of competent personnel to monitor and effectively police the implementation of the oil production agreement, the government had to forgo millions in revenue. 4° The oil industry is actually totally dependent on foreign expertise as indicated by the fact that the master plan for oil development was commissioned to C. Itoh Co. of Japan. Pernas, the acquisitive arm of the government, has N.M. Rothschild & Sons (London Merchant Bankers) as its main advisors. With transfer pricing and an array of book-keeping mechanisms at their disposal, this ensured for the transnationals continued control with the added security of state participation. The current array of project possibilities shows that transnationals are clearly ready for such participation.

As we can see, after 1969 the offensive of international monopoly capital took place against a background of heightened struggle amongst bourgeois fractions and increasing political mobilisation of the working class, peasants and the fractions of the petty bourgeois class. Both the local and foreign bourgeoisie had competed eagerly with each other for access to state officials with the power to grant them licenses and government business. With the development of the state as a major market and producer, the comprador role had been easily assumed by public officials whose position allowed them to influence state spending and government policy. In these circumstances it was only to be expected that most state venture.s had wound up bankrupt after a time. +' Instability is endemic in the struggle among intermediaries for state patronage, '2 and in the competition among officials. Furthermore, tension had developed between public officials charged with the technical implementation of state capitalism and those who were at the political helm "3

The next section will disclose that despite the concessions that a nationalistic bureaucratic Malay bourgeoisie had extorted from foreign and Chinese capitalists," the state remained overwhelmingly bourgeois in character, with the interests of the bourgeoisie prevailing over those of the subordinate classes. State intervention can achieve a more independent line of development and therefore realise a higher rate of accumulation in the country. As discussions in the next section will show, while the absolute level of the poverty line may be raised in relative terms, the gap between capital and labour will be even wider. For in the process of struggling to the top, nationalist bureaucrats have to organise and rationalise for more effective exploitation of the masses in order

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270 JOURNAL OF C~NTEMPORAR Y ASIA

to enable them to fight their battles with foreign capital.

I lL The State and the Peasantry

The agricultural sector has been singled out for special mention because about two-thirds of the Malaysian labour force are employed in this sector. Precisely because of the preponderance of this sector in the Malaysian economy, the state has to intervene massively to arrest the spate of rural unrest which has occurred with increasing frequency after 1970. If a massive state presence in peasant agriculture was dictated by deteriorating conditions, the solutions chosen were much more related to struggles waged between fractions of the dominant class. Instead of attacking the structural causes of poverty 45 head on, and in the process alienating not only the class of rich landlords from whom the Malay bourgeois class draws its main support, the state prefersto adopt the World Bank type of solution to rural poverty which attempts mainly to raise productivity through imported technology viz. rubber replanting, state- managed land schemes and the so-called integrated approach to agricultural development, embracing the whole panapoly of agro-chemical, bio- technological and credit inputs channelled through numerous state agencies. These choices are preferred for reasons of political exigency, for the state creates in the process new classes dependent on it for access to all kinds of subsidies and allocations, hoping in this way to extend its own chances of survival.

While it cannot be denied that some poor farmers have genuinely benefited from improving productivity as a result of state intervention programs, ~ poor farmers as a group actually now hold less power vis-a-vis landlords and the state. Ultimately such state subsidies actually enhance the accumulative potential of the well-to-do peasants and bureaucrats and extend their areas of exploitation.

Improved overall productivity brought about by massive injections of state funds into the agricultural sector has actually exacerbated the problem of rural poverty, changing radically class relations in this sector. First, improved productivity was inevitably followed by increasing demand for agricultural land. Consequently both price of land and rentals have escalated upwards. This trend was further aggravated by the fact that rich Malay peasants and other members of the Malay bourgeois and petty bourgeois classes with access to loans subsidised by the state, inflated salaries, political connections and location in the state apparatus, can now easily purchase land from the depressed peasant. The Malay Reservation Act 1913 and the NEP make it that much easier for the better-off Malays to buy land from the farmer. 4~ As a result the GINI index for land concentration in heavily capitalised areas such as the Muda Scheme has increased from 0.354 to 0.383 to 0.4 in 1966, 1975 and 1976 respectively. 4e According to one highly placed technocrat from MADA, "Longer term concerns over tenant farmer displacement and increasing inequality in farm size distribution as mechanisation enables large scale operation also arise . . . . large scale mechanisation will further impoverish farmers who are already poor". 49 Not only has greater returns to land

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encouraged existing landlords to retain the land and work it for themselves using machines bought with subsidised credit, it also brought the incursion of Chinese mercantile capital into the traditional subsistence farming sector. All this has given rise to a Malay proletarian class which has no choice but to migrate to the towns to seek wage work.

