Private Sector Participation in Affirmative Action in Malaysia: - Asian ...

that adversely affected export driven economies such as Malaysia, the government
liberalized foreign equity ownership in manufacturing and amended the Industrial
Coordination Act to make it easier for manufacturers to start new projects, expand their
capacity and diversify their products. It introduced Investment Incentives Act in May
1986 to provide further tax incentives to the manufacturing, agriculture and tourism
sectors. By the end of September 1986, the government, in fact, walked two steps further
and granted full ownership to foreign companies that exported 80 per cent or more of
their products. This was a significant deviation from the NEP (Kim, 1997).
Further, the government under Mahathir announced that foreign investments undertaken
between October 1985 and December 1990 under these conditions, would not be required
to restructure their equity at any time. Similarly, in 1997, the Mahathir government in
response worst financial crisis kept ICA restrictions in abeyance particularly in the case
of foreign investment. However, to keep the Bumiputera constituency happy, the
leadership continued to subject private sector players to restructuring rules and
restrictions in employment. So in a sense, the leadership tried to balance between two
competing interest groups: foreign investors who would create growth and new
employment and Malay population. Even in the case of non-Malays particularly the
Chinese, despite number of restrictions on their business, it did not follow the principle of
paying robbing Peter to pay Paul and Chinese continued to benefit from state intervention
as well 10 . The Chinese continued to benefit from growing economy and in many cases
officials overlooked rules so as to keep them happy 11 .
Private Sector’s Participation in Affirmative Action
What were the responses from the private sector to NEP led affirmative action which
talked about employment and corporate ownership restructuring that heavily favoured
10 Despite many of the disincentives, overwhelming majority of Chinese businessmen made profits. For
instance, non-Malays (brute majority of them were Chinese) shareholding actually rose from 34.3 percent
in 1970 to 40.1 percent in 1980 and 46.2 percent (44.9 owned by Chinese) in 1990 (Fourth Malaysia Plan).
In every sense, Chinese made major economic gains under the NEP regime. Fact is Malay ownership
growth happened largely at the cost of foreign companies mainly British (63.3 per cent of share capital in
1970 to 25.1 in 1990).
11 Interview with a senior representative of Chinese business chamber.
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