Affirmative Action in Private Sector in Malaysia - Observer Research ...

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Puthucheary, M. (1978). The politics of administration: The Malaysian experience. Kuala Lumpur, Malaysia: Oxford University Press. Ratuva, Steven (2002), Affirmative action and Good Governance: Some Lessons for Vanuatu,a paper presented at “Vanuatu Governance Update – 2002, University of South Pacific, Vanuatu. Sabbagh, Daniel (2004): Affirmative Action Policies: An International Perspective, Occasional Paper for UNDP Report, 2004 Samad, M Fazilah Binti Abdul, 2003, Bumiputeras in Corporate Malaysia: Three Decades of performance, 1970-2000, in Edmund Terence Gomez and Robert Stephens (edited) The State, Economic Development and Ethnic Coexistence in Malaysia and New Zealand, CEDER. Searle, Peter. 1999. The Riddle of Malaysian Capitalism: Rent Seekers or real Capitalism?, NSW, Australia: Allen and Unwin. Shamsul, A.B. 1986. From British to Bumiputera Rule: Local Politics and Rural Development in Peninsular Malaysia. Singapore: ISEAS. Snodgrass, D.R. 1980. Inequality and Economic Development in Malaysia, Kuala Lumpur: Oxford University Press. Tan, Boon Kean, 1993, Role of the Construction Sector in National Development: Malaysia, Ph.D thesis, University of Malaya. Thorat, Sukhadeo and Nidhi Sadana, 2009. “Caste and Ownership of Private Enterprises”, Economic and Political Weekly, Vol. XLIV, No.23. Yusof, Zainal Aznam and Deepak Bhattasali, 2009. “Economic Growth and Development in Malaysia: Policy Making and leadership”. Commission on Growth and Development, World Bank Working Paper No.27. 1 Broadly conceived, affirmative action is a term that refers to measures or practices that seek to eliminate discriminatory practices by permitting the consideration of race, ethnicity, sex, or national origin in the availability of opportunity for a class of qualified individuals that have been the victims of historical, actual, or recurring discrimination (for details see: Sabbagh, 2004) 2 To elaborate little further, for instance the Malaysian experience can provide useful insights on implementability of ‘diversity’ in private sector workforce, the linkages between diversity and incentives and aspects of reconciliation between the goals of private sector (merit and efficiency) and government’s priorities of equity and inclusion. Some of these issues have been recently raised by the government appointed Sachar Committee on Minorities in India. 3 J.S. Furnivall, a senior British administrator-scholar called Malayan society a plural society. He famously put it the 1930s, “each group holds by its own religion, its own culture and language, its own ideas and ways. As individuals they meet, but only in the market place, in buying and selling. There is a plural society, with different sections of the community living side by side, but separately, within the same political unit”. (for mere details, see J.S. Furnivall, 1938). . 4 For instance, in 1911 Malays constituted 59 per cent of the population of what is now known as Peninsular Malaysia and non-Malay 40 per cent. By 1931 there was a 50:50 even balance between the indigenous Malay and the migrant populations, a situation that continued until 1957. The fact is the formation of Malaysia in 1963 with Singapore joining the new federation had in fact made ethnic Malays a minority for a brief period until Singapore was expelled from Malaysia in 1965 (Searle, 1999).
5 The concept of Malay Special Right originated with British colonial rule in the Federated Malay States in 1874. The key aim behind such idea is that even though colonialism was imposed on Malaya, the myth that Malays were still the rightful owners of the country should, and could, be maintained by granting them special status and ‘protection’. There would be two layers of ‘protection’: the Malay rulers who would continue to ‘protect’ their Malay subjects, and in turn, the British colonial government which would continue to ‘protect’ the interests of the Malay rulers and the population from being overrun by non- Malays. The ‘protection’ layer were imposed in key economic domains such as land, education and employment. For example, in 1913, the colonial government passed Malay Reservation Enactment which reserved certain areas fro Malay ownership only and prohibited non-Malays from holding mortgages on Malay Reservation Land. Similarly, to mollify Malay aristocracy, Malays were given preference in Malaysian Administrative Service (MAS) and political positions (for details see: Lim, 1985). 6 At the top were the colonial government and British merchant capital. The Malay aristocracy and royalty formed an adjunct to that apex of British political and commercial power. The Chinese were in the middle as compradors and mercantile class. Forming the base of the society were the Malay peasantry and migrant wage labour (see: Searle 1999). 7 Snodgrass (1980), however, saw it differently. To him apart from colonial policy which discouraged Malays to take on modern sector, cultural attitudes of Malay too played a role in their entry into modern sector. 8 With active British encouragement of forming political organizations on ethnic lines, the post- Independence government formation saw key ethnic groups forming an Alliance to control political power. The Alliance that captured political power in 1957 were led by UMNO; key political organ of Malays, the Chinese by Malaysia Chinese Association (MCA) and Indians by Malaysian Indian Congress (MIC). The Alliance comprised of these three ethnic groups changed its name to the Barison Nasional (National Front) after including some of the opposition parties in the post-1969 period. However, there were many Malays, Chinese and Indians who remained outside these ethnic formations and had their support for other political formations. But the above coalition continues to hold political powers in Malaysia ever since the country got its Independence (see: Crouch, 2001; Searle,1999). 9 The consistently positive and tolerant attitude of the newly independent Malaysian government to a large foreign stake in economy was largely because of Malaysia’s heavy dependence on Britain for military defence in the 1960s in the face of growing threats from communist insurgency and likely threats posed from Indonesia (see: Jesudason 1990). 10 The 1969 ethnic riot was taken as a blessing in disguise for many Malays particularly the politicians and elites. It provided them enormous opportunity to push forward nationalist economic agenda which could not be carried out in letter and spirit in the previous decades. With an avid agenda of maintaining “Malay hegemony”, the nationalists belonging to UMNO tightened various legislations and introduced new ones such as Sedition Act 1970 that prohibited discussion around “Malay special rights”, Malay language, religion etc (see: Shamsul, 1986) 11 The NEP can said to be the product of the efforts of Tun Razak, who was Prime Minister at that time, and his “back room boys” called ‘Young Turks’ comprised of Malay bureaucrats, academics, technocrats and several others who were responsible for organization Bumiputera Economic Congress. Among them the most famous being Mahathir Mohammad who penned “The Malay Dilemma”, an explosive book that went on analyzing Maly economic backwardness vis-à-vis Chinese rise and solutions to them. 12 The FIC was enacted in 1974 with the goals of monitoring and controlling ‘foreign’ takeovers of Malaysian companies or assets to ensure that they conformed with NEP objectives. With high ranking officials on board, FIC was one of the lethal instruments for enforcing the NEP requirements, particularly getting large public and non-public companies to restructure their equity. Firms that ignored the FIC were subjected to bureaucratic obstructions. 13 The CIC is another lethal instrument to aid in regulation and restructuring of the corporate sector. All public companies have to comply with CIC’s requirement of 30 per cent equity for Bumiputeras if they seek approval for changes in their equity structure or wish to apply for a public listing (see Searle, 1999). 14 Under NEP, the banks were directed to increase their lending to Bumiputras. While in August of 1974, banks were required to provide at least 12 per cent of their loans to Malays, this was enhanced to 20 per cent in October, 1976. Consequence of this decision, bank credit to Bumiputera rose from RM 149 million in 1971 to RM4, 780 million (20.6 per cent) in 1980. Commercial banks which were lending to the tune of 3 per cent of their total loans to small enterprises, were asked to raise it to 10 per cent by 1975. In fact, the
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