Moreover, traditional obligations tying landlords to tenants no longer hold as transactions increasingly take on a cash value. It is now much more difficult for landlords to mobilise support for the ruling party. One indication of such disaffection is the mass demonstration of farmers in the Muds Scheme in January 1981, the strong support given to opposition Malay parties such as PAS, and the rise of government-labelled "deviationist" Muslim groups who refused to worship in government-built mosques (because they are considered "tidak sah" - - not valid) or to send their children to state schools, s°

Peasants who want access to improved means of production were now forced to place their labour directly under the organisational control and direction of the landlord and officers of state agencies. And insofar as these agencies can direct, energise and control production and marketing with greater efficiency they can raise the productivity of labour and ultimately raise the rate of surplus appropriated. By contrast, the peasants have lost effective possession of the means of production during the process of production and marketing. Settlers in state-run land schemes have complained that the authorities are "running the scheme with an iron f i s t . . . They realise they are not better off (and in fact worse off, due to isolation from the rest of the society by virtue of the remoteness of the schemes and lower income than the estate labourers due to heavy loan repayments) than the kuli (wage workers) on private plantations. ''s' It is no wonder then that "many settlers had misunderstood that payments from Felda to them were salaries", s2

In the state irrigation schemes too, schedules for land preparation, transplanting and harvesting are all determined by MADA and other state agencies. The farmer who has a direct interest in production has no say over water management and control. All the operations, from decision of how much water to discharge from the dam to regulation of the inlet operation, the weeding of the irrigation canals are done by labourers employed from the Drainage and Irrigation Department. With increasing mechanisation a farmer with a very small piece of land very aptly described himself as 'redundant' on his own farm for he now has to sell more of his labour power in order to pay for the fertilisers, insecticides, rental for tractor, increased water rates, land rentals, and so on. As peasants become more integrated into the cash economy, it is evident that "fuel shortages and rising fuel costs will be traumatic issues in heavily mechanised agriculture".s3

Approximately one decade after the implementation of the NEP, and after millions have been allocated to the agricultural sector, rural Malaysia is still in the doldrums. According to one government report, "the farmers outside the Muds are poverty-stricken by both relative and absolute measures". In fact, per capita GDP for Kedah and Perils (two of the poorer states) had declined from 67 per cent of the national average in 1970 to 56 per cent in 1975 to 54 per

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cent in 1978) 4 The picture in the urban sector is just as dismal. Around 50 per cent of workers in Malaysian Limited Companies earn less than $200 per month. 55 For the majority of the population who find it increasingly difficult to maintain a decent standard of living whether the corporate equity shares ratio of foreign, Malay and Chinese ownership will be realigned from the original 71:2:27 to the 40:30:30 formula by 1990 remains an academic question. Conditions after the 1969 riots had opened up ample opportunities for insertion into the power structure to challenge the existing economic order. But development projects conceived by a bourgeois state could only degenerate into just so many ways for petty bourgeois opportunists occuping the state apparatus to complete with other petty bourgeois interests.

Inadequacies of current policies are becoming clearer as time passes. With the majority of the agricultural population dependent upon fluctuating commodity prices, there is inherently a great deal of instability in the political and economic system. Mass protests and mobilisation became more frequent after the early 1970's. The first of these was the Baling demonstrations which occurred on 21 November 1974, when about 12,000 peasants took to the streets. It was the first time in 28 years that peasants had staged a march of that order. This was essentially and predominantly a confrontation between the Malays and their Malay government and was therefore the more significant, for till that time racial identification had more often than not prevented the crystallisation of class conflict. Students of all the universities held simultaneous demonstrations in sympathy with the protesting peasants and nearly caused the declaration of a state of emergency to be declared in the capital city. The immediate government reaction was to gazette The Universities and University Colleges Act (1974) which seeks to ban any student group from "doing anything which can be construed as expressing support, sympathy, or opposition to any political parties and trade unions".

Between 1978-1979, widespread settler unrest was reported in government- organised land schemes. These had resulted in rebellious acts such as burning of property, holding supervisers to random and even murder. 56 From September 1977 to the first quarter of 1978, the country was further shocked by events following the go slow action by 4,000 workers of the national carrier MAS. This resulted in the sacking of 11 members of the Union, suspension of 221, deregistration from union membership of 874, the detention of 22 union members under the Internal Security Act (1962) 5~ and the grounding of MAS flights. Since then the state had revamped existing labour laws to close any loopholes which allowed for worker's initiative and control? I At the same time that workers were registering their protest over the new amendments to the labour laws, approximately 10,000-15,000 rice farmers were mounting a stormy protest in the Muda Scheme for higher padi prices. This demonstration was effectively halted by the arrest of farmers, charging 92 in court, and then detaining them under the ISA. In September of the same year (1980), a series of wildcat strikes were reported in the Free Trade Zone of Bayan Lepas. 5~ The list of anti-capital actions can be expected to grow as the congruence between race and class diminishes and as the capitalist state continues to secure the

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conditions for the expansion of capital. It is difficult to say to what extent these militant acts of violence were communist-inspired but " the guerrillas are still active in the jungles . . . nearly 20 years after their armed revolt was crushed . . . . ,,60 So long as high prices for exports prevail and imports are controlled, the technological industrial dependency of the Malaysian economy has some viability. The recent trends o f falling oil palm and rubber prices and rising oil prices have certainly brought the old contradictions again in play. 6~

As the degree of race-class congruence diminishes, we can also expect the demands of the Malay masses to reflect more the problems of their objective circumstances. ~' However, lest some Marxist enthusiasts be fired with undue optimism, two crucial facts must be recognised. So far, left-wing parties have failed to make significant impact on the Malay masses. Secondly, wherever there have been popular movements with a wide basis, they have been populist movements lacking a clear theoretical analysis and revolutionary theory. On the whole, the peasants have remained passive and faceless, clinging to their old ways and superstitions. There is no revolutionary spark. Perhaps the failure of most Left propaganda can be traced to a large extent to the inability to deal seriously with one fundamental fact m the depth to which Islam has penetrated and still moulds the Malay consciousness at a level where rational explanation fails to leave any marks even where there is an objective basis for it. The only way to break through this alienation is from within the religious consciousness itself. Religion has long been utilised as an instrument to preserve the capitalist system of oppression since the pre-colonial era. The left should therefore work co-operatively with sections o f the l~slamic revivalist movement which are now particularly active in political conscientisation and the organisation o f the people, and which are now even struggling against the paralysing and reactionary manipulation of religion by the existing regime. However, if the Left are not to be viewed as mere opportunists, their insistence on the absolute character of a dialectical materialism - - demanding an all-out war on religion of any form - - needs to be examined in the light of the Malaysian context. But there are also questions plaguing the liberated Muslim. Is it legitimate from the Koranic point of view to locate the field o f action o f Muslims at the concrete level of social and political life?

Conclusion

We can safely conclude that while international capitalism and the national bourgeoisie have been able to expand their interests they have not been able to organise accumulation and redistribution o f surplus in a way that permits stable domination. This stems in large part from the extreme vulnerability of the Malaysian economy to externally precipitated crisis. It stems also from an unwillingness to challenge power structures inherited from the past colonial regime in order to build a state based on mobilised and conscious people. While state intervention has generated a higher rate of economic activity, it has also unleashed powerful forces which come readily to the surface when the many people suffering economic hardships are confronted with the flaunted privileges o f the few. In the rural areas, subsidies are sceptically viewed as

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"ma in politik saha ja" - - a political gambit . The state is therefore caught in a cleft stick. I f on the one hand it intervenes to stabilise the economy, the parallel production and marketing structures so produced will only bring temporary respite. Its inaccessibility to peasants, petty commodi ty producers and urban workers will ultimately lead to loud protests and frequent eruptions as shown during the decade of 1970's. On the other hand, if the state allows unbridled operations o f the laissez f a i r e principle, it is only leaving the way open for a repeat of the May 1969 riots.

I f we view the rise of the bureaucratic bourgeoisie as synonymous with increased competi t ion for markets and monopolist ic privileges, only then can we appreciate the fact when it comes to the crunch all capital owners share a common interest and a common cause in confronting the other classes. For whatever conflicts may beset the bureaucratic bourgeoisie, other local fractions o f capital and foreign capitalists, all are similarly driven to maximise profits and their own gain and therefore are interested in maintaining structures which maximise opportunities for expropriat ion which make labour available cheaply. It is ironic that government agencies set up to bolster the rights o f the Bumiputras - - the underprivileged communi ty - - are now turned against the Bumiputra masses, including the peasants organised by Felda, by MADA and the workers labouring in productive enterprises owned by the state. I f previously, British plantat ion owners were using cheap immigrant workers to run their holdings, today it is a fact that Malaysian and state-owned enterprises including Felda are employing cheap Indonesian immigrants to replace Malaysian workers who prefer to work in Singapore or the Middle East for a higher wage. For the people life is the same: difficult. Only the colour of the bureaucraft and capitalist has changed; their methods of mind control and manipulation' have become increasingly pervasive and sophisticated; their ability to physically repress and control the " reca lc i t ran t" rakyat has also been strengthened ?3

Footnotes I. Hence to referred to as Malaysia. 2. See. for instance. K.J. Ramam. Commtmalism and the Political Process. (Kuala Lumpur,

1965); C.H. Enloe, Multi-Ethnic Polttics: The Case o f Malaysia, Ph.D. Thesis (Berkeley, 1970); J. Nagata, Malaysian Mosaic, (Vancouver, 1980).

3. For instance, according to a recent US Embassy (Kuala Lumpur) report, Malaysia was cited as one of the most attractive countries in South-East Asia for trade and investment. Business Times (BT), (Kuala Lumpur), l 1.7.81.

4. Hugh Low, British Resident of Perak in 1878 (CO 809/18). 5. In 1911 the Malays formed only 1 per cent of the mining workers as compared to the

Chinese who constituted 95 per cent. Annual Report, Mines Department. On the other hand, the Indians constituted 77 per cent of the estate labour force whilst the Malays made up only 3 per cent in 1906. Annual Report, Federated Malay States, 1906o p.7. From T.G. Lira, 'Peasants and Their Agricultural Economy, in Colonial Malaya 1914-1941, (Kuala Lumpur, 1977), we learn that about 97 per cent of padi cultivators were Malays in 1931, p.Z48.

6. Letter by Secretary of State to the Governor of the Straits Settlements dated 12.9.1905. 7. So, it became "the policy of the government to direct planters to the coastal districts . . . .

leaving the inland less accessible districts practically free to miners . . . . it is most

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undesirable that cultivated land should be disturbed by mining". AnnualReport, Selungor, 1894, p.400.

8. In the Federated Malay States the exports of tin and tin ore constituted $78,000,000 (Straits Dollar) of the total exports of $80,600,000 while the export of rubber amounted to only about $2,000,000 as late as 1907. The situatiofi first reversed itself in 1915 when rubber provided more than $93,000,000 as compared with $61,000,000 for tin in a total export of $162,000,000. See, Dun J. Li, British Malaya, (New York, 1955), p.38.

9. In 1931 only 30 per cent of the Chinese were born either in Malaya or Singapore. The figure was 60 per cent for 1947 and more than 75 per cent by 1957. A. Short, The Communist Insurrection in Malaya 1948-60, London, 1974), p.427.

10. For information on strikes occurring during this period up to 1948, see K.W. Yea, '*The Communist Challenge in the Malayan Labour Scene, September 1936-March 1937", Journal o f the Malaysian Branch o f the Royal Asiatic Society (JMBRAS) 1976, Part il, Vol.49, and M.R. Stenson, Industrial Confiict in Malaya (Kuaia Lnmpur, 1977).

11. See for example, Despatch No.397 from Straits Settlements to Secretary of State, 24 September 1887, "1 am also anxious for political reasons that the great preponderance of the Chinese over any other races in these settlements, and to a less marked degree in some of the native states under our administration, should be counter-baianced as much as possible by the influx of Indian and other nationalities".

12. W.R. Roff, The Origins o f Malay Nationalism (Kuaia Lumpur, 1974), p.208. 13. A. Short, op.cit, p. 19. A more recent report in the Far Eastern Economic Review, Hang

Kong (FEER) gave the breakdown as 70 per cent Chinese, 5 per cent Maiays, and the rest as Thais, (6.3.81) p.31.

14. Not all sectors of the capitalist class welcomed the immediate tightening of control over the labour force. As the mining sector was more able to meet wage demands and price decline by mechanisation, they did not experience such widespread demonstration of dissatisfaction. The rubber sector on the other hand, was not only inaccessible to mechanisation due to its inherent nature; but because of its shortsighted policy of giving out high dividends during booms was also incapable of meeting a recession. They were therefore amongst the fraction most vociferous in pressing for emergency rule as their workers had the most genuine reasons to 8o on strike. The colonial administration was hesitant because it did not have the manpower to face a complete showdown with militant workers. A. Short, op.cit., Ch.3. Moreover some of the new administrators sent out by the Labour government after the Second World War were of a liberal "bent" and were not totally in sympathy with "conservative" commercial interests. M. Stenson, op.cit., p.158.

15. A. Short, pp.141-142. 16. Radio Malaysia, News Bulletin, 31.7.1981. 17. M. Stenson, op.cit., p.234. 18. Malaysia Official Year Book, 1963. 19. Ibid. 20. Commissioner for Labour, Singapore, Review o f Labour Situation, January, 1949. 21. P. Arudsothy, The Labour Force in a Dual Economy, Ph.D. Thesis (University of

Glasgow, 1968). 22. Ibid., p.315. 23. These special rights for the Malays and other indigenous people (Bumpiputras) are

enshrined in Article 153 of the FederatiOn of Malaya constitution, 1957. In practice, Bumiputras were given preference in the issue of business licenses, civil service posts, scholarships, corporate equity, etc. Conversely, European business and government interests' opposition to liberalising citizenship rights to the non-Malays was based on the fact that this might play into the hands of the MCP. M. Stenson, op.cit., p.176.

24. The government's own estimation of the capital outflow for 1976-78 was $2.45 billion (Malaysian rin88it), FEER, 13.4.1979. The GDP for 1978 (at factor cost) was $18,964 million (Malaysian ringgit), Mid-Term Review of the Third Malaysia Plan 1976-80.

25. The policy measures taken for stimulation of industrial development were: 1. Tax incentives (concessions) for "pioneer companies" for a specified number of years

under the Pioneer Ordinance (1958) and the Pioneer Industries Act (1965).

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26.

27.

28.

29.

30. 31.

2. Tariff protection as stressed by the World Bank Mission Report on the Economic Development of Malaya (Baltimore, 1955) was only vigorously implemented after 1967/68, considered as the period in which Malaysia approached "the familiar pattern of a medium to high protected developing country". See, L. Hoffmann and S.E. Tan, Industrial Growth, Employment, and Foreign Investment in Peninsular Malaysia (Kuala Lumpur, 1980), p.55. Pressures from Plantation Interests: to prevent increase in cost of living; and Import Agency houses: fears of loss of business were strong enough to delay the implementation of tariff protecton although the policy of tax concessions was a more expensive one. Ibid., Chapt.3.

3. Other incentives included Labour Utilisation Relief (1971) to encourage the growth of labour intensive industries and locational incentives to disperse industries into the rural backwaters.

The increase of the lowest 40 percentile decreased from M$86 per month in 1957/58 to M$75 per month in 1970. D.R. Snodgrass, "The Fiscal System as an Income Redistributer in West Malaysia", Public Finance, No.l, 1974, p.58. Approximately 50 per cent of all households in Malaysia were living under the government designated poverty line and 86 per cent of all households in poverty were from the rural areas. The Third Malaysia Plan 1976-80, p.161. According to D.R. Snodgrass, Inequality and Economic Development in Malaysia, (Kuala Lumpur, 1980), the poverty line as defined by the government was held constant at M$120 per month from 1957/58 to 1970, p.80. The GDP was growing at rates of 7.3 per cent and 8.5 per cent during 1971-75 and 1976-80 respectively, Bank Negara Malaysia, Money and Banking, (Kuala Lumpur, 1979). in 1975, 82 per cent of the Malay population were found in rural areas (gazetted areas with populations less than 10,000). The comparable figure for the Chinese was 49.2 per cent. The racial breakdown for Malays, Chinese, Indians and Others on the whole was 53 per cent, 35.6 per cent, 10.6 per cent, and 0.8 per cent respectively. Urban mean income is approximately 2.2 times that of rural mean income calculated according to figures given in the Mid-Term Review of the Third Malaysia Plan (1976-80). i. Sha'ari and R. Mat Zaln, Agihan Pendapatan di Kalangan Orang Melayu di Semenanjung Malaysia -- Satu penilaian. Paper presented to the Bumiputra Economic Convention at Universiti Kebangsaan Malaysia, Bangl, shows that after 1970 (when the implementation of special rights was speeded up) the Gini Index of concentration for the Malay community showed a more unequal distribution of income relative to the rest of the Malaysian population (Kuala Lumpur, 1978). Emergency rule was declared immediately following the riots and rule by decree lasted for two years. A weakened Parliament was restored by February 1971. Reported in BT, 18.1.1980, p.24. Pernas (The National Corporation) and Bumiputra Investment Fund (a unit trust fund launched by the state for the Bumiputras) owned approximately 27 per cent of Sime Darby's equity shares (the largest multinational in Asia and the largest plantation conglomerate in Malaysia). The powerful Armed Forces Fund (Tebung Angkatan Tentera) together with Felda (Federal Land Development Authority) controls 55 per cent of Boustead Holdings another of Malaysia's largest plantation conglomerates, BT (24.7.1978), p.6. Besides, the state through Felda, Risda (Rubber Industry Smallholder's Development Authority) and Felcra (state sponsored fringe alienation schemes) also controlled in various degrees about 42 per cent of total rubber acreage. Computed from Rubber Statistics Handbook, Malaysia, Dept. of Statistics for 1976 (1979) p.25. In the tin mining sector, Pernas, with Chartered Consolidated formed The Malaysian Mining Corporation, which when merged with Malayan Tin Dredging (impending) will control about half of the worldts tin output, BT(13.6.81) p. 1. The state and Bumiputra individuals (negligible) control two-thirds of total banking investments, BT(9.6.81) p.20. On various occasions the state had taken over control of banks as a result of some crisis or other. For instance, in 1971, the state acquired 49.6 per cent of Malaysian Banking Bhd. after a rights issue by that company had collapsed. Again in 1976, the state took over 30 per cent of United Malayan Banking Corporation (UMBC) as a result of growing concern about the bank's management and quality of its loan portfolio. Petronas (The National Petroleum

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Corporation) had contracted out explorations and developments of the petroleum industry to multinationals such as Exxon and Shell on a production-sharing basis at a 83.5-16.5 ratio in the government's favour. See, FEER Asia Yearbook 19"/9, p.244. Pernas also has interests in large-scale international trading. For instance, Pernas now controls trade with the People's Republic of China. Several State Economic Development Corporations (SEDC) also used their preferred position to enter the trading field.

32. FEER, (23.1.81), p.52. 33. See Annual Report, Malaysian Industrial Development Authority (MIDA), various yeats. 34. Developments related to the passing of the ICA and the PDAA are collated from FEER

(7.4.78, !.!0.76, 16.6.78, 13.1.78, 29.8.75); NST (10.10.79); BT (29.8.79); and FEER (29.10.76, 12.12.76, 13.4.79, 23.3.79) respectively.

35. Many examples of how state governments fight fiercely to retain their indei~,~lent powers can be cited. We will only cite two recent cases. The first concerns the protracted wrangling that occurred over exploitation of the massive Kuala Langat tin deposit in Seiangor state. It was reported that the Chief Minister of Selangor "exploded" when he received the letter from MMC (controlled by Federal Agency Pernas) Chairman proposing involvement of MMC in Kuala Langat. This was seen as a direct pressure from the Central Government in general and Tengku Razaleigh in particular. These forces within the federal government had found direct agreement between the Selangor government and Britain's Charter Consolidated unpalatable. On the part of the states, memories were still strong of the way federal government had made petroleum a national resource, from which an individual state could reap only 10 per cent in royalty and taxes from within its boundaries. But finally the state had to cave in for the controlling fraction of bureaucrats using nationalist appeals insisted that a state government should not show preference of doing business with a foreigner over a federal agency, See details in FEER (1.8.80z7 pp.100-103. The second case depicts the furor caused when the Chief Minister of Johore State publicly denounced part of the Auditor General's Report for 1977 as a "piece from Suara Revolusl Komunis (Voice of the Malayan Communist Party)". The UMNO Youth (Johore) leader Datuk Abdul Rahman championed the Chief Minister by saying that "we are the political masters of the state and we decide on policy". The Star (18.12.80) p.9. It was dear that the Central government was behind the move to bring down this recalcitrant Chief Minister. The details of this case can be gleaned from Watan (19.12.80) p.12-13.

36. FEER (13.1.78), p.44. 37. Calculated from Census of Manufacturing Industries, Peninsular Malaysia, 1973, (Kuala

Lumpur, undated) p. 19. 38. Reported in NST(IO.IO.79). The Deputy Prime Minister was reported by the BT(29.8.79)

to have told a gathering of Chinese businessmen that the government had among other things "made amendments to relevant legislation to create a conducive c l i m a t e . . . Those are some of the concessions given by the government in order to accommodate the views of the Chinese business community and others". 15.1. See also BT(13.5.81) and BT(|7.7.81) p. l .

39. A good indication is MIDA's director's (Singapore) expectation that Malaysia can expect an increased flow of investment from Singapore-based firms following the Singapore government's policy of increasing wages and developing capital intensi~[e industries. BT (10.7.81) p.I. The wage differential between parent company and their local subsidiary is about 10:1 for American companies, 10:2.5 for European enterprises and 10:5 for Japanese enterprises, a reflection of the strength of multinationals of various nationalities in Singapore. The argument that low wages form a dominant basis of multinationals profit is underlined by Japanese threat to divert their investments when Singapore instituted her higher wages policy. See BT(13.3.81) p.l .

40. The details of these losses were exposed by an ex-employer of Exxon for whatever reasons. See FEER (31.10.80) p.67, 68.

41. If we take only the five integrated sugar projects which have been promoted in Malaysia under the sponsorship and participation of the public sector and which in terms of their capital investment ranks among the really large projects that have ever been undertaken in the country, with capital investments amounting to around M$100 million per complex, we

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see that only one is still surviving. See R. Thillainathan, "Discriminatory Allocation of Public Expenditure Benefits for Reducing Inter-Racial Inequality in Malaysia m An Evaluation", Review of Indonesian and Malayan Affairs (1979, Voi.13), gives an assessment for the failure of two of these projects. Bribery, corruption and wrong estimations of project viability are some of the reasons cited. The Bank Rakyat (Peoples' Bank) debacle stands out prominently as a reminder of how the lack of public accountability on the part of the state agencies can easily lead to malpractices and colossal losses. A White Paper on Bank Rakyat and the accompanying report made by the international accountancy firms of Price Waterhouse constitute a catalogue of dishonesty, mismanagement and sheer ignorance on the part of the bank officials. According to FEER (13.7.79), p.69-72, "Even more disturbing is the extent to which pillars of the establishment are represented in the catalogue of bad loans". See also BY (25.6.79). Failures of state agencies are too numerous to list in detail. But the following references provide detailed information on this subject. The Star (29.4.80) p.4, (23.12.80) p.3, (9.10.80) p.5; BT(29.8.80) p.20 and (7.10.80) p.20; and NST(7.10.80) p.8. Certain state agencies on the verge of bankruptcy had to be placed under the management of the private sector. "See BT (21.7.81) p.20. Recent revelations by the Auditor-General provide all the necessary details. Lapuran Ketua Odito Kerajaan Persekutuan, 1977.

42. Competition for positions are so intense that ruling party leaders had to issue frequent warnings to party members who "jostle and fight for posts". See NST (10.5.80) p a l . Besides "conflicts and rows occurring" in UMNO (United Malays National Organisation, the Malay component party in the ruling Alliance) meetings (see NST20.5080, p.17), party stalwarts had complained about poison or "Flying letters" (see The Star 14.5.80, p.5, NST I 1.5.80, p.6); Walkouts (see The Star 26.5.80, p.2); "Buying of votes to get positions" in the party (see NST20.5.80, p.17); Members using UMNO as a "get-rich-quick club" (see NST30.11.80, p.5) and members who "behave like gangsters" (see NSTS.5.80, pa l ) . In addition the ISA ! 960 (Internal Security Act), the Anti-Corruption Bureau and the racialist stance were used against opponents in the party. See BY(13.3.81) p.20, which detailed how changes to the Societies Act (1981) would bar all persons convicted of criminal offences from seeking or holding office in any societies, including political parties. This is one of the many steps supposedly to have been taken including pressing corruption charges - - to prevent Datuk Harun from challenging the incumbent ruling fraction of the bureaucrat bourgeois class. The ISA was used against Abdullah Ahmed (then Deputy Minister of Science and Technology) and Abdullah Majid (then Deputy Minister of Labour and Manpower), young party usurpers who were accused of barring party veterans from access to the Prime Minister to influence decisions, or to obtain benefits for their clients and constituencies. This was done to clear the way for the resurgence of the old guards. See FEER (26.11.76) for details on the succession struggle. The accession of the New Prime Minister Was followed by the demotion of the Home Minister to the Foreign Affairs Ministry in the recent cabinet reshuffle. Watan 24.7.81, p.3 after which we witness the release of 21 "high status" political detainees (including MPs from opposition parties and a former senior government officer) immediately after his removal. See The Star, Berita Harian, 31.7.81, p. l .

43. In the author's own experience it was common for technocrats to complain about politicians meddling with their work. According to some Felda managers it was difficult for them to discipline the settlers as they would more often than not appeal to politicians to intercede for them. This was natural as a place in a Felda scheme very often represented a reward for political support. The author had also heard complaints from officials of MADA (the Muda Agricultural Development Authority) that the interference of politicians constituted one of tile difficulties encountered in collecting repayments for loans to farmers. Extension officers are now not surprised by the "erratic" behaviour of politicians who would demand distribution of subsidies such as fertilisers or chickens on the eve of elections.

44. The formula in equity participation for the foreign, Malay and Chinese bourgeoisie respectively are stipulated clearly in the Third Malaysia Plan (op.cit.). Collusion between fractions of the bourgeois is endemic. Due to their inexperience or lack of time many of

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these Malay members of the bourgeois class had to contract out their share of capital ventures to Chinese capitalists; thus reaping only a rentier profit. For instance almost 100 per cent of logging licenses had gone to bumiputras with political connections; these Malays had "sold" their license to non-Malays. BT(I !.2.80) p.20 and The Star (!1.2.80). Two- thirds of bumiputra rice dealers are either "inactive in doing business the 'All Baba style" (the Malay partner remains only as frontmen), NST (27.1.80) p.5. For comments on 'Aft Babas' of the building trade, see NST (10.5.80) p.10; The Star (2.3.80) p.7, contains warning by the Finance Minister to Malays who pawned their license to the Chinese for a 'Commission'. That this is political rhetoric is indicated by the fact that at least in the transport sector no licenses have been withdrawn for this reason. NSTo 9.7.81, p.4.

Depending on their economic strength, foreign bourgeois elements also differ in their ability to 'combat' nationalistic demands. According to A.R. Negandi, Quest for Surviwsl and Growth (New York, 1979), Japanese and West Europeans are more willing to comply with most government regulations. American companies however, are more concerned with operational efficiency and are therefore more reluctant to waste time maintaining a harmonious relationship with local bourgeoisie. According to one director of a US Multinational operating in Malaysia, this little country and their little people need help but they must be reasonable, otherwise we will get out of here".

45. According to the Director-General of the Farmers' Organisation Authority the problem of land shortage was ~the major contributing cause of rural proverty in Malaysia. See BT (8.8.78) p.6. This was recently confirmed by the Secretary General of the Ministry of Agriculture in the BT (28.8.80) p.l . See also, International Bank for Reconstruction and Development, Problems of Rural Poverty in Malaysia. A Report prepared for FAO/World Bank Co-operative Program (Washington, 19"/5). It was reported that less than 50 per cent of Malaysian farmers own land; 80 per cent of padi (rice) cultivators own less th.an 5 acres and the average size of land owned by rubber tappers is around 6.4 acres. See A.H. Ahmed Sarji, Farmers' Co-operative (Kuala Lumpur, 1977) p.4.

46. For instance it was reported that in the Muda Irrigation Project (a show piece of Malaysian Agricultural Development), "paddy production which was 266,000 tons in 1965 increased to 678,000 tons in 1974 and is expected to reach 718,000 tons by 1980". IBRD "Malaysia Loan 434-MA: Muda Irrigation Scheme Completion Report, No. 795-MA.

47. Land designated as part of a Malay Reserve could only be sold to a Malay. in addition only a limited number of agencies such as Bank Bumiputra and Bank Pertanian could hold Malay Reservation land as collateral for loans. For' these reasons land in Malay Reservations could usually be bought below the prevailing market price. See D. Wong, Tenure and Land Dealings in the Malay States (Singapore, 1974). it was reported by Z. lsmail "Economic and Social Aspects of Padi Production. Paper for Seminar on Economics, Development and the Consumer (Penang, 1980) that urban classes such as Chinese rice millers and Malay bureaucratic elites were becoming gentlemen farmers in the Muda area. See F. Halim, 'The Differentiation of the Peasantry in West Malaysia' in The Journal of Contemporary Asia, Vol. 10, No.4, 1980.

In the kampongs studied we only saw the acquisitions of petty government servants such as teachers, and clerks who either were located in the village itself or had close relatives who acted as agents buying the land for them. The bourgeoisie however, have other more lucrative forms of revenue. See FEER (6.10.78), which detailed how UMNO officials and influential Malays line up for shares allotted to the Malays at below market price. See, also Mokhzani bin A. Rahim, Credit in a Malay Peasant Economy, Ph.D. Thesis (School of Oriental and African Studies, London, 1973), who commented that state subsidised credit was more often than not taken up by the well-to-do to buy out the land of the poor.

57. For the more vivid details, see FEER (4.5.78) pp.26-27 and (23.2.79) p. 15; NST(3.9.79 and 30.8.79); and The Star (4.5.79 and 31.1.80). Despite these labour problems MAS made a record profit of M$42.66 million for the year ending 31 March 1979. See also Suara Buruh (newsletter of the Malaysian Trade Union Congress, MTUC), (May, 1979).

58. In brief, the new amendments to the Trade Union Ordinance (1959) and the Industrial Relation Act (1967) would: a. Prohibit workers from holding strikes on questions of dismissal, termination of

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employment and reinstatement; b. Lengthen the three-year restriction of pioneer status employees to unionise to an

indefinite period; c. Control affiliation of local unions with international labour organisations; d. Empower the Minister of Labour to ban any union without giving reasons and his

decisions could not be challenged by any court and; e. Disallow union members from holding positions in political parties;

See The Star, 31 January, 28 February, 5 and 6 March, 1980; also refer to BT, 27 January and i March ! 980 for details.

59. Workers here were not permitted to form unions. In this area the turnover rate was between 33 per cent t o 89 per cent, see NST (25.9.80 and 28.9.80); The Star (26.9.80) and BT (28.8.80) p.20.

60. NST, 22.11.1979. In 1955, it was estimated that MCP guerrillas numbered no more than 3,000. A. Short, op.cit., p.472. A more recent estimate is 2,512 guerrillas FEER (6.3.81) p.30. in 1957, the population was approximately 6.3 million and in 1980 the estimate was approximately i l .8 million. Monthly Statistical Bulletin of West Malaysia (Kuala Lumpur), various issues.

61. An attempt by rubber smallholders and tappers to stage a demonstration in Sik (Kedah) was called off when the police countered by organising countless roadblocks, and patrols by FRU personnel from Penang and members of the Police Field Force. NST 29.7.81.

62. By 1980, 79 per cent of the Malays were found in rural areas comparable figures for the Chinese and the general population were 46 per cent and 65 per cent respectively. (Fourth Malaysia Plan, p.224). See the call by the then Deputy Prime Minister to UMNO branches to stop criticising without basis if they want to continue attracting investors to this country. He also alleged that some of these "people who championed the workers' causes" had adopted unlawful or destructive methods to "sabotage and scare the management". BT 15.6.81, p . l .

63. Besides the ISA 1960 (Revised 1972) and the Essential (Security Cases) Amendment Regulations 1975, the state still required wide powers to ensure the security of the nation. Recently, other harsh laws such as the Amendments to the Societies Act 1966 (to restrict public protest against government bodies by non-political societies) Were passed and the Constitution changed again (it has already been changed 23 times) to give the King more freedom to declare an emergency. See FEER 24.4.81 for details. The Star (10.4.81) registered the protests of the Bar Council which challenged the Home Minister to a public debate on the amendments. The state is also considering introducing The Broadcasting Act (BT ! 3.6.8 i) to further tighten its monopoly on TV and radio transmission. At present the major dailies are owned by component parties of the ruling Alliance.

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Capital, labour and the state: The West Malaysian case

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