Financialization of Malaysian Citizens

A thesis submitted to the University of Manchester for the degree of Doctor of Philosophy in the Faculty of Humanities

2018

Syahirah Abdul Rahman Alliance Manchester Business School People, Management, and Organisation

Table of Contents

List of Figures ...... 5 List of Tables ...... 6 List of Abbreviations ...... 7 Abstract ...... 8 Declaration ...... 9 Acknowledgements...... 11 About the Author ...... 12 Chapter 1: Introduction ...... 14 1.1 Opening Remarks ...... 14 1.2 Research Background ...... 16 1.2.1 Situating Financialization and Cultural Political Economy in the Thesis 19 1.2.2 Situating Financial Citizenship in the Thesis ...... 24 1.3 Research Objectives and Research Questions ...... 27 1.4 Summary of Research Design and Methodology ...... 28 1.5 Significance of Research ...... 30 1.6 Structure of the Thesis ...... 31 Chapter 2: Literature Review ...... 34 2.1 Introduction...... 34 2.2 The Development of Financialization ...... 35 2.2.1 Financialization at the Macro- Middle-, and Micro-Levels ...... 38 2.2.2 Historical Analysis of Themes, Drivers, and Outcomes of Financialization Studies ...... 45 2.2.3 Identifying Limitations and Situating the Thesis in Financialization Literature ...... 56 2.3 The Choice of CPE to Explore Financialization ...... 58 2.3.1 From Political Economy to Cultural Economy ...... 58 2.3.2 Positioning CPE in the Thesis ...... 62 2.4 Conclusion ...... 67 Chapter 3: Conceptualising Financial Citizenship ...... 69 3.1 Introduction...... 69 3.2 What is Financial Citizenship? ...... 70

3.2.1 How Citizenship Matters in Financialization ...... 71 3.2.2 Defining Elite-Citizen Relations in FC ...... 76 3.3 FC: The Malaysian Historical Context ...... 82 3.3.1 Colonialism and Its Impact on Malaysian Societies ...... 83 3.3.2 Postcolonial Nation Building ...... 89 3.3.3 Post-Independence Modernisation ...... 93 3.4 FC Initiatives and the Stock Market ...... 96 3.5 Formulation of Research Questions ...... 100 3.6 Conclusion ...... 103 Chapter 4: Methodology ...... 106 4.1 Introduction...... 106 4.2 Pragmatism and Mixed Methods Research Design ...... 108 4.3 Research Methods Employed for Data Collection ...... 116 4.3.1 Document and Datasets Analysis ...... 116 4.3.2 Sequential Semi-Structured Interviews...... 119 4.4 Phase 1: Sources of Information and Data Collection Procedure for RQ1.... 125 4.5 Phase 2: Sources of Information and Data Collection Procedure for Research Question 2 ...... 130 4.6 Data Analysis: Triangulation ...... 134 4.7 Conclusion ...... 136 Chapter 5: Policies and the Stock Market: The Historical Development of the Malaysian FC ...... 138 5.1 Introduction...... 138 5.2 Early Beginnings for the Stock Market and FC Development (Pre-1970s) .... 141 5.3 The New Economic Policy (the 1970s) ...... 143 5.4 The Mahathir Era (the 1980s to early 2000s) ...... 151 5.4.1 Neopatrimonialism, Look East, Malaysian Inc., and Vision 2020 ...... 152 5.4.2 The Agogo Years ...... 158 5.4.3 The 1997/98 Asian Financial Crisis ...... 161 5.5 Rebuilding FC Credibility Post-AFC (Post-2000s until 2009) ...... 166 5.5.1 Continuing Direct Investment Initiatives in the Stock Market ...... 168 5.5.2 FC Development Through the Promotion of Indirect Ownership and Shariah Investment Products ...... 174 5.6 Conclusion ...... 184 Chapter 6: The Modern Programme of Financial Citizenship Development (2009 onwards) ...... 187 6.1 Introduction...... 187

6.2 Steps in Shifting Responsibility from Elites to Citizens ...... 189 6.2.1 Reducing Broad-Based, Citizen-Focused Subsidies ...... 191 6.2.2 Creating Financially-Responsible Citizens ...... 195 6.2.3 Reforming the Retirement System...... 200 6.2.4 Cultivating Inclusion through Education ...... 206 6.3 Elites’ Perspective on Results and Issues Faced in the Modern Programme of FC Development ...... 212 6.3.1 Expectations, Results, and Issues ...... 213 6.3.2 Problematising the Inclusive Notion of FC ...... 218 6.4 Chapter Conclusion ...... 225 Chapter 7: The Role of Citizens in FC ...... 228 7.1 Introduction...... 228 7.2 Characteristics of Financial Citizen Interviewees ...... 232 7.3 Financial Citizens’ Response to Elites ...... 235 7.4 Financial Responsibility and Autonomy Among Citizens ...... 243 7.5 Problematising Neoliberalism in FC Development...... 250 7.5.1 Culturally-Conditioned Financial Empowerment: The Case of Shariah Investment ...... 251 7.5.2 Socially-Conditioned Financial Empowerment: The Case of Financial Intermediaries ...... 255 7.6 The New Networks of Privilege: Inclusion vs. Exclusion ...... 264 7.7 Conclusion ...... 275 Chapter 8: Conclusion ...... 277 8.1 Concluding Remarks ...... 277 8.2 Summary of Thesis ...... 278 8.3 Findings of the Thesis: Chapters 5, 6, and 7 ...... 283 8.3.1 Resolving RQ1: The Roles of Elites in FC Development ...... 283 8.3.2 Resolving RQ2: Telling the Citizens’ Story of FC Development ...... 290 8.4 Analysis of Findings ...... 294 8.4.1 Problematising the Relationship of Responsibility in FC ...... 295 8.4.2 The Undemocratic Spread of FC ...... 298 8.4.3 Time and Social Influences of Financialization ...... 300 8.5 Thesis Contributions ...... 301 8.5.1 Academic Contributions ...... 302 8.5.2 Contributions to Policy ...... 305 8.6 Limitations of the Thesis ...... 306

8.7 Recommendations for Future Research ...... 309 References ...... 312 Appendices ...... 346 Appendix 1: List of Sources of Secondary Data and Documents Used* ...... 346 Appendix 2: List of Interview Questions for Elites ...... 348 Appendix 3: Formal letter for the recruitment of elites ...... 350 Appendix 4: List of Elite Interviewees ...... 352 Appendix 5: Recruitment Advertisement for Financial Citizens ...... 354 Appendix 6: List of Interview Questions for Financial Citizens ...... 355 Glossary ...... 357

Total Word Count: 74,816 words

List of Figures

Page Number

Chapter 3

Figure 1 The Malay Archipelago 86

Figure 2 Malay Peninsula 86

Chapter 5

Figure 3 Kuala Lumpur Composite Index (KLCI) 160 Daily Trend and Annualised Historical Volatility (1993-1996)

Figure 4 Selected Volume Traded on KLSE and 164 Closing KLCI pre- and post-capital controls announcement in Malaysia

Figure 5 Breakdown of Trading (by Value) in 171 Bursa from 1993 to August 2008

Figure 6 Total Unit Trust Industry NAV to Bursa 181 Malaysia Market Capitalisation (1992- 2017)

List of Tables

Page Number

Chapter 5

Table 1 Statistics on the Malaysian Unit Trust 180 Industry – NAV and Number of Accounts (2004-2017)

Chapter 6

Table 2 Statistics on the Malaysian Unit Trust 198 Industry – NAV and Number of Accounts (2007-2017)

Chapter 7

Table 3 Demography and Characteristics of 234 Financial Citizen Interviewees

Table 4 Mean Monthly and Household Income by 269 State for 2016 (£ and RM)

List of Abbreviations (in alphabetical order)

AFC 1997/98 Asian Financial Crisis AFI Alliance for Financial Inclusion CDS Central Depository System CEO Chief Executive Officer CMP1 Capital Market Masterplan 1 CMP2 Capital Market Masterplan 2 CPE Cultural political economy DoSM Department of Statistics Malaysia EPF Employees’ Provident Fund FC Financial citizenship FiMM Federation of Investment Managers Malaysia FLE Financial literacy education GDP Gross Domestic Product GFC 2007-09 Global Financial Crisis GNP Gross National Product IMF The International Monetary Fund KLCI KLSE Composite Index KLSE Kuala Lumpur Stock Exchange MEPU Malaysian Economic Planning Unit MMR Mixed methods research NAV Net asset value NEAC National Economic Advisory Council OECD Organisation for Economic Cooperation and Development PEMANDU Performance Management & Delivery Unit PM Prime Minister PNB Permodalan Nasional Berhad RM Ringgit Malaysia RQ Research question SCM Securities Commission of Malaysia UK United Kingdom UMNO United Malays National Organisation US United States

Abstract

Abdul Rahman, Syahirah, Financialization of Malaysian Citizens, PhD in Business and Management, November 2018, Alliance Manchester Business School, the University of Manchester, UK

This thesis explores the roles that elites and citizens have in influencing the processes of financialization. The thesis’ observation on financialization is underpinned by the theory of financial citizenship development, the process of expanding rights of ordinary citizens to have access to financial markets and skills, regardless of their profession, educational background, or income status. Using a cultural political economy approach, the research in this thesis has been conducted to address two objectives. Firstly, the thesis responds to limitations in existing financialization studies which tends to focus on Anglo- American or European contexts. In doing so, the thesis highlights the argument that financialization is diverse and shaped by localised factors. Secondly, the thesis observes financialization from a multidimensional perspective. As such, the research conducted pays attention to financial citizenship and the responsibilities and actions of the actors involved in its development, more importantly, elites and citizens. To highlight the localised nature of financialization, the thesis considers the colonial histories of Malaysia and its impact on financial citizenship development. The stock market has been chosen as a site for observation due to its role in facilitating financial citizenship development along nation building objectives during Malaysia’s postcolonial and post-independence periods. A mixed methods research has been employed to address the thesis’ research questions. A combination of secondary data analysis and sequential semi-structured interviews with 13 high-ranking elites and 30 financial citizens (citizens who are actively investing in the stock market) was used to arrive at the thesis’ analysis and discussions. This thesis’ findings extend existing understanding of financial citizenship development by providing empirical analysis that problematizes its democratic notion. Firstly, specific to Malaysia is the combination of elites preparing citizens to become individualised, self-acting actors; while at the same time aspiring for nation building goals. The misrecognition of financial citizenship as a simultaneous solution for nation building and the betterment of citizens’ lives is that it still does not address the existing inequalities in the Malaysian financial system. Secondly, the thesis demonstrates that financial citizens also play important roles in financial citizenship development; although, their behaviours might not perfectly align with the kind of outcomes envisioned by elites and are sometimes conducted in resistance of the elites themselves. Instead, the case of Malaysian financial citizens demonstrates that their influences in financial citizenship development are characterised by social and cultural conditions.

Declaration

I declare that no portion of the work referred to in the thesis has been submitted in support of an application for another degree or qualification of this or any other university or other institute of learning.

i. The author of this thesis (including any appendices and/or schedules to this thesis) owns certain copyright or related rights in it (the “Copyright”) and s/he has given The University of Manchester certain rights to use such Copyright, including for administrative purposes. ii. Copies of this thesis, either in full or in extracts and whether in hard or electronic copy, may be made only in accordance with the Copyright, Designs and Patents Act 1988 (as amended) and regulations issued under it or, where appropriate, in accordance with licensing agreements which the University has from time to time. This page must form part of any such copies made. iii. The ownership of certain Copyright, patents, designs, trademarks and other intellectual property (the “Intellectual Property”) and any reproductions of copyright works in the thesis, for example graphs and tables (“Reproductions”), which may be described in this thesis, may not be owned by the author and may be owned by third parties. Such Intellectual Property and Reproductions cannot and must not be made available for use without the prior written permission of the owner(s) of the relevant Intellectual Property and/or Reproductions. iv. Further information on the conditions under which disclosure, publication and commercialisation of this thesis, the Copyright and any Intellectual Property and/or Reproductions described in it may take place is available in the University IP Policy (see http://documents.manchester.ac.uk/DocuInfo.aspx?DocID=487), in any relevant Thesis restriction declarations deposited in the University Library, The University Library’s regulations (see http://www.manchester.ac.uk/library/aboutus/regulations) and in The University’s policy on Presentation of Theses.

Acknowledgements

I would like to extend my gratitude to the many people, in many countries, who so generously contributed to the work presented in this thesis. First and foremost, I thank my supervisors, Professor Julie Froud and Mr. Ismail Ertürk for making my last four years an incredible learning journey. Their thorough knowledge on the subject of my research and more importantly, their compassion to understand my strengths, weaknesses, and personal predicaments, have been an important source of hope and inspiration for me to finish this Ph.D. Julie and Ismail, I thank both of you for appreciating the importance of my physical and mental health throughout this journey. Your incredible supervision on my academic, professional, and personal developments is something that I will be forever grateful for.

Many thanks are also in order to the many colleagues from the AMBS who have taken the time to provide me with insightful feedback that added depth to my thesis. Along the same vein are the countless colleagues whom I have met in workshops and conferences who keep encouraging me to address my thesis critically. I would also like to thank my examiners who have taken the time to read this indulgent work of mine. I have not forgotten about all the participants of my studies, those who have been kind enough to be interviewed or who have provided me with data and information that I needed. Thank you from the bottom of my heart for sparing your time and effort for me. Without your help, this thesis would have not been an original work; it would have not allowed me to find out new knowledge that had been so close to my passion and interests.

Lastly, I would like to thank my pillars of strength. In the last year of my Ph.D., I had suffered from PTSD due to my presence at the Manchester Attack. Friends were an important source of happiness. I thank all of you for being there to share my tough times; you know exactly who you are. I would also like to thank my therapist, Wendy, who kept encouraging me to value my health above all else. Without her, this Ph.D. would probably have never been completed. Finally, but by no means least, I thank the most important people in my life, my family. I cannot thank you enough for your unconditional support, understanding, and patience throughout my life. I would have not been able to walk this last bit of journey had it not been for you and your continuous encouragement for me to keep going on even when it feels too tough to do so.

About the Author

This research is an original work conducted by Syahirah Abdul Rahman. She had previously gotten her Master’s Degree in Global Business Analysis at the Alliance Manchester Business School, University of Manchester and a Bachelor’s Degree in Accounting and Financial Management at the University of Sheffield. Her research experiences included a collaborative work with the Associate of Engineering Doctorates and the EPSRC to build a pilot study which assessed the impact of the Engineering Doctorates programme in the UK. This thesis is the first academic effort she had undertaken to develop herself as a critical, qualitative researcher.

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Chapter 1

Chapter 1: Introduction

1.1 Opening Remarks

The initial motivation to conduct research on financialization of Malaysian citizens arose during late 2013. After returning to my home country,

Malaysia, from my Masters’ studies in the United Kingdom (UK); I had observed an interesting phenomenon back home. Nearly every week, the

Malaysian media had churned out headline after headline which focused on financial planning and savings for retirement. On the television, the radio, and the internet, influential financial experts from the public and private sectors were invited to discuss topics on financial planning, painting them as pressing issues that every Malaysian citizen should begin to pay attention to.

During this period, it appeared as if there had been a growing interest among ordinary Malaysian citizens in investment as part of everyday financial planning. This included a somewhat curious euphoria about stock market investment, which appeared mainly on social media. The euphoria

14 had gained traction to the point that popular investors were beginning to emerge, often ordinary individuals who had success stories in the stock market to be told, gaining hundreds and thousands of followers from the

Malaysian public. This was accompanied by an increase in popular and accessible information on stock market investment, with “how-to” articles made viral and shared by thousands. At the same time, there was growing interest in investment classes conducted by ordinary Malaysian citizens who had become “success stories” in stock market investment.

It was through these classes that I had the opportunity to observe the phenomenon from a closer perspective. In the first few months of 2014, I attended several stock market investment classes held by popular investors as well as public financial institutions to gain an initial understanding of the sudden rise in popularity of stock market investment among Malaysian citizens. In these classes, some of which were free of charge and others costing hundreds to thousands of Ringgit Malaysia (RM), many Malaysian individuals regardless of status, education, race, age, and gender had come together to pursue the learning of stock market investment as a tool for financial planning. Through these classes, my initial ideas for this thesis were formed, and they served as a foundation for this introductory chapter.

This chapter’s purpose is to demonstrate how this thesis came into being. The chapter is organised in a way that illustrates the flow of the thesis’ foundation, from its early stages of identifying the research problem, to the construction and conceptualisation of its research questions and objectives.

In explaining this foundation, the chapter will also describe the design of the research, the significance of the research, and finally, the organisation of the

15 thesis. The chapter will now begin by describing the background of the research problem.

1.2 Research Background

In early 2014, my main focus in regards to this research was to gain some understanding of the stock market investment phenomenon among

Malaysian citizens. In one of the stock market investment classes that I attended, a virtual game was used where attendees were given imaginary starting capitals of RM1,000 (approximately £180). The point of the game was to allow attendees to learn about the risks of the stock market by virtually deciding on whether they were to purchase or sell their investment on a pretend stock, Stock ABC, which started at the price of RM0.10.

In the first stage, attendees decided on how much they were to invest on Stock ABC with their initial capital. Then, different scenarios were given to them which related to changes in the global and domestic economy, polity, and the environment; in which the attendees then had to respond with their investment decision. For example, if they had spent RM500 of their initial capital on Stock ABC, what would they do if the stock went up to RM0.20 when Moody’s decided to increase the credit rating of the Malaysian government? On the contrary, what would they do next should Stock ABC fall to RM0.15 due to shocks in the economy after the United States (US) announced that they were to cease their quantitative easing programme?

In the middle of the game, the instructor gave the attendees a chance to take up a bank loan of RM100,000 (approximately £18,000) for the purposes of their investment which was exercised by more than half of the attendees. During the last scenario of the game, an unforeseen financial crisis hit the global markets due to uncontrollable fall on oil prices, and as such, the

Malaysian stock market’s value was wiped in half. Banks increased their interest rates, and loans were urged to be repaid. The game left more than half of the attendees of the class virtually bankrupted. This game, which was brief and incited many discussions and laughter, did not seem to provoke fear in these participants that if they were to invest in the stock market, such scenarios could evidently come true.

Similar scenes were found in the many stock market investment classes that I attended. Some of the classes lasted for days, with Malaysian adults of all demographic and social backgrounds, diligently and excitedly taking notes, eagerly anticipating the time in which they could manage their own stock market investment. These classes sparked curiosity: how could a highly-complex and risky financial market instrument become so popular among these Malaysians? Furthermore, why were they willing to spend their time and money to learn about an activity that was unrelated to either their own careers or everyday activities?

At first the answer had been anecdotal. A quick exploration of any national newspaper would tell us that the year 2014 had been riddled with events which could make any Malaysian citizen think seriously about their financial futures. With growing political instability, falling global oil prices, the introduction of a new goods-and-sales taxation system in the country,

17 rising domestic prices, and reforms in subsidies and the pension system—

Malaysian citizens were seemingly feeling the pressure to become more and more aware of their finances. The reason behind this pressure could be due to multiple reasons: the fall of the oil prices that had hit the government’s budget thus worsening the nation’s economy, political scandals which involved fraud and public money mismanagement by none other than the previous Prime Minister (PM) Najib Abdul Razak and his network, rising prices due to inflation. In summary, many Malaysian citizens were unhappy with their living conditions and had found it important for them to consider financial planning more seriously.

However, such answers seemed too shallow in providing an understanding of how such a complex activity as stock market investment could become normalised in everyday life of Malaysian citizens.

Furthermore, it did not explain the number of individual shareholdings in the stock market which had been at nearly 30.0% in 2014 (comparably, the figure is negligible in the UK during the same period). These answers too did not explain why stock market investment classes are so popular in Malaysia, with one of the classes that I had attended having nearly 5,000 participants, to the point that citizens were willing to spend days and nights to learn about investments as part of their long-term financial planning. More had to be done to engage in explaining the process in which this phenomenon had occurred and the motivation behind the different actors who were and are involved in the process.

What happened next was an effort to situate this question in an academic context. As such, the research begun in September 2014 after I had

18 secured a scholarship to pursue my doctoral studies at the Alliance

Manchester Business School in the University of Manchester. With the supervision of Professor Julie Froud and Mr. Ismail Erturk, alongside the many conversations conducted with various researchers across multiple fields; the topic of financialization was raised as an interesting phenomenon in which the Malaysian case could be studied.

1.2.1 Situating Financialization and Cultural Political Economy in the Thesis

In Natascha van der Zwan’s (2014) Socio-Economic Review article, she argued that financialization is difficult to be described in a straightforward manner which has led to a variety of definitions. Although, for the purpose of this introductory chapter, financialization can first be understood as an academic field that celebrates critical research observing how finance and financial markets grow to become more complex and integral in several facets of modern life: in capitalism, polity, business systems, and everyday life.1

Due to the multiple scholarly focuses on financialization, the strand of financialization of everyday life was chosen as it fits the objectives of this research. Financialization of everyday life, explored by authors such as Paul

Langley and Randy Martin, is about the intrusion of financial activities in the ordinary lives of individuals. As described by van der Zwan (2014), this strand of financialization studies:

1 A more in-depth discussion on financialization will be explored in Chapter 2.

[…] concern themselves with the rise of the citizen as investor. What

distinguishes these studies from those investigating financialization at the

macro or meso level is a cultural perspective on financialization,

particularly with regard to the encroachment of finance into the realms of

everyday life. (p. 111)

As it will be discussed in Chapter 2, many of the studies in financialization of everyday life critically observe how the intrusion of finance—through debt and credit instruments such as credit cards, mortgages, and personal loans— has transformed the everyday realm. Although, this research differs from these existing studies by taking a focus on equity rather than debt or credit, more specifically in the form of stock market investment. This study observes how stock market investment has gained popularity among Malaysian citizens. The aim of carrying out this thesis is to add to existing understanding on how everyday financial practices in the form of financial planning and investment contribute to the processes of financialization.

During the shaping of this thesis’ objectives, it became evident that studying individuals alone was not enough when observing an under- researched location in terms of financialization, such as Malaysia. This feeds back to what Brett Christophers (2012) called as a “geographical anaemia” in financialization studies which have long been interested in Anglo-America or

European contexts of the phenomenon. When financialization first emerged as an academic field, the main focus was the macroeconomic, with Paul

Baran, Paul Sweezy, Harry Magdoff, Michel Aglietta, and Giovanni Arrighi as some of the more important and influential writers in early financialization studies. Although these authors did not discuss financialization explicitly,

20 they initiated scholarly interest on the changes in capitalism and the rise of financial over productive capital. What comes next is the emergence of financialization studies from the mid-1990s until mid-2000s, with earlier works concentrating on in-depth analyses on the actors who are responsible in the construction and influences of financialization and its processes. Many of these studies have an Anglo-American and/or European focus, and as such their findings have become integral in building a foundation of financialization as an academic field. Through these studies, other researchers have been able to extend the analyses on financialization, with research queries that look into how changes in capitalism and the rise of financial capital have shaped and shifted the economy, the society, corporate behaviour, and eventually, ordinary individuals.

Nonetheless, existing financialization studies, especially in everyday life have been highly influenced by the assumptions already laid out by earlier works in the field. Due to the geographically-specific nature of these earlier works, the assumptions made are also geographically-biased. As pointed out by Christophers (2012), many financialization scholars are concerned with studying financialization from the perspectives of developed, western countries, more specifically, the UK and the US. With countless studies of these countries, existing financialization of everyday life studies have often taken the historical context of financialization for granted, presumably due to the familiarity of many financialization authors with the

Anglo-American and/or European context of financialization. Similarly, existing financialization of everyday life literature is limiting in their omission of elites’ (the state, the government, policymakers, technocrats,

21 and/or business actors) perception and their motivations to normalise finance in everyday life. Instead, financialization of everyday life studies often focus on in-depth analysis of the individual: on the processes in which they become entangled in finance, in the intricate ways in which their lives have become factored by market risks and rewards.

However, in developing, eastern countries, financialization studies and its strand of everyday life have been near-absent, and in Malaysia specifically, only one exception could be made (at the time of the thesis’ writing), which is Lena Rethel’s work that considers financialization from a political economy angle. Important strides have been made recently by geographer Karen Lai especially in her recent contribution to The New

Oxford Handbook of Economic Geography (2018), which observes the construction and mobilisation of financial behaviour in Singapore.

Responding to the limitation in existing studies as outlined above, the thesis’ first objective is to observe the rather unexplored geographical focus through a Malaysian case study as to build the argument that financialization is diverse and shaped by localised factors. It is important that this thesis considers financialization of Malaysian citizens from a cultural and political angle, which can be conducted by paying attention to the historical trajectory, actors, and events which have contributed to the way we understand the phenomenon in the country today. This leads the thesis to its second objective, which is to explore financialization from a multidimensional angle by considering the roles that both elite s and everyday actors play to influence its processes.

To begin this study, the choice to approach financialization of everyday life using cultural political economy (CPE) (Best & Patterson, 2010) was made. CPE is an apt approach to study financialization critically as it provides researchers the ability to observe a phenomenon from multiple angles before arriving at a critical analysis. For example, to approach financialization from a political economy angle would have been useful in observing power relations and institutional influences that contribute to financialization, but it would have not allowed for critical cultural consideration on financialization, such as the intricacies and nuances of everyday life. On the other hand, cultural economy studies are increasingly positioned in a rather niche approach of observing financialization, with more scholars paying attention to the relationships between humans and the non-humans, including technical practices which has led to the construction and maintenance of financial systems and its growth.

The choice of CPE responds to the limitations of a singular political economy or cultural economy approach. CPE would allow this research to approach financialization from a pluralistic logic of discovery. CPE celebrates an observation of a phenomenon that looks into firstly, the separate practices which constitute economic life (culture), and secondly, the forms of power which have been constituted and embedded within this economic life

(politics) (Best & Patterson, 2010). As such, the approach of CPE is apt for the objectives of this study as it encourages in-depth analyses that takes into consideration multiple facets of everyday life which influences financialization and its processes.

Lastly, financial citizenship (FC) is chosen as it is argued to be a useful concept that will allow the thesis to explore that the roles which both elites and citizens play in influencing financialization. The discussion of FC will be as follows. FC, which refers to a language that encourages governments to make financial systems more inclusive among ordinary citizens (Leyshon &

Thrift, 1995), helps to connect the Malaysian contexts of stock market development and everyday financial planning and investment.

1.2.2 Situating Financial Citizenship in the Thesis

The concept of FC gained prominence in the 1990s, with transnational policy institutions encouraging governments to expand the rights of ordinary citizens to have access to financial markets and skills, regardless of their profession, educational background, or income status. The concept itself was popular as it provided a language to discuss the need for formal actors (such as political and policymaking actors) to address the exclusionary nature of the financial system (Dymski, 2005; Leyshon & Thrift, 1995). The

“exclusionary nature” of the financial system refers to “processes that serve to prevent certain social groups and individuals from gaining access to the financial system" (Leyshon & Thrift, 1995, p. 314). The introduction of FC thus serves a specific purpose of providing a platform of discussion on the manners in which financial environments could be more inclusive and accessible among the general public (Dymski, 2005).

Extending this concept is Mark Kear, who in his 2013 paper, problematises FC and its proponents by arguing that inclusive finance is more complex than the dichotomous notion of inclusion versus exclusion.

The author faults the financial system itself for this complexity, arguing that spreading inclusion in such a system is problematic due to its underlying

“discriminatory” logic (p. 928); or what French, Leyshon, and Wainwright

(2011) describe as only serving the "socially powerful" (p. 314).

This present study draws inspiration from Leyshon and Thrift’s concept of FC and Kear’s critical commentary in conceptualising financialization and the relevant actors. The appeal of FC to this thesis is that it allows a focus on the efforts placed by elites in normalising stock market investment among Malaysian individuals. Additionally, the thesis draws upon the work of Lai and Tan (2015), which shows that elite-citizen relations in FC can be geographically-contextual and political.

The choice of observing elite-citizen relations is reflective of citizenship, which is a relational concept. As further discussed in Chapter 3, citizenship is about a dichotomous relationship of responsibilities between governing and governed actors (Turner, 1990) or, as per this present study, between elites and citizens. For both groups of actors, maintaining their respective responsibilities could shape the harmony and safe conduct of the spaces in which this membership exists. Elites who grant rights in FC, are important in driving processes and effects of financialization (Davis &

Williams, 2017). For this thesis, elites are identified as political or technocratic actors who are integral in providing support for FC construction, and more importantly, those who play the important role of shaping policies and/or initiatives that drive stock market investment among

Malaysian individuals. Thus, similarly to elites, citizens too are integral in influencing the construction and maintenance of financial systems in a

25 specific manner, through their consumption and/or resistance of financial activities, and their everyday behaviours (Langley, 2008b; Martin, 2002). I have termed these groups of citizens as “financial citizens,” based on the active roles that they play in the development of FC. Observing this group of citizens is important for this thesis as it highlights the importance of the perspectives of individuals in a study of everyday life and that these individuals are not simply passive actors in the processes of financialization.

In conceptualising financialization in Malaysia, the thesis moves away from the Islamic finance or Islamic banking finance focus (Elder, 2017;

Pollard & Samers, 2007; Rethel, 2016; Samers & Lai, 2016). Although Islamic finance is important to the Malaysian context, the thesis’ study of financialization is centred on the development of FC-related policies from the postcolonial period (post-1950s onwards) that pre-dates the establishment of

Islamic finance in Malaysia (Yakcop, 2002). Having a purely Islamic finance focus could take away important historical context that would better contribute to our understanding of Malaysia’s FC development.

Having outlined the problem background and explained the usage of

FC for this thesis, the next section now moves on to elaborate the research objectives and research questions used in this thesis.

1.3 Research Objectives and Research Questions

The first research objective of this thesis is to explore financialization as a programme of FC development in Malaysia, that is, by observing the dissemination of formal efforts aimed at widening access to financial markets, skills, and products, among citizens. A second objective of this thesis is to respond to limitations in existing studies by providing lived experiences of financialization of the everyday life. This will be resolved through its research design, which seeks to collect empirical data from both elites and citizens. These objectives were subsequently reflected in the construction of the thesis’ research questions (RQs).

When constructing the RQs, I had to consider how to best reflect the thesis’ second objective. As such, it was determined that two RQs would be formulated, RQ1, focusing on the Malaysian elites’ story of FC development, while RQ2, focusing on the citizens’. The RQs and its sub-questions are as follows:

RQ1: What roles do political and financial policy elites play in

Malaysia’s FC development?

RQ1a: What types of historical developments in terms of

policies and initiatives could be identified as encouraging

the involvement of citizens in the stock market?

RQ1b: What are the current events and policies that shape

the modern development of Malaysian FC?

RQ1c: Have FC formal initiatives met elites’ expectations?

RQ1d: What are the obstacles faced by political and

financial policy elites in the development of FC?

RQ2: What roles do financial citizens play in Malaysia’s FC

development?

RQ2a. How do financial citizens’ behaviours relate to the

formal initiatives in FC development?

RQ2b. Has the outcome of FC development demonstrated

that financial citizens’ behaviours align to the objectives

envisioned in elites’ formal initiatives?

RQ2c. How do financial citizens’ behaviours in stock market

investment differ from neoliberal assumptions that citizens

should take control of their personal security in an

individualised and self-acting manner?

A more in-depth explanation of the RQs and its sub-questions are outlined in

Chapter 3. The next section now turns to the overall design of the study, outlining the philosophical underpinning and methodology employed.

1.4 Summary of Research Design and Methodology

To address the thesis’ RQs, the thesis uses a pragmatic philosophical underpinning and a mixed-methods research (MMR) approach. Firstly, pragmatism was chosen as its origins coincide well with the exploratory

28 nature of this study. Perhaps, one of the biggest contributors to pragmatism in terms of epistemology and methodology for social sciences is John Dewey, who resisted formalism in scientific thought in the field. As explained in

David Morgan’s (2014) paper, Dewey built his view on pragmatism “by reorienting philosophy away from abstract concerns and turning it instead toward an emphasis on human experience,” (Morgan, 2014, p. 1046). Dewey treated human experiences as historically- and culturally-dependent, as well as socially-shaped by others. Instead of focusing on the nature of reality and truth, the starting point for many pragmatists such as Dewey, is life itself, which is argued to be inherently contextual, emotional, and social

(Cherryholmes, 1992; Maxcy, 2003; Morgan, 2014).

These origins have given birth to many pragmatists. Pragmatism celebrates flexibility in research in a way that would generate the best outcomes for research queries. This background of pragmatism is appreciated in the current study, as it allows me to have freedom in the process of research conduct. As such, MMR design was chosen as a fitting methodology due to its usefulness in allowing researchers to develop a more in-depth insight into a certain observed phenomenon. It should be mentioned that the choice of MMR design differs from the popular formulation of MMR research design (quantitative + qualitative research design). Instead, this study adopted a qualitatively-driven MMR design

(Morse, 1991) as it seeks to have freedom in exploring financialization and FC development in a critical and in-depth way; rather than having a quantitative component that are often used in MMR studies with the objective of hypothesis testing to reach a generalised finding.

The data of this thesis came from: 1) secondary data in the form of more than one thousand publicly-available and reliable documents, policies, reports, datasets, journal articles, among others; and 2) primary data in the form of semi-structured interview findings with thirteen elites (of various positions: political, financial policy-based and/or financial business-based) and thirty financial citizens (who are actively investing in the stock market).

1.5 Significance of Research

Financialization as an academic field has been growing rapidly. The subject has now expanded to various academic fields, from sociology, to anthropology, to geography, among others. Despite this expansion, financialization studies that focus on non-Western, developed countries remain relatively few in number. As such, this thesis is intended to achieve two objectives.

The first objective is to expand existing understanding on financialization to include perspectives of the East and its experiences. The lack of studies that focus on eastern, developing countries means that there is a gap in knowledge on how financialization and its processes work in different historical and cultural assumptions. Focusing on Malaysia has been an interesting experience, academically, as the country’s postcolonial and modernisation history has provided a rich source of analysis for the thesis.

Malaysia’s complex mix of history and culture has shaped its financialization

30 of everyday life in a unique way, thus contributing to a place-specific context of the phenomenon.

Secondly, the thesis will focus on the perspectives of a largely ignored group in financialization studies, which are individual citizens who are directly impacted by the processes of financialization, hoping that this could demonstrate how the phenomenon has transformed their lives. For example,

Chapters 7 and 8 argue that there are multiple socioeconomic shortcomings that might come with expanding access to financial investments to the point of normalising it as an everyday activity.

1.6 Structure of the Thesis

The remainder of this thesis is organised into seven chapters. Chapter 2 presents a literature review of financialization studies. It segregates existing financialization studies into three main categories: financialization at the macro-level, the middle-level, and the micro-level. This chapter also provides a historical analysis of the drivers of financialization as discussed in existing literature. Furthermore, the chapter also includes a discussion of CPE as an approach in observing a complex phenomenon such as financialization using existing studies. Chapter 3 is used to conceptualise FC specific to the thesis’ objectives. To do so, it contextualises FC through a Malaysian perspective by drawing upon the postcolonial and modernisation history of the country. It then argues how these elements make FC development different to the

31 country in comparison to what is presently understood of the concept in existing studies. Additionally, the chapter is used to formulate the study’s

RQs.

Both Chapters 2 and 3 are important in setting theoretical and conceptual foundations which this thesis rests upon. They describe the limitations of existing financialization studies and highlight the need to expand studies that are novel in terms of the geographical area observed

(east and developing countries, such as Malaysia) and the objectives explored

(to combine multiple perspectives in understanding financialization).

Furthermore, they also introduce the usage of FC as a useful concept to understand financialization of everyday life by encouraging observations on the dichotomous relationship between actors who are responsible for the construction, expansion, and spread of finance (elites) and actors who are impacted by this effect (citizens).

Chapter 4 describes the methodology employed in this thesis. This includes a justification of the philosophical underpinning adopted, the use of

MMR design, research methods used and their benefits and challenges, phases of data collection, and the data analysis procedure.

The following Chapters 5, 6, and 7 present the empirical findings.

Chapter 5, which analyses secondary data, focuses on building the historical trajectory of FC development in Malaysia. This includes important events and actors who have shaped the path of FC development, as well as the obstacles that have been met, and how this historical path has led to the way we understand FC development today. Chapter 6 uses a combination of primary and secondary data to describe the modern FC development from

2009 onwards from the elites’ perspective. Interview data was used to analyse how the modern FC development is less straightforward than what is seen in formal policy documents and what is promoted by FC proponents.

Specific to Malaysia, FC development is made complex by multiple objectives from the different elites involved, as well as pressing socio-economic issues which might belittle the efficacy of the programme. Chapter 7 draws on interview findings with financial citizens to explore reasons why citizens invest in the stock market, whether their choices align with formal elite aspirations in FC development, and how their behaviours in stock market investment could problematise the neoliberal underpinning in the process of

FC development.

Lastly, the concluding chapter synthesises the findings and explains how they add to present understanding of financialization. Additionally, the chapter outlines the contribution that this thesis has made for academic understanding and policy discussions.

Chapter 2

Chapter 2: Literature Review

2.1 Introduction

The purpose of this chapter is twofold. Firstly, Section 2.2 provides a literature review of financialization studies by observing the different approaches adopted in financialization studies: the macro-level (the macroeconomic accumulation of financial capital), the middle-level (the shift of strategy in modern corporations which prioritise finance above everything else), and the micro-level (the intrusion of finance and its activities in the realm of everyday life). In this section, the chapter also outlines the traditional drivers of financialization as discussed in existing, largely Euro-

American-centric, studies. A statement on limitations of the study is followed by an exploration of the scope of research for this particular thesis.

Secondly, the chapter explores the conceptual framework in Section

2.3. Before justifying the choice of CPE, the section discusses the approaches of political economy and cultural economy in financialization and draws out

34 their limitations with reference to the thesis’ objectives. Additionally, the section provides an explanation of why CPE is useful for this thesis, drawing upon the works of Jacqueline Best and Matthew Patterson.

2.2 The Development of Financialization

In spring 2012, Nobel-prize winner Robert Shiller delivered a lecture on finance and society by introducing the etymology of “finance”. He described the word’s origin from the Latin “fīnis,” defined as “end” and used as a noun to describe the achievement of goals. From this description, Shiller went on to introduce finance as a glorified concept of a personal goal, one that, if done in an autonomous, self-acting, and personal manner, would earn an individual some form of achievement (Shiller, 2012). Shiller’s argument for finance as an activity that is intimate and individual contrasts with how the word is defined in modern dictionaries. In 2018, the Merriam-Webster and

Oxford Dictionary both define “finance” as the way money is used and handled in large amounts by governments and corporations. Yet, in the realm of everyday life, finance continues to increasingly matter, assisted by innovations in the financial system and state arrangements which continue to normalise its activities among ordinary individuals.

In academia, the observation of this phenomenon started at the macro level; early studies, such as those by Michel Aglietta and Giovanni Arrighi began with the question of changes in capitals of accumulation and the transformation of capitalism (Aglietta, 1979; Arrighi, 1978). Decades later,

35 financialization has now penetrated multiple academic disciplines with up to fifty different academic definitions to describe the phenomenon (Palan,

2013). To give a few examples, financialization could refer to the “growing influence of capital markets, their intermediaries, and processes in contemporary economic and political life,” (Pike and Pollard, 2010, p. 29).

Earlier discussions on financialization did not explicitly define what the terminology means but have surrounded the concept of “the gravitational shift toward finance in capitalism,” (Sawyer, 2013, p. 5). A more common definition found in political economy studies of financialization could be taken from Epstein’s (2005) edited book Financialization and the World

Economy: “[…] financialization means the increasing role of financial motives, financial markets, financial actors and financial institutions in the operation of the domestic and international economies” (p. 3) or what van der Zwan (2011, p. 101) simplified to as “everything finance.” As the breadth of studies focusing on financialization increases, it is clear that the definition of the term itself has become necessarily more sweeping and vaguer.

When financialization as a terminology has grown to become as widely used in academia as globalisation (Dore, 2008), it is often too easy to become confused about what financialization means, as authors shape and re-shape its definitions to fit different academic inquiry. Although, as argued by Julie

Froud and her team of researchers (2008, p. 24), “[d]escription is not enough for those who will still want a concept of financialization which is more than a dictionary definition.” Financialization, a complex phenomenon, surely could not be constrained to a single definition. A study that observes financialization should be more about the question of “how does finance

36 matter?” (Froud, Ertürk, Johal, Leaver, & Williams, 2008, p. 3). It should interrogate the processes that have made finance grow to become more important and complex, of how these processes have transformed capitalisms, societies, and the realm of everyday life.

The present study seeks to carry out the literature review by looking at how financialization is observed by existing scholars through the question that Froud et al. have posed. Additionally, Natascha van der Zwan's (2014) review on financialization studies make an important contribution to this chapter, in the way it organises financialization based on different levels of empirical analysis. Van der Zwan’s categorisation of financialization studies differ from one another based on their theoretical assumptions and research objectives. Scholars of the first approach, the new regime of accumulation, focus on the question of how the capitalism has shifted from being productive to financial, while critically providing empirical evidence and commentary to explain this shift. In the second approach, the rise of shareholder value, scholars are interested in the question of how financial hegemony in modern capitalism has impacted the way modern corporations operate. In the last approach, the everyday life, scholars are concerned with the question of how the rise of finance has transformed everyday living, in which financial activities intrude the intimate spaces of households and individuals. While this chapter is inspired by van der Zwan’s organisation of the literature, it focuses more on the types of actors that have been impacted by financialization and its processes at the macro-level, middle level, and micro-level, as outlined below.

2.2.1 Financialization at the Macro- Middle-, and Micro-Levels

At the macro-level, scholars could be distinguished by their observation of financialization as changing patterns of economic and financial developments (Crotty, 2003; Epstein & Jayadev, 2005; Stockhammer, 2008,

2010).. Due to the nature of their work, financialization scholars at the macro-level usually focus on a specific period in which to observe financialization, with earlier literature especially interested in the changes that have occurred from post-World War II to the replacement of

Keynesianism in the 1970s in the US and the UK.

Such financialization works draw upon the regulationist approach, similar to Aglietta’s (1979, 1998) analysis of the decline of productive capital, or what the author saw as a post-Fordist era of financial capital accumulation. The theory of capital accumulation is important in the regulationist approach (Peck & Tickell, 1992), providing a basis on which financialization can be explored. This theory helps scholars to observe the processes that have led to the exponential growth of financial capital in the post-Fordist era. This includes the existence of a crisis-free environment made possible by a set of favourable conditions that are put in place by the state (Orhangazi, 2008; Stockhammer, 2008), which results in taken-for- granted modes of social regulations that are important for sustaining the capital accumulation system (Peck & Tickell, 1992).

At the turn of the millennium, French economist Robert Boyer (2000) helped shape the subsequent works of financialization at the macro-level by providing a preliminary analysis of whether post-Fordism transitions in capitalism have resulted in a regime that is financial in nature. The author

38 outlined a macro-level model of financialization that proposed the ways to observe the institutional shift of logic away from Fordism. The economy is observed as being financialised through the privileging of shareholder value in modern firms, a reference to firm strategies that focus considerably on financial indicators which are highly influenced by financial markets.

Additionally, Boyer argued that a financialised economy has also transformed households’ savings behaviour. More and more employees’ wages and salaries are tied to market performance, which influences households to prioritise the movements in financial markets.

The effects of financialization are observed as (re)distributional; the growth of finance propels the financialization of economies, and in turn, financialised economies continue to expedite finance’s unsustainable growth

(Boyer, 2000). These are the kinds of processes that have been observed in the 1970s and the 1980s, especially in Anglo-American countries. Duménil and Lévy (2005) for example, argued that the demise of post-war

Keynesianism during that period heightened the adoption of market-based policies in political and economic spaces (Jessop, 2002; Jessop, Bonnett, &

Bromley, 1990), thus making way for the growth of finance. This echoes

Aglietta (1979) who observed this period as a key time in which US capitalism was transformed, affected by political and economic ideologies that assisted in the process of capital accumulation (Epstein & Jayadev, 2005).

The primacy and growth of finance has been transformative to the way modern corporations strategise, especially in Anglo-American countries, leading to a prioritisation of financial over productive growths. These

39 changes have led to a second approach of observing financialization, which this thesis terms as the middle-level.

As noted earlier, Boyer (2000) argued that financial-led capitalism could influence the upper management in modern corporations to rethink and reshape their corporate governance by privileging the concept of shareholder value.

Shareholder value plays an important role in financialization studies at the middle-level; with scholars using this concept to address the question of how modern corporations have changed with the increasing importance of finance. For example, Froud, Haslam, Johal, and Williams (2000) traced the emergence of shareholder value as a package of consultancy products sold in the 1980s. These products included a set of metrics and corporate guidelines on how senior management should align their corporate decisions with the financial performances of their companies. In doing so, consultancy firms argued that “purposive management action will be rewarded,” (Froud et al.

2000, p. 80) although the exact manner in which this reward should come in had always been ambiguous (Aglietta, 2000).

The increasing focus on shareholder value in the 1990s helped in expediting financial expansion; both the senior management and shareholders of modern corporations turned their attention to financial performance rather than the productive capabilities of the corporations

(Lazonick & O’Sullivan, 2000). Financial indicators such as share prices, dividend payouts, and the internal rates of return became the corporate dogma that drove decision making (Froud et al., 2000). The popularity of shareholder value, as according to Lazonick and O’Sullivan (2000), have

40 assisted in the shifting of corporate priority towards investor interests, changing popular corporate strategy of “retain and reinvest” to “downsize and distribute” (p. 17). The latter strategy’s growth is celebrated as a remedy to the decline of competitive production faced by US manufacturing firms in the 1970s (Froud et al., 2000; Lazonick & O’Sullivan, 2000). Then, academics have developed the agency theory, which explains that the decline of competitive production is an issue of senior management (agents) not necessarily acting in the interests of the shareholder-owners (principals)

(Jensen & Meckling, 1976; Mitnick, 1975; Ross, 1973). Ross (1973) noted that the principal-agent problem occurred due to the increasing dispersed ownership in modern firms through public share issues. He claimed that in the 1970s, senior management’s compensation and salary schemes were not tied to market mechanisms; as such, senior management did not feel pressure to act in the interest of shareholder-owners. He further argued that modern corporations should find a solution that would align senior management’s reward system to their good corporate performances.

To resolve this issue, modern firms have been urged by scholars to link senior management’s compensation to their firms’ financial performances, for example, via stock options, swaps, or other financial-market based schemes

(Baker, Jensen, & Murphy, 1988; Fama & Jensen, 1983; Jensen & Meckling,

1976; Lazonick & O’Sullivan, 2000; Ross, 1973).

This corporate behaviour has been prevalent ever since, with senior management increasingly prioritising financial performances above all else

(Aglietta, 2000; Froud et al., 2000; Morin, 2000). Such corporate behaviour was also sustained by the boom of the stock market in Anglo-American

41 countries, which gave somewhat a false perception that prioritising shareholder value is beneficial to corporate performances (Froud, Johal,

Leaver, & Williams, 2006; Froud et al., 2000). Due to its success in Anglo-

American countries, the promotion of shareholder value had since expanded, for example in Germany (Bluhm & Martens, 2009; Jürgens, Naumann, &

Rupp, 2000), France (Alvarez, 2015; Morin, 2000); Japan and Korea

(Lechevalier, Debanes, & Shin, 2017), China (Froud, Johal, Leaver, &

Williams, 2014; Wang, 2015), among others.

This point is relevant in introducing the next set of literature, financialization at the micro-level. Boyer's (2000) model of financialization, recognises that changes in corporate behaviour that prioritises financial markets will ultimately transform the way households act financially. Such observations are indeed prevalent in financialization at the micro-level, with scholars going beyond observing households’ savings pattern, to interrogating the manner in which financialization has transformed the everyday life of ordinary individuals.

As argued by many scholars, state arrangements play an important role in expediting the importance of finance within the everyday day realm

(Froud, Johal, & Williams, 2002; Lai, 2018; Langley, 2008b; Martin, 2002,

2009; Pellandini-Simányi, Hammer, & Vargha, 2015). This often begins with the shift of financial welfare responsibilities from the state to individuals which results in the individualisation of financial risks related to the personal security of individuals and households (Langley, 2007; Martin, 2002).

Ismail Ertürk and his team of researchers (2007) referred to this phenomenon as the “democratization of finance,” reflecting official efforts to

42 make finance more accessible and attractive using political pitches and promises. The authors described financial literacy initiatives in the US and the UK intended to facilitate households and individuals’ involvement in capital markets, with the promise that taking responsibility for their own financial futures could be rewarding and empowering. As such, households and individuals have been encouraged to channel their savings through financial market products, or a “coupon pool” (Froud et al., 2002), intended

“to meet a range of financial needs, such as saving for retirement or for the university education of children, as well as to avoid risk and personal mishap from unemployment, ill health or falling house prices,” (Ertürk, Froud, Johal,

Leaver, & Williams, 2007, p. 554).

Such promises often fall short in meeting their expectations; state- arrangements such as financial literacy have often been implemented with a shallow consideration of households’ and individuals’ lack of capacity “to manage complex choices and unknowable risks” in financial markets (Ertürk et al., 2007, p. 570). This limits households’ and individuals’ ability to profit from financial markets, in contrast to the promises. Furthermore, there is an ambiguity as to whether state-arrangements seek to benefit households and individuals, as they promise, or whether they aim to benefit financial institutions from the resulting deepening of financial markets (Aalbers,

2008; Langley, 2006; Williams, 2007).

The implication of the democratisation of finance goes beyond the failure of promises, however, as the participation of households in financial markets has been found to be detrimental in the long-term. Individuals and households have been encouraged to take on financial risks through various

43 mechanisms in their life: home mortgages (Aalbers, 2008; Langley, 2006), life insurances (French & Kneale, 2009; McFall, 2009), pension funds

(Wainwright & Kibler, 2014), education loans (Goodnight, Hingstman, &

Green, 2015), and planning for uncertainty such as ill-health or unemployment (Froud, 2003; Langley, 2007; Martin, 2002). This has resulted in an escalation of personal and household debt (Roberts, 2016) and increasing inequality, as reported in multiple geographies, such as the US

(Fligstein & Goldstein, 2015; Kim, 2013), Turkey (Eroglu, 2014), France

(Alvarez, 2015), and multi-country comparisons (Dore, 2008; Froud et al.,

2002; Godechot, 2016; Zalewski & Whalen, 2010).

Official statistics play an important role in financialization studies at the micro-level. From a political economy angle, Montgomerie and Tepe-

Belfrage (2017) used the UK to expose the limits of a finance-fuelled economy by questioning the hegemony of neoliberal policies that they believe have encouraged financialization. Quoting official statistics, the authors argued that the state of indebtedness of UK households is understated, and as a result, it is difficult to gain a full understanding of the effects of financialization. Montgomerie and Tepe-Belfrage concluded by noting that stagnating household income coupled with households’ increasing debt obligation could place constraints in “the material, emotional, and legal obligations of care and responsibility that constitute households,”

(Montgomerie & Tepe-Belfrage, 2017, p. 664). This could subsequently transform everyday life, as increasing pressure is placed on individuals and households to take on entrepreneurial and investor roles to meet their financial needs (Peters, 2009; Wainwright & Kibler, 2014).

Furthermore, observing the types of technologies used to normalise finance in everyday life is also a popular approach in observing financialization at the micro-level. For Shaun French and James Kneale

(2009), the importance of life insurance to everyday life is observed through the way such products have become embedded in the lifestyles of individuals.

French and Kneale commented that life insurances have become so important by making the risks and security associated to households’ lives more calculable and manageable. Langley (2006) focused on the usage of credit reporting and scoring as calculative devices of risks that assists in the politicisation of sub-prime mortgage lending. In a similar way, Aitken (2013) looked into the transformation of micro-credit as a tool for financial inclusion and how its spread has contributed to financialization of everyday life. These studies approach financialization from a cultural economy angle, using concepts that assist in the observation of how financialization, its technologies, and its actors come into being.

2.2.2 Historical Analysis of Themes, Drivers, and Outcomes of

Financialization Studies

The popularity of financialization in social science studies have grown exponentially over the past few decades that the topic can now be found in multiple disciplines, from sociology to anthropology, development studies to geography. Regardless, the evolution of financialization as an academic topic has often followed similar paths based on a few common themes that have been discussed by existing scholars as influential to our understanding of

45 financialization. The thesis separates these drivers based on the macro- and micro-level studies in financialization. The choice to focus on these two specific levels of financialization is in connection to the thesis’ main aim, which is to provide a multidimensional perspective of financialization from both the perspectives of elites (in the form of policymakers and/or the government) and citizens, actors which are discussed more frequently in macro- and micro-level studies of financialization.

The section first begins with an analysis of the drivers of financialization that have been popularly discussed in macro-level studies.

Costas Lapavitsas’ 2011 paper can be used as an overview to understand these drivers, which he themed as Marxist political economy, post-

Keynesianism, and heterodox or sociological approaches. Marxist political economists have used financialization as early as the 1960s as they discussed the maturing of modern capitalism. Lapavitsas identified the likes of Paul

Baran, Paul Sweezy, and Harry Magdoff, who argued that capitalist accumulation in the 20th century is characterised by slow growth, monopolistic multinational corporations, and financialization (Baran &

Sweezy, 1966; Sweezy, 1997; Magdoff & Sweezy, 1987).

The themes that drive the interest of financialization studies from a

Marxist political economy approach compete classical Marxism as it recognises that finance had been hegemonic in the 20th century capital accumulation, replacing the slow growth of productive capital. Instead, post-

Keynesians’ views were focused on the slow growth of productive capital

(read, for example, a series of articles in Epstein, 2005). Post-Keynesians’ approach to financialization places importance on the role of moneylenders

46 and financial institutions as rentiers, who, thanks to neoliberal policies, had encouraged financial profits “at the expense of industrial profits” (Lapavitsas,

2011, p. 615). Lastly is the work of heterodox or sociological approaches to financialization. For Lapavitsas, these works cover a range of interests, from that of Giovanni Arrighi’s (1994, 1997) cyclical patterns of evolution in capitalisms to the regulationist approach surrounding new systems of regulation surrounding financial markets (Aglietta, 2000).

Although Lapavitsas’ paper had been important in highlighting the historical evolution of financialization studies, the studies discussed in the paper are unsurprisingly Euro-American-centric. Many of these studies share similar characteristics. They often focus on the longitudinal changes in the macro-economy with a developed-country and Western-centric focus, observing changing patterns of capital accumulation and alongside it, the decline of productive sectors in replacement with financial ones (Aglietta,

1979; Boyer, 2000; Crotty, 2003; Epstein & Jayadev, 2005; Krippner, 2005).

Financialization is also understood from a historical time-frame, often grounded in a limited geography, more popularly, in Euro-America. The work of Giovanni Arrighi (1994), for example, traced 700 years’ worth of cyclical patterns of capitalism with an observation of Europe and North

America to show the changing hegemony of capitalist power in Euro-

America. To Arrighi, financialization represents a new mode of capital accumulation that can be traced to the periods of the 1970s. Then, American capitalism had been shaken by the loss of appeal for Fordism due to the pressure of international competition in the US. Arrighi observed financialization as a shift of investments from productive to financial spaces

47 in an effort for the US to minimise their potential losses over international competition. This shift also meant that the state had to begin competing for capital in financial markets as a response to declining national revenues and public budget demands, which consequently encouraged financial expansion

(Epstein & Jayadev, 2005; Orhangazi, 2008). Arrighi’s work has been important in providing historical perspectives on financialization which can also be found in the works of Greta Krippner.

Through The Financialization of the American Economy, Krippner had written an in-depth and long-term account of financialization at the macro-level in the US. Krippner’s analysis encourages the view that financialization is temporal, shaped by the development of policies made by specific actors (policymakers, the state, capitalists) which coincide with important events that shape a country’s politico-economic nature. The temporal notion of financialization is again highlighted through Krippner’s

(2011) more recent book, Capitalizing on Crisis, which observes the effects of finance’s unsustainable growth after the 2007-09 Global Financial Crisis

(GFC).

While Krippner provided an important mono-country account of financialization, authors such as Duménil and Lévy (2005), tried to find patterns of financialization in multiple nations. In these authors’ work, the impact of neoliberal policies which had been identified as the main catalyst of financialization was observed on the US in comparison to a collection of

European countries. Duménil and Lévy found that there is evidence of the growing importance of financial capital at the macroeconomic level, despite the differences in geographical and historical contexts of these countries. In

48 all these countries, the authors argued that there is a significant increase in financial corporations’ profit rates and the prioritisation in financial markets from the 1980s onwards. Similar analyses of financialization at the macro- level grew over the years, with scholars paying attention to the roles that elites, capitalists, institutions, and governments play in constructing, influencing, and maintaining the growth of finance (Alvarez, 2015; Crotty,

2003; Dore, 2008; Stockhammer, 2010; Zalewski & Whalen, 2010).

Besides describing the drivers of financialization, observed as changes in capitalism, macro-level scholars also discuss the distributional impacts of financialization. For example, Duménil and Lévy (2005) argued that financial hegemony could place capitalistic pressure and the undertaking of additional risks in order to sustain the economy under a new growth regime.

This could also potentially increase the concentration of wealth in specific class groups, thus encouraging inequality along class lines. Similarly, Arrighi

(1997) noted that the new financial hegemony could influence businesses to seek refuge from their declining profits in productive capacities by innovating through financial activities, thus taking greater risks. The author claimed that states could also engage in greater risks when they compete for capital in financial markets in an effort to respond to declining national revenues and increasing state debt (Arrighi, 1994). The risks undertaken by important economic and political actors could inevitably create ripple effects across society.

Krippner (2011) commented that such distributional effects of financialization might lead to differential outcomes according to the social positions that particular actors occupy. Financialization could, for example,

49 benefit households that possess monetary or financial assets, which more often than not excludes the lower-income households (Duménil & Lévy,

2005). This could be exemplified by a trend of favourable financial gains by such households from the mid-1980s onwards, coinciding with the period when neoliberal policies had grown in popularity in Anglo-American countries (Duménil & Lévy, 2005). More importantly, for macro-level scholars, financialization is often argued as a growth of unsustainable financial accumulation, evidenced by the growing global economic instability from the 1990s onwards (Crotty, 2003; Krippner, 2011; Sheng, 2009).

Firstly, speculative financial activities engaged by financial and non-financial actors who wish to benefit from the growth of financial markets have led to uncontained volatility in financial markets (Parenteau, 2005). Secondly, the benefits of financialization have been distributed in an unequal manner, causing inter-class disparities, especially between capitalists and non- capitalists (Crotty, 2003; Eroglu, 2014).

Financialization studies at the macro-level thus play an important role in establishing an understanding of the (re)distributional effects of financialization. The (re)distributive element of financialization is important in demonstrating that financialization does not impact certain groups of actors in isolation. Financialization has in fact penetrated different spaces of the society, its effects trickling down from the macroeconomic level to the intimate spaces of everyday life. With state arrangements and changing corporate behaviours that prioritise the hegemony of finance, everyday life too has become entangled with financial markets and activities, as reflected in the research focus of many financialization at micro-level studies.

As argued by many scholars, state arrangements play an important role in expediting the importance of finance within the everyday day realm

(Froud, Johal, & Williams, 2002; Lai, 2018; Langley, 2008b; Martin, 2002;

Pellandini-Simányi, Hammer, & Vargha, 2015). This often begins with the shift of financial welfare responsibilities from the state to individuals which results in the individualisation of financial risks related to the personal security of individuals and households (Langley, 2007; Martin, 2002).

The macro-level approach of financialization had been important in establishing the foundation of the academic field as being Euro-American- centric, as the modes of capitalist accumulation focused mainly on these geographies. As such, at a micro-level, it is unsurprising that there are a plethora of studies focusing on similar geographies to trace how macro-level changes can impact everyday life actors. Equally, a few major themes characterise the analyses of financialization at the micro-level, more specifically, the linkages between macro- and micro-actors through observations on how the actions of formal actors and their policies impact households and individuals. Additionally, this approach of financialization engages in critical commentaries on the effects of finance’s intrusion to the reduction of human life into quantifiable, financial numeric in the form of market risks and rewards. Further, the theories and concepts of Michel

Foucault have been influential in financialization in everyday life. This thesis will focus on two key literature to demonstrate the themes prevalent in Euro-

American financialization literature at the micro-level, Randy Martin’s

Financialization of Daily Life and Paul Langley’s The Everyday Life of

Global Finance.

For Martin, Foucauldian notions of power and governmentality were used to frame an observation on how financialization transforms households’ lives into a process of gaining a sense of self-mastery. The author initially explored the US government’s role in making all of this possible through the usage of pro-ownership policies such as the 401(k) plans (private-based pension plans used to displace the traditional government pension plan scheme). These arrangements helped in developing an equity culture among

US households but in this transformation is the dissemination of financial risks and the normalisation of financial instruments in the daily lives of US citizens. These instruments characterise the behaviours of US households, as simple as the swiping of credit cards to more complex (though equally as taken-for-granted) practices such as the purchases of mortgages, education loans, and personal insurances. For Martin, financialization is a dynamic phenomenon, one that allows individuals to gain a sense of developing themselves from uncertainty into something meaningful and eloquent

(Martin, 2002). This has resulted in the transformation of everyday life, in which happiness has become an object of financial gratification.

From here, Martin argued that pro-ownership policies in the US are a means to transfer responsibilities from the state to the citizens through the individualisation of financial risks and ownership. However, Martin referred to financialization as a paradox, as the encouragement to individualise financial risks and ownership that has instead resulted in their socialisation, with financial innovations such as securitisation that spreads risk from one individual to another across the society. The result of financialization is a

“redefinition of the family home as an object of speculation and credit”

(Martin, 2002, p. 195).

Similar to Martin, Foucault’s work had been influential in Paul

Langley’s work, which highlighted the importance of observing the agency of households in financialization. Langley (2008b) applied the concept of political possibilities to demonstrate how households embrace, protest, or adjust to certain changes in their lives; in this case, the growing importance of consuming financial products. In developing his analysis, Langley considered the changes to retirement planning that has been encouraged by the creation and implementation of neoliberal government policies, which results in the “individualising” of responsibility for risks involving pension management, what the author refers to as a creation of “investor subjects”

(Langley, 2006). Like Martin, Langley (2007) also argued that financialization has created a paradox by increasing uncertainty in the lives of individuals and households, rather than reducing it:

Individuals cannot identify with the subject position of the investor to which they are summoned in an unambiguous manner: investment as a technology for the calculating and embracing of financial-market risk/reward fails to bring order to future uncertainty and instead leads to heightened anxiety; and the performance of investment stands in tension with the practices of work and consumption that also appear as essential to securing, advancing, and expressing individual freedom in neoliberal society. In short, everyday investors are necessarily uncertain subjects in Anglo-American financialization. (p. 70)

While Langley and Martin have developed rich arguments about the transformation of everyday spaces through financialization, their work does not provide empirical evidence of how individuals and households engage with the changes in their lives due to financialization. This gap makes Brooke

Harrington’s (2008) Pop Finance particularly compelling in moving away from the analysis of institutions in which economic activity is embedded in to observe instead the actual calculative practices of actors involved in financialization.

Similarly, with Martin and Langley, Harrington first provided a historical foundation in which financialization of everyday life is to be observed, which is through the US pension reforms in the 1990s. This event led to a particular boom in US financial markets due to households collectively pouring their life savings into financial investments in the pursuit of security for their retirements. Using an ethnographic methodology,

Harrington studied American investment clubs to observe how their actions and thinking in terms of financial markets could differ from that theorised by scholars. Her findings problematised the way neoliberal policies are aimed at households, which often visualise them as wholly rational investors. Instead,

American investors have been found to not only be concerned about financial returns but also to be concerned about the social meaning of their investment actions and performance. In addition, their financial behaviours have been a response to varying structural conditions in which they have found themselves in.

Despite the popular drivers of financialization, it is clear that there is a considerable geographical gap in the literature. While the focus on Euro-

American countries is increasing (see, for example, an overview of financialization in emerging economies by Karwowski and Stockhammer,

2017), these literature are rarely focused on financialization at the micro- level. An exception could be made of the works by Karen Lai (2013, 2016,

2017, 2018). Lai (2017) observed everyday investors in Singapore and their engagement with government-led financial literacy events, arguing that the logic of governmentality is dynamic and operates through multiple channels, with a variety of outcomes. Lai’s distinctive approach of looking at financialization external to Euro-America has shown that there are specific nuances that are attached to the financialization of everyday life, which is influenced by the socio-cultural elements of the countries observed.

Furthermore, Lai demonstrates such socio-cultural elements are often influenced by certain political aims, in the case of Singapore, for “(financial) security at the individual, family and national levels,” (Lai, 2017, p. 928).

Lai’s work proves that there is a rationale to widen the gaze in which financialization is viewed.

As we reach the end of this sub-section, it is clear that existing financialization studies have mostly focused on Euro-American histories and concepts in understanding the growth and spread of finance. This has led to an incredible gap in the literature in terms of studies of financialization in other regions, and especially at the micro-level. Exceptions should be made for studies that are not explicitly looking at financialization, but are nonetheless concerned with providing a critical analyses on financial practices in everyday life, such as those found in feminist and economic geography literatures (including and not exclusively, Bergeron, 2001; Elias

55 and Roberts, 2016; Harker, 2017; Harker, Sayyad and Shebeitah, 2018;

James, 2014; Pollard and Samers, 2007). Despite the existence of these studies, it is clear that the works on countries external to Euro-America are limited. The next section will be used to extend this argument and outline the scope for this existing research which aims to provide a contribution to address this gap.

2.2.3 Identifying Limitations and Situating the Thesis in

Financialization Literature

The lack of studies focusing on non-Euro-American countries is noted by

Brett Christophers (2012) as a geographical anaemia in financialization literatures. There has, however, been a more recent growth in research that observes financialization in contexts external to Anglo-America or Europe, including, and not limited to, South Africa (Ashman, Fine, & Newman, 2011;

Karwowski, 2017); Brazil (Klink & Denaldi, 2014); Korea (Kyung-Sup, 2016);

Japan and Korea (Lechevalier et al., 2017); Malaysia (Rethel, 2010); China

(Wang, 2015); and Singapore (Lai, 2013, 2017). Most of these studies observe financialization at the macro- and middle-levels, rather than the micro-level.

This means that there is still a persistent gap in financialization of everyday life studies that have a non-Anglo-American or European focus. As such, the thesis responds to this limitation by providing a case study of financialization in Malaysia, an eastern, postcolonial, and developing country.

The second limitation that this thesis seeks to respond to is the lack of methodological design that “activates” the voices of micro-level actors such

56 as households and individuals. Empirical works that engage with individual actors through the methodological tools of interviews, survey analysis, ethnography, or participative observation, are relatively limited (for example, to name a few: Coppock, 2013; Harrington, 2008; Lai, 2017; Pellandini-

Simányi et al., 2015). Even more absent—at the time that this research project commenced—are works that engage with both actors responsible for the actions and programmes related to the expansion of financial markets and its activities and the individuals to which these actions and programmes are directed. Such methodological design could be important in observing the roles that different actors play in financialization, thus providing a more dynamic and in-depth analysis on its processes.

Additionally, the thesis draws upon Krippner's (2005, 2011) works which place great importance in historical context in analysing financialization, as well as the works of Froud et al. (2002) and Ertürk et al.

(2007) which call for attention on the types of policies and formal actors involved that have led to finance’s hegemony and complexity today. The thesis also uses a distinctive approach to financialization, which will be viewed through the lens of financial citizenship (FC) development (Leyshon

& Thrift, 1995). The concept of FC is chosen as it provides the language to discuss the spread of finance in everyday life by highlighting the importance of both the actors who are responsible for the programme of making finance more accessible to the masses (for example, formal actors such as states,

57 elites, policymakers) and actors of the masses (for example, households, individuals, or specific to the concept, citizens).2

The next section explores different approaches in financialization, such as political economy and cultural economy, before explaining why a combined approach of CPE is appropriate and insightful for this thesis.

2.3 The Choice of CPE to Explore Financialization

2.3.1 From Political Economy to Cultural Economy

Earlier studies in financialization could be traced to Marxist political economy approaches, used to explain and analyse the transformations of capitalisms in the 21st century. Classical political economy analysis of financialization stemming from Marxist ideas helped in identifying ways to understand how capitalisms mature, develop, and transform over different periods of time (Lapavitsas, 2011). Political economy also provided scholars alternative ways to observe macroeconomic changes beyond orthodox economic means by identifying finance as an important element in understanding the transformation of capital accumulation in the 21st century

(Baran and Sweezy, 1996; Sweezy, 1997).

2 The conceptualisation of FC and how it will be used in this thesis will be further elaborated in Chapter 3.

Additionally, in the earlier days of financialization, political economy had been useful to consider the institutionalisation of finance and the actors and authority involved in this process. As described by Jonathan Goldstein

(2009) in a special financialization issue of the Review of Radical Political

Economics, a dominant political economy approach in financialization explores a few similar themes. This includes “the rise to power of financial capitalists and the impact of financial growth on real capital accumulation, the production and distribution of surplus value, rising inequity, macro instability, economic crisis, and macro policy formation,” (Goldstein, 2009, p. 453). Modes of enquiry accompanying this approach include: How have capitalisms changed? (Aglietta, 1998); which give rise to sub-queries such as,

What roles do politics play in the change and transformation of capitalisms?

(Froud, Leaver, & Williams, 2007); and What role does financial innovation play in the process of financialization? (Grossman & Helpman, 2001).

Despite the breadth of research in the political economy of financialization, the approach comes with several limitations. The usage of political economy has been argued to largely ignore cultural elements in the form of practices and technologies that constitute economic life (Du Gay &

Pryke, 2002). Authority and power within political economy is theorised as a right to permit order or a right for enforcement, rather than freewill agency, which tends to prioritise certain types of actors for analyses, such as elites over individuals. Moreover, approaching financialization from a political economy angle could restrict the types of academic exploration which might be more concerned with heterogeneous modes of power in finance, such as agency in everyday life (Langley, 2008a, 2008b; Rose, 1999). Responding to the limitations of political economy, a second approach of financialization

59 has since come to emerge; cultural economy, which is made popular through the works of cultural studies’ scholars such as Paul du Gay, Michael Pryke,

Liz McFall, Donald Mackenzie, among others.

The appeal of cultural economy to financialization scholars is in its permission to focus on the agency of economic life, which, according to its advocates, could belong to any human or non-human elements such as professionals, practices, and/or objects that have allowed for finance to come into being (Aitken, 2007; Gulledge, Roscoe, & Townley, 2015; Mackenzie,

2006; Mackenzie, Muniesa, & Siu, 2008; McFall, 2009). Popular concepts in cultural economy include agencement, the property in which spaces come into being; assemblage, the envisioning of finance and its practices as an ensemble; and performativity, the capacity in which financial objects and processes could consummate action (Pryke & du Gay, 2007).

Cultural economy allows academics to consider that the economy and the organisation are not pre-formed entities, that they are given shape and meaning based on socio-cultural factors and technical practices (Du Gay &

Pryke, 2002). They inform that discourses surrounding phenomena consummate action and transforms them into being (Callon, 1998). This treatment of cultural economy has been fruitful in contemplating financialization as a phenomenon that is not necessarily one-dimensional, which is what political economy approaches seem to demonstrate. Instead of a top-down power flow, cultural economy scholars view financialization as relationships between the human and non-human, the consequences of which are sometimes intentional and more often than not, incidental. As such, a considerable amount of financialization literature focuses on

60 financial techniques, practices, technologies, and media and the role they play in influencing the growth of finance (Aitken, 2007; Alexander, 2011;

McFall, 2009; Morris, 2018; Prince, 2015).

Despite the usefulness of cultural economy in advancing financialization studies to include facets of economic life that had been largely ignored before, this thesis finds that the approach is also limited due to its widely accepted description of “culture”. “Culture,” within cultural economy of financialization, is highly influenced by the cultural turn in economic geography studies (Du Gay & Pryke, 2002; Gibson, & Kong, 2005).

This aspect of “culture” is more specific to the way economic life is influenced by media instruments, symbols, signs, practices, technologies, and discourses. Such an understanding of “culture” sometimes omit “culture” viewed as forms of ideas, customs, history, national institutions, and social behaviours; which still gives valuable meanings and is constructive of the practices which determine economic forms of life (Best & Patterson, 2010).

Additionally, this viewing of cultural economy tends to depoliticise financialization, with specific focus given on the heterogeneous production of economic practices.

While cultural economy is useful in bringing new concepts into financialization, the way the approach has developed in financialization studies has sometimes led to a much narrowed focus on practices and technologies in economic life. In doing so less attention is given to traditional political authorities (such as the states, institutions, and elites); and their influences on the practices of economic life. As such, the thesis argues that cultural economy will not be useful for this thesis’ objectives.

Given the thesis’ exploratory focus on Malaysia as a postcolonial, eastern country; and the roles that both elites and citizens play in the processes of financialization, the justification for an approach that incorporates cultural and political consideration is needed. As such, the choice to apply CPE will be made in the next sub-section.

2.3.2 Positioning CPE in the Thesis

This sub-section discusses two frameworks of CPE, firstly by Ngai-Ling Sum and Bob Jessop, and secondly, by Jacqueline Best and Matthew Patterson. In this discussion, the strengths and limitations of both frameworks will be explored, before the choice to apply Best and Patterson’s CPE framework in this present thesis is explained.

The section first begins by reflecting on the relatively recent (and limited) development of CPE in financialization, which has led to quite a vague conceptualisation of the concept. The framework of CPE is not necessarily a bridging between political economy and cultural economy, nor is it about putting up a framework that combines cultural, political, and economic elements together. Instead, CPE could be viewed as an incorporation of critical cultural analysis which has been omitted from traditional political economy concepts (Best & Patterson, 2010).

Although there has been a variety of CPE studies, some being recognised as cultural economy studies with a political element (Langley,

2008b; Martin, 2002), and others being recognised as a political economy studies with a cultural element (Engelen et al., 2011; Ertürk et al., 2007;

Froud et al., 2006); there have been very few authors who have developed

CPE as an academic and conceptual framework. Two authors who have attempted to overcome this limitation are Ngai-Ling Sum and Bob Jessop

(2013). In their book, the authors provided a framework for CPE, arguing that such a framework is necessary for academic studies as to avoid ontological and epistemological misunderstandings. The authors’ framework of CPE could be used to define ontological, epistemological and methodological assumptions, with the authors arguing that researchers should use a critical realism perspective when applying their framework of

CPE.

Ontologically, Sum and Jessop encourage scholars who want to use

CPE to explore the way complexities of the world are reduced using semiosis and structuration. Semiosis refers to the apprehension and meaningful communication of the natural and social world through sense- and meaning- making, that is, processes which give meaning to the world. As such, CPE allows for research queries that observe how individuals perceive, comprehend, and interpret the world around them, as well as the behaviours of others towards them. Epistemologically, the authors argued that

CPE derives from a combination of Marxist critique of political economy and

Foucauldian philosophies, which assume that knowledge is partial and incomplete. As such, CPE studies are critical realist by nature, as the approach recognises that knowledge is fallible and latent, due to the existence of diverse factors and/or actors. Methodologically, CPE relies on the approach of a pluralistic logic of discovery, with CPE studies often presenting their analyses in a logical-historic method, which “entails the movement from abstract-simple analytical categories to increasingly complex-concrete ones,”

(Sum & Jessop, 2013, p. 7). As such CPE studies often pay attention to the interactions of different causes and conditions of a phenomena and encourages for a variety of methodological tools with the aim of providing adequate explanations for research problems.

Besides Sum and Jessop, Jacqueline Best and Matthew Patterson have also contributed in unpacking the framework of CPE (2010, 2015). For Best and Patterson, CPE is about bringing together “cultural dimensions of the economy, the economic aspects of culture, and the political character of both,” (Best & Patterson, 2010, p. 3). The authors argue that academic disciplines which seek to understand modern societies have been founded on the “rhetorical separation of these aspects of social life” (Best & Patterson,

2010, p. 3). Bridging this gap could assist in providing in-depth and rich debates by focusing on the central practices which have been silenced by academics who insist that ‘the economy’ could and should be analysed with the separation of actors and practices that constitute economic life (culture) and the forms of power that are constituted and embedded within this economic life (politics) (Best & Patterson, 2010). CPE thus can be applied to research with an “attention to the role of culture in political economy [which] allows us to understand a multitude of different empirical phenomena that resist narrower forms of analysis,” (Best & Patterson, 2015, p. 739).

Despite the benefits of Sum and Jessop’s CPE framework to social science studies, it is argued here that their framework is not necessarily useful for addressing this study’s objectives. Sum and Jessop’s encouragement that researchers who apply their CPE framework to follow a

Marxian or Foucauldian analysis could constrict the types of methodology

64 and analysis applied to address the thesis’ objectives. Although these forms of analyses have great value, it is argued here that both Marxist and

Foucauldian theories are deeply woven in western histories that assume liberal conceptions of freedom, justice, and power. For a country such as

Malaysia which has been developed through neopatrimonialism - described as combinations of formalised, patriarchal, and authoritarian politics

(Erdmann & Engel, 2007) - the usage of Marxist and Foucauldian theories might limit or proscribe an understanding of the country’s experiences with financialization. This drawback could be addressed by drawing on Best and

Patterson’s (2010) framework instead. To Best and Patterson, Marxist and

Foucauldian analyses are often constrained to a specific ‘left’ politics.

However, the authors encourage researchers who are adopting CPE the freedom of not having to subscribe to a certain type of politics, especially in observing the way authority and power are understood. Furthermore, Best and Patterson also mentions that their CPE approach tries to underplay the global scope of political-economic life, at least for the purpose of allowing more nation-specific analyses, insofar as scholars consider different elements of an observed phenomenon—political, cultural, and economic—as being important in constituting economic life. Due to Best and Patterson’s celebration of providing scholars a flexible framework in return for a wider and more dynamic observation of a phenomenon, this thesis has opted for this framework as it appeals to the needs of the present research’s objectives.

Overall, the different way in which Best and Patterson views political analyses in CPE compared to Sum and Jessop’s make their framework particularly fitting with the present study’s aims. Using Marxist and

Foucauldian analyses might limit the opportunity to find differences in the country’s experiences with financialization that is unique and place-specific due to its history and culture. With this in mind, it is also now important to define and understand how culture is to be viewed in the present study. As mentioned in the previous sub-section, the concept of “culture” in cultural economy has been constrained to specific individual acts, practices, technologies, and discourses which creates meaning and contributes to economic life. Instead of following this commonly understood conceptualisation of culture, this thesis defines culture as values found in shared identity, customs, national institutions, social behaviours, and common interpretations. This thesis argues that such a definition of culture as shared values is important to financialization, as these shared values condition the way economic practices in everyday life come into being, and thus, influence the processes of financialization (Best & Patterson, 2010).

This consideration of culture could be argued to have been taken for granted by existing scholars in financialization, especially as there tend to be specific types of geographies that make up the spaces of critical finance such as

Anglo-America or Europe (Christophers, 2012; Pollard, McEwan, Laurie, &

Stenning, 2009). The historical, cultural, and social assumptions behind these geographies are often widely recognised among existing financialization scholars and as such, more and more literatures in financialization tend to omit these types of analyses. Viewing culture as shared values could highlight interesting elements of financialization that had been largely ignored, for example, the influences of ethnic, religious, and/or racial customs in financial practices.

To conclude this section, the way CPE will benefit this thesis will be outlined. Firstly, considering financialization from a political economy angle helps in addressing the thesis’ first objective; observing financialization using

Malaysia as a specific geographical case study. Politicising the analysis on financialization of everyday life in Malaysia would allow for in-depth commentary on its postcolonial past, the development of policies that have encouraged financialization, and the types of elite actors and the roles they play in this process. At the same time, having a cultural analysis in this thesis is also useful in addressing its second objective, to provide a multidimensional perspective on the roles that both elites and citizens play in financialization. It is through this cultural lens that an observation could be made on the agency that exists in everyday life which contributes in influencing and/or expediting the processes of financialization.

2.4 Conclusion

This chapter has presented a literature review of financialization, exploring the development of the concept over time and its extension to cover the macro-economy, the corporate sector, and everyday life. While the development of financialization literature has been substantial and insightful, with the term financialization now widely used, relevant limitations have been identified. Most significantly for this thesis which is situated in the everyday life literature is the lack of focus on geographies external to Anglo-

America and Europe as well as the lack of multidimensional focus on the

67 roles the macro- and micro-actors play in financialization. Also, this chapter has also considered different academic approaches to understand financialization. While political economy has been useful in the development of the field, particularly in the works of financialization at the macro- and middle-level, the limitation of the approach is in its downplaying of social and cultural aspects in the processes of financialization. The emergence of cultural economy seeks to respond to this limitation, by allowing researchers to pay attention to the cultural practices that assist in producing economic life integral to the processes of financialization.

Although cultural economy approaches have been used quite widely to understand financialization, the thesis argues that the field of cultural economy is limited as it tends to narrow the definition of “culture” by ignoring elements of national institutions, social practices, customs, history, shared identity, and social behaviours. The thesis also argues that the heterogeneous analysis of cultural economy tend to depoliticise financialization, taking for granted the types of power and authority that are relevant to the construction of an economic environment in which cultural practices are produced in. As such, the thesis employs CPE, justified for its encouragement of research that employs critical cultural analysis with political economy concepts. In the next chapter, the thesis now turns into conceptualising how financialization will be viewed through the concept of

FC in this thesis, which will assist in the formulation of the RQs.

Chapter 3

Chapter 3: Conceptualising Financial Citizenship

3.1 Introduction

The concept of FC has been used in the 1990s by governments and policymakers worldwide as an argument for making financial systems more inclusive (Lai & Tan, 2015; Leyshon & Thrift, 1995). The Malaysian context of financialization can be understood through the language of FC as it is about the efforts put in place by certain macro-actors (for example, elites, governments, and policymakers) to expand access to complex financial arenas (such as the stock market) and normalise finance in everyday life realm.

The purpose of this chapter is to explain how FC fits the thesis’ objectives: i) to explore a specific geographical focus through a Malaysian case study as to build the argument that financialization is complex and shaped by localised factors, and ii) to explore the roles that both formal and everyday life actors play in financialization. To meet these objectives, the

69 chapter will consider the political foundations of FC before addressing how the concept will be used in this thesis from a Malaysian contextualisation.

The chapter first describes in Section 3.2 how the concept of citizenship plays a role in a study of financialization by exploring the traditional concept of citizenship from a political angle (Turner, 1990). Then, the chapter extends existing research on FC (Dymski, 2005; Kear, 2013; Lai

& Tan, 2015; Leyshon & Thrift, 1995) by discussing elite-citizen relations.

Following this, the chapter explores FC through a Malaysian lens in Section

3.3, discussing the history of Malaysia's colonialism, postcolonial nation building, and post-independence modernisation. By doing this, the chapter demonstrates how important elites, policies, and financial arenas emerge to become important in FC development, as discussed in Section 3.4. Section

3.5 discusses the formulation of the thesis’ RQs. The chapter then concludes.

3.2 What is Financial Citizenship?

The concept of FC has been explored by various scholars as a language to discuss formal efforts to make finance more accessible and inclusive among everyday actors, such as citizens (Dymski, 2005, 2010; Kear, 2013; Lai &

Tan, 2015; Leyshon & Thrift, 1995). While the discussion on FC started with an observation on the decline of banking access to the US and British rural communities (Leyshon & Thrift, 1995, 1997); the concept of FC has since been extended beyond particular national contexts to consider financial exclusion along class, ethnic, and gender lines (Dymski, 2005; Dymski & Li,

2003). However, the concept’s foundation in the theories of citizenship rarely makes an appearance in financialization studies.

This could be related to the emergence of FC itself, which came towards the end of Leyshon and Thrift’s (1995) paper. FC was suggested by

Leyshon and Thrift as a concept that can be used to think about the exclusionary tendencies of financial markets. Financial markets could be thought of having state-like boundaries, assigning them with responsibilities

“which reach beyond consumer sovereignty into basic human rights.” (p.

336). The description provided by Leyshon and Thrift, which was further extended work that followed literatures (Dymski, 2005; Dymski & Li, 2003;

Leyshon & Thrift, 1995, 1997), refers to FC as the politics of territory. This conceptualisation has been helpful as it allows us to think of finance from an everyday perspective, focusing on the exclusion of certain types of actors from financial systems. Furthermore, the concept of FC is useful as it explores efforts to expand financial inclusion by responsibilising states over their citizens’ ability to access the financial system effectively. By exploring this notion, the thesis aims to contribute to the development of FC discussions by scrutinising the dichotomous elite-citizen relations and how it shapes the development, implementation, and outcomes of FC. The discussion begins next.

3.2.1 How Citizenship Matters in Financialization

Citizenship can be understood as membership (Kymlicka & Norman, 1994); those who belong to it are granted certain rights, privileges, and duties which could determine not only the sovereignty of the ruling state but also the civic

71 harmony of the society in which the citizenship is assigned to (Sim, 2008).

Citizenship thus is often thought of as a dichotomous relationship of responsibilities between actors who grant rights and actors who are granted those rights (Turner, 1990). The concept of citizenship emerged from political studies; it concerns the discussion of the legal and political position of an individual in relation to the nation that they are members or non- members of (Parker, 2003). Citizenship is so integral to the construction of societies and the harmony of everyday life that it has often been taken-for- granted; it has been transformed into discursive mental objects for most individuals, bearing no manifestation in physical and objective forms in reality (Turner, 1990). Regardless, members of a citizenship, citizens, reap the benefits (or disadvantages) of an (in)effective implementation of a citizenship institution which could determine the harmonious governance of societies and everyday life (Sim, 2008).

The evolution of citizenship could be explained by Thomas Humphrey

Marshall's influential essay, Citizenship and Social Class (1950), which describes the evolution of citizenship rights. Historically, the egalitarian granting and institutionalisation of rights were founded on the basis of inequality; in the past, rights had only been offered to selected privileged groups—adults, males, white people, wealthy people, and/or the ruling class.

Thus, the assumption behind citizenship is the efforts to ensure that rights which are needed by members of the society are granted in an egalitarian and inclusive manner.

This could be explained by the institutionalisation of political rights in the UK. Marshall explained that in the late 18th and 19th century, the right to

72 vote had already existed albeit in an unequal manner, to the point that only less than one-fifth of the adult male population had access to these rights

(Marshall, 1950). The radicalism to fight for voting rights in the 19th century was thus not about the creation of a new right; instead it had been “the granting of old rights to new sections of the population,” (Marshall, 1950, p.

19). The fight for voting rights by the excluded group—those who are working-class and in poverty—against the upper and ruling class, has resulted in an egalitarian institutionalisation of voting rights as enjoyed by

UK citizens (as well as citizens in many of the countries in the world) today.

This historical foundation brings an understanding that rights equate to a form of empowerment, as exercising rights would allow members of a territory to have a choice over the type of actors that would serve their interests (Turner, 1990).

Perhaps it is due to this history of citizenship and its elements of membership and territorialisation, inclusion versus exclusion, those who are in and those who are out—which has made citizenship a useful concept with which to explore financialization of everyday life. For example, Leyshon and

Thrift (1995) argued that introducing the concept of citizenship when discussing financial systems could shed light on the exclusionary nature of the systems that work against the poor and disadvantaged social groups. By discussing financial systems along the lines of citizenship, it could responsibilise the actors governing the financial systems over actors who need the systems, in the same manner that nation states are responsibilised for their citizens:

Traditional states are, amongst other things, about boundaries. States

define spatial and other boundaries of inclusion and exclusion and, on the

basis of these boundaries, confer citizenship and rights to those on the

inside. States have an ‘inside’ and an ‘outside’, a ‘here’ and a ‘there’; they

have citizens (on the inside) and non-citizens (on the outside) (Walker,

1993).4 Contemporary financial systems also have these characteristics.

They draw borders which are difficult to transgress and which are currently

being rolled up. What we need is a concept like financial citizenship which

can relate the two, both as a means of putting pressure on states to reform

their financial systems so that they include rather than exclude and of

putting pressure on financial systems to realize that they have some state-

like responsibilities which reach beyond consumer sovereignty into basic

human rights. (Leyshon & Thrift, 1995, p. 336)

On this basis, the thesis adapts Leyshon and Thrift’s way of thinking of

FC as a language in which to analyse financial systems through a citizenship lens, emphasising the roles of actors who are responsible for the construction and maintenance of financial systems. Thinking of the financial system along citizenship lines encourage for a discussion on the types of financial rights to be granted to citizens, that is, the right to have a fairer and safer financial system, the right to have access to this environment, and the right to have skills that would sustain its members in said environment (Dymski, 2005).

In global policy discussions, the concept of FC has thrived, even if it has not been used explicitly. Instead, the concept has been driven by worldwide efforts to expand access to finance using policy technologies such

4 The citation in Leyshon & Thrift’s quote refers to: Walker, R.B.J. (1993) Inside/outside: international relations as political theory, Cambridge University Press, Cambridge.

74 as financial inclusion and financial literacy education (FLE) (Arthur, 2012;

Dev, 2006; Lusardi & Mitchell, 2007). These efforts are often guided by neoliberal market logic that promotes the concept of the responsible and financially self-disciplined individual (Coppock, 2013; Lai, 2018; Lai & Tan,

2015). The proponents of FC include the private financial industry, increasingly partnering with policymakers to find commercial solutions that would ensure more citizens are included in the financial system (Cairns,

2015; Han & Melecky, 2013; Kear, 2013).

However, this effort can be scrutinised by the idealism of FC as promoted in theory, which sometimes ignores the political aspects of the financial system. For Kear (2013), the popularity of FC amongst policy elites promises inclusivity while ignoring the deeply unequal system that makes up the spaces in which FC forms, given that the survival of finance itself is dependent on capitalistic tendencies. This effectively privileges some types of actors over others, such as those who are financially disadvantaged over the wealthy. This argument is useful in exploring whether the exclusion of certain actors is a deliberate or inadvertent consequence of policy design by elites, decisions by citizens or some other process. Analysing elite-citizen relations provides a way to explore these nuances, allowing this thesis to examine the socio-political history that shapes these relations and consequently influences FC development. The next sub-section extends this discussion further.

3.2.2 Defining Elite-Citizen Relations in FC

Earlier FC studies observe elite-citizen relations in a much more normative manner (Dymski and Li, 2003; Leyshon and Thrift, 1995). Elites were understood in a traditional sense, closer to the Millsian theorisation of elites which sees this group of actors as possessing economic and political power and authority that construct and influence social life (Mills, 1956). Such views seem to fall under the more traditional political economy viewing of elite power, which travels through a top-down approach, from elites to citizens (Acemoglu & Robinson, 2008). Similarly, these elites are understood to be influential in the way the financial system is organised and developed; they are thus responsibilised for FC development, with the aim that the financial system becomes more inclusive and more deeply embedded in society.

Recent work on FC has challenged this view of elite-citizen dynamics.

Lai and Tan’s (2015) study showed that elite-citizen relationships in FC could be geographically-contextual and political, as in the case of Singapore in which the government had expanded financial inclusion for citizens for the advancement of the country’s economy. Lai and Tan’s work could be viewed as Foucauldian-inspired, observing power as omnipresent, ambiguous, complex, transversal, and multifaceted (Foucault, 1975/2012, 1982, 1983;

Langley, 2008a; Martin, 2002); and thus adding agency to non-elite actors in influencing the processes of FC.

While this thesis finds value in Foucauldian conceptualisation of power, it seeks to explore whether the Malaysian elite-citizen relations could tell a different story of FC altogether. Given the novelty in terms of the

76 location observed in this present study, coupled with Malaysia’s complex postcolonial histories and political system, the thesis moves away from strictly guiding its observations according to a single way of understanding authority and power. It considers instead, that elite-citizen relations are a set of complex interactions, driven by specific localities and shaped by historical trajectories, cultural conventions, actors, events, and socioeconomic factors

(Swyngedouw, 2004; Wolch & Dear, 2014). The thesis will now break down the components of elite-citizen relations in order to understand why there is a value of observing each of these group of actors.

Firstly, elites are important actors in understanding financialization due to their dynamic and complex roles in the construction, transformation, and sustenance of financial systems (Wedel, 2017). Unlike governments and states, elites are not necessarily purely political; their objectives might also not necessarily be purely for extracting wealth or rent (Engelen et al., 2011).

Elites come from various positions, political, technocratic, and/or financial; but more importantly, their positions could sometimes overlap with one another. The power of elites in modern financial systems have been argued to be extremely important and influential to making finance grow to become more important and complex (Davies, 2017; Engelen et al., 2011; Wedel,

2017). As such, observing elites could help in understanding the roles that they play in the context of FC more clearly and therefore develop our understanding of FC as a concept.

The conceptualisation of elites in existing financialization literature sometimes diverges from the traditional, Millsian elites, viewed as groups distinguished for example by their family, wealth or class (Mills, 1956).

Instead, elites in financialization literature can be political, policy-based, and technocratic (Engelen et al., 2011; Epstein & Jayadev, 2005; Krippner, 2011), or, at other times, corporate and capitalistic (Bowman, Froud, Johal, &

Williams, 2017; Froud et al., 2000), and in many cases, their positions are overlapping, fragmented and fluid (Davies, 2017; Wedel, 2017). Moreover, in many cultural studies of financialization, the roles that elites play over financial spaces are analysed as being much more ambiguous (Hall, 2012;

Langley, 2008a; Martin, 2009; Rudnyckyj, 2017). Davis and Williams (2017) argued that the differences in conceptualising elites have much to do with the way the growth of finance has reshaped the spaces in which elite power is mechanised and reproduced. In modern day, it is perhaps more suitable to conceptualise elites by their "modus operandi," that is, "how they operate, rather than where they come from, the capital they have amassed, or the official position they occupy at a given time," Wedel (2017, p. 154). Following this, the thesis argues too that the specific composition of elites could reflect the location and temporality in which they hold power in, rather than observing elites as a fixed universal membership group.

Wedel’s approach to understanding elites is helpful in relation to

Malaysia, which has a political system that has been defined as neopatrimonial (Erdmann & Engel, 2007): a hybrid institutional political arrangement of complex combinations of formalised, patriarchal, and authoritarian politics that are driven by personal and informal public norms within governing spaces (as explored in more detail in chapter 5). This political arrangement means that elites have more direct power and control over the everyday life of the actors they govern, in comparison to Western

78 settings that are more dependent on state and/or institutional apparatuses

(Acemoglu & Robinson, 2008; Froud et al., 2007).

As such, elites in this thesis are described as actors who are responsible for the construction and sustenance of the Malaysian financial system. These could be political elites or elites with responsibilities for financial policymaking. The thesis’ choice to focus on elites that are political and/or policy-based is because they are important for FC policymaking and implementation, as well as influencing the types of national economic ideologies adopted which affect FC development. In many financialization studies, the ideology that is often chosen as a point of reference is neoliberalism (Ashman et al., 2011; Chaput & Hanan, 2015; Crotty, 2003;

Davies, 2017). These scholars argued that neoliberalism has driven governments worldwide to hand over their control to market forces (Jessop,

2002). In line with this ideology are efforts to develop neoliberal individuals who are more financially-responsible and self-acting, while at the same time being less reliant on governments for the management of their life savings

(Lai, 2018).

Secondly, this is where the role of the citizens come into the lens of the thesis’ observation. Similarly to elites, citizens are important in influencing the construction of financial systems in a specific manner through their behaviours, whether through their active consumption or resistance of financial activities (Langley, 2008; Martin, 2002). In his 2013 paper, Kear made a distinction between the conceptualisation of individuals as “citizens” versus “subjects”. He used a political distinction made by de Tocqueville

(1835/2001), which states that, “to be a subject is to be subjugated, powerless

79 and passive, while to be a citizen is to be the opposite, a self-governing individual with the power and liberty to act on one’s interests, goals and desires,” (Kear, 2013, p. 935). This description implies that citizens possess different types of power compared with subjects: being a citizen is a demonstration of inclusion to a certain membership, providing the individual with a sense of autonomy, democracy, and empowerment that is missing from the subject.

However, de Tocqueville’s distinction between citizens and subjects is not generally taken up in conceptualisations of individuals as subjects in cultural financialization studies (such as, and not limited to: Coppock, 2013;

French & Kneale, 2009; Hall, 2012; Lai, 2013; Langley, 2006, 2007;

O’Malley, 2000; Rudnyckyj, 2017). Instead, many studies are guided by the concept of Foucauldian governmentality, which notes the process of governments regulating everyday behaviour through discourses and techniques of self-governance (Foucault, 1975/2012, 1982, 1983). This notion of self-governance normalises individuals to become financial subjects, who are more active in taking control of the management of their life finances

(Aitken, 2005; Hall, 2012; O’Malley, 2000). In this sense, both de

Tocqueville’s citizen and cultural studies’ subject are similar in that they both are conceptualised as having authority and power in their everyday life through practices, shaping and influencing the environment in which they live.

Regardless, there is value in conceptualising individuals as citizens in a study of financialization. This is due to the difference in which financial subjects can be understood separate to that of a financial citizen. The notion

80 of financial subjects in financialization studies is largely related to the development of neoliberal policies, which responsibilises individuals to leave their personal financial security to market devices (see the literatures discussed in Chapter 2, Section 2.2.3). Such neoliberal policy discussions have been prevalent in Anglo-American countries but have also spread their influence in many developing countries, including Malaysia, through global policy directions led by transnational economic institutions (Harvey, 2005).

These very institutions are found to place pressures on developing countries to adopt strategies which have been deemed as integral to the economic success of developed, western countries (Arthur, 2012). These discussions often are driven by the values of liberalism which promote market opportunities, individual freedom, and more inclusive policymaking. Under this premise, governments are urged to ensure that excluded citizens are given opportunities, accesses, and resources that would facilitate their autonomy and agency (World Bank, 2000).

Nonetheless, the foundation of the popularity of such inclusive policymaking, especially in developing countries, is that citizens are increasingly being responsibilised not only for their personal financial security, but also for the advancement of the country’s economy. In the implementation of inclusive financial policies, the governments of developing countries are focused on fostering specific financial behaviours among their citizens in order to develop their countries’ economies in a specific manner.

As such, conceptualising citizens as individuals move beyond the notion that they are being subjectified to neoliberal policymaking. Instead, financial citizens need to be understood through the role of responsibility that they

81 play in FC and financialization. As mentioned in Sub-Section 3.2.1, citizenship is about a dichotomous relationship of responsibilities between governing actors who grant rights and governed actors who are granted those rights (Turner, 1990). For both actors, keeping up with their responsibilities in this membership could determine harmony and sovereignty of the spaces in which this membership exists. As this thesis seeks to this aspect of elite- citizen relations, it is therefore more apt to observe individuals as citizens who play a role in elites’ FC development strategies, rather than investor subjects of neoliberal policies that are encouraging them to leave their personal security to market devices. This reflects the importance of observing the inter-related roles that both elites and citizens play in influencing FC development.

Having described FC and elite-citizen relations as will be observed in the thesis, the next section now moves forward to provide a foundational setting of FC development contextualised from a Malaysian angle. It does so by looking at the country’s history of post-colonialism and post- independence modernisation.

3.3 FC: The Malaysian Historical Context

The purpose of this section is to contextualise FC through a Malaysian angle.

To do this, the section first begins by discussing the colonial history of the country, followed by its postcolonial nation building efforts, and ending with its modernisation period. The historical background of Malaysia serves as a

82 foundation in which FC is to be observed through a development of elites’ policies, which in turn, has resulted in the transformation of financial practices among citizens in their everyday life. The section now turns to the history of colonialism in Malaysia.

3.3.1 Colonialism and Its Impact on Malaysian Societies

According to Ishak (2014) the most prominent feature of Malaysia as a country is its multi-ethnic, pluralistic society. John Sydenham Furnivall’s work on the final years of Western colonialism in Southeast Asia defines pluralism as a society comprising “two or more element or social orders which live side by side, yet without mingling, in one political unit,”

(Furnivall, 1939/1944, p. 446). Pluralism often occurs as a result of colonialism, in which colonised countries are placed in subservient positions to construct new nations with the state of the society that is left by colonists, whether pluralistic by choice or not (Hefner, 2001).

The complication of this history is that popular nation building theories derived from Western scholars have been initially pessimistic on the prospects for the construction of a democratic society arriving from deeply plural histories (Hefner, 2001). This pessimism originates before the First

World War; however, ethnic and racial horrors experienced in World War II cemented the negative perception that scholars have of deeply plural societies. As such, Western theories of nation building have evolved post-

World War II, including the promotion of liberal views that call for the

83 protection of individual rights (Kymlicka & Norman, 1994)5; to the modernisation theory that encourages a homogenous political culture; and finally, to a more secular and singular political authority in replacement of traditional, religious, familial, and/or ethnic-based polity (Huntington,

1968). The limitation of these discussions is the persistent rarity of arguments in newly independent countries that are often forced and coerced to accept arrangements unfamiliar to their historical precedence, such as the case of post-colonial countries.

Countries that are formerly colonised and deeply plural have undergone through completely different courses of nation building experienced in Western countries. The same could be said of Malaysia and several of its neighbouring Southeast Asian countries. Their histories are often marked by newly-elected national governments, whose actors are selected based on their conformity to existing institutional (political, economic, financial) colonial arrangements (Hefner, 2001). More importantly is the manner in which these actors’ conformity often occurs through coercion and/or pressure for the expedience of an independence agreement for their respective countries with colonist authorities (Hefner,

2001; Jamil, Aminuzzaman, & Haque, 2015). Post-independence, newly- elected governments would sometimes change and shape the institutional pillars of their countries to make sure that they are national and local, fine- tuning them to reflect domestic and contemporary needs, although the colonial foundations could remain the same.

5 This is not to be confused with the rise of identity politics, which comes at a much later period (Crenshaw, 1991).

The absence of critical analyses of colonialism history in much financialization literature results in an omission of the inorganic development of national customs and laws in colonised countries, and how these histories shape the way we understand the formation of financial markets either in these countries or globally (Christophers, 2012, 2015;

French et al., 2011; Pollard et al., 2009). Understanding pluralism in the

Malaysian context is important to explain these challenges and complexities faced by the programmes in FC development.

In Malaysia, colonialism is the main cause of its deeply plural society, which has greatly affected the course of FC policymaking during its earlier days. Before going deeper into how this has occurred, it might first be worthwhile to understand the impacts of colonialism on the country's pluralistic society.

For Malaysia or the geographies in which it was historically situated, the existence of multiple races and ethnicities have existed for centuries through trade and cultural exchange (Embong, 2001). As explained by

Embong, for trade purposes, the Malay-Archipelago (consisting of what is now known as Brunei, East Malaysia, East Timor, Indonesia, Singapore, and the Philippines; Figure 1); as well as Malay Peninsula (consisting of what is now known as West Malaysia, southernmost tip of Myanmar, and Southern

Thailand; Figure 2); actively interacted with other major Asian civilizations.

Immigration and inter-marriages were common customs during this period, which introduced multiple minority ethnic groups, cultures and ethnicities to these geographies, providing a variety of skills and trading activities,

85 although the Malay group continued to be the largest ethnic population of the region (Alatas, 2010; Roff, 1994).

Figure 1: The Malay Archipelago (Source: www.google.com/images)

Figure 2: The Malay Peninsula (Source: www.google.com/images)

Malaysian pluralism as known today, however, is strictly by design, arriving from every dimension—“ethnic, linguistic, religious, cultural, and

86 others […] largely shaped during the colonial period,” (Embong, 2001, p. 60).

Although Malaysia has been colonised by the Portuguese Empire, the British

Empire, and the Empire of Japan; the colonial period as referred to by Abdul

Rahman Embong is the second British colonisation of the country, then known as Malaya, from early 18th century until its independence in 19576

(Alatas, 2010). Then, the three main Malayan ethnic groups—Malays,

Chinese, and Indians, among other smaller native groups—lived in complete ethnic segregation, separated by the roles that were informally assigned to them by the British colony.

The origination of this plurality stems from the British need to organise divisions of labour along economic functions, as well as to ensure that the largest population of Malaya would not possess economic control that could minimise their colonial power. As elaborated by sociologist Syed

Hussein Alatas (2010), Chinese business elites were brought in by the British from regions in Qing Dynasty7 to run the Malayan commercial life. Indian8 estate owners also immigrated to Malaya to run the production of agricultural plantations. Among the two groups, the Chinese group consists of mostly upper-class business elites, who, in their migration to Malaya would also carry along mass groups of labourers with them. For Indian upper-class elites, such immigration also occurs on a large scale, although

6 It should be noted that there has been a brief control of Malaya by the Empire of Japan for three years during the Second World War, when they defeated the British Empire in the region from 1941 to 1945 (Kratoska, 1988). 7 This is later known as the Republic of China. 8 The Indian race in Malaya and afterwards Malaysia is technically a confusing and racially insensitive identification, as the migration of people from the Indian subcontinent to Malaya meant that a variety of ethnic groups had initially come to Malaysia. However, as a legacy of the British colony, those who had migrated from the Indian subcontinent were referred to as a singular category, thus birthing the "Indian" race specific to Malaya and Malaysia (Sandhu, 1969).

87 many forced cheap labourers have also been brought in by the British colonists from South Asia to fill in labour force needs in colonial offices

(Sandhu, 1969). In both groups, their presence in Malaya was widely understood as being temporary, granting them the term of pendatang (direct translation: newcomer or immigrant) and as such, systems of social stratifications that existed in their previous countries of origin continued to be assumed in Malaya (Alatas, 2010).

Lastly, is the complex group of the Bumiputeras (direct translation: sons/daughters of the soil), widely accepted as the native inhabitants of

Malaya. The Bumiputeras are made up of the indigenous people known as orang asli and the Malays. There are many arguments about the difference between orang asli and Malays as there is considerable genetic, linguistic, cultural, and social diversity among the different subgroups due to immigration and colonialism (Milner, 2010). However, it is widely accepted that the two could be distinguished based on the way Malays are identified as native inhabitants who have accepted modernisation and Islam as their main religion.

Due to the Malay feudal systems which existed through colonialism, there was a division between class hierarchies among the Malay ethnic group.

Malay rulers and royalty lived in major cities and acted as points of communications with British rulers (Alatas, 2010); however, the majority of

Malays who were commoners, along with other indigenous groups who were often left out from the consideration of Malay rulers, continued to live in segregation from urban areas as self-sustaining farmers or as other roles according to the rules of their indigenous groups (Alatas, 2010). Such was the

88 segregation that for nearly a century, each ethnic group sometimes lived unbeknownst to the social and economic development of other groups.

After the independence of Malaya in 1957, the country continued to face great issues as a consequence of ethnic tension. These issues will eventually become integral to the earlier processes of FC development and will be explored in the next sub-section.

3.3.2 Postcolonial Nation Building

Ethnic segregation had been a great problem in Malaysia’s experience of postcolonial nation building. Many of these issues were addressed by

Furnivall (1939/1944), but specific to the country was the question of how to construct nationalism in a deeply divided society? This question goes back to

Furnivall’s argument; a democratic society is dependent on some degree of homogeneity, in shared values or identities which individuals could experience collectively and exclusively as a member of a certain society.

However, such homogeneity is absent in pluralistic, postcolonial Southeast

Asian countries, especially in Malaya in which immigration had resulted in a divergence of the national population, thus resulting in Furnivall’s comment that such countries were “doomed to a nightmarish anarchy,” (Furnivall

1939/1944, pp. 468-469).

When Malaya was granted independence by the British in 1957, the newly-enfranchised nation did not necessarily face the anarchy envisioned by

Furnivall straight away; although, its pluralism did create a gradual and growing struggle among ethnic groups. This struggle could be due to the lack

89 of inter-ethnic integration, an experience that had been starkly different from its neighbouring country, Indonesia, which had chosen to uphold the Malay culture, literature, language, and customs as the representation of the

Indonesian identity (Alatas, 2010; Hefner, 2001; Suryadinata, 1992).

In fact, Malaya's postcolonial nation building could be argued to be truly unique among postcolonial countries. This could be the result of the

Malay rulers' agreement with the British decision to create an asymmetrical society that was also lawfully-binding in the country’s new constitution

(Hefner, 2001). As a result of this agreement, basic civic and political rights were granted to Chinese and Indian groups; although, the Malay group would be granted special, constitutionally-binding rights (in Malay: hak ketuanan Melayu, hereinafter hak) (Hefner, 2001; Ismail, 1986). With hak, the Malay ethnic group had precedence over other ethnic groups on all legal, political, and economic matters. As such, when Malaya became enfranchised, residents of Chinese and Indian-descent who wished to become a Malaya citizen had to oblige to Malay dominance in nearly all political, socioeconomic, and social matters.

However, the absence of universal individual rights in Malaya did not cause immediate social issues. In fact, Malaya’s experiences with other ethnic groups had been more “racially-forgiving” than its neighbouring countries.

Other ethnic groups in the country were permitted to live harmoniously in the newly enfranchised nation. Indian and Chinese groups were not forced to practice Malay customs or speak in the Malay language; instead, they were given the freedom to practice religion and customs, a political decision that contrasted ones found in the (also) newly-independent neighbouring

90 country, Indonesia (Alatas, 2010). Such freedom of culture was institutionalised in the way “alien” schools and publications (newspapers, magazines, and eventually even TV and radio channels) that used the language medium of different ethnic groups had been widespread in Malaya

(and still continue to run today).

These “racially-progressive” arrangement had much to do with the securing of the hak, as Malayan political elites’ main objective then had been to ensure that the Malay groups were given back their status as the original inhabitants of Malaya, after nearly 200 years of oppression by the British

(Roff, 1994). Securing hak had been more important than creating a universal, nationalistic society; as providing the Malay groups with institutionalised rights meant that they would also gain political support from the majority population.

Alatas (2010) argued that the acceptance of this arrangement could be in part, ignorance by Malay ruling aristocrats who had, during colonialism, lacked the critical analysis of the British colonial oppression on the Malay states. Chua (2008) added that, like other Southeast Asian post-colonial countries, problematic constitutional arrangements made in agreement with

European colonies could be due to new rulers’ misguided appreciation that the colonists brought modernity to the new nations. This modernity was extremely encouraging to new rulers as it provided a much more systematic foundation for new nation building that could be comparable to the West, which was upheld as the ideal example.

Curiously, the way European colonies insisted on the import of chauvinistic customs in their colonies, maybe purposely so, contrasted with

91 their own economic transformation towards (neo)liberalism and marketisation. Instead, Southeast Asian nation building was encouraged in a decidedly illiberal manner (Hefner, 2001). The postcolonial period was thus initiated with chokehold chauvinism; economies often closed with continuous trade arrangements between the colonist and the colonised. For the deeply pluralistic nations of Singapore, Malaysia, and Indonesia; the strategy was according to Haque (2015, p. 90), “a planned and coordinated development process led by the state, [with] a significant developmental role played by state bureaucracy.”

In Malaya’s case, despite the issues that could arise with its asymmetrical constitution, the appearance of the political elites’ success to bring the country independence could have assisted in temporary social harmony (Embong, 2001). This, and in part, due to the allowance for each ethnic group to freely practice their customs, religion, and culture; gave the political elites some sense of sovereignty (Ishak, 2014). Despite this seemingly peaceful arrangement, concerns raised by Furnivall on the issues of ethnic segmentation did eventually arise after the formation of Malaysia in

1963.

Malaysia was formed with the inclusion of North Borneo, Sarawak, and Singapore to Malaya. The joining of the majority-Chinese-populated

Singapore ignited senselessness among the Malay groups, as it had deepened the population of Chinese groups in the country. This resulted in the forced secession of Singapore from Malaysia two years after, due to arguments over the special hak which strictly limited the ability of the Chinese ethnic group to hold important political positions (Embong, 2001).

Although, ethnic tension was not unique to the country; it had existed across the region as Furnivall expected, resulting in the 1964 Race Riots in

Singapore and ethnoreligious tension between the Chinese and Malay groups in Indonesia, with major racial and religious riots taking place every few decades, the most violent accounts occurring in the 1990s (Hefner, 2001).

Even today, such ethnic tension continues to create social chaos, especially in

Indonesia (“Indonesia has been mercifully resistant to extremism - until now,” 2017). Similarly, Malaysia faired the same fate when ethnic tension caused a violent riot called the 13 May Incident, an event to be further explored in Chapter 5.

As for this chapter, Malaysia’s ethnic tension is significant because it directly contributes to the shaping of economic policy intended to such tensions. This will be explained in greater detail in the next sub-section.

3.3.3 Post-Independence Modernisation

According to Hefner (2001), ethnic tension in pluralistic countries could be stabilised by ensuring the economic success of the nation in a way that would have a trickle-down effect on its citizens' livelihoods. This had been true for many of the postcolonial countries in the Southeast Asian region. For

Malaysia, reforms in the economic sector with a focus on foreign-capital and export industrialisation assisted in its economic success from the 1960s until the 1980s (Chua, 2008). The focus on rapid capitalist development in an effort to minimise social issues were prevalent in both Singapore and

Malaysia (and in a more modest way, in Thailand and Indonesia), earning

93 the region the term—“the second East Asian Miracle”—after the success of

South Korean and Japanese economies (Chua, 2008; Haque, 2015).

Observing Malaysia in isolation, total national income has risen by 6-7.0% annually from 1970 until the mid-1980s, demonstrating the success of the political elites’ effort in building the nation economically (Yusof & Bhattasali,

2008).

Economic success helped in improving material life for the first time for Malaysian citizens, regardless of ethnicity, thus providing the government a temporarily, non-interrupted period of political rule (Hefner, 2001).

Nonetheless, the delirium of economic growth was interrupted by pressures from an increasingly interconnected global market. The mid-1980s global recession further exacerbated the government’s need to refine their understanding of citizens’ needs, which saw Malaysia, for the first time, embracing modernisation using neoliberal principles in the 1980s and 1990s

(Haque, 2015).

The 1980s recession was integral to the emergence of marketisation politics, which spread across the Southeast Asian region (Haque, 2015).

Marketisation, promoted through neoliberal ideologies, had been adopted from Western examples which saw a shift from government-led economic development and regulation to that of market forces’ (Gomez & Jomo, 1997;

Harvey, 2005). Haque's (2015) analysis on globalisation’s impact on

Southeast Asian governance suggests that many Southeast Asian countries could also be motivated to choose marketisation by the pressure of maintaining their “East Asian miracle” status. Neoliberalism presented an opportunity for these countries for capitalistic development and nation

94 building. Haque added that the process of globalisation in the late 1980s and early 1990s, which facilitated the expansion of transnational markets and the integration of national economies, meant that Southeast Asian countries had to conduct major changes to the role of the government, more importantly by replacing them with pro-market reforms and minimising government intervention.

The impact of these strategies on economic life was considerable.

Laissez-faire economic policymaking began taking place, where at the surface; it appeared as if the government had attempted to keep their intervention in financial markets at a minimum in an effort to encourage competition (Smith, 1976; Thorsen & Lie, 2006). Additionally, the private pursuit of self-interest was encouraged in replacement of societal-wide collective growth and/or public and social welfare (Jessop, 2002). At the everyday level, citizens were encouraged to become liberal, individualistic subjects, and entrepreneurial subjects (Froud et al., 2006; Williams, 2007), using various policy mechanisms, such as financial inclusion and FLE

(Arthur, 2012).

Although it might appear that the economic development of Malaysia in the 1970s onwards seemed similar to that of popular Anglo-American accounts (Krippner, 2005; Langley, 2008a); the application of neoliberalism was rarely autonomous in the Southeast Asian region. This could be explained using Dolowitz and Marsh's (2000) argument that modern governance could rarely insulate itself from global pressures. For developing countries which were often dependent on trade support from more developed

Western countries, public policies could rarely be wholly created by local

95 political elites; rather, they were/are often influenced by global networks and institutions such as the World Bank or the Organisation for Economic Co-

Operation and Development (OECD) that were/are led by Western leaders

(Arthur, 2012). Pressures from such networks were integral to developing countries’ own public policy development, which had been evident in

Malaysia’s experience in the 1980s (Zafarullah, 2015).

In terms of FC development, Malaysian elites have been integral to the construction, influences, implementation, and maintenance of economic ideologies and national policymaking. This places them at the heart of financialization studies, as numerous studies have demonstrated that the hegemony of finance usually stems from the foundation of policy efforts, shaped by specific elite groups (Davis & Williams, 2017). As such, the chapter now turns to the exploration of this specific feature of FC development in the context of Malaysia and its history, while placing a greater focus on the usage of FLE as a technology at the heart of this programme.

3.4 FC Initiatives and the Stock Market

As mentioned in the previous section, the shaping of Malaysian FC development had been largely driven by neoliberal ideologies adopted from the West, that encouraged the “responsibilisation” of citizens to take control over their personal security (Arthur, 2012; Williams, 2007). While the global emergence of neoliberalism had been explained in the previous section as deriving from the 1980s, formal, nationwide application of FLE had only

96 become popular in the early 2000s. This initiative was led by the OECD’s

Financial Education Project, a comprehensive strategic direction in FLE policymaking that encouraged governments worldwide to empower their citizens in a financial manner, with the promise that such moves could combat societal issues such as poverty and economic issues such as financial instability (Arthur, 2012).

Then, economists and global organisations had blamed citizens’ poor financial literacy as causing adverse socioeconomic effects such as high national household debt and/or general “irrational” behaviour in financial consumption (Greenspan, 2002; Marcolin & Abraham, 2006; OECD, 2005).

At the Ninth Annual Economic Development Summit in Oakland California,

Alan Greenspan (2002) remarked:

Educational and training programs may be the most critical service offered

by community-based organizations to enhance the ability of lower-income

households to accumulate assets. Indeed, analysts have shown that a

comprehensive understanding of basic principles of budgeting and saving,

at the tart, increases household wealth in later years. Education can also

increase economic opportunity by enabling individuals to overcome their

reluctance or inability to take full advantage of technological advances and

product innovation. […] Financial education can equip consumers with the

fundamental knowledge required to choose among the myriad of products

and providers in the financial services industry. It can also help to inculcate

individuals with the financial knowledge necessary to create household

budgets, initiate savings plans, and make strategic investment decisions.

Such financial planning can help families meet near-term obligations and

maximize their longer-term well-being and is especially valuable for

populations that have traditionally been under-served by our financial

system. (pp. 39-40)

Greenspan’s quote echoes the arguments for FC development, insofar as upholding the need to expand access to financial services and skills with a socioeconomic justification. Such justifications provide a foundation for national policymakers to actively promote their efforts in transforming financial markets into a household space and thus, normalising complex financial activities in the everyday life (French et al., 2011; Kear, 2013). The popularity of such arguments have inspired multiple reports and recommendations encouraging governments around the world, Malaysia included, to formalise FLE for the purposes of making the financial system a more inclusive arena (Lusardi & Mitchell, 2007; Willis, 2008).

In Malaysia's case, however, the experiences with FLE have begun earlier than the popular global early-2000s movement. As early as the 1990s, an important group of financial policy elites in the central bank, Bank Negara

Malaysia, had begun formulating nationwide FLE. In collaboration with the

Ministry of Education, they set out to incorporate financial elements in the school curriculum (Ooi, 2016). Throughout the 1990s up to mid-2000s, the focus on FLE had been in developing citizens' understanding of basic concepts of finance such as income and savings (Ali, 2013). Contemporary efforts starting from 2009 have been much more elaborate to include multiple financial institutions, and therefore, financial policy elites.

The political motivations behind these elites might differ greatly based on the institutions they represent. In Malaysia, the Ministry of Finance is responsible for the development of the Malaysian capital market. Under the

Ministry’s wings are several financial authorities. The ones most relevant to this thesis, selected based on their involvement in programmes identified as being related to FC development, are:

i) Bank Negara Malaysia (Bank Negara), which is responsible for

the overall governance of the country’s financial markets and

banking sector;

ii) The Securities Commission of Malaysia (Securities Commission),

a self-funding statutory body responsible for supervising and

developing the Malaysian capital markets; and

iii) Bursa Malaysia, an incorporated holding company responsible

for the running and regulation of the Malaysian stock market

Due to the differences in the political structures of the institutions above, a closer observation of the motivations of political and financial policy elites could assist in a critical analysis of Malaysia’s FC development. This is where the approach of CPE could be beneficial for this thesis, as it would allow for an in-depth analysis on the politicisation of FC development while looking at the contribution of different types of elite actors and the roles they play in FC.

Meanwhile, observing how citizens respond to these elites’ FC initiatives, specifically in terms of expanding stock market access and skills among ordinary citizens, would make up the cultural component of this thesis. It would demonstrate the agency that the citizens possess in their everyday life, as they influence, expedite, and/or sustain the processes of financialization as viewed through the lens of FC development.

3.5 Formulation of Research Questions

The objectives of the thesis are:

i) to explore Malaysia as a case study to build the argument

that financialization is diverse and shaped by localised

factors, and

ii) to explore the roles that both formal and everyday life

actors play in financialization.

To critically evaluate the elite-citizen relations which assumes FC development, the thesis will observe financialization and FC development as not only driven by elites and their actions but also by everyday practices of citizens. Accordingly, there are two main research questions to capture elites and citizens’ roles in FC development. The first research question (RQ) is:

RQ1: What roles do political and financial policy elites play in

Malaysia’s FC development?

To answer RQ1, four sub-questions have been outlined. The first is,

RQ1a: What types of historical developments in terms of

policies and initiatives could be identified as encouraging the

involvement of citizens in the stock market?

This sub-question focuses on the development of the stock market in the context of citizens’ involvement in its activities. To resolve this objective, focus will be placed on identifying the types of initiatives specific to the normalisation of stock market activities with citizens (such as the different

100 ways in which FLE is targeted to citizens with a stock market component), the motivations behind them, as well as the success(es)/failure(s) of the initiatives.

Resolving RQ1a could also be important in providing a historical perspective on Malaysia’s own experience with financialization. Given the taken-for-grantedness of historical perspective in studies with an Anglo-

American or European context (Christophers, 2012), it is important to reintroduce this perspective as to demonstrate the possible differences that other geographies might have experienced in their processes of financialization.

To bring contemporary context to the discussion, the second sub- question is formulated as follows:

RQ1b: What are the current events and policies that shape

the modern development of Malaysian FC?

For this sub-question, the research seeks to explore contemporary formal initiatives, which have continued to shape and progress Malaysia’s FC development. Resolving this question could provide a foundation for the problematisation of FC by displaying possible issues faced by in its process.

To assist in the critical analysis of such themes, the next sub-questions are formulated as follows:

RQ1c: Have FC formal initiatives met elites’ expectations?

RQ1d: What are the obstacles faced by political and financial

policy elites in the development of FC?

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These two sub-questions could be important for a critical analysis of the political interests involved in the process of FC. Due to the multiple elite actors involved, resolving these sub-questions will be done by exploring the alignment of interests between political and financial policy elites to gain a better understanding on the reasons behind formal initiatives in FC and the way the initiatives have been implemented.

RQ1 and its sub-questions are expected to support the positioning, findings, and analysis of the second research question. The thesis argues that citizens too could play active roles in the normalisation of financial activities in their everyday life. Active participation in financial markets could be argued as providing demand for the construction of financial rights and thus enforcing elites' objectives in FC development. As such, the second research question is as follows:

RQ2: What roles do financial citizens play in Malaysia’s FC

development?

RQ2 has three sub-questions. Firstly, the thesis will observe the impact of elites’ formal initiatives on the everyday lives of citizens and their decision to invest in the stock market. The sub-RQ should thus reflect on the need to observe perceptions and behaviours of citizens who are participating in the stock market (identified as financial citizens) and on how influential elites’ initiatives had been on their decision to invest in the stock market. The sub- question is as follows:

RQ2a. How do financial citizens’ behaviours relate to the

formal initiatives in FC development?

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Observing the connection between elites and citizens through the alignments in policy objectives could assist the thesis in critically evaluating the idealism behind FC development. As such, the last sub-question of RQ2 connects the spaces between elites and citizens by seeking whether citizens are behaving in a way that is expected of them by elites’ formal policies in FC development:

RQ2b. Has the outcome of FC development demonstrated

that financial citizens' behaviours align with the objectives

envisioned in elites' formal initiatives?

Following this sub-question, the thesis also seeks to observe other determinants that have affected financial citizens’ decision to invest in the stock market. More importantly, the following sub-question will be used to problematise neoliberal generalisation in FC, as far as its encouragement that citizens should take control of their personal security in an individualised, self-acting manner. As such, the last sub-question for RQ2 is:

RQ2c. How do financial citizens’ behaviours in stock market

investment differ from neoliberal assumptions that citizens

should take control of their personal security in an

individualised and self-acting manner?

3.6 Conclusion

Throughout this chapter, the conceptualisation of FC was conducted by firstly discussing the reasons why the political concept of citizenship has been

103 chosen as a practical language in observing financialization of everyday life.

The concept of FC, as firstly introduced by earlier literature (Leyshon &

Thrift, 1995; Dymski, 2005), seek to encourage researchers to begin discussing the exclusionary nature of financial systems and to encourage actors who are responsible for these environments to begin thinking of methods to make these environments more inclusive.

Nonetheless, the challenge of FC is in elite-citizen relations that exist between the governing and the governed actors which could be rooted in deeply political and unequal terms. As such, FC is argued to be more than just a simple binary coding of membership (Kear, 2013), and understanding the complexities behind this membership based on the localised histories that shape its development, could help us understand whether FC development and financialization develops in a different manner external to

Anglo-America. More importantly, the chapter emphasised the importance to contextualise elite-citizen relations in the Malaysian angle, especially in connection to the power relations that exist between them. This contextualisation is important as it seeks to differentiate the thesis from many existing financialization of everyday life studies by focusing on the place-specific context of the way in which power is understood.

This conceptualisation placed value on the adoption of a CPE approach to financialization in this thesis. This was demonstrated through the contextualisation of FC from a Malaysian angle, drawing upon Malaysia’s history of colonialism, post-colonial nation building, and post-independence modernisation. The description of these histories was useful in setting a foundation to demonstrate how certain elites, policies, and financial arenas emerge to become relevant to FC development. This foundational setting was

104 also helpful in the formulation of the research questions which reflected the thesis’ objectives, as outlined in the conclusory section of the chapter.

The thesis now moves on to the methodology that will be employed in its research. This will be conducted in the next chapter, which also elaborates on the philosophy behind the methodology employed, the methodological tools to be used, and the data collection procedure.

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Chapter 4

Chapter 4: Methodology

4.1 Introduction

According to Creswell (1994), an essential starting point for any type of research undertaken is the philosophical underpinning which expresses the researcher’s approach, that is, the shared belief systems among researchers

(Guba, 1990; Morgan, 2007). These shared belief systems are more popularly known as “paradigms” by academics, a term coined from Thomas Kuhn’s

(1962) The Structure of Scientific Revolutions. Paradigms can be widely understood as a matrix that divides researchers based on their ontology

(What is reality?), epistemology (What and how can I know knowledge/reality?), and methodology (What procedure do I go through to know knowledge/reality?) (Kuhn, 1962).9

9 A more modern viewing of research paradigms has also included a fourth element, axiology, the value of research (Hesse-Biber, 2012).

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For decades, research paradigms have been dichotomous—positivists and constructivists—whose differences begin largely from their ontological abstraction (Guba, 1990). Positivists believe that the world exists objectively, singularly, and detached from our understanding of it, while constructivists claim that the world is subjective, multiple, socially-constructed and shaped by individual conceptions (Guba, 1990; Morgan, 2014). Debates on these research paradigms are particularly passionate in the late 19th century and early 20th century (Kuhn, 1962); although, during the time, a third strand of paradigm—pragmatism—was making its way through academia. This movement was led by American philosophers such as Charles Sanders Pierce,

William James, and John Dewey (Maxcy, 2003).

In reflection on the above statement, the chapter focuses on exploring the different definitions of pragmatism as a philosophical underpinning, justified to be the best choice for this research and its application of CPE in studying financialization. Furthermore, it will explain how pragmatism is suitable for the methodology chosen, which is MMR design. The chapter is organised as follows. Section 4.2 justifies the research design of this thesis, explaining the selection of pragmatism and MMR for this thesis using existing literature. This is followed by Section 4.3, which explains the benefits and challenges of the research methods employed in this thesis; which are documents and datasets analysis and sequential, semi-structured interviews.

Sections 4.4 and 4.5 explain the sources of information and the data collection procedure used to resolve RQ1 and RQ2, respectively. Lastly,

Section 4.6 describes the usage of triangulation for the analysis of the data collected, before the chapter concludes.

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4.2 Pragmatism and Mixed Methods Research

Design

During the late 18th century until early 20th century, research paradigms were divided among two polarising views—positivists and constructivists. These two paradigms’ differences begin at their strictly divergent ontological abstractions. From this philosophical underpinning, the two research paradigms evolved into two different sets of formal research principles that guide research inquiry from the types of research questions observed to the types of methodology employed.

The third paradigm that had since come to emerge, pragmatism, differ greatly from positivism and constructivism, its origins mainly to move away from such strict views of research conduct (Denzin, 2010; Kivinen &

Piiroinen, 2006; Morgan, 2014; Tsilipakos, 2012). Unlike positivists and constructivists who widely believe that ontology is an important philosophical underpinning for research (Burrell & Morgan, 1979; Guba,

1990; Hassard, 1991); pragmatists are stereotyped (sometimes wrongly so) for omitting ontology in favour of epistemology and methodology (Morgan,

2014). According to Lohse (2017, p. 5) who termed some pragmatists as

“anti-ontological,” the decision to lessen the focus on ontological foundation rests on the assumption that its prioritisation may impede the types of explanations needed (i.e., the methodology employed) to resolve epistemic interests (i.e., research inquiry).

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This is unsurprising, as the birth of pragmatism came from a period of radical social and cultural change in America (Maxcy, 2003). In his contribution to The Handbook of Mixed Methods, Spencer Maxcy explained that early philosophers in pragmatism influenced social science philosophy and brought new ways to conduct research methodology. Ontologically, early pragmatists such as Charles Sanders Pierce, William James, and John

Dewey; saw reality as being “in process” (Maxcy, 2003, p. 63) and evolving, shaped by human thought, beliefs, and actions. Cherryholmes (1992) argued that pragmatists accept that there exists an external reality independent of the human mind (similar to that of positivists) and that there is no possibility for a researcher to objectively conduct research in this reality as they are confined to their experiences, norms, and values (similar to that of constructivists). This ontological abstraction is important in bridging the gap between positivists and subjectivists (Cherryholmes, 1992).

Pragmatism would provide this thesis the ability to bridge the rhetorical separation of analysing the cultural and political aspects of FC development and financialization, which will be realised through the application of CPE. The values of pragmatism is especially useful for applying

CPE as it allows this present study to treat experiences as culturally and historically situated (Dewey, 2008). Such treatment of history and culture is important in the thesis’ adoption of Best and Patterson’s (2010) CPE framework. This specific CPE framework allows for more nation-specific analysis of a phenomenon, such as the present study’s case study of financialization and Malaysia; insofar as all considerations of political, cultural, and economic aspects of economic life are considered.

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Pragmatism is also chosen for its celebration of research itself, in which epistemology matters more, that the process of inquiry should be the focus of research rather than its ontological philosophies (Dewey, 2008,

1948; Morgan, 2014). This epistemological approach thus places importance in the process of research conduct and gives researchers freedom in methodological design that is often constricted in other paradigms (Morgan,

2007), which fits the objectives of this thesis, as explained next.

Due to the flexibility of pragmatism, it has often been found as the underlying philosophy for research that employs a mix of methods, such as this thesis. Such research, which is sometimes referred to as multimethodology (Morgan, 2007), refers to the usage of more than one type of data collection, allowing researchers the freedom to mix different types of research tools in favour of resolving research questions (Tashakkori &

Teddlie, 1998, 2003). Multimethodology research is also known in academia via different names and definitions. For example, in many qualitative studies in sociology, studies employing the research design of case studies, ethnography, or triangulation analysis; could be argued to be multimethodology studies, as a variety of research methods are employed in such studies (Creswell, 1994; Yin, 1994). However, the employment of pragmatism as an underpinning philosophy is often related to the research design of MMR, which celebrates researchers’ choice in the types of research methods employed for the progress of their research inquiry (Creswell &

Plano Clark, 2006; Morgan, 2007; Tashakkori & Teddlie, 2003). This also means that unlike the qualitative multimethodology research design found in

110 sociology studies, MMR studies could stem from multiple paradigms and provide different perspectives (Creswell & Plano Clark, 2006).

Among MMR scholars, there tend to be differences in the way this research design is defined. Some groups of researchers, for example, those whose works are featured in the Journal of Mixed Methods Research (Morse

& Cheek, 2015); view MMR as studies that incorporate both quantitative and qualitative data (QUAN+QUAL). For these researchers, MMR is different from other types of multimethodology studies which use multiple types of qualitative or quantitative data in a single study (i.e., QUAL+QUAL or

QUAN+QUAN) (Creswell & Plano Clark, 2006). However, this study argues that the strict definition of MMR as QUAN+QUAL is moving away from the essence of pragmatism, which resists formalism or strict subscriptions to certain ways of conducting research.

For example, philosopher Abraham Kaplan’s ( 1964) dedication to pragmatism comes from a time when his work was directed at bridging the divide in methodological confinements in social sciences. To Kaplan, the aim of methodology should be in explaining the process of research inquiry; the strategies employed should move away from narrow, empiric explanations

(Kaplan, 1964). As such, the restriction on methodological explanations should be reduced, and a freedom for methodological choices be celebrated:

“What is objectionable is not that some techniques are pushed to the utmost, but that others, in consequence, are denied in the name of science,” (Kaplan,

1964, p. 29). Similarly, neo-pragmatist Richard Rorty (1979) challenged the assumptions of frameworks and rules in scientific inquiry. His life works in the re-introduction of pragmatism to social sciences has a focus on arguing

111 against the strict division of the world into different thoughts and objects. He argued that there is idealism in the Western approach to scientific rationality, and urges for new, democratic, and liberal ways of conducting research

(Maxcy, 2003).

Reflecting on the works of these pragmatist philosophers, the thesis argues that the definition of MMR should not be constricting to certain types of formula or framework, or in this case, that MMR strictly refers to

QUAN+QUAL studies. To help justify this notion, the argument for a purely qualitative or purely quantitative MMR study by Janice Morse (2003, 2010) could be used. In the Handbook of Mixed Methods, Morse (2003) explains that MMR could be a mixture of strategies that are derived from quantitative and qualitative methods. For Morse, MMR is not about mixing and matching research methods in a liberal manner, but instead strategically selecting supplemental research methods that would not be obtained from the main method (Morse, 2010). As such, MMR studies do not have to be strictly a mixture of quantitative and qualitative data. Morse’s MMR format instead calls for researchers to consider if their research is qualitatively- or quantitatively-oriented, based on the main research method selected. This orientation is what Morse calls a theoretical drive (Morse, 1991), the purpose of which is to be aware of whether the research is conducted inductively (for exploratory purposes, often to answer the “what” form of research questions) or deductively (for explanatory purposes, often to answer the “how” and

“why” research questions) (Morse, 1991; Yin, 1994).

Although quantitatively-driven MMR studies are usually accepted by

MMR researchers (Morse & Cheek, 2015), the authors explain that there is a

112 lack of attention on qualitatively-driven MMR studies. This, to the authors, is unfortunate as qualitatively-driven MMR could provide rich insight into a certain phenomenon. Morse (1991) argued in an earlier study, that researchers who want to pursue a more qualitatively-driven, exploratory

MMR studies, should do so; insofar as the supplementary research methods provide explanation or insight to the core research method, and that the two methods are insufficient in providing solutions to the research questions when interpreted or used alone. Furthermore, Hesse-Biber, Rodriguez, and

Frost (2015, pp. 8-9) claimed that qualitatively-driven approach to MMR is useful “to obtain a more comprehensive understanding of a phenomenon from differing perspectives,” “to develop a more rounded understanding/theoretical framework,” and/or “to gain insight into the multiple layers of the experience of a phenomenon.” This thesis draws upon these views on qualitatively-driven MMR, given its benefits to the exploratory nature of the thesis’ RQs and its CPE approach in studying financialization.

Furthermore, the thesis also considers financialization from a multilevel perspective. This means that it would benefit from a research design that satisfies its need to observe the active roles that both elites and citizens play (and their consequences), as a continuous, dimensional, and progressive process; rather than one that is linear and moving in a top-down structure (for example, from elites to citizens). Flexibility in the research methods employed to discover and/or gain insights is therefore valued over the types of methods used to test or generalise findings. Consequently, the usage of MMR is beneficial for this purpose as it allows for a range of different approaches and methods.

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However, it is important to note the challenges of conducting MMR, especially when exploring a novel territory such as FC development in

Malaysia. These challenges could be presented in criticism on the art of mixing methods itself. Giddings (2006) for example, likened this act as

“positivism dressed in drag” (p. 195). The author’s main argument about

MMR is however specific to the types of MMR researchers who place more focus on a positivist way of thinking. To her, these researchers have not taken serious consideration into the in-depth analysis on their research, placing focus on the quantitative aspects of their studies over in-depth and critical qualitative analysis, thus debunking the idea that MMR could bridge the positive and constructivist paradigms together:

The majority of studies use the analytic and prescriptive style of positivism

[…] A design is set in place, a protocol followed. In the main, the questions

are descriptive […] Integration is at a descriptive level. A qualitative aspect

of the study is often ‘fitted in’. (Giddings, 2006, p. 200)

Freshwater (2007) also questioned the act of mixing and matching methods, claiming that there could be a lack of consistency and rigour when different types of methods are chosen, challenging philosophical and methodological traditions. This is especially true for MMR studies that combine both positivist and constructive paradigms, such as in

QUAN+QUAL studies. For Freshwater, each type of paradigm has opposing philosophical views, which could pose challenges for researchers when it comes to justifying the rigour in their research conduct. Additionally, this lack of rigour may lead to weak persuasive evidence, making it difficult for

114 the results of MMR studies to possess the quality of comparable interpretation.

To counter these criticisms, it is useful to once again revisit the values of Dewey’s pragmatism as applied in this thesis. Dewey’s focus on inquiry as a main point of research is one that makes a contribution to the justification of this thesis’ specific way of conducting MMR; “It is a process of making choices by asking and answering questions, in which those questions concern the likely outcomes of applying current beliefs to future action,” (Morgan,

2014, p. 1047).

This thesis thus follows Dewey’s process of research, which encourages a considerable effort and consideration to be made to ensure that the research methods chosen generate the most desired consequences.

Additionally, to ensure that the research adheres to comparable studies in different paradigms, the thesis bears in mind the validity, reliability, and credibility in research conduct (Tashakkori & Teddlie, 2003).

Having explained the definitions of pragmatism and MMR, alongside their benefits and challenges that it may pose to this research, the chapter now moves on to explain the research methods employed for this thesis: a combination of document and datasets analysis, as well as sequential, semi- structured interviews.

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4.3 Research Methods Employed for Data

Collection

A combination of document and datasets analysis, as well as semi-structured interviews, will be used as research methods for the data collection process.

The research methods will be used in sequential phases so that the data derived from each method could be triangulated to enhance and inform the other (Miles & Huberman, 1994). The next sub-sections will first explain the advantages and challenges of document and datasets analysis before moving on to explore the same themes for sequential semi-structured interviews.

4.3.1 Document and Datasets Analysis

In her editorial introduction to Using Documents and Records in Social

Research, Lindsay Prior (2011) described documents as sources of textual inscriptions which can contain many forms or combinations of forms: images, diagrams, charts and tables, symbols, as well as writing. The author defends the importance of documents (as well as records, and the graphic symbols within), as “having the potency to shape, pattern and drive interactions every bit as much as the humans that claim to have ‘authored’ them,” (Prior, 2011, p. xxii). For her, along with the other researchers featured in the book, the information in documents are important in the way they carry rich sources of information, or what she specifically refers to as content; those of which that inform ideas and patterns on an observed

116 phenomenon. Similarly, Patton (2002) argued that when observing a phenomenon, important documents should be analysed to inform a researcher about things that have taken place, and goals or decisions that might be otherwise unknown to the researcher: “[…] documents prove valuable not only because of what can be learned directly from them but also as stimulus for paths of inquiry that can be pursued only through direct observation and interviewing,” (p. 294).

The variety of sources of information that documents carry could also include secondary datasets. Vartanian’s (2011) book on datasets analysis provides a clearer description of what these data entail: “[…] dataset typically covers a broad sample of individuals or other entities (e.g., schools, hospitals) and is generally representative of some broader population […]” (p. 9). The representational aspect of secondary data, as per Vartanian’s quote, is beneficial for research conducted in small settings (such as a doctoral research) as it brings cost and time benefits. As datasets are secondary data, they are often publicly-available or could be made available upon request, and as such would save researchers the cost and time of having to conduct their own data planning and collection fieldwork.

Vartanian also claims that using data sets that have been derived from research of large institutions or research groups “provides an alternative to the collection of primary data, often giving the researcher access to more information than would be available in primary data sets," (Vartanian, 2011, p. 3). Large institutions normally conduct high-quality research, with large sampling that spans a great length of time, and varieties of issues. Such data is useful not only for the examination of current issues but also to monitor

117 intergenerational changes. As such, secondary datasets are advantageous for researchers as they would cover a breadth of information.

However, the disadvantages of using secondary datasets come from the lack of control that researchers might have over original data collection, such as monitoring specific issues, population, and/or time relevant to their current research. Although many benefits from secondary datasets come from their volume and size, this could also be problematic as it might cause a lot of complexities in the analysis stage, especially in trying to understand what each data means. However, such issues could be minimised in this thesis specifically, as datasets will only be used as supplementary data to inform specific issues and to contextualise financialization in Malaysia; rather than as a sole and main source of information.

The choice to conduct document and datasets analysis as a research method is made due to their usefulness in bringing context to the phenomenon studied in this thesis (financialization of everyday life in

Malaysia through the FC development angle). Bowen (2009) explained that information from documents, including that of datasets, can provide supplementary research data, adding insights for the researchers’ knowledge base. This can come in the form of providing information to track change and development or verifying findings or corroborating evidence at any stage of the research; all of which would be useful for the triangulation of findings for this thesis.

However, careful attention should be given before research with documents and datasets is undertaken, as a major challenge for these methods is in getting access to high-quality data (Patton, 2002). This is

118 especially true for developing countries such as Malaysia (Malde & Vera-

Hernandez, 2012; Nabainivalu, 2012; World Health Organization & Regional

Office for the Western Pacific, 2003). Steps should be taken to ensure that formal and cultural procedures are considered and organised so that important documents and secondary datasets could be obtained before the research is conducted (Patton, 2002). The section now moves along to describe the benefits and challenges of sequential semi-structured interviews before justifying its usage in this research.

4.3.2 Sequential Semi-Structured Interviews

In their contribution to Mixed Methods Research…, Johnson and Turner

(2003) argue that interviews are a useful research method in social science studies, as it allows researchers to measure attitudes, behaviours, and interests. In doing so, researchers could probe further into a certain subject, by using human perspectives as in-depth information for exploration, confirmation, and interpretive validity on a certain phenomenon.

While there are many types of interviews, the semi-structured format will be chosen for this thesis, as it gives freedom for researchers to construct interviewers based on outlined objectives, but also allows interviewees the freedom to express their opinions and views (Creswell, 1994). In his book,

Patton (2002, p. 344) refers to semi-structured interviews as a “standardised way” of conducting interviews. He said to conduct this research method, researchers should have an interview guide, which should contain a set of standardised questions to be asked, potential probes, and transition

119 methods. The interview guide is important as it ensures that each interviewee goes through the same process of interview, in the same order.

The reason to conduct a semi-structured interview over conversational, non-structured interviews is to assist in the evaluation stage by ensuring that the “exact instrument used […] is available for inspection by those who will use the findings of the study,” (Patton, 2002, p. 346). Having a standardised procedure and interview guide will also ensure that interviews could be highly focused and used efficiently while assisting in the evaluation stage by ensuring that responses could be easily found and compared

(Johnson & Turner, 2003; Patton, 2002).

Due to this thesis’ RQs, which seek to observe financialization from multiple perspectives—elites and citizens—the semi-structured interview data collection procedure will be conducted in a sequential manner. First, semi-structured interviews with elites will be conducted to resolve RQ1 and its sub-questions; the findings of which will then assist in the planning for semi-structured interviews with citizens, which will be used to resolve RQ2 and its sub-questions.

Several challenges are expected to be faced at the semi-structured interview phase. The first is about gaining access and trust from elites. As outlined by Patricia Adler and Peter Adler10 in Baker, Edwards, and Doidge

(2012), elites are characterised as “hard to access” population. Mikecz (2012) suggests that gaining access to elites should be done through careful

10 This contribution was made for the National Centre for Research Methods. The authors' contribution is from pages 8-11 of the review paper.

120 negotiations, which might take an excessive amount of time and higher costs, compared to other types of interview participants.

There is also a challenge of a power differential between elites and the researcher, which can pose subsequent issues during the interview procedure such as time limitation, intimidation, and overall loss of control of the interview (Mikecz, 2012). Additionally, as elites are usually representing a higher institution or in this thesis’ case, the government and/or public/private financial institutions; there is a reasonable expectation that interviewees might be concerned about confidentiality in the subjects discussed. Therefore, consideration must be placed on the types of realistic promises that will be made to elite interviewees; such as promises on anonymity, on access to transcription, and on how data will be stored and managed. If promises cannot be made realistically, the risk of getting turned down for participation could be higher (Mikecz, 2012).

To overcome these challenges, the thesis reflects upon Patton’s (2002) guide for interviewing, which calls for researchers to have a carefully-planned system that reflects upon the respondents’ statuses and culture. For example, elites should be recruited through a more formal recruitment system, such as by letter of invitation that contains an official letterhead from the university, and signatures from university officials as well as the researcher (Mikecz,

2012; Patton, 2002). Access to elites could also be done informally, for example, through personal connections; as such connections could build trust that is important for acquiring high-quality data during the interview procedure (Mikecz, 2012).

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As for citizen interviewees, a major challenge to overcome is a selection bias, which might cause issues in the validity of the interview findings (Kvale & Plas, 1996; Patton, 2002). Selection bias usually occurs when a certain population is targeted in sampling (for example, in the case of this thesis, citizens who invest versus citizens who do not invest). When selection biases occur, variation in research findings might be limited

(Patton, 2002). Although, variation in research findings might be more important in researches that are trying to provide a generalised finding. This is not the case for this thesis, which is exploratory by nature, and as such, values sampling that is information-rich on the phenomenon observed. This could be conducted by having a purposeful sampling, that is, sampling that begins by looking for interviewees who are well-situated in the phenomenon observed. These interviewees would provide the best impact on the development of knowledge surrounding the area of research (Patton, 2002).

Another challenge of semi-structured interviews is the differences of worldviews of interview respondents, that is, the kind of experiences they have based on the reasons why they have been selected as an interviewee.

These experiences could inherently influence their opinions and how they respond to interview questions. Worldviews of interview respondents are often related to the kind of profession they have in relation to a research’s objectives. For example (and specific to this thesis), a financial policymaker could have a different worldview when interviewed for their expertise in a study on financialization, compared to if they were interviewed for a study that researches patterns on individual’s healthy meal consumptions.

Additionally, in studies where multiple types of respondents are used, it is

122 important that researchers contextualise themselves with the worldviews of these different respondents (Kvale & Plas, 1996; Patton, 2002). Specific to this thesis, the worldviews of elites compared to ordinary citizens could be polarising, as elites would have specific knowledge to issues on finance, financial markets, and FC development; while ordinary citizens might not. As such, in the interviews, elites might be more used to a more formal, professional setting; whereas the latter group might be more comfortable with a more informal and/or colloquial setting. These worldviews should be considered in the planning of the interview questions and the way the interviews are to be conducted (for example, face-to-face or over the phone), as they could greatly influence the quality of data obtained. Consideration should be placed for example, when interviewing elites, on the usage of words/terminologies that are more familiar to their professional status and the industry(ies) they are in. Nonetheless, to build rapport with citizens might begin by avoiding such professional language and using simple, illustrative examples, such as quoting what other interviewees have said to empathetically encourage them to give more high-quality answers (Kvale &

Plas 1996; Patton, 2002). Although, this should be done with special care as to ensure that interviewees are not simply repeating the answers that they might think interviewers want to hear (Patton, 2002). To do this, interviewers could use personalised language, for example, by saying “While this person answers in such a way, what about your own thoughts and perspectives on this issue?”

The last challenge to consider for the semi-structured interview method is the issue of translation. As elite and citizen interviewees are largely

123 from Malaysia, the interviews should be conducted in either English or

Malay, which are the two official language choices of the country. The challenge of having more than one language being used in the interviews is on how the differences in languages might influence the quality of the translation in interview transcriptions. Influencing factors to translation efficiency include the researcher’s fluency in both languages (the one used in interviews and the one used in the write up) (Vulliamy, 1990), the conceptual equivalence or comparability of meaning, and cultural or lexical differences

(Temple, 1997).

However, Phillips (1960) argued that cultural or lexical differences are often unsolvable and beyond the researcher’s control. Temple (1997) suggested that researchers instead focus on gaining conceptual equivalence without trying to gain absolute lexical comparability; although, such lexical comparability could be obtained if the researcher/translator is proficient in the languages used in the interview and the transcription, and that they also have an intimate knowledge of the cultures of the languages. Given that the researcher on this thesis is proficient in Malay and English languages and simultaneously has an intimate knowledge of the cultures surrounding both languages; it is justified here that language issues might not pose a great threat to the quality of this research’s interview transcriptions.

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4.4 Phase 1: Sources of Information and Data

Collection Procedure for RQ1

Phase 1 of the data collection procedure is used to resolve RQ1: “What roles do political and financial policy elites play in Malaysia’s FC development.”

The first source of information used at this phase is secondary datasets and information taken from publicly-available documents written by formal institutions (see Appendix 1). Additionally, data has been collected from news articles, academic journals, social media, and financial media. The data collected from these sources are used to support the findings from official documents (such as those written by large public/private institutions and agencies).

Official documents which have been selected with special interests in building a story of the historical development of FC in Malaysia include

(although the choice is not limited to these documents alone):

 Malaysia Plans; a series of 5-year economic plans that have

been constructed from 1966. Of interest to this thesis are the

2nd to 11th Malaysia Plans, which demonstrates changes in the

Malaysian economic development from an integral moment

of Malaysian history, during the aftermath of the Malaysian

racial riot (13 May Incident) of 1969, until today

 The Privatization Master Plan; a policy document that

outlines the intention to liberalise the Malaysian economy

along (neo)liberal lines in the 1990s

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 The Capital Market Masterplan (CMP1); an official document

that outlines strategic reforms for the Malaysian capital

markets industry after the 1997/98 Asian Financial Crisis

 The Capital Market Masterplan 2 (CMP2); an official

document that outlines strategic reforms for the Malaysian

capital markets after the tenth-year anniversary of CMP1

 The New Economic Model; an official document outlining

Malaysia’s economic strategy after the election of Najib

Abdul Razak as PM

The data collected at this phase is used to analyse and arrive at a preliminary understanding of historical motivations, interests, influences, events, and actors concerning elites’ role in FC development; especially with regards to using the stock market and FLE as arenas and tools for FC purposes. As such, they are most useful in resolving RQ1a: “What types of historical developments in terms of policies and initiatives could be identified as encouraging the involvement of citizens in the stock market?” Secondary data collected from more recent time (for example, post-2000s), is also useful in resolving RQ1b: “What are the current events and policies that shape the modern development of Malaysian FC?”

As explained in Section 4.3.1 above, the main challenge for this phase of data collection is in obtaining access to high-quality data, especially in a developing country such as Malaysia. This challenge has been borne out in the initial stage of the data collection, as many high-quality and nationally- represented secondary datasets were not publicly-available. The challenge was overcome when a few official documents were published at a later stage

126 during the research (around late 2015),11 which contained important datasets, for example, on the savings and investment patterns of Malaysian households. Furthermore, the challenge was also overcome when the interviews with elites were used to obtain important statistics on the demography of current and active direct individual investors in the stock market. These data were used to understand the state of current FC development and to compose interview questions used in the next data collection method, which is explained now.

The second source of information is primary data in the form of interview findings, which are collected through semi-structured interviews with elites (political and financial technocrats). The interviews were used to observe the perceptions on political motivations behind the promotion of equity investment to citizens, the (non-)alignment of interests between different types of elites, as well as the existence of discrepancy behind expectations and results (See Appendix 2 for a list of base questions asked.

These base questions were further personalised to reflect the role and experiences of each elite.).

During the planning stage of the data collection procedure, the main challenge encountered was in the recruitment of elite interviewees, due to their "hard-to-access” status. To recruit elite interviewees, formal letters were sent out to potential interviewees in the official language of Malay. The letters included: 1) a request for interviewees’ participation in the interview,

2) an information sheet on objectives of this thesis, and 3) confidentiality

11 Specific to this point are these documents: The State of Households II (Khazanah Research Institute, 2016) and Finance Matters (Asian Institute of Finance, 2015).

127 terms and conditions which the interviewees can address and change before the interviews are conducted (see Appendix 3). Given the information-rich characteristic of the elites group, this thesis argues against the need for a large sample size. Baker, Edwards, and Doidge (2012) argued that in certain cases, a small number of interviewees may be extremely valuable for a research project. The authors identified the need for a smaller sample size for hard-to-access populations such as elites and suggested a minimum of six interviews as adequate for insights into a social phenomenon. This justification was employed for the sampling of the elite interviewees.

Additionally, a large sample is not necessarily needed in the context of

Malaysia as many of the elites interviewed are by virtue limited due to the roles that they are playing (for example, there are only about ten finance ministers in the history of Malaysia). Furthermore, information from secondary data, for example, speeches of former elites, newspapers, official reports, have also been used to supplement interview findings, which makes the number of elites interviewed justifiably.

A total of thirteen elites were interviewed for this thesis (Appendix 4).

They were recruited through several channels. They are categorised as:

 Political – elite actors who are influential in the development

of the Malaysian financial markets, especially in the

construction and implementation of financial policies that

impact citizens. These actors also have direct impacts on the

Malaysian polity;

 Financial policy-based – elite actors who are influential to

the development of the Malaysian financial industry, more

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specifically in the construction and implementation of

financial policies impacting citizens; and

 Financial, business-based – elite actors who might not have a

direct impact in the construction and implementation of

financial policies in Malaysia, but possess experience in the

finance industry which could aid to a more in-depth and

dynamic understanding of Malaysian FC development

Elite interviewees were chosen based on their political and professional insights into the promotion of stock market investment to citizens as an expression of FC development. As such, the interviews were useful in resolving RQ1c: “Have FC formal initiatives met elites’ expectations?” and RQ1d: “What are the obstacles faced by political and financial policy elites in the development of FC?”

All financial, policy-based elites (eight in total), were recruited during my internship at the Malaysian Ministry of Finance from July to August

2015. The internship was secured through a citizen’s request from the former

Second Malaysian Minister of Finance, Ahmad Husni Hanadzlah. Upon the former Minister’s permission, I was able to acquire information pertaining to the thesis' research queries, as well as acquire access to relevant personnel which has been formally interviewed. Two former finance ministers were also recruited with assistance from my personal connections, due to the difficulty of having access to these elites who are of high-status in the country. The remaining elites who are financial and business-based were recruited through personal connections of my supervisory team. Snowballing effect also took place in the recruitment of these three elite interviewees.

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During the interviews, which lasted for 45-90 minutes, interviewees were first given an information sheet on the research asked if they preferred written or oral consent. The choice of types of consent was given to elites as to adhere to the Malaysian cultural norm whereby figures at a higher hierarchical level (either professionally or socially) would still desire some form of control, especially when they are given instructions by those who are below their hierarchy. This strategy was taken to overcome the power differential challenge between elites and the researcher and to gain trust from the elites, which had been essential in ensuring that high-quality answers were given in the interviews (as mentioned in Section 4.3.2). The interviewees were also provided a copy of the consent form and were informed that they could request a copy of the transcriptions. Each of the elite interviews took place face-to-face, during three periods of fieldwork that scattered around Kuala Lumpur, Malaysia; and the city of Singapore. Lastly, the interviews were transcribed, translated (when needed), and anonymised for personal data protection.

4.5 Phase 2: Sources of Information and Data

Collection Procedure for Research Question 2

Findings from Phase 1 greatly assisted in the data collection procedure of

Phase 2, which is used to address RQ2: “What roles do financial citizens play in Malaysia’s FC development?” and its sub-questions. The main source of

130 information in Phase 2 comes from semi-structured interviews with financial citizens.

Two criteria were chosen for the interviewees' selection: 1) that they have invested in the stock market and 2) that they are between the ages of 20 to 39 years old. The choice for interviewees who have invested in the stock market is in line with the thesis’ observation of the stock market as an important financial market in Malaysia’s FC development. Due to the study being exploratory in nature, the decision to interview citizens who are already investing in the stock market (rather than citizens who are not) is to aid the observation on the active roles they play in FC development and whether this role coincides with formal initiatives carried out by elites. The justification for the age criteria is based on preliminary findings in Phase 1, in which many formal initiatives seem to target a particular set of groups, which are the “Gen Y” population in Malaysia. However, to provide a definition of who belongs to the Gen Y group takes a longer consideration, due to the multiplicity of definitions that exist.

Based on a report by the Asian Institute of Finance (2015), Gen Y (who are defined as belonging to the age group of 20-33 years old as of 2015), make up the largest consumer group in Malaysia. Furthermore, a

PricewaterhouseCoopers report (2009) on Malaysian Gen Y claims that this group of Malaysians make up approximately 62.0% of the Malaysian workforce. A report by Bursa Malaysia (2009) titled “Rethink Retail” specifically targets Gen Y in their promotion of stock market investment.

Corroborating these data with population statistics gathered from the

Malaysian Department of Statistics, Gen Y makes up 38.4% of all employable

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Malaysian citizens, and 57.6% of all employed Malaysian citizens. As a conclusion, Gen Y is the group that is most important for the current

Malaysian workforce and the group that is considered as facing personal financial security issues (Employees' Provident Fund (EPF), 2015); issues of which are relevant to the discussion of FC.

Due to the variations of definitions on who belongs to the Gen Y group, several reports have been used to justify what this group means for this thesis. In many western countries, Gen Y is described as “millennials,” which could mean the population that are born between the years 1979 and

2000 (Hershatter & Epstein, 2010), although a comprehensive review of various reports on millennials by Wells (2015) claim that millennials are those who are born between 1976 to 2010. In Malaysia however, Gen Y has been strictly identified as belonging to the ages of 20 to 33 years old as of

2015 (or those who were born between the years 1980 and 1995) by the Asian

Institute of Finance (2015), which is a collaborative identification made by two key financial institutions in the country: Bank Negara and the Securities

Commission.

While the Gen Y definition is important to the Malaysian workforce, this thesis chooses to move away from constricting the sample selection to a particular definition. Instead, it justifies the need to consider Malaysians who are actively being targeted by elites in FC development (i.e., Gen Y, who are between the ages of 20 to 33), and also those who are actively employed and beginning to think about long-term personal finance security (i.e., people between the ages of 25 to 39 years old). As a result, the age criteria chosen for financial citizens’ interviewees are between the ages of 20 to 39 years old.

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To recruit interviewees, multiple recruitment advertisements were posted on social networking sites and online forums that provide information on the research and the intention to recruit voluntary participants based on the two criteria given above (see Appendix 5). Additionally, using a personal contact with an investment agent, the advertisement for the recruitment of participants was posted to the agent’s portfolio of clients via email and messages. Participants who voluntarily responded to the post were contacted and upon their agreement, selected for an interview. Snowballing took effect in the recruitment of financial citizen interviewees (Biernacki & Waldorf,

1981); although this effect had only been present for the recruitment of four interviewees. Additionally, this thesis employed Guest's (2006) sample size recommendation for interviews used in qualitative research; which is a minimum of 15 interviewees. The choice for a minimum amount of interviewees is in reflection of Onwuegbuzie and Collins' commentary (2007, p. 289); “In general, sample sizes in qualitative research should not be so small as to make it difficult to achieve data saturation, theoretical saturation, or informational redundancy.”

In total, 30 citizen interviewees were selected and interviewed. Most of the interviewees (28 out of 30) are from the Bumiputera ethnic group, while the remaining interviewees are Chinese and Indian respectively.

Initially, when it was realised that there had been a majority of Bumiputera interviewees (at the time, there had been approximately 15 interviewees recruited, all of them had been Bumiputeras), efforts were made to selectively recruit non-Bumiputera interviewees. This was done by changing the participants’ recruitment advertisement to request for Chinese and

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Indian participants. Subsequent attempts were made to purposefully recruit

Chinese and Indian participants by advertising on Chinese-based or Indian- based, Malaysian online investment forums. However, such efforts were not fruitful as no one had voluntarily responded to these advertisements. As such, the only Chinese and Indian interviewees were recruited via snowballing exercises.

During the interview, financial citizen interviewees were given an information sheet which explained that they could withdraw their participation or the information they had given in the interview at any time.

They were also asked to sign a consent sheet before the interviews began. The interviews lasted around 30-60 minutes and were used to explore interviewees’ perspectives on whether elites’ efforts have influenced their decision to invest in the stock market, responsibilities on financial planning among Malaysian citizens, the security that stock market investment brings, among other issues related to RQ2 (see Appendix 6). Each of the interview was transcribed, translated (when needed), and anonymised for personal data protection.

4.6 Data Analysis: Triangulation

The data analysis method chosen for this thesis is the triangulation method, which is often found in MMR studies (Denzin, 2012; Morse, 1991). Patton

(2002) explained that a triangulation analysis is conducted when multiple (at least two) sources of evidence are used, converged, and corroborated against

134 one another. Bowen (2009) argued that triangulation is helpful for giving a researcher a defence on their study's findings, as the multiplicity in sources of evidence mean that the researcher could minimise biasness found in a single-method and single-source study.

The data analysis procedure is organised as follows. Firstly, the data collected from documents and datasets were analysed interpretatively, by observing the messages and themes which could be useful in resolving the

RQs, as well as informing how interview questions are to be constructed.

Secondly, the data from the interviews were analysed thematically (Lapadat,

2010). The steps taken to categorise the interview findings into themes were adapted from Miles and Huberman's (1994, pp. 245-246) suggestion in analysing interviews, which had been summarised in Kvale and Plas's (1996, p. 204):

"Noting patterns, themes (1), seeing plausibility (2), and clustering (3)

help the analyst see "what goes with what". Making metaphors (4), like the

preceding three tactics, is a way to achieve more integration among diverse

pieces of data. Counting (5) is also a familiar way to see "what's there".

Making contrasts/comparisons (6) is a pervasive tactic that sharpens

understanding. Differentiation sometimes is needed, too, as in partitioning

variables (7)

We also need tactics for seeing things and their relationships more

abstractly. These include subsuming particulars under the general (8);

factoring (9), an analogue to a familiar quantitative technique; noting

relations between variables (10); and finding intervening variables (11).

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Finally, how can we systematically assemble a coherent understandable of

data? The tactics discussed are building a logical chain of evidence (12)

and making conceptual/theoretical coherence (13).”

The last step taken to triangulate the data in this thesis is to correlate the analysis of the data with each other (Tashakkori & Teddlie, 2003). This is done by consolidating, comparing, and integrating data from the different research methods to arrive at a synthesised analysis for the thesis. The presentation of the findings in the thesis is as follows. The findings of RQ1 are presented in Chapters 5 and 6, which builds the historical trajectory of elite policies on FC, as well as the story of FC development from elites’ perspectives. This is followed by the findings of RQ2, which is presented in

Chapter 7, telling the story of FC development from financial citizens’ perspectives. The triangulation of the data from Chapters 5, 6, and 7 are conducted in Chapter 8, thus wrapping up the thesis to arrive at a conclusion.

4.7 Conclusion

To conclude this chapter, it is worthwhile to look back at how the thesis has developed. In Chapter 2, the objectives of this thesis have been outlined.

They highlight that the observation of financialization is to be carried out from a locally-contextual angle, as a response to the geographical limitation of existing studies, especially ones focusing on the micro-level of financialization. As such, CPE is chosen as the most appropriate approach of observing financialization, framed in a way that responds to the geographical

136 context of financialization. Due to this very specific need of observing financialization, this chapter outlines the importance of choosing pragmatism as an underlying philosophy for conducting this research. More specifically, it draws upon the works of Dewey, which celebrates historical and cultural context in constructing human experiences.

Additionally, this chapter explains the choice for an MMR research design. More importantly, it should be noted here that the choice for MMR responds to the second objective of this thesis, as outlined in Chapter 2, which is to explore both actors that are responsible for the actions and programmes related to the expansion of financial markets and its activities and the individuals to which these actions and programmes are directed.

Guiding this methodology is the concept of FC, which is useful in conceptualising the different actors in financialization, or in this thesis, elites and financial citizens. As such, the chapter also demonstrates how the research methods employed reflect on the multidimensional needs of the thesis.

Having outlined the benefits and challenges of different methods employed and the process of data collection, the thesis now turns to the discussion of the findings. This begins with the historical trajectory of elite policies in FC development in the next chapter.

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Chapter 5

Chapter 5: Policies and the Stock Market: The Historical Development of the Malaysian FC

5.1 Introduction

The aim of this chapter is to address the first part of RQ1: “What types of historical developments in terms of policies and initiatives could be identified as encouraging the involvement of citizens in the stock market?” (RQ1a). To do so, the chapter explores the historical development of policies that use the

Malaysian stock market as an important financial arena for FC. In doing so, the chapter attempts, first, to distinguish the importance of policies and how they are used by various political and financial elites to advance FC objectives, and second, how the trajectory of roles that elites play influence and advance current FC development.

Exploring RQ1a involves analysing how the specific (place-based) experience of financialization reflects distinctive historical development which can shape current policymaking. While the history of the Malaysian

138 stock market predates its independence in 1957, this chapter places greater focus on its development from 1970 onwards, due to the stock market’s rapid growth and the increasing participation by citizens since then. Chapter 5 is the first findings chapter in this thesis with data that have been collected from publicly-available secondary sources, such as academic literature; official government policies, reports, and documents; official financial institutions’ reports and documents; official government statistics, among others.12

The chapter has been divided into four main sections based on different key development periods of the stock market. Section 5.2 briefly discusses the Malaysian stock market’s early beginnings, mainly to demonstrate how the financial arena has an origin story that begins with postcolonial influences, which benefits colonial rulers rather than the country’s native households or businesses. This origins story has made the strategic growth of the stock market more complex, especially when the objectives of the New Economic Policy were introduced in 1970. The New

Economic Policy which was controversial and ethnically affirmative was influential to Malaysia's polity from the 1970s onwards. The New Economic

Policy helped the then-government to focus on the growth of economic and financial systems by mixing FC in these objectives. As a result, the stock market’s role became more ambiguous as it was used as a technology that would deliver socioeconomic objectives of the New Economic Policy by mobilising and redistributing wealth along ethnic lines.

12 See Chapter 4 and Appendix 1 for more information on the secondary data sources used in this chapter.

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Section 5.4 discusses the period in which former PM Tun Dr. Mahathir

Mohamad13 (hereinafter “Mahathir,” due to the Malay custom in which personal names are used rather than patronym names, even in formal context) came into power. The Mahathir Era was a time of radical changes that brought the Malaysian economy and polity closer towards modernisation and internationalisation, backed by neoliberal ideologies adapted from Anglo-American nations. The section discusses the effect of

Mahathir’s policies to promote FC development, and how his administration responded to the unexpected interruption to this process when the 1997/98

Asian Financial Crisis (AFC) occurred.

Section 5.5 observes post-AFC reforms in the stock market. The section is divided into two. The first sub-section explores how financial policy elites related to FC development continues their initiatives in encouraging citizens to invest in the stock market directly. The second sub-section discusses how these elites also added a focus in FC development by encouraging citizens to invest in the stock market indirectly, using the instruments of unit trust investment, financial intermediaries, and shariah- based investments. The chapter then concludes.

13 The Malay language consists of several titles and honorifics which would signify a person’s hereditary or honorary status in the society. For Malaysia, hereditary, royal statuses are complex and dependent on the states one originate from. The titles include “Tuanku,” “Tengku,” “Tunku,” among others. Non-hereditary, honorary, federal titles are “Tun,” “Tan Sri,” and “Datuk”/”Dato’”.

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5.2 Early Beginnings for the Stock Market and FC

Development (Pre-1970s)

The Malaysian stock market was founded in 1930 by British colonists with the inception of the Singapore Stockbroker’s Association (Bursa Malaysia,

2015), which replaced direct transfer of ownership transactions between

(rubber and tin) joint stock companies (Wong, 1988). In 1938, the

Stockbroker’s Association was renamed the Malayan Stockbrokers

Association, firstly to reflect the pan-Malayan characteristic of its membership; and, secondly, to allow for new Peninsular Malayan firms to join (Wong, 1988)14. It was not until March 1960, when the Association’s name was changed to the Malayan Stock Exchange that publicly-traded shares were made available. The exchange was linked with Singaporean trading rooms via telephone lines in 1962, creating a single stock market for

Singapore and Malaya (Jomo, 2003).

The formation of the Malay[si]an stock market did not necessarily follow traditional macroeconomic theories (Fisher & Merton, 1984). Its objectives were to serve the interests of the British colony, rather than to the financing of local business interests in Malaya or to stabilise its (non- established) financial system (Fisher & Merton, 1984). British companies which were incepted for the purposes of extracting rent from locally-mined

14 Malaya, also known as British Malaya, loosely refers to the combination of a set of Malay sultanates and an island which was under Sultanate of Johor’s ownership from the 16th century, known as Singapura, or Singapore in English. British Malaya was colonised by the British from the 18th century until 1957.

141 rubber and tin commodities were floated in the stock market to transfer interests into the colony (Wong, 1988). The stock market had been especially useful for the British during the rubber boom of 1910 and the subsequent increase of global dependence on tin mining. Both events resulted in the floatation of more (and mostly) British companies in the stock market. As such, the capital flows into and out of the stock market were integral to the maintenance of the British colony rather than Malay[si]a as a singular country, assisting them in holding dominance in commercial and financial areas (White, 2003).

The Malayan independence in 1957 and subsequently the formation of the Federation of Malaysia in 1963 did not bring an adverse effect on the dominant influence of the British (White, 2003). Much of the changes to the stock market occurred in a superficial manner, for example, with yet another changes of names to “the Stock Exchange of Malaysia” following the secession of Singapore from Malaysia in 1965 and to “Kuala Lumpur Stock

Exchange” (KLSE) in 1976 (Wong, 1988). With Malayan independence, the newly-enfranchised government attempted at developing the stock market by establishing the Capital Issues Committee (Jomo, 2003); it was used by the government as a vehicle to spur credit financing pioneer companies, culminating in an increase in new market issues at the end of the 1960s and early 1970s (Zeti, 1989).

Even after these changes, the British influence over the Malay[si]an economy had been significant. As of 1963, the British held 75.0% of assets in

Malaysian territories (White, 2003, p. 223) and in 1969, this influence was still important at 62.1% of the share capital (in value) of limited companies in

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Malaysia (Malaysian Economic Planning Unit (MEPU), 1970, p. 40). The dependence on the British control over the Malay[si]an economy was sustained by the support of Malay[si]a’s finance minister between 1959 and

1974, who, “remained persistently loyal to the sterling system,” (White, 2003, p. 224). In fact, it was not until a racial riot in the late 1960s that triggered a policy transformation with a focus on correcting the country’s socioeconomic issues. In this process, the first instance of FC development in the country had emerged with the stock market being used as a technology to mobilise wealth from colonial hold to the local government and to selected groups of

Malaysian citizens. These events will be further discussed in the next section.

5.3 The New Economic Policy (the 1970s)

“Whatever their proximate causes, the racial riots of May 1969 owed their origin to inadequate efforts to redress socio-economic imbalances which have characterized

Malaysian society for so long. […] A society marked by significant economic imbalances was no longer acceptable. A concerted effort to accelerate the removal of these imbalances became imperative.”

– Third Malaysia Plan (MEPU, 1975, p. 6)

As mentioned in Chapter 3, the main legacy of British colonisation over

Malay[si]a is the construction of a plural society in which different ethnicities were purposely segregated along specific economic functions (Alatas, 2010).

This arrangement worked favourably to the British colony but inevitably

143 caused long-term social consequences for Malay[si]a, as reflected in the opening quote of this section. After the country’s independence in 1957,

Malay[si]ans were left with significant income, employment, and equity ownership disparity;15 all of which were strongly linked to differences in ethnic groups, an issue that was further magnified by the newly formed government’s lack of palliative policy responses (Abdul Khalid, 2015; it should also be noted that “ethnicity” and “race” are used interchangeably in many Malaysian official policy documents, although they essentially refer to the same thing).

As of 1970, the ethnic income disparity ratios (measured using an oft- quoted ethnic disparity ratio that indicates the average income differences between ethnicities) were at 2.29 for Chinese:Malay and 1.77 for

Indian:Malay (Anand, 1983).16 According to Abdul Khalid (2015), in terms of household income, nearly 90.0% of all households earning less than M$10017 a month (approximately £15 at current exchange rates) in 1970 had been

Malays. According to the Third Malaysia Plan, with respect to ownership of equity capital, while the majority was held by foreigners18 at 63.3%, there was a considerable gap of equity ownership between the three main ethnic groups with the Chinese holding 27.2% equity capital, followed by the Malays at

2.4% and Indians at 1.1% (MEPU, 1975, p. 6).

15 For more information, see Chapter 3 of the Second Malaysia Plan (MEPU, 1970). 16 These ratios had been taken from Anand's (1983) analysis of inequality and poverty in Malaysia, which gave attention to the country’s ethnic pluralism. Ethnic income disparities had been measured using the ratios between the mean incomes of one ethnic group to that of another (p. 273). 17 Malaysian dollar (M$) was used as an official Malaysian currency symbol from 1967-1993 before it was replaced by the symbol of Ringgit Malaysia (Claassen, 1992). 18 More specifically, business owners and/or other affiliations linked to the British colony.

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A national election held in 1969 heightened the decades of hostility between the Chinese and the Malay ethnic groups, resulting in a state of emergency and a hung parliament (Ooi, 2016; Rabushka & Shepsle, 1972).

The history of this racial hostility is related to the colonial strategy of ethnic segregation, which begins with the Chinese group demanding greater political power to justify their positions in Malaya, based on their economic influence over the country (Alatas, 2010). While the modern ethnic grouping of Bumiputeras encompasses both Malays and the indigenous people of

Malaysia, it had always been the Malay group who historically held hegemonic political and authority power of the land through the feudal system. In response to the Chinese group's demands, Malays refused to yield to other ethnic groups whom they believed were still foreigners to the country. This refusal had been a direct result of colonial arrangements, in which the British had promised and promoted their colonial arrangements as being temporary (Roff, 1994). The 1957 independence formally legalised the statuses of the Chinese and the Indian groups, although it came with much controversy. The arrangement was made by the British colony with only

Malay royals and/or aristocrats; consultations with ordinary Malay citizens who were the majority ethnic group had been near-absent. Ethnic animosity and tension were successfully kept at bay with the granting of independence by the British, although the 1969 election which saw the Malays almost losing their political position with a reduced majority to the Chinese party had tipped the tension over the edge. This event ignited the Sino-Malay sectarian and violent riot of 13 May 1969.

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Under a temporary replacement government, the New Economic

Policy was quickly drafted to resolve the socioeconomic issues of Malaysia, as mentioned in the opening quote. To restore stability in the country, former

PM Tunku Abdul Rahman stepped down in 1970 and was replaced by his deputy, Tun Abdul Razak Hussein (Abdul Razak). Abdul Razak was responsible in setting up the National Operations Council which governed the country from 1969 to 1971 in lieu of the then elected government (MEPU,

1970). Abdul Razak entrusted Tun Dr. Ismail Rahman as the Minister of

Home Affairs, a ministry in charge of the construction of the New Economic

Policy. When the New Economic Policy was completed, its overriding objective was national unity, to be achieved through a two-pronged strategy of poverty reduction and economic restructuring (Chapter 1, Second Malaysia

Plan, MEPU, 1970). As according to the Second Malaysia Plan, the justification for national unity is that,

[Its] achievement imposes demands on all sections and levels of the

Malaysian society. Social and cultural, political and economic, public and

private, emotional and psychological factors all play a part and they are all

interrelated. National unity is unattainable without greater equity and

balance among Malaysia’s social and racial groups in their participation in

the development of the country and in the sharing of the benefits from

modernisation and economic growth. (MEPU, 1970, p. 3).

It is the New Economic Policy that had introduced what could be identified as the first instance of FC development in Malaysia. Unlike the

Western experiences in which the state had transferred financial responsibility (especially for retirement) to citizens, such as in the case of the

US and the UK in the late 1980s and early 1990s (Froud et al., 2002;

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Krippner, 2005; Langley, 2007); the Malaysian experience instead saw the state taking greater responsibility to create social cohesion and to build their nation. This first instance of FC development occurred through the strategy of addressing inter-ethnic income disparity by mobilising the country’s wealth, which had previously been held in majority by colonial power. Under this policy transformation, the government paid much attention to wealth in the form of equity ownership, and as such had focused on mobilising wealth from colonial hold to the local government, and from there, to Malaysian citizens (Abdul Khalid, 2015; Alatas, 2010).

More importantly, however, this process had not occurred in a democratic manner, unlike what had been proposed in FC rhetoric. Rather, access to equity ownership among the mass public was exclusively given to the Bumiputeras, and as such problematised the equal inclusion rhetoric of

FC development. Although, for the country’s context this had been unsurprising given that within the Bumiputera ethnic group was the Malay sub-group, who composed the majority ethnic group and therefore the political voting influence of the country (Alatas, 2010; Jomo, 1998; Khoo,

2003). Targeting the Malay group was also important as the majority ethnic group had been the one at the bottom of the income line, as according to the

Third Malaysia Plan:

In terms of per capita income, the Malays received $34 per month or one-

half that of the Chinese at $68, while the Indians obtained $57 or some

70% more than the Malays. Of all poor households, about 74% were Malay,

17% Chinese and 8% Indian.

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[…] Of all Malay households, 65% were in poverty compared

to 26% for Chinese households. In the case of Indian and

other households, 39% and 45% had incomes below the

poverty line. (MEPU, 1975, p. 5)

The Third Malaysia Plan provided details on the concentration of wealth in the country in 1970. Whereas Malays’ wealth had been largely in agriculture, an industry with the lowest per capita product among all sectors; the rest of the country’s wealth had been concentrated in “mining, manufacturing and construction where per capita product was 167% higher than in agriculture and 60% higher than the average for the entire economy,”

(MEPU, 1975, p. 6). The document further mentioned that most of the country’s economy and fixed assets were held and owned by corporate entities, whose ownership were firstly concentrated among colonial power, followed by the Chinese ethnic group (MEPU, 1975).

To overcome this issue, the Foreign Investment Committee was established in 1974 (MEPU, 1980). The purpose of the committee was to guide the regulation in the acquisition of assets, mergers, and take-overs of foreign-owned (or more specifically, colonially-owned) companies and businesses with interests in Malaysia. According to the Fourth Malaysia Plan,

“[d]uring the period of 1974-80, about 840 proposals for acquisitions, mergers and takeovers and restructuring schemes were submitted to the

F[oreign] I[nvestment] C[ommittee] by the private sector. These proposals involved a total of about 1,940 companies mainly in plantation, mining, manufacturing, trading and property development,” (MEPU, 1980, p. 137).

Furthermore, to restructure the ownership of wealth in the country, the

148 corporate sector was made to adhere to an equity restructuring exercise. Tax exemptions were given to companies who conformed to the New Economic

Policy’s requirement that their equity ownership was structured so that

70.0% of public equity ownership was given to Malaysians, "including at least

30% for Bumiputera, and not more than 30% equity ownership of foreign interests,” (MEPU, 1980, p. 137).

After restructuring equity ownership from foreign hold to the government, the stock market’s role was redrawn to serve the New Economic

Policy’s wealth mobilisation objective. How these changes related to FC development could be identified in the initiation of government-led investment management agencies, which were incepted for the purpose of mobilising wealth via government equity that was and is managed by these agencies. The most important of these agencies is the Permodalan Nasional

Berhad (PNB), founded on January 1981, and had since been the largest government investment management agency offering sovereign unit trust schemes, the first being Sekim Amanah Saham Nasional or National Unit

Trust Scheme (PNB, 2015, p. 26).19 The establishment of PNB had been important in introducing and normalising the concept of financial investment to ordinary Malaysian citizens. During the launch of the National

Unit Trust Scheme, Malaysia experienced its first instance of mass investment activity involving ordinary citizens, when 170,000 individuals

19 Unit trusts are collective investment instruments, defined by the Federation of Investment Managers Malaysia on their website, as investment schemes "that allow investors with similar investment objectives to pool their funds to be invested in a portfolio of securities or other assets," (FiMM, 2017).

149 exercised the unit trust scheme’s offer during its first week in 1981 (Bidin,

2009).

The establishment of PNB and its schemes also transformed the stock market into becoming an arena that was no longer wholly financial; instead, it also acted as a palliative instrument for socioeconomic issues. This period was an important juncture in understanding Malaysia’s context with FC, in that, unlike its Western counterparts, its development began with an ethnic issue. This could be compared directly to the UK’s experience in privatisation in the 1980s where the government strategy was to increase wider share ownership, although this strategy was not exclusively targeting a certain ethnic group over others (Marsh, 1991).

Going back to Malaysia's case, it is interesting to observe and question now, why such a complex financial arena as the stock market had been adopted by Malaysian elites as a proper technology to mobilise wealth.

Furthermore, why had equity indicators, which had been traditionally linked to businesses, become the appropriate measure to indicate the socioeconomic status of citizens? This history tells us specifically that sometimes policies that normalise finance in everyday life is not necessarily direct, for example, in the case of the rise of neoliberal policies in the 1980s (Haque, 2008) that had encouraged individuals to resort to market measures for their long-term financial planning and security (Chaput & Hanan, 2015). For Malaysia’s case, the period of the New Economic Policy is important in demonstrating that the country’s experiences in FC development had been unique and place- specific due to its history of post-colonialism.

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The next period, however, brings Malaysia closer to the story of FC development as often understood in Anglo-American contexts, with the development of neoliberal policies (French & Kneale, 2009; Langley, 2008a;

Larner, 2006; Martin, 2002). Nonetheless, the Malaysian experience with neoliberalism was also unique due to the involvement of PM Mahathir

Mohamad and his authority over the country’s governance during his first premiership (from 1981 to 2003). It was during his twenty-two-year office which saw many great changes to the Malaysian polity (such as an influence of neopatrimonialism) and economic direction (the implementation of economic liberalism), among others. These events, observed, were instrumental to the shaping of what we know of FC development today.

These will be discussed next.

5.4 The Mahathir Era (the 1980s to early 2000s)

An observation of the character of Malaysia’s polity is important to address

RQ1a, especially in explaining the complexities faced in today’s FC development. In Malaysia’s case, there has not been a more intriguing nationwide scrutiny on a political figure besides that on PM Mahathir

Mohamad during his first premiership from 1981 to 2003 (Khoo, 2003).20

This section observes Mahathir’s leadership, outlining policy changes which had been highly influenced by Mahathir’s neopatrimonial polity.

20 This position was challenged by former PM Najib Abdul Razak, especially in his second premiership term when he was accused with multiple scandals involving financial fraud and the mismanagement of public money (“1MDB scandal: A timeline,” 2018).

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Furthermore, it discusses Mahathir’s important nation building policies that had eventually affected FC development. Lastly, it explains how the AFC has impeded the progress of Mahathir’s policies and simultaneously interrupted

FC development.

5.4.1 Neopatrimonialism, Look East, Malaysian Inc., and Vision

2020

Under Mahathir’s leadership, the Malaysian political system became increasingly neopatrimonial, with political hegemony held by the country’s largest political party, United Malays National Organisation (UMNO)

(Jesudason, 1989).21 Malaysia’s instance of neopatrimonialism is not specifically unique to the country. Neopatrimonial politics masked under democratic ideologies were and are prevalent in many Southeast Asian countries, where democratic procedures such as national elections are sometimes modified in order to sustain the hegemony of a dominant, single- party government that “either co-opts or marginalizes opposition,” (Chua,

2010, p. 204). In Malaysia, this single-party government is termed by Wong,

Chin, and Othman (2010) as an “electoral one-party state”. This means that although national elections had been held successfully in the past, UMNO had always emerged as the incumbent government, ruling the country whether individually or in a coalition (called the Barisan Nasional) since the country’s independence. Although, this political de facto has since been

21 As a reminder, “neopatrimonialism” in the Malaysian context could best be described using Erdmann and Engel's (2007) definition, whereby the institutional political arrangement is hybrid, with the complex combination of formalised, authoritarian politics with personal and informal public norms in governing spaces.

152 challenged when for the first time in Malaysia's history, a new political coalition Pakatan Harapan emerged to lead the government in 2018 (Barron,

2018). Regardless, the political coalition was and is surprisingly led by

Mahathir himself, making him a PM of Malaysia once again after being away from politics for fifteen years.

Going back to Malaysia’s history of premierships, those who had led

UMNO were known to have a somewhat authoritarian power over policymaking (Wain, 2012; Wong et al., 2010). The same applied to

Mahathir, who left multiple policy legacies under his ruling. One of the most memorable ones was an ideology to transform Malaysia into a developed economy using the strategy of modernisation and internationalisation

(Searle, 2000). Business elites played important roles in this vision.

Surrounding Mahathir was a group of financiers, economists, and businessmen, who collectively, with the political patronage of UMNO, begun mixing political and business spaces in the creation, advancement, and implementation of the country’s economic policies (Jomo & Tan, 2003;

Jomo, 2004; Wain, 2012; Wong, Jomo, & Chin, 2005). Malaysia’s political- business relationships were complicated, as many elites held multiple roles.

There had been elites who were of business backgrounds who were suddenly given political roles, such as in the case of former finance minister Daim

Zainuddin (Wain, 2012). Nonetheless, it had been Mahathir who was influential in catalysing the growth of these business-politics relationships, implementing two economic policies with this objective in mind. These policies are Dasar Pandang ke Timur (Look East), a bilateral economic policy between Malaysia and Japan (Khoo, 2005) and Malaysia Inc., an

153 economic strategy adapted from the rather deprecatory “Japan Incorporated” used in the West (referring to the strong unity between the Japanese state and their private sector) (Wain, 2012, p. 88).

While Look East and Malaysia Inc. were economic policies, they were often used by Mahathir as a social motivation, to cultivate the desired type of citizens who are self-acting, patriotic, and hard-working; skills and ethics in citizens which he had deemed as important to the economic success of Japan:

Malaysia identified what we believed to be the factors which contributed

towards Japan's success. They are the patriotism, discipline, good work

ethics, competent management system and above all the close cooperation

between the Government and the private sector. And so we tried to adopt

these practices and instil these cultures in our people. (Mohamad, 2002)

As a consequence of Look East and Malaysia Inc., the Mahathir

Administration began incubating a class of preferred business elites strategically chosen for their business capabilities and more often, based on their close connections to political elites (Gomez & Jomo, 1999). This group of business elites had been mostly Bumiputera (mostly of the Malay sub- group) at first, in line with Mahathir’s preference to elevate this ethnic group economically—but eventually; political patronages were extended to non-

Bumiputera close connections (Gomez & Jomo, 1999; Wain, 2012). To

Mahathir, the group of business elites were important in not only contributing to nation building strategies but also to inspire other citizens to become more independent, entrepreneurial and self-acting; “[…] the private and public sectors see themselves as sharing the same destiny as partners,

154 shareholders and workers within the same “corporation”, which in this case is the Nation.” (Mohamad, 1984)

However, Mahathir's nation building visions were mostly idealistic and complex. This could be reflected in the way his administration continued to experiment with various policies, constructing, implementing, and barely focusing on them before there were serious results to be garnered, only to begin with another and completely new sets of policies. In the 1980s alone, the Mahathir Administration had more than three different types of major national economic strategies, all of which failed to bring the promised successes.

This could be demonstrated by the period when Look East was still under implementation in the 1980s when the Mahathir Administration had also made a complete reversal in strategies by “looking west,” adopting whatever popular policies that had been discussed globally at the time. For example, during his early years as PM, Mahathir had already started discussing the possibility of adopting neoliberal ideologies in policymaking, especially in the form of privatisation (Mohamad, 1984). In the late 1980s and in his second term when he had started exerting his power, Mahathir began seriously formulating privatisation and economic liberalisation, following the Reagan-Thatcher movement in the late 1970s and early 1980s

(Tan, 2007).

Jomo and Tan (2003) argued that Mahathir’s adoption of neoliberal policies had mostly been an attempt to recuperate the nation’s economy which suffered during the 1980s global economic downturn. However, the contradiction between Look East and neoliberalism demonstrated Mahathir’s

155 lack of in-depth understanding on economic policies then and with it, his influence on policymaking in general, as many of the elites in his administration continued to do what he had demanded. This had resulted in a hybrid mix of neoliberalism and government intervention in economic and financial spaces.

To understand this point, it is worthwhile to define how neoliberal policies were implemented in western, developed countries. Privatisation, for example, was backed by the foundation of neoliberalism which urged for the minimisation of government control in businesses and for the activation of the free market economy (Brennetot, 2015). Along with this concept is the promotion of individual autonomy and freedom in the society from the state’s control—as a result, decision-making in business spaces and everyday life is left to market forces (Larner, 2006). However, in Malaysia, privatisation simply exacerbated the importance of the government in economic and financial spaces. The most obvious indicator of this had been the public listing of multiple state-owned enterprises during the first five years of privatisation, which resulted in a raised stock market capitalisation by RM31.4 billion by 1996 (approximately £5.9 billion at current rates)

(MEPU, 1995, p. 213). At the time, the stock market had been wholly owned by the government, and thus the raising of stock market capitalisation only served to benefit and heighten governmental control over private spaces.

Furthermore, the methods of privatisation undertaken by the government were varied; as such only a small percentage of equity had been sold to

156 private investors.22 In addition to this, until today, the major shareholders of the top ten companies listed in the stock market are government bodies, the biggest being the EPF, Khazanah Nasional (a Malaysian sovereign wealth fund management government agency), PNB, Lembaga Tabung Haji (the

Islamic Pilgrimage Board), Petronas (a state-controlled oil and gas company), and the Malaysian provident fund for government employees.23

After the lacklustre performance of their economic policies in the

1980s, the Mahathir Administration decided to start anew with a 30-year nation building strategy called Wawasan 2020 or Vision 2020 (Gomez &

Jomo, 1999). Implemented in 1991, it served to replace Look East and

Malaysian Inc. Vision 2020 was simple to understand in text; its main objective was to transform Malaysia into a self-sustaining developed nation by the year 2020 (MEPU, 2018). However, rather than using other countries as examples, Mahathir had now declared that it was up to Malaysia and

Malaysians to assist in building the nation together (Mohamad, 1991).

Nonetheless, Vision 2020 was ambitious and unclear, with its objectives strictly focused on macroeconomic indicators, truly comparable to the West, with idealistic projection and belief that the country could sustain an annual Gross Domestic Product (GDP) growth of 7.0% for the next three decades for Malaysia to become a developed nation. To advance Vision 2020,

Mahathir decided to follow the strategy of economic liberalisation (as

22 Other methods included sale of assets, lease of assets, contracting the private sector to manage government contracts, among others (MEPU, 1991). 23 The information for this sentence had been extracted from multiple publicly-available Annual Reports of the top ten companies listed in the Malaysian stock market, of various years, including Public Bank, Malayan Bank, CIMB, Tenaga Nasional Berhad, Axiata, Sime Darby, Digi, and Petronas.

157 mentioned briefly in Chapter 3). It was during this period that the stock market had been drawn more explicitly as a site that would simultaneously help the government in achieving both its economic and social goals.

The plan to liberalise the stock market came with the strategy to modernise and internationalise the financial arena. Along these plans were several important initiatives that would eventually affect citizens’ participation in the KLSE, and therefore advance FC development in the

Malaysian context. Firstly, a Central Depository System (CDS) was created in

1991 which managed the physical delivery and transfers of scrips and stock purchase transactions (MEPU, 1989). In the same year, the Malaysian government established the Securities Commission, a self-funding statutory body with reinforcement authority (MEPU, 1995). The Second Board, established in the KLSE in 1998, was increasingly promoted in the early

1990s which assisted in exacerbating retail investors’ (composed of

Malaysian individual, citizen investors) involvement in the stock market

(Wong, 1988). The affordability of the companies listed in the Second Board compared to the Main Board contributed to this effect. The next section now focuses on the outcome of these initiatives.

5.4.2 The Agogo Years

The agogo dance was a popular discotheque dance in Malaysia, especially after its independence in 1957 and the early 1960s. The word agogo was commonly used by Malaysians to describe a good time. The word appears in this sub-section as an apt introduction of the stock market euphoria in the

1990s, which occurred in Malaysia as a result of the policy directions of the

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Mahathir Administration. With the combination of favourable and liberalised state-arrangements, the ratio of KLSE’s market capitalisation as a percentage of GDP more than doubled from 163.1% in 1992 to 359.8% in 1993.24

During this time, stock market investment was aggressively promoted to citizens by the stock exchange itself, which had still been under full government ownership. An observation of KLSE’s annual reports in the

1990s saw an increase of initiatives targeted at ordinary citizens, under the section “Investor Education”. These initiatives included the publishing of retail investor magazines, nation-wide retail investor workshops and seminars, and websites dedicated to disseminating retail investors’ knowledge. As a result, from 1987 to the 1990s, the KLSE saw a growth of individuals investing directly in the stock market from 24.0% to 50.0%

(Jomo, 2003; Wong, 1988). According to the former chief editor of a national newspaper, by 1993, Malaysia was commonly referred by the media as the

Las Vegas of stock markets (Sulong, 2014).

The rapid growth of the stock market over a short period of time had made it excessively bullish, mirroring similar experiences in the U.S. during the early 1990s (Harrington, 2008). Similarly, Malaysian citizens enjoyed the excitement of stock market investment as a daily activity, as they perceived it an interesting opportunity for making quick capital gains:

Stories about teachers and engineers quitting their jobs and spending their

time in the trading rooms of various stockbroking houses were true. They

24 Stock market capitalisation figures are RM245.82 billion in 1992 and RM619.64 billion in 1993. GDP figures are RM150.68 billion in 1992 and RM172.19 billion in 1993 (at current prices. Stock market capitalisation figures were taken from BNM’s September 2015 Statistical Bulletin under the section of Bursa Malaysia Securities Berhad: Selected Indicators and GDP figures were taken from the Department of Statistics Malaysia.

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were joined by housewives, taxi drivers, shopkeepers and amahs (tr:

domestic maids). […] Everyone was making money.” (Sulong, 2014, p. 42)

Despite their strong presence, retail investors actually had very little influence on the Malaysian stock market in terms of value traded (Jomo,

2003; Wong, 1988). Most retail investors were ordinary citizens with barely any professional training in finance and more importantly, their stake in the stock market had been miniscule in comparison to institutional shareholders and/or high net worth retail investors (Sulong, 2014).

1400 70.00%

1200 60.00%

1000 50.00%

800 40.00%

600 30.00%

400 20.00%

200 10.00%

0 0.00% 03/12/1993 03/12/1994 03/12/1995

Adjusted Close Index Annualised Historical Volatility

Figure 3: Kuala Lumpur Composite Index (KLCI) Daily Trend and Annualised Historical Volatility (1993-1996). Data of KLCI Index were taken from Yahoo! Finance and Annualised Historical Volatility was calculated using 20-day standard deviation annualised on 252 trading days. White lines in the adjusted close index represent days in which the stock market had not been operating.

Besides their lack of influence in the stock market in terms of value traded, retail investors also did not possess the right financial skills to be able to secure their positions in the stock market. According to Wong et al.

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(2005), retail investors demonstrated both speculative and pessimistic behaviours, as well as herd mentality; characteristics that are so often linked to irrational exuberances in the events of stock market crashes (Shiller,

2005). Furthermore, the stock market was rarely seen as a long-term investment vehicle, rather, a casino for making quick money.

A combination of the government’s policies which brought in a surge of investment (including that of Malaysian citizens’) in the stock market might explain an increase in volatility in KLSE from 1990 until the AFC. The annualised historical volatility in the KLSE market in January 1994 rose by more than 40.0% from the previous month, then fell by more than half a month later (Figure 3). This instability continued to be prevalent in the volatility trend all through 1995 and 1996, before the stock market finally crashed in the AFC, an event that would be explored further in the next section.

5.4.3 The 1997/98 Asian Financial Crisis

In the last three quarters of 1997, a net sum of RM30 billion (approximately

US$12 billion at 1997 rates)25 of foreign portfolio investment outflows were recorded, a figure equivalent to almost a fifth of Malaysia’s annual Gross

National Product (GNP) at the time (Wong et al., 2005, p. 27). In terms of stock market indicators, the KLCI had fallen 968 points from 1,270 points on

25 From 1990 to 1997, RM traded on a free float at an average of 2.50 to the US$ (Source: http://www.tradingeconomics.com/malaysia/currency).

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3 February 1997 to only 302 points on 3 August 1998.26 It was then that the

AFC finally arrived in Malaysia.

One of the most important lessons of the AFC was the effect of international pressure on developing nations such as Malaysia. Joseph

Stiglitz, who was openly critical of international institutions’ one-size-fits-all policy recommendations, argued that developing nations were constantly under pressure by these institutions to adopt economic ideologies they were yet to understand (Stiglitz, 1999). Such examples could be extended to the global pressure to liberalise financial markets during the late 1980s and early

1990s, without careful guidance on regulatory and/or supervisory structures.

Specific to the AFC, Stiglitz lamented that many of the East Asian and

Southeast Asian countries who fell victim to the crisis had been running on budget surpluses pre-crisis. Liberalisation only attracted unsustainable short-term capital; risk consideration of which was omitted by advocates of free-market ideologies.

The AFC is an important event in understanding the current development of FC in Malaysia, in that, many of the country’s contemporary

FC initiatives reflected on the grave experiences suffered during the crisis. On the political front, the Malaysian government, which had had a reputation for being resilient and innovative under the leadership of Mahathir, was suddenly put under question in every aspect of their governance (Tourres,

2004). The crisis created factions in UMNO, groups which differed in opinions on how to solve the crisis. The finance minister at the time, Anwar

Ibrahim, had been the name popular with the modernisation of Malaysian

26 Data taken from Yahoo! Finance.

162 finance. Anwar was well-known for his preferences over international financial institutions’ policies, whose opinions he still opted for as a resolve for the crisis (Sulong, 2014). Mahathir’s strong belief in Western-backed neoliberalism seemed to have faltered, however, especially after privately consulting with a Special Economic Adviser, Nor Mohamed Yakcop, on the ways in which the Malaysian financial system had changed and developed after embracing modernism and liberalism.27 Suddenly critical of neoliberalism, Mahathir almost single-handedly decided for an unorthodox response, capital controls; a decision that was made possible by the neopatrimonial arrangement of Malaysian polity.

With the help of an emergency council composed of elites such as politicians, economists, and policymakers, capital controls were implemented on 1 September 1998 (Tourres, 2004). Almost every aspect of this response differed from the government’s economic stance for the past decade. It was as if Malaysia attempted to free itself from the chokehold of neoliberalism by micromanaging every aspect of the financial system. In a short period of time, KLSE’s volume traded fell by 80.0% from approximately 81.9 million units on 28 August 1998, to just 15.9 million units on 31 August 1998 (Figure 4).

Capital controls brought international attention to Malaysia, albeit one that was much more negative than desired by the Mahathir

Administration. Critics and economists focused on Mahathir and the decision

27 Nor Mohamed Yakcop was a former Bank Negara officer who afterwards became the finance minister of Malaysia. The details on how he had taught Mahathir about the financial system could be found in Notes to the Prime Minister (Sulong, 2014).

163

90000000

80000000 KLCI 302.91 as at 70000000 29/08/1998

60000000

50000000

40000000

30000000 KLCI 262.7 as at 2/9/1998 20000000

10000000

Figure 4: Selected Volume Traded on KLSE and Closing KLCI pre- and post-capital controls announcement in Malaysia. Source: Yahoo! Finance.

they assumed had been strictly his, with the expulsion of Anwar and many of his confidantes from their government posts (Sulong, 2014). Nonetheless, assessing the success of Mahathir's decision had been difficult as many of these critics—popular publications and figures alike—were more focused on

Mahathir's unconventional method rather than the method's effects on

Malaysia's economy. For example, Time magazine was quoted accusing

Mahathir of turning Malaysia into a black market (Sulong, 2014). Similarly, the former International Monetary Fund (IMF) managing director Michel

Camdessus (1999), criticised Mahathir and Malaysia openly at the 1999 Asia-

Europe Finance Ministers Meeting; “[…] investor confidence has been damaged by the capital controls, and some official sources of external finance

164 have dried up. Neither source is likely to recover until the overall stance of policies is modified.”

However, others such as economist Paul Krugman doubted the effectiveness of the more dominant policy action, the adoption of IMF policies. He argued that the IMF had not anticipated the AFC and had not analysed the situation properly, suggesting policy responses that instead had worsen localised effects of the crisis to countries who chose to adopt these suggestions (Krugman, 1998). On one hand, Kaplan and Rodrik (2001) argued that the Malaysian capital controls might have outperformed IMF policies. On the other hand the authors claimed that a direct comparison between Malaysian capital controls policy and IMF policies could be problematic as countries that had chosen IMF policies benefitted from large foreign capital injections, a feature absent in Malaysia. Thus, the nature of economic recovery would be completely different in those countries compared to Malaysia.

A more significant outcome of the crisis, however, was how it affected

FC development. Essentially, the financial crisis had dampened political and financial policy elites’ socioeconomic plans for Malaysian citizens, a plan which had been running smoothly in accordance to the country’s stable economic growth since the 1970s. Due to the crisis, many ordinary citizens faced incredible losses from their stock market investment; an outcome which inevitably affected the manner in which political and financial policy elites had to reconsider the complexities of normalising the activities of complex financial arenas among citizens. More importantly, this event demonstrated that FC development had been much more complex than

165 anticipated. It had been clear that providing citizens access to financial markets and arenas did not succeed in creating responsible, self-acting, neoliberal citizens if they were to simply lose their life savings in the market from unexpected tragedies such as a financial crisis.

Formal responses to this issue regarding citizens and the stock market demonstrated that the government finally assessed the risks of normalising complex financial market activities with citizens, as had been done in the program of FC development. KLSE and Securities Commission were directed by the government to conduct reviews on corporate governance policies of listed firms and to review the Second Board system, at least as to minimise the opportunity of speculation in the stock market (Sulong, 2014). After the

AFC, fundamental reforms were conducted in the Malaysian financial system, which greatly affected the way the stock market is to operate, and how citizens could continue managing their life savings using its products.

These changes are discussed in the next section in relation to FC development in the country.

5.5 Rebuilding FC Credibility Post-AFC (Post-2000s until 2009)

After the AFC, the government’s focus was to reform the Malaysian financial system in order to fix the weaknesses that they identified as contributing to the financial crisis. The Capital Market Strategic Committee was constructed,

166 which consisted of both elites with financial expertise (policymakers and private industry representatives) responsible for devising the Capital Market

Masterplan (CMP1), launched on 22 February 2001 by the Securities

Commission (Securities Commission of Malaysia (SCM), 2001a, 2001b).

CMP1 charted strategic reforms and future directions of the Malaysian capital market, including that of the stock market, with 152 recommendations that were to be achieved over a decade. Similarly, Bank

Negara launched its own plan, the Financial Sector Masterplan, aimed at reforming the wider financial sector (BNM, 2001). In combination, the two plans were used as guidelines to bring back pre-AFC economic and financial progress.

The years 2001-2008 had been crucial for the Malaysian economy and polity. With plans in place to reform the financial system and the Malaysian economy, in line with Vision 2020, Mahathir decided to retire after twenty- two years in administration in 2003. Mahathir was replaced by Abdullah

Badawi, popularly known as “Pak Lah” or Uncle Lah, an indication of the leader’s approachable personality.28 Nonetheless, the new government under the leadership of Abdullah Badawi had made it certain to citizens that they would continue Mahathir Administration’s efforts. This included a renewal and reorientation of the FC development plan, with the new objective of shifting focus from familiarising Malaysian citizens with direct rather than indirect stock market activities.

28 Abdullah Badawi’s premiership was short-lived mostly due to factions that grew in UMNO (Bell, 2008).

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The next sub-sections focus on these efforts, using especially the CMP1 due to its extensive focus on the stock market. The sub-sections first observe on the continuation of FC development initiatives from pre-AFC periods, more importantly, Bursa and Securities Commission's efforts to promote direct stock market investment to citizens. This is followed by a sub-section focusing on the reorientation of FC development to indirect ownership of investment products and the promotion of shariah-compliant investments before the chapter concludes.

5.5.1 Continuing Direct Investment Initiatives in the Stock

Market

Post-AFC, the KLSE had experienced fundamental reforms aligned with the overall government objective to elevate the stock market's status so that it is internationally-recognised and competitive. Along with these reforms, it had been identified in the CMP1 that the KLSE should fundamentally change some of its outdated systems which were closely linked to retail investors’ investment behaviour in the stock market (Sulong, 2014). As mentioned in

Sulong’s book, one of the concerns expressed by Nor Mohamed (Mahathir’s economic advisor) directly to Mahathir was the exuberance of retail investors’ speculation, something that he mentioned should be addressed immediately. Given the influence of Nor Mohamed’s recommendations to the former Premier, it was unsurprising thus that the reforms in the KSLE post-

AFC had reflected on these concerns.

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Firstly, the settlement period was reformed to T+3 working days29 in

December 2001 (KLSE, 2001, p. 14); ensuring that the Malaysian system adhered to international standards. The settlement period, which is the period taken between the time a trade is executed until the time it is settled

(the money is paid for its purchase), had previously been identified by Nor

Mohamed as the main issue for speculative investment among Malaysian retail investors (Sulong, 2014). Previous to the AFC, Nor Mohamed claimed that the Malaysian stock market had too long of a settlement period, allowing speculators who were mostly ordinary Malaysian citizens, to take advantage by making profits without actually having the capital for purchases (Sulong,

2014). Reforming the settlement period could not only ensure that the

Malaysian stock market adhered to international standards, thus making it a globally competitive market, but also to discipline Malaysian citizens into approaching stock market activities as a long-term investment, rather than a short-term speculative pursuit.

Secondly, multiple board lot of units for share purchase were also replaced with a singular and standardised board lots of 100 units in 2003

(KLSE, 2003, p. 21).30 Besides ensuring efficiency in monitoring share purchases, the reduction to 100 units for share purchases also resulted in affordability in stock market products, which had the increasing effect of re- attracting ordinary citizens into the stock market.

29 T+N is an international securities settlement formula, with T being the time and day a trade is transacted in the stock market and N being the number of days taken for the trade to be settled. Before the reforms in 2001, the Malaysian system still applied a longer settlement period compared to the international benchmark of T+3 (SCM, 2001; Sulong, 2014). 30 Previously, KLSE operated on a multiple board lot of 1,000 units, 200 units, and 100 units. This was deemed to be inefficient for the exchange and investors alike (Bursa Malaysia, 2004).

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Lastly, the KLSE was demutualised in 2004, with a change of name to

“Bursa Malaysia”.31 This had been justified by the government as important in re-branding the image of the stock market and to regain the confidence of investors (for the case of FC development, these had been ordinary citizens)

(Bursa Malaysia, 2004). With its demutualisation, Bursa was entrusted with full responsibility for the development of the stock market, with regulatory oversight by the Securities Commission. This responsibility provided Bursa with the flexibility to promote the market in a more aggressive and competitive manner. In Bursa’s 2004 Annual Report, their chairman mentioned the direction that the exchange would take after its demutualisation:

The first strategic objective of Bursa is to boost liquidity and velocity. For

the year 2004, Bursa recorded a 31.8% turnover velocity. This is low

relative to regional benchmarks and we aim to see it rise to pre-crisis levels

of about 60%. This we hope to achieve by encouraging trading activity

from both retail and institutional investors through aggressive promotion

of our market and listed companies […] (p. 11, emphasis added)

In 2005, Bursa outlined a three-pronged retail plan was outlined to attract retail investors back into the stock market (Bursa Malaysia, 2005).

The aim was to “i) improve availability and accessibility of information and research reports; ii) promote fundamental investing; and iii) strengthen the retail sales force” (Bursa Malaysia, 2005, p. 51). With the formalisation of retail investors strategy, Bursa had since developed multiple initiatives targeted at Malaysian citizens, including roadshows, investment classes, and

31 The demutualisation of KLSE was formally achieved on 5 January 2004 (Abdullah, 2004).

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6% 6% 6% 6%

7% 7%

10%

11%

14%

35%

40%

45%

36%

43%

53%

48%

51% 63%

51%

54% 66%

45%

42%

71%

77%

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54% 54%

50%

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45%

44% 44%

43% 43%

42%

40%

37%

34%

29% 23%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 YTD August Retail Institutions Others 2008

Figure 5: Breakdown of Trading (by Value) in Bursa from 1993 to August 2008. “Others” refers to trades conducted for accounts not belonging to individuals/institutions. Definitions of investors' type clarified in 2004, hence reducing the type of investor falling under the "others" category

171 online investment competitions with prizes reaching up to RM500,000

(approximately £100,000 at the time) were offered to its participants (Bursa

Malaysia, 2005-2007).

Despite Bursa’s multiple efforts, they had not been successful in increasing retail investors’ presence in the stock market. During his presentation at the Hong Kong’s 2008 Credit Lyonnaise Securities Asia

Investors’ Forum32, Bursa’s then-Chief Executive Officer (CEO), Yusli

Mohamed Yusoff, provided statistics which highlighted the drop in retail participation by value from 1993 to 2008 (Figure 5). From this graph, retail participation continued to drop, even after post-2000 retail initiatives were conducted, from 54.0% of retail participation by value in 2000 to 23.0% by

August 2008.

An independent report conducted by Oxford Business Group suggested the possible reasons behind why many Malaysian citizens were reluctant to participate in the stock market (Oxford Business Group, 2008).

The Group centred their assumption on the stock market’s lack of self- promotion, citing that Bursa had not been attracting retail investors back into the stock market, although, this could be a problematic assumption given the stock market's continuous retail investor initiatives.

Additionally, the report also claimed that the AFC could still be contributing to the Malaysian citizens’ reluctance to invest in the stock market, despite it being almost a decade since the crisis when the report was written (Oxford Business Group, 2008). Although, this finding was not

32 Credit Lyonnais Securities Asia is an equity broker and investment group founded in Hong Kong. It is well known in Asia for its annual investor forums (CLSA, 2015).

172 surprising given that studies have demonstrated loss of trust in financial markets after occurrences of crises (Dorn & Weber, 2013; Roth, 2009; Yeoh,

2010). Indeed, loss of trust could perfectly describe the sentiments of

Malaysian citizens' perception on not only the stock market but also the economy and the political system of the country; especially towards the end of PM Abdullah's term in 2008. This loss of trust could be explained by the growing political and economic issues in the country. From the stock market’s perspective, 2008 began with the KLCI reaching a record high of

1,516.22 points on 11 January 2008 (Bursa Malaysia, 2008). This was however followed by a steady decline throughout the year, influenced by both external and domestic factors.

According to Bursa, external factors included selling pressures in response to the GFC (Bursa Malaysia, 2008). Domestically, the twelfth

Malaysian General Election on 8 March 2008 was riddled with controversies, causing a heavy drop in voters’ confidence on the incumbent government, as well as elites that were being linked to them, including policy and business elites who were influential in the Malaysian financial system. The lacklustre win of only 51.4% of total votes by the incumbent government further weakened direct participation by citizens in the stock market (Bursa

Malaysia, 2008). The unexpected result of the election saw a drop of 123.11 points when the market reopened the following Monday (two days after the election). As the Eurozone and Japan entered a technical recession in

October 2008; the Malaysian stock market remained bearish throughout the year. Bursa noted that retail investors were among the most cautious participants in the market (Bursa Malaysia, 2008).

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Although the AFC and additional political and economic issues continue to riddle citizens’ direct participation in the stock market, FC development post-crisis was no longer focused solely on ensuring that citizens would participate in the stock market directly through Bursa. The

CMP1 had outlined a greater focus to attract citizens into the stock market through indirect channels, most importantly, via unit trust investments and shariah-compliant products. These efforts will be elaborated further in the next sub-section.

5.5.2 FC Development Through the Promotion of Indirect

Ownership and Shariah Investment Products

Before the AFC, many Malaysian citizens had been involved in the stock market directly, that is, by directly purchasing and selling securities through the KLSE platform (Sulong, 2014). As of 2001, indirect stock market investment (which this thesis identifies as purchasing and selling securities in the stock market through managed funds such as unit trusts), had accounted “for nearly 15% of total funds under management” (SCM, 2001a, p. 33). However, out of this amount, nearly all the funds were accounted for by PNB, who “manage[d] nearly 70% of all the Malaysian unit trust industry’s NAV,” (SCM, 2001a, p. 33).

Despite the many changes that have occurred in the country after the crisis, it appears that elites who have been involved in FC development are still keen on carrying out the process, although this time around, they have also reoriented the programme to indirect ownership via unit trust

174 investments and shariah-compliant financial products. This sub-section explains how both unit trust and shariah industries have been integral in the post-AFC movement of FC development. The sub-section also highlights how the AFC had not faltered FC elites’ vision to use the programme for meeting multiple objectives, as they justify their FC decisions with nation building dreams.

The sub-section focuses first on the unit trust industry’s role in

Malaysia’s FC development. As of December 2008, the Malaysian unit trust industry made up 20.3% of the Net Asset Value (NAV) to Bursa market capitalisation (SCM, 2008). Since the post-AFC reform in 2001, the

Malaysian unit trust industry’s NAV consistently enjoyed double digit growth from RM43 billion in 2001 (approximately £8 billion)33 to RM169 billion in

2007 (approximately £25 billion)34 (Federation of Investment Managers

Malaysia (FiMM), 2008, p. 7). This growth was only interrupted by the global financial crisis in 2008, which wiped 20.0% of NAV from the unit trust industry, although the industry remained strong at RM134 billion NAV

(approximately £22 billion).35

These statistics had been vastly different in 2001 when CMP1 was released. Then, the industry's market capitalisation was half what it had been in 2008, at 10.0% of NAV to the KLSE market capitalisation (CIMB, 2001;

SCM, 2001a). These statistics are important, as they not only demonstrate the growth of the unit trust industry; however, they also illustrate the

33 The rate used was RM1 = £0.1828, which is the historical average for the year 2001 (Source: www.investing.com). 34 The rate used was RM1 = £0.1454, which is the historical average for the year 2007 (Source: www.investing.com). 35 The rate used was RM1 = £0.1634, which is the historical average for the year 2008 (Source: www.investing.com).

175 reorientation of FC development which, post-AFC, is more focused on indirect ownership of stock market investments.

The CMP1 outlined intentions to expand the unit trust industry in line with the objective of attracting more citizens into various channels of stock market investment, whether directly or indirectly. This included encouraging competition of private fund management firms in Malaysian markets. Under

Strategic Initiative 2.2 in Chapter 3 of the CMP1 (which explains the strategy to “establish a vibrant and competitive investment management industry”

(SCM, 2001a, p. 72); it had been mentioned that the development of the unit trust industry was not only important for nation building but also to cultivate

Malaysian citizens who are financially self-acting, as per FC development:

Investors who wish to participate in the capital market, but who lack sufficient

resources or incentives to undertake the research and costs that accompany direct

investments in the market, commonly leave their excess funds in less productive

accounts […] Further development of the domestic investment management

industry is therefore a central element of any strategy to mobilise domestic

savings more effectively. […] Essentially, this will require the industry to be more

competitive and vibrant, whereby current and potential customers are able to

access a diverse range of products and services at a reasonable cost.

A key implication of this is the need to increase the number of industry players

with greater access to a larger pool of funds for management. This is necessary for

reducing the current concentration of funds under management and creating the

critical mass within the investment management industry needed to accelerate its

further development. At present, the bulk of Malaysian households’ funds are

concentrated within the banking system and the EPF. While centralised EPF

management of retirement savings has served Malaysian workers well over the

years, as the nation moves towards a developed economy, the need for more

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diversified and effective means by which to achieve better returns on these funds

will grow in tandem with contributors’ growing income and investment needs.”

(SCM, 2001a, pp. 72-73; emphasis added)

In response to the intention to develop the unit trust industry, a new form of licensed intermediary (actors who play a formal role at intermediating investors with the stock market) for the industry was introduced in February 2000 (SCM, 2001b). As according to the Capital

Markets and Services Act 2007, any persons or institutions (stockbroking houses or investment management firms) who want to carry out stock market activities is required to be licensed by the SCM, who is the sole licensing authority that approves not only stock market intermediaries

(institutional or individual), but also intermediaries in the wider capital market (SCM, 2017).

Previous to the year 2000, the more commonly known licensed intermediaries are remisiers (or brokers). The role of remisiers not only include marketing and promotion activities, but they are also licensed to carry out regulated dealing activities, that is to carry out purchasing and selling transactions for their clients. As such, they are typically employed by investment banks or stockbroking houses, and often would be expected to have a related educational or experience background with finance and investment. On the other hand, the new form of licensed intermediary in the unit trust industry was at first termed as Institutional Unit Trust Agents

(IUTAs) They were given the main responsibility of "market[ing] unit trust products of third parties,” (SCM, 2001a, p. 14). Although, in October 2007, they had since been known as “unit trust consultants” to reflect their new

177 advisory role, as according to FiMM, a self-regulatory body recognised by the

Securities Commission who is accountable for the governance of unit trust consultants (FiMM, 2007).

Unit trust consultants have been growing in numbers since their introduction, demonstrated by the almost twofold growth of unit trust consultants from December 2001 until December 2008,36 from 26,963 to

63,205 people (FiMM, 2001-2008). The reason why unit trust consultants have gained popularity could be due to the little requirement needed by any persons who are interested to become a licensed unit trust consultant. There is no restriction in terms of related higher education subject, thus making it possible for any Malaysian citizen above the age of 21, with a minimum requirement of obtaining three credits in the Malaysian Certificate of

Education (equivalent to the UK’s General Certificate of Secondary

Education), to become a unit trust consultant (FiMM, 2016). Rather than brokerage fees, unit trust consultants earn commissions which are regulated by the Securities Commission and differ based on the fund management firm they are working for, although the rate is substantially higher than that of remisiers’ (less than 1.0% for all types of investment firms in Malaysia)

(Yeong & Kang, 2012), at an average of 2.75% (FiMM, 2015).

Their popularity could also be linked to the promotion of the unit trust industry by the government, with favourable policies such as deregulation and lax taxation on income from the unit trust industry (SCM, 2001a), that encourage fund management firms to aggressively promote the usage of unit

36 The year 2008 has been taken as a benchmark as the year 2009 has been identified as a new beginning in Malaysia’s FC development, efforts of which have been led by the Najib Administration, which will be discussed in Chapter 6.

178 trust consultants to attract citizens into the stock market. As such, the focus on the unit trust industry post-AFC had been evident in terms of policy construction and implementation, as presented in this section. The choice to focus on the industry could be due to the incredible growth of the industry in the 1990s, demonstrated in Figure 6. From the years 1992 to 2000, the unit trust industry total NAV had grown 175.4% (as opposed to Bursa market capitalisation growth at 80.6%). With post-AFC efforts, the industry further grew by 304.9% from 2001 to 2009 (as opposed to Bursa market capitalisation growth at 114.9%). The industry’s total NAV trends were also stable, despite the stock market experiencing fluctuations and at times, severe volatility; which is most clear when crises years are observed, such as from 1996 to 1998 (the AFC) and from 2006 to 2009 (the GFC).

The stability in the unit trust industry might have also been the motivation behind why financial policy elites placed so much focus on the unit trust industry after the crisis. Unit trust investment could be seen as a “safer” investment vehicle for citizens in comparison to direct stock market purchasing and selling. As a result, this focus could also have encouraged greater participation by citizens in stock market activities. This could be observed through statistics on the number of unit trust accounts (for purchases and sales of unit trusts by individuals) in the industry (Table 1).

From December 200437 to December 2008, the number of accounts grew by nearly 3 million from 10.4 million to 13.0 million. While the number of accounts does not necessarily represent the number of citizens investing in

37 The year 2004 was chosen for observation given that the most detailed publicly-available data for the unit trust industry begins from this year.

179 unit trusts (as an individual can have more than one accounts), it does however indicate that there is a growing interest by citizens upon the expansion of access to the stock market using indirect channels.

Table 1: Statistics on the Malaysian unit trust industry – NAV and Number of Accounts (2004-2008)

NAV (RM Billion) Number of Accounts Year1 Total Conventional Islamic Total Conventional Islamic

2004 87.39 80.62 9.76 10,425,317 9,998,317 427,000

2005 98.49 90.00 8.49 10,860,675 10,221,136 639,539

2006 121.41 112.31 9.10 11,163,833 10,398,395 765,438

2007 168.02 151.24 16.79 12,274,573 11,024,209 1,250,364

2008 130.44 114.32 16.12 13,046,973 11,411,337 1,635,636

1The statistics are derived from data taken at December of every year. Source: FiMM website.

Additionally, the shift of focus by elites to promote stock market investment to citizens—from direct investment to indirect investment—could also be observed through the development of shariah-compliant investment in the unit trust industry. In the CMP1, the document highlighted the growing importance of Islamic finance as well as shariah-compliant investment products, those that adhere to the rules and teaching of Islam.

Under Recommendation 66, which focuses on the promotion of a wider range of Islamic collective investment schemes—the document stated:

Although the Islamic collective investment industry has developed

significantly over the past few years, it still possesses significant scope for

expansion given a growing investor population with high rates of savings, a

wide and growing range of eligible investment products, and the sizeable

pool of global Islamic funds. […]

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1200.00 25%

1000.00 Percentage of NAV/Bursa MarketCapitalisation 20%

800.00

15%

600.00

RM Billion 10% 400.00

5% 200.00

0.00 0%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Market Cap NAV (billion RM) %of NAV/Bursa Malaysia Market Capitalisation

Figure 6: Total Unit Trust Industry NAV to Bursa Malaysia Market Capitalisation (1992-2008). Source: Data from 1992 until 2014 was taken from FiMM Annual Reports from the years 2002 until 2008.

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However, the present size and market share of Islamic collective

investment schemes are still small in comparison with the broader

investment management industry within the conventional capital market.

While the number of Islamic unit trust funds within the Malaysian capital

market has doubled from seven in 1995 to 14 in September 2000, the 14

funds still only represent RM1.7 billion or 3.6% of the total net asset value

of the unit trust industry.

Accordingly, the SC will work closely with the investment management

industry to facilitate the introduction and promotion of a wider range of

Islamic collective investment schemes, including Islamic bond and

derivative funds. The introduction of these funds will be facilitated to cater

to investors who wish to invest in Islamic investment products, and to

achieve a more effective mobilisation of their funds. Such initiatives will

also create opportunities to tap external Islamic investment funds.” (SCM,

2001a, p. 175-176, emphasis added).

The initiative to attract ordinary citizens into investing in shariah- compliant products is reflective of the Malaysian population, as more than

60.0% of Malaysian citizens practice Islam, with the majority of this population coming from the Malay group (Department of Statistics Malaysia

(DoSM), 2010). As such, incorporating religious values into FC was seen as having the potential to attract more Malaysians, especially Malays who had been economically-disadvantaged in the past, to begin thinking about their life finances in a responsible and self-acting way.

The result of shariah initiatives along FC lines had been substantial in attracting ordinary citizens into investing in the stock market. In FiMM’s

2004 Annual Report, the institution observed the growth of Islamic finance

182 in the unit trust industry of more than 10.0% since the launching of the

CMP1:

Reflective of the growing appeal of Islamic unit trusts to investors who are inclined

towards longer term investments that conform to Syariah38 principles, the NAV of

Islamic funds rose to RM6.0 billion, comprising 15.8% of total industry assets.

(FiMM, 2004, p. 15)

Observing the statistics of the unit trust industry divided by conventional and Islamic finance is also illuminating in demonstrating the influence of Islamic finance to attracting citizens into the stock market. As presented in Table 1, the growth of the number of Islamic accounts (283.1% growth) was 20 times more than the growth of the number of conventional accounts (14.1% growth) in the unit trust industry from 2004 to 2008.

However, the focus on shariah investment is made complicated when its objectives are compared to the wider objective of the Malaysian government. In 2002, the special economic advisor to Mahathir, Nor

Mohamed Yakcop, delivered a speech to introduce the Malaysian Strategy to approach Islamic Financial Market Development. In this speech, the rationale behind the development of Islamic Finance is more closely linked to nation building aspirations, for example, when he mentioned:

The implementation of an Islamic financial system is not the end goal. It is,

in fact, a means and tool of competitive advantage […] including economic

success. Earlier in this paper, I mentioned how the conventional system,

within our overall development model, had served us well, and how the

Malaysian economy has grown by leaps and bounds over the years. We are,

38 “Syariah” is the Malaysian spelling for “shariah”.

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however, today facing several challenges. As an ambitious nation, we are

not satisfied with the current level of achievement. Our Vision 2020

necessitates us to grow our GDP by 8 times between 1990 and 2020. With

these growth targets, the productivity of capital becomes especially

important. And this is where I believe one of the many strengths of the

Islamic financial system lies. (Yakcop, 2002, emphasis added)

With this speech, there appeared to be a multiplicity in the objectives of expanding shariah-compliant products catered towards citizens. This expansion was approached with the objective to not only serve the citizens by providing them with a plethora of investment products that could best attract them to the stock market; it also motivated their involvement to serve nation building goals by deepening the Malaysian capital market and therefore, contributing to the nation's economy.

These complex issues of FC would be carried out through the next period under a new government, led by Najib Abdul Razak (also referred to as “Najib” in this thesis) starting 2009. Najib would begin a new programme of economic development while at the same time pursuing a modern programme of FC development. These processes, as well as the issues that have arisen in its course, will be presented and discussed in the next chapter.

5.6 Conclusion

The discussions in this chapter have helped in resolving RQ1a, focusing on historical events, actors, and policy strategies that have been important in shaping FC development as we know today. The chapter demonstrates that

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Malaysia’s experience with FC development is linked to its colonial history, which has left deeply ingrained inter-ethnic issues in the country. The first instance of FC development in the country has been uniquely different from popular FC discussions, which is more about the equal inclusion of citizens in financial arenas, rather than one that is focused on certain ethnic groups.

Having this unequal foundation has already complicated the notion of FC as being equally inclusive.

Furthermore, the twenty-two years leadership of Mahathir has brought a strong neopatrimonial system to the Malaysian polity, which means FC development in Malaysia has, in the past, been influenced by a single authoritative figure, Mahathir. Mahathir brought significant changes to the Malaysian economy by introducing neoliberal ideologies, although, he has also contradicted his own ideas, as evidenced by the response in the AFC.

These events have shown the complexities of FC development in Malaysia, given that formal elites’ initiatives in the process could be highly and directly affected by political figures such as the PM. Although, having this direct authority also means that FC development was immediately revisited and reoriented post-crisis, with the focus on indirect ownership of investments and the expansion of Shariah investment products. The result, at least as far as 2008, had been successful, indicated by statistics of growth of the unit trust industry and within it, the growth of Islamic finance and accounts related to Islamic finance.

However, efforts to attract citizens into the stock market directly had not been as successful. This process was further impeded by growing political and economic issues, resulting in a drop of direct retail participation in

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Bursa. Furthermore, to this end, there is a concern however on how elites will continue to approach FC development, especially if objectives for the programme are used in simultaneously with nation building aspirations.

Resolving RQ1a in this Chapter had been integral, as it sets the foundation on elements that make up FC development in a geographically- contextual manner. This foundation, as argued in this thesis, is influential in shaping contemporary FC development and the issues that it faces, as will be explained in the next chapter.

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Chapter 6

Chapter 6: The Modern Programme of Financial Citizenship Development (2009 onwards)

6.1 Introduction

This chapter is the first empirical chapter for this thesis. Unlike Chapter 5, which observed FC development from a historical perspective, this chapter brings this programme into contemporary time by discussing the types of efforts that have been used to develop FC in Malaysia from 2009 onwards.

Despite the chapter strictly focusing on recent years, it also reflects on the types of challenges faced in the past in FC development, which is then argued to have influenced the way the programme is shaped and understood in recent years and today.

To provide these discussions, the chapter addresses the rest of the sub-questions of RQ1:

 RQ1b. What are the current events and policies that

shape the modern development of Malaysian FC?

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 RQ1c: Have FC formal initiatives met elites’

expectations?

 RQ1d: What are the obstacles faced by political and

financial policy elites in the development of FC?

In resolving these RQs, the chapter seeks to demonstrate the idea of FC as an emerging idea which can be pieced together through various policy initiatives.

The data used for the analyses and discussions in this chapter was gathered mostly from primary sources, collected using thirteen semi- structured interviews with elites who are identified as having expertise in FC development, including former finance ministers, financial policymakers, and high-ranking financial officials (Appendix 4). Complementing the interview findings are secondary data collected from publicly-available secondary sources, as outlined in Chapter 4.

It should be mentioned that the interviews conducted for the analysis of this chapter were carried out during the period of August 2015 and April

2016. Thus, the questions asked and therefore the answers provided, were more specific to the initiatives that were being carried out during the period.

When necessary, additional secondary data has been collected to provide the most up-to-date information which further complements interview findings.

The chapter is organised as follows. Section 6.2 is used to answer

RQ1b, outlining four steps used in the modern programme of FC which surrounds the notion of responsibilising citizens over their financial futures.

These steps are: 1) reducing broad-based, citizen-focused subsidies, 2) creating financially-responsible citizens, 3) reforming the retirement system

188 and lastly, 4) cultivating inclusion through education. This is then followed by Section 6.3 which analyses elites’ interview answers to build their perspective on the results and issues faced in the modern programme of FC, thereby simultaneously answering RQ1c and RQ1d. This section also uses elites’ interview findings to problematise the inclusive notion of FC development. The chapter then concludes.

6.2 Steps in Shifting Responsibility from Elites to

Citizens

The modern programme of Malaysia’s FC development had begun with the election of Najib Abdul Razak as PM in 2009. Under the Najib

Administration, FC development faced a change from its historical past

(1970s-early 2000s) when the government had taken a more direct control over citizens’ financial responsibility. Although citizens were already encouraged to begin thinking about their finances then, much of it had to do with wealth accumulation assisted by government investment schemes.

Instead, from 2009 onwards, the rhetoric of FC in Malaysia developed along much more explicit neoliberal lines, with the shift of financial responsibility away from the elites to citizens.

These changes were assisted by policy directions as outlined in Najib’s

New Economic Model, a ten-year economic blueprint. The New Economic

Model was, in fact, draw up by an independent think tank consisting of

189 elites—economists, independent researchers, academics, and financial experts—who were appointed by Najib to formulate a plan with the overarching goal of nation building (Performance Management & Delivery

Unit (PEMANDU), 2013). It is perhaps worth noting that the nation building aim was a repetition of Mahathir’s Vision 2020 plans, which is to see

Malaysia being transformed into a high-income, developed nation by the year

2020.

Despite the repetition of the (then) twenty-year-old goal, the New

Economic Model’s strategic plans had influenced FC development in a much more explicit manner in comparison to Vision 2020. This was observed through four main steps, which composed the four sub-sections of this section. Firstly, the New Economic Model suggested changes in improvements to public budget, which explicitly points at the inefficient and misallocation of public subsidies. Secondly, the New Economic Model argued that there had been an inefficient retirement management system under the

EPF and suggested for better ways to address the retirement issues of

Malaysian citizens. Thirdly, the New Economic Model mentioned that its objectives were to be carried out using the Economic Transformation

Programme, initiatives that aimed twelve national key economic sectors which would account significant contributions to Malaysia’s economy (Prime

Minister's Office of Malaysia, 2011).39 Under the Programme, the financial services industry had been identified as a key economic sector, with

39 Under each of these sectors are different projects carried out and monitored by the Performance Management & Delivery Unit (PEMANDU), an agency under the Prime Minister's Department headed by the former PM Najib himself. The progress of the Programme was and is published on an official website (etp.pemandu.gov.my), viewable to the public with details on each of the projects implemented, coupled with a traffic light system on their progress.

190 suggestions to deepen its markets by introducing a private pensions industry, thus reforming the Malaysian retirement system. This will be covered in the third sub-section. The fourth step covers the inclusive notion of FC development, which is aided by initiatives to spread financial skills among citizens using FLE.

6.2.1 Reducing Broad-Based, Citizen-Focused Subsidies

One of the main recommendations in the New Economic Model is to encourage the Malaysian government in reducing their control over economic and everyday life matters by resorting to market means. This explicitly neoliberal recommendation discussed the importance of creating a competitive domestic economy through the “elimination of subsidies, price controls and a myriad of incentives which have lost their original objectives,”

(National Economic Advisory Council (NEAC), 2010, p. 21). Under the discussions on subsidies, the New Economic Model claimed that subsidy provisions in public budget are equivalent to market distortions as prices of goods and services in Malaysia did not reflect market supply and demand, and furthermore, it claimed that subsidies had been inefficiently misallocated:

The large government outlay on subsidies – mostly funded by petroleum

proceeds – is not sustainable. The subsidies were meant to support the

vulnerable groups but it has benefited a wider group, including the well off.

It is time for a more targeted approach rather than broad-based subsidies.

(NEAC, 2010, p. 7)

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This recommendation demonstrates a difference in the modern programme of FC development, compared to its processes in the past. As mentioned in the introduction of this chapter, citizens had already been encouraged to think about their finances then, although, wealth accumulation through government investment schemes had been the main policy goal. From 2009 onwards, FC development had been more about the shift of financial responsibility away from the elites to citizens, with the first step being the reduction of broad-based, citizen-focused subsidies.

While Malaysia has not really been known as an exemplary welfare country, the Malaysian government had in fact spent a considerable amount of public expenditure on subsidies, an equivalent to almost 27.0% of the country’s GDP in 2013 ("Asia’s emerging welfare states spread themselves thinly," 2013). The subsidy system in Malaysia, at the time, had been maintained since the implementation of the New Economic Policy in 1970, which justified the system for its poverty reduction strategy ("Subsidy rationalisation a bold step for the future - Najib," 2010; IMF, 2010). This meant that prices on everyday items such as fuels, sugar, gas for cooking, rice, among other things, had been regulated by allocating public expenditure to ensure that these items have not been subjected to external factors such as inflation or market supply and demand. Although, this also meant that the subsidy system had been incredibly inefficient some forty years after the New

Economic Policy, with only 0.6% to 3.8% of Malaysians falling under the poverty line between 2009 to 201440 (DoSM, 2014b, 2014a).

40 The highest poverty statistics in this period was 2009, at 3.8%. The rate began falling down to 0.6% in 2014 due to an increase in average household monthly income and low inflation rate (DoSM, 2014a).

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It should be noted that there are many Malaysians who would correctly benefit from the subsidy system. Nonetheless, due to the egalitarian and broad-based way in which subsidies were provided to citizens, it had been found that only one-third of subsidies reached the needy citizens while the rest had been misallocated to high-and-middle income groups ("Subsidy rationalisation," 2010; IMF, 2010). Echoing this statement was Idris Jala, a minister at the Prime Minister’s Office; “[The current system reaches] everyone regardless of income level, for example, subsidised primary, secondary and tertiary education, medical services, petrol, sugar and cooking oil, as well as welfare aid and sustenance allowance.” (""We could go bankrupt by 2019"", 2010, words in brackets added for clarity)

The sustenance of the same subsidy system since the birth of the New

Economic Policy could be a strategy implemented by political elites to retain the hegemony of the Malay-based political party, UMNO (Ngui, 2014). This had been important as UMNO made up the largest portion of the political coalition, Barisan Nasional, who had been ruling the country since its independence. As such, retaining the vote of confidence using a broad-based subsidy system from the Malay group, who composed 50.0% of the

Malaysian population, was observed as politically-inspired (Ngui, 2014.).

However, this also meant that the government was becoming highly dependent on petroleum revenues from the oil and gas industry to keep sustaining subsidies for petroleum. To put in perspective, the highest public expenditure dedicated to subsidies was recorded in 2008 at approximately

US$6 billion or 22.9% of the government’s operating expenditure and 2.5% of Malaysia’s GDP (IMF, 2009; Ministry of Finance Malaysia, 2011, p. 104).

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Subsidies for petroleum accounted for 40.0% of these figures. The high record of subsidies allocation had also been due to the sharp increase in oil prices in 2008, which meant that public expenditure (as demonstrated in this paragraph) and income was highly dependent on just one industry.

A report by the IMF in 2015 could further attest to this statement. The report, which outlined Malaysia’s economic issues, stated that nearly half of the Malaysian government’s revenues are earned through taxes and dividends collected from oil and gas companies, with the majority coming from Petronas, a government-owned national oil company. The report can be used to explain the high dependence on the oil and gas industry, especially

Petronas:

The price of oil is very important for the government as oil related revenue

is about a third of all revenue. Income tax on oil and gas companies

constitutes more than half of such revenue, and the rest comes from the

dividends paid by Petronas, the national oil company owned by the state.

Petronas is very large, and with revenue at about 30 percent of GDP, profits

reached about 9 percent of GDP in 2013. Dividends are negotiated between

the government and the company, providing stability to fiscal accounts. The

payout has been between 50 and 75 percent of after tax dividend. The

company had assets in excess of 50 percent of GDP and cash equivalent to

14% of GDP in 2013. With capital expenditure at 6 percent of GDP it

accounts for a significant amount of investment, domestically and abroad.

(IMF, 2015, p. 28)

The report further explains that the dependency on the oil and gas industry and Petronas has much to do with subsidy burdens. Relying on only one source of income from had been argued to be too risky in the long-term

194 sustenance of public budget, especially in the face of oil price shocks from

2008 onwards.

As of now, it is clear that Malaysia had been riddled with issues on subsidies, which had started placing strains on the government’s expenditure and income. Following the recommendations made in the New Economic

Model, the Najib Administration began phasing out subsidy cuts, beginning with cuts in subsidies for fuel, sugar, and gas for cooking; taking effect mid-

July in 2010 (Malaysia Kini, 2010a). As according to the New Economic

Model, cutting broad-based subsidies would not only correct public financial burdens but also to follow a more liberal path that responsibilised citizens for their financial futures. This brings us to the second step in the modern programme of FC development, the move to create financially-responsible citizens.

6.2.2 Creating Financially-Responsible Citizens

When discussing the motivations behind the modern programme of FC development, many of the elite interviewees elicited discussions on a pressing need for Malaysian citizens to become more responsible about their finances. The interviewees had been honest about the pressure on the public budget in maintaining subsidies or managing the citizens’ retirement funds.

They cited influencing factors such as the changing global and domestic economic trends, including rising costs of living, Malaysia’s ageing population, the expansion of the middle class, and global and domestic economic instability following shocks in oil prices from 2014 onwards

(former finance minister, #13, 5 April 2016; official at EPF, #6, 14 December

195

2015, official at Malaysian Ministry of Finance, #8, 23 December 2015; official at Bank Negara, #9, 23 March 2016; CEO of Wealth Management

Firm C, #12, 5 April 2016).

The same interviewees claimed that the uncertainties that had come with these events meant that FC development had much to do with preparing citizens so that they do not have to solely rely on the government for their financial welfare. For example, an official at the EPF mentioned that the efforts in expanding access to stock market investment and financial skills, are not so much about “releasing the government’s responsibility [on the citizens,” but about “recognising that it is not something [the government] can do on their own” (official at EPF, #6, 14 December 2015). Even so, instead of focusing on the many factors that could be affecting citizens’ ability to be financially responsible (for example, citizens’ income levels); elites instead tend to blame citizens for their inability to save for their futures. This was regarded as a “social issue,” a problem that had to be fixed by raising awareness that Malaysian citizens were not doing enough to financially prepare for their future:

Another issue about Malaysia is retirement. It's going to be a

big issue in the future because as costs go up, how can people

retire with enough savings because, at the same time, your

life expectancy is getting longer. (Official at Regulator M, #2,

5 August 2015)

[…] 80% of our members still don’t meet the basics of the

requirement when they retire [which] means that even then

they don’t have enough money. And for the 20% that do

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apparently most of them blow it after two years […] (Official

at EPF, #6, 14 December 2015, words in brackets added for

clarity, original emphasis)

Following these interview excerpts, nearly all interviewees agreed that measures should be undertaken to ensure that citizens are “equipped” with the right skills and access to financial markets that would prepare them to become financially responsible. These measures were seen by elites as a way to “provide[s] the ability for people to be more responsible in terms of how they actually manage themselves […] to have the necessary skills and abilities for them to participate in a growing economy,” (official at Bank Negara, #9,

23 March 2016). Similar statements had been made and targeted to the mass public, for example, by the EPF’s deputy CEO, Mohammad Naim Daruwish:

“Ninety percent of rural households have zero savings, while in urban households; 86% do not have savings. […] Malaysians need to be empowered and take charge of their own financial decisions according to their life stages,”

(The Star, 2016).41

In addition to these interview excerpts, an analysis of the New

Economic Model shows that the private sector—including the unit trust industry in the finance sector - was intended to become the future economic growth driver of the Malaysian economy. As part of their economic strategy, the government focused on creating an “investment culture” among citizens, although it was clear even through the elite interviews that the focus for FC development had been on the unit trust industry. As mentioned in FiMM’s

2009 Annual Report, the drop in the Malaysian unit trust industry’s NAV

41 Inconsistencies in writing were due to the quote being taken verbatim from the article.

197 during the GFC had been much less severe than the decline in the Malaysian commodity and Bursa Malaysia’s indices. Within the unit trust industry itself, shariah investments’ NAV only fell by 4.0% from 2007 to 2008 compared to the decline in conventional investments’ NAV at 24.0% (Table 2). In the year that follows, the NAV for both conventional and shariah investments in the unit trust industry rebounded and grew by 48.0% and 37.0% respectively. NAV (RM Billion) Number of Accounts Year1 Total Conventional Islamic Total Conventional Islamic

2007 168.02 151.24 16.79 12,274,573 11,024,209 1,250,364

2008 130.44 114.32 16.12 13,046,973 11,411,337 1,635,636

2009 191.71 169.63 22.08 14,104,713 12,327,880 1,776,833

2010 226.81 202.77 24.04 14,625,057 12,820,679 1,804,378

2011 249.46 221.60 27.86 15,433,356 13,455,437 1,977,919

2012 294.85 259.49 35.36 16,109,555 13,997,415 2,112,140

2013 335.51 292.69 42.82 16,776,401 14,527,200 2,249,201

2014 343.02 296.36 46.66 17,415,418 15,025,187 2,390,231

2015 346.58 294.45 52.12 17,990,789 15,424,224 2,566,565

2016 356.47 299.70 56.77 18,549,134 15,726,808 2,822,326

2017 426.98 349.20 77.78 19,184,132 16,090,276 3,093,856

2018 426.175 342.722 83.45 20,043,459 16,748,384 3,295,075

Table 2: Statistics on the Malaysian unit trust industry – NAV and Number of Accounts (2007-2018)

1The statistics are derived from data taken at December of every year. Source: FiMM website.

It was clear thus that the government’s encouragement of citizen participation in unit trust investments not only continued to support shariah investments but also provided an economic support to this important industry. This could be seen by the stability of the unit trust industry’s NAV

198 as a percentage of Bursa Malaysia’s market capitalisation, which remained at an average of 20.0% from 2009 to 2017 (FiMM Annual Report, 2009-2017).

Elite interviews have also shown that the growth of the unit trust industry has largely been linked to the unit trust consultant system, which has been seen as integral in creating awareness and promoting an inviting environment for investments among citizens. The significance of the unit trust consultant system in the government’s plan to create financially- responsible citizens can be seen in the Financial Sector Blueprint (2011-

2020), what Najib referred to as the government’s 10-year plan “to drive

Malaysia to become a fully developed nation” (BNM, 2011, p. 4).

The Blueprint made several recommendations for creating a vibrant pension industry in Malaysia, in which Malaysian citizens are envisioned to become more autonomous in their preparation for retirement using investment activities. Among these recommendations is to ensure that the unit trust consultant system continues to be developed in a rigorous way, by ensuring that the stature of the consultants could be enhanced in its professionalism through stricter licensing requirements. These changes were enforced in 2012, reducing the number of unit trust consultants by nearly

20.0% from around 60,000 consultants in 2011 to around 50,000 consultants in 2012. Despite these changes, unit trust consultants have continued to grow and has since restored its 2011 number as of 2019.

Furthermore, the success of the unit trust consultant system can be seen anecdotally from the growth of total number of unit trust accounts from 2007 to 2018 by 63.3% (Table 2). Within these numbers are the growth of conventional accounts by 51.9% and more remarkably is the growth of

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Islamic accounts at 163.5%, thus demonstrating the attraction of unit trust investments and shariah investments as part of FC development.

The discussion so far in this chapter illustrates that in the modern programme of FC development, access to financial skills and markets are seen as important for citizens’ ability to responsibly and autonomously save for their retirement; as opposed for wealth accumulation through government investment agencies in the past. Besides interview excerpts, the

New Economic Model too mentioned that the EPF, the main national retirement management agency, was insufficient in ensuring that Malaysian citizens’ retirement needs could be met in the future. This brings us to the third step in the modern programme of FC development, which is reforming the retirement system, as discussed in the next sub-section.

6.2.3 Reforming the Retirement System

In 2011, the EPF reported that some 86.5% of its 6.3 million contributors had barely RM100,000 (approximately £20,389)42 in their accounts (EPF, 2011, p. 150). The institution also reported that retirees often spent their pension

(amounting to an average of RM150,000 or approximately £30,583)3 within the first three to five years of their retirement (Shahriman, 2013). Although such statistics can only be found in the annual report of the institution after a close investigation, in reality, many Malaysians were made aware of such figures through headlines in the newspapers. A quick Google Trends search demonstrated that after 2009, there had been a growth of the term “pension”

42 This figure was calculated using the 2011 GBP to MYR average at 4.9047 (Source: www.oxf.com)

200 in search engines, which doubled in popularity from 2009 to 2018.43 The majority of the sources mentioning this term came from local newspapers, government ministries, and the EPF.44

This finding had not been surprising; as mentioned in the previous section, the New Economic Model had already highlighted issues on the retirement system in the country. The New Economic Model also recommended for the Najib Administration to pay attention to these issues, claiming that Malaysians needed protection from the potential of financially- unsecure retirements. It is therefore intriguing to see the intention for reforming the financial system, as mentioned in the Economic

Transformation Programme as aligning to economic and nation building goals, as well as to solve the social issues highlighted in the New Economic

Model.

This could be observed by looking into the Economic Transformation

Programme itself; accelerating the growth of the private pension industry had been one of the main action plans listed for the financial services industry (PEMANDU, 2010). The stated rationale behind this plan had been,

“[…] to align pension systems with demographic and socioeconomic changes and reduce fiscal pressures [which] is driving pension reforms across the world,” (PEMANDU, 2010, p. 226). This quote is interesting as the sentence that follows it mentions that many countries in the world were adopting the

World Bank pension system multi-pillar framework, celebrated for its

43 The Google Trends search showed that “pension” generated 53 interest over time points in 2009 and 100 in 2018. According to Google, “interest over time” represents search interest relative to the highest point on the chart for the given region and time. A value of 100 is the peak popularity for the team. A value of 50 means that the term is half as popular. 44 Interestingly, the main topic related to the term “pension” had also been about happiness.

201 success in ensuring economic growth and resolving social issues in retirement. Furthermore, adopting such frameworks was seen as influential in driving Malaysia into its advanced economy status by providing the country an “incremental GNI of RM2.1 billion (approximately US$515 million) in the financial services sector and 2,200 jobs […] by 2020,”

(PEMANDU, 2010, p. 228).

With these suggestions, reforms in the pension system occurred almost immediately, beginning with the extension of the national mandatory retirement age from 58 to 60 years old (Malaysia Kini, 2010b). The justification given by elite interviewees about this move had been transparent. They mentioned that the goal to transform the country into a developed nation and an advanced economy could be assisted by having more economically active people (official at Bank Negara, #9, 23 March 2016; official at Malaysian Ministry of Finance, #8, 23 December 2015; official at

EPF, #6, 14 December 2015). This is especially important in Malaysia’s case, as at the time, its mandatory retirement age of 58 years old had been one of the lowest retirement ages in the world.

Besides extending the national mandatory retirement age, a private pension industry was also added to the retirement system, as according to the

World Bank framework (PMO, 2011). In the past, actively employed

Malaysian citizens were subjected to mandatory retirement savings scheme.

Pensions of employees working in public and private sectors are managed by

Kumpulan Wang Persaraan (Sovereign Wealth Fund Institute) and the EPF respectively. With the introduction of the private pension industry, Malaysian citizens had been encouraged to voluntarily contribute to a private pension

202 scheme, not simply for their personal financial futures, but also for the achievement of the country's nation building strategy:

Vision 2020 is not merely about reaching a target GDP growth or boosting

the per capita income growth of Malaysia, it is about improving the quality

of life for the rakyat (tr: citizens). A high-income nation must have a sound

and sustainable social framework to ensure adequate retirement savings.

This involves both public and private sector participation to ensure the

nation is prepared for the challenges of an ageing population.

(PM Najib Abdul Razak at the launching of the PRS as quoted in Carvalho &

Rahim, 2012, translated word added in brackets)

The enforcement of the private retirement scheme in 2014 came just two years after the official extension of the retirement age in 2012 (Abdul

Razak, 2011; Ministry of Human Resources, 2013). Observing the official statement made by the Private Pension Administrator (the central administrator for Malaysia’s private retirement scheme) on the introduction of private retirement scheme had been interesting in understanding

Malaysia’s FC development:

The Private Retirement Schemes or PRS was initiated under the

government Economic Transformation Programme (ETP), to address the

need for Malaysians to save more for their retirement, as the nation strives

towards becoming a high income nation. The need for an additional

voluntary retirement pillar to complement the Employees’ Provident Fund

and other pension schemes has been recognized as a pressing social security

issue, in view of the nation marching towards becoming an aging society by

2020. It has been projected that by then, over 10% of the nation's

population or 3.0 million plus persons will be above 60 years. The key

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concern is whether they will have adequate retirement income to provide

and sustain them for their retirement years. If not, the nation will then have

to address the socio economic ramifications of an aging society that is not

prepared for their retirement. (Private Pension Administrator, 2017,

emphasis added)

Again, the quote above demonstrated that regardless of the time that had passed between the historical development of FC and its modern programme, the one element that could not be escaped is the multiplicity in

FC objectives: to create financially-responsible citizens and for nation building. Interview findings further attest to this statement, with elites directly responsible in initiatives related to FC providing answers which justify FC initiatives from an idealistic view. In this view, citizens should be financially-independent, autonomous, and self-acting:

[B]y 2020 once we (Malaysia) get the GNI numbers, we will

be classified as a developed nation. So we also don’t want to

be caught in the situation as a nation, a developed nation

(but) when it comes to the way you think, or even at the

investors’ level you still act as if you know; so we just want to

make sure financially every Malaysian is more savvy. They

know what they are doing, they know what their options are,

they know what they think they should do, you know, when it

comes to investment. I guess that’s the overall objective [...]

(Official at Market M, #3, 28 August 2015, original

emphasis)

But also, these citizens should not only act in a financially-frugal manner; it appears that they are only viewed as responsible if they behave in a way that

204 could minimise socioeconomic issues and contribute to the country’s economy. This could be seen in these interview findings which mentioned that Malaysian citizens’ savings behaviour had simply not been enough, that they should go further and financially invest in various ways:

(Quoting a study by the OECD): About 97% of Malaysians are

saving. So, the savings rate, through that sample, was quite

high. But at the same time only 3% of them, and this is not

the balancing figure, but only 3% of the respondents said that

they had in the past six months looked at or explored

financial investment products. This is something where a lot

of people are saving but not many of them are necessarily

maximising their returns. […] we would like to see greater

retail participation. (Official at Regulator M, #2, 5 August

2015)

Our push now, is, for example, giving them a retirement

option so that the capital market can be an option. What we

are trying to do is to open all sorts of touch points. Hopefully

a Malaysian will find there's a space for them in the capital

market, even if they are not investing directly. We would like

to get retail investors to be more advanced in understanding

before they come and invest directly in the stock market.

(Official at Regulator M, #1, 5 August 2015, some sentences

translated from Malay)

After reducing subsidies to citizens, creating awareness about their financial responsibilities, and reforming the retirement system; the last step of the modern FC programme is to cultivate inclusion through education.

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This step is taken in an effort to prepare citizens to become financially responsible, although, it had also been conducted in a way that motivated citizens to become more active in sophisticated financial investments rather than just to conduct basic savings. These issues are explored further in the next sub-section.

6.2.4 Cultivating Inclusion through Education

When the New Economic Model was introduced during the first term of

Najib Administration (2009-2013), much of the document was filled with the introduction of a new concept: “inclusiveness”. The word first appeared in the document in the third page, expressed as a radical change in the way the government would henceforth carry out policymaking, in a way that would, as promised, benefit every Malaysian citizen regardless of ethnicity, strata, or geography (NEAC, 2010).

Nonetheless, for Malaysian citizens, “inclusiveness” could represent many different things. Firstly, it could be a direct message to the non-

Bumiputera groups that the government was responding to criticisms on the

New Economic Policy’s ethnic prioritisation. It should be made clear here that societal-wide policy reach has been present in the New Economic Policy under its second strategy of poverty eradication (MEPU, 1975). In 1970, the

Third Malaysia Plan reported incidence of poverty at about 49.0% of all

206 households in Peninsular Malaysia (MEPU, 1975, p. 5);45 while the 2009 figure46 for the incidence of hard-core poverty for Malaysia as a whole is at

0.7% (MEPU, 2013).

Nonetheless the introduction of “inclusiveness” appeared as a response to criticisms against the New Economic Policy’s first strategy, ethnic-based wealth mobilisation, which has favoured Bumiputeras in economic and social policymaking. Politically, this had been important as there had been nationwide growing pressure that had arisen from citizens’ disapproval of UMNO. In 2009 when the New Economic Model was introduced, UMNO has been a part of the government through strategic coalitions since the independence of Malaya. At the time, UMNO was increasingly challenged by emergent opposition political parties led by minority ethnic groups. See for example Kuppusamy's (2007) analysis on

Malaysia’s growing ethnic tension during the premiership of Abdullah

Badawi which resulted in a vote of no confidence for the prime minister in

2008, who was promptly replaced by Najib Abdul Razak in 2009 ("Profile:

Najib Abdul Razak," 2009). “Inclusiveness” thus, acted as a symbolic gesture from the Najib Administration, a message to citizens that this government was different, that it was democratic and inclusive.

While “inclusiveness” appeared to be ambiguous during its introduction, the concept was gradually shaped and familiarised to financial

45 As according to the Third Malaysia Plan, “The poverty line which has been measured for this purpose is defined to cover minimum food requirements and minimum needs with respect to clothing, housing, consumer durable goods and transport services to sustain a decent standard of living. Available data did not permit estimates to be made for Sabah and Sarawak,” (MEPU, 1975, p. 5) 46 When the New Economic Model was released.

207 contexts over time, especially in recent years. One of the reasons behind this move could be due to the influence of global discussions amidst and post-

GFC. This surrounds the notion of governments’ responsibility in ensuring citizens are given the right to be financially informed in a way that could ensure that they are able to make financial decisions for their survival.

Furthermore, governments are encouraged to think of whether citizens could protect themselves from financial instabilities that would contribute to overall macroeconomic financial soundness (Arthur, 2012; Lusardi &

Mitchell, 2007). The main outcome of these discussions was the increasing effort to construct and disseminate FLE at national levels.

In Malaysia's case, however, the focus on FLE had begun in the early

1990s during Mahathir’s implementation of economic liberalism (Koid,

2010). Although then, the initiatives had the objective of educating citizens on the basic concepts of saving. While many of these “basic level” FLE still exists today, recent years’ development in this programme had been transformative, as it focuses more on sophisticated levels of financial planning. This includes the incorporation of financial investments in the stock market.

The move behind FLE had been outlined in the Economic

Transformation Programme, where Bank Negara was named as the entrusted institution that would lead the construction and dissemination of FLE initiatives:

Bank Negara will lead the creation of a coordinated national financial

literacy programme based on a public-private partnership […] Initiatives

under this programme will be designed to teach Malaysians, from an early

208

age through adulthood, financial skills covering basic money management

(budget and savings, responsible credit, debt counselling, etc.), financial

planning for long-term protection and retirement needs as well as how to

make prudent investments. (PEMANDU, 2010, p. 245)

Additional to this, the Financial Sector Blueprint provided several recommendations regarding FLE:

 Recommendation 5.2.1 — “Promote financial capability as an

essential life skill from an early age through the integration of FE into the

formal curriculum…”

 Recommendation 5.2.2 — “Adopt life events approach to the

development and delivery of programmes and encourage greater

collaboration among stakeholders…”

 Recommendation 5.2.6 — “Strengthen the enabling infrastructure by

providing comprehensive access to financial education info and

introducing a mechanism to gauge the financial capability of consumers

and enhancing the effectiveness of the implementation of FE initiatives”

(BNM, 2011, pp. 156-158)

Even through FLE, it is clear that FC development continues to be driven by nation building goals, besides the motivation of cultivating financially-responsible citizens. This is further supported by the message given by the former Governor of Bank Negara during the launching of a nationwide FLE initiative:

Financial education has never been more important than in today's

environment. Participating effectively in the financial system can improve

the economic wellbeing of individuals and businesses. Financial education

is therefore key so that members of our society will benefit from the

209

financial system and from the new technologies that are transforming our

financial landscape. (Aziz, 2015)

Given the different natures of elites involved in this programme: political (the government), policy-based (financial institutions such as Bank

Negara, Bursa Malaysia, and Securities), and business (the private investment sector); one question that has arisen at this level of the analysis is whether their motivations in FC development align with one another. For example, an official at the Bank Negara mentioned that one of the Bank’s first initiatives in FLE had been through a collaboration with the Ministry of

Education and private financial institutions, beginning from 2012 onwards.

This collaboration focused on incorporating elements of understanding financial activities and its concepts in school curriculums as early as primary education (7 to 12 years old) and as endmost as university-level education

(between 21 to 25 years old) (official at Bank Negara Malaysia, #9, 23 March

2016). Understanding the nature of the different parties involved in this programme could further problematise the objectives of FC development, given that in contemporary time, public financial institutions in Malaysia are supposed to be independent of the government.

Bank Negara, for example, had no budgetary allocation from the

Federal Government (official at Bank Negara Malaysia, #9, 23 March 2016), while Bursa Malaysia had been incorporated in 2004 (Bursa Malaysia, 2015).

This might explain the existence of several parallel initiatives focusing on sophisticated FLE, with different types of motivations. For instance, while

Bank Negara attempted to deliver FLE in a democratic, equal, and inclusive manner, by encompassing all types of citizens using school curriculums,

210 there had been a different type of FLE organised by Bursa Malaysia. Bursa’s sophisticated FLE efforts were surrounded by the idea of developing what they refer to as “fundamentally-informed” investors (official at Regulator M,

#1, 5 August 2015 and official Market M, 28 August 2015). In 2014, the stock exchange initiated a major project surrounding stock market literacy called

BURSA MKT.PLC (Bursa Malaysia, 2014). The initiative, delivered as an information website aiming to educate Malaysians using games, virtual investment portfolio, articles, and videos; is publicly supported by notable political elites, such as the former PM Najib Abdul Razak who congratulated the institution on his official Twitter account using the project’s corporate tagline (https://goo.gl/kUhvFo). Similar to Bursa’s initiatives, the SCM had launched the SC’s Investor Empowerment Initiative and InvestSmart, promoted via a catchphrase of “Smart Investing Made Simple,” (SCM, 2014); the programme aims to build confidence and encourage retail participation in the capital market through FLE initiatives.

Besides Bursa MKTPLC, Bursa had also engaged in promotional material targeted towards retail investors, for example using a programme called Celeb.Tradr. Celeb.Tradr consisted of the partnering of high profile

Malaysian celebrities with stock market analysts. The celebrities were given an amount of money to invest, and their activities recorded through popular web platforms such as YouTube and social networking websites, such as

Twitter and Facebook (“Celeb.Tradr Experience,” 2015).

Having outlined the different types of educational initiatives used for the purposes of FC, the section now arrives at its conclusion. To critically

211 analyse elites’ modern FC initiatives, the chapter now turns to observing elites’ perspectives on the modern programme of FC development.

6.3 Elites’ Perspective on Results and Issues Faced in the Modern Programme of FC Development

The discussion under this section is used to resolve RQ1c and RQ1d; questions about the results of the FC development and issues faced in the programme by elites. The section is divided into two. The first sub-section focuses on elites’ perspectives of whether the results of FC development meet their expectations and with these answers is a reflection of issues that they have faced during the programme. The second sub-section is a further analysis of interview answers which problematises the inclusive notion of FC.

To explore these issues, elite interviewees were asked to discuss their perception of the results of FC development and if these results had met their expectations. During the interviews, different FC initiatives whether in contemporary time or in the past had been explored. This included the more recent initiatives such as the promotion of stock market investment among citizens through FLE as well as older initiatives, such as shariah-compliant investments. Additionally, elites were asked if they felt that there were issues in FC development which had been specific to the Malaysian context. The discussions are provided in the next two sub-sections.

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6.3.1 Expectations, Results, and Issues

When elite interviewees were questioned on their motivation in encouraging citizens to participate in complex financial markets such as the stock market, they mentioned the intention to see citizens being transformed into financially autonomous, independent, and responsible actors. Nonetheless, the concept of responsibility found here differs slightly from that in existing studies, which often portray responsible financial subjects as those who take control of their financial futures for their own individual benefits (Froud et al., 2002; Langley, 2006, 2007, 2008a, 2008b; Lusardi & Mitchell, 2007;

Martin, 2002; Wainwright & Kibler, 2014). In Malaysia’s case, such views depend on the type of elites interviewed.

Political elites appeared to be motivated by the nation building agenda, in which neoliberal, financial citizens were envisioned to be empowered to take control of their personal financial goals. Such behaviours have been celebrated as contributing to macroeconomic goals, for example, by tying up these behaviours to the possibility of expanding the country’s economy. Furthermore, financially-responsible citizens are assumed to assist in minimising nationwide financial instabilities and potential financial crises, by ensuring that individuals are using financial products in an informed manner (officials at Regulator M, #1 and #2, 5 August 2015; official at

Ministry of Finance, #8, 23 December 2015; official at Bank Negara Malaysia,

#9, 23 March 2016). It should be noted that these answers echo post-GFC global discussions on financial policymaking related to citizens, which tend to place the blame of the crisis on citizens who are seen as ignorant and irrational in their financial consumption (Ali, 2013; Arthur, 2012). Following

213 this, policies focus on transforming the financial behaviours of citizens, rather than other financial actors such as banks, regulators, policymakers

(Williams, 2007; Willis, 2008).

On the other hand, elites in financial policymaking appeared to be motivated by the vision of transforming citizens into financial entrepreneurs; that they should be able to adopt complex investment strategies such as portfolio management and diversification and contribute to the deepening of financial markets (officials at Market M, #3 and #4, 28 August 2015).

Business elites, who did not directly impact policymaking concerning FC but who have in-depth knowledge on the matter, also tend to think of FC development as being beneficial for financial markets rather than for the citizens themselves (official at Investment Bank H, #11, 31 March 2016; official at International Bank I, #12, 31 March 2016). Both of these interviews explicitly mentioned that while FC initiatives could benefit citizens, for example, by educating them and preparing them to think about their finances more responsibly; the programme, however, is seen as more beneficial for businesses and the economy.

The different motivations among elites complement one another; reflecting on the corporate and/or institutional goals of interviewees. While political elites might be more concerned with equipping citizens with the right skills and accesses to financial systems; financial policy and business elites might be more interested in the effect of FC development to “tap the untapped market,” (Official at Economic Research Group K, #5, 11 December

2015), that is, for profit-making in a financialised economy. These perspectives come from the angle that FC development could contribute to

214 the country’s economy by putting measures that simultaneously ensure safe consumption and growth of financial activities are in place.

Although, when elites are asked to provide more in-depth views on the inclusive notion of FC from the citizens' perspective, the answers demonstrate the many issues that riddled the programme. Many elites were critical of the inclusive notion of FC development, regardless of their positions. For example, two elite interviewees noted that encouraging citizens into complex financial arenas is risky, as citizens do not possess the same skills or investment capital as financial professionals, which is needed to ensure their sustainability in the markets (official at Bank Negara

Malaysia, #9, 23 March 2016; official at Wealth Management Firm C, #10, 28

March 2016). This suggests that, regardless of elites’ positions, there exists a realization that their FC expectations might not necessarily deliver the results that had been originally desired.

Moreover, at the time of the interviews, these elites admitted to not knowing the direct outcomes of their initiatives: efforts to monitor these outcomes had not yet demonstrated whether market literacy rates are higher, if stock market participation has increased, and/or investment and savings behaviour have changed among citizens (official at Regulator M, #1, 5 August

2015). Additionally, complications arise with efforts of "regulation through education and access," especially when there is a methodological difficulty to track "behavioural change(s)" among citizens (both quotes taken from

Official at Bank Negara Malaysia, #9, 23 March 2016). Such a methodological difficulty includes (surprisingly) limited efforts by institutions to conduct wide-scale data collection to reveal patterns of savings and investment among

215 citizens, although such efforts are on the increase (see, for example, BNM,

2013b; Khazanah Research Institute, 2016).

The ambition to resolve multiple goals is problematised by the absence of evidence to support the correlation between citizens' participation in the stock market and national development. This is especially true when the nation building objectives to transform Malaysia into a developed country have changed several times over the past three decades and contemporary policies remain confusing. One on hand, Malaysia's nation building objectives are promoted to citizens with the justification of societal advancement, that with the development of the country, citizens' lives would become much more prosperous and better (Mohamad, 1991). However, much of the strategies focusing on nation building is economic, with idealistic objectives using economic indicators such as the GDP and the GNP (Mohamad, 1991; NEAC,

2010). Similarly, FC development is promoted by placing the notion that the development is for the betterment of the citizens themselves, and yet, the encouragement behind this development is justified by the notion that their financial empowerment could assist in the growth and stability of Malaysia’s economy (former finance minister, #13, 5 April 2016). However, such objectives were viewed as problematic by one elite interviewee because it ignores citizens’ economic position:

You'll be surprised how many people still do not have access

to formal financial institutions. Especially in certain pockets

of origin, for example, Kelantan, (access to formal financial

institutions) is still low. […] Why? There is a lack of income,

of course! (Official at Economic Research Group K, #5, 11

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December 2015, translated from Malay and emphasis added,

words in brackets for clarity)

When FC development includes nation building objectives, it ignores the difficult situation that many Malaysian citizens are unable to participate in even the most basic of financial activities because of their low incomes:

[It's] premature. […] if you want them to participate [in the

stock market], there must be savings. Now, where is the

savings coming from? Savings can only come if you have

good income. (Former Malaysian finance minister, #13, 5

April 2016; translated from Malay with original emphasis;

words in brackets added for clarity)

Attempts to promote FC for nation building in the face of entrenched income inequality and, at the lower end, low absolute incomes could further deepen inequality and disunity, not only along inter-ethnic lines, as had been the case in the past (reputable Malaysian economist, #5, 11 December 2015), but also, along inter-class and urban-rural divisions, thus excluding low-income, rural citizens from many economic and financial opportunities regardless of how financially-informed and empowered they might be (official at EPF, #6,

14 December 2015). These issues are further explored in the next sub-section by problematising the inclusive notion of FC development.

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6.3.2 Problematising the Inclusive Notion of FC

In Chapter 3, it was outlined that FC would be observed as efforts carried out by elites, in the dissemination of a new “financial right,” that is, widespread access to financial markets and skills among citizens. Such efforts include the rhetoric of inclusiveness, promoted through the concept of democratic inclusion in financial spaces which are disseminated and implemented through FLE initiatives; efforts that have been similarly carried out in the

Malaysian case as outlined in Chapter 5 and the preceding Section 6.2 under this chapter.

Despite its optimistic connotation, “inclusiveness” as applied in

Malaysian policymaking during the early days of Najib Administration was largely an elusive concept. It was ambiguous due to the manner in which it was used over and over again in the New Economic Model in reference to multiple socioeconomic issues, for example, as a solution for inter-class and urban-rural divide. Although this happens despite each issue having a long and deeply troubling historical context in the Malaysian case, with much of it relating to its underlying foundation, that is, inter-ethnic divide.

However, upon a closer observation of the strategies behind

“inclusiveness” could inform Najib Administration’s real objectives. When

“inclusiveness” was first mentioned in the New Economic Model, the document also highlighted that most of Malaysian rural, lower-income population who belonged to one ethnic group, the Bumiputeras: “[A] key challenge of inclusive growth is the design of effective measures that strike a balance between the special position of Bumiputra and legitimate interests of different groups,” (NEAC, 2010, p.10). Furthermore, the document

218 mentioned that the government’s affirmative action to address inter-class, urban-rural divide was by “[t]arget[ing] the assistance to the bottom 40% of households – of which 77.2% are Bumiputera […] (NEAC, 2010, p. 10).

Analysing these statements, “inclusiveness” appears to be problematic as the Najib Administration’s claim for equality in policymaking was in contradiction to the strategies they had in place. In reality, the modern

Malaysian society is still economically unjust along inter-ethnic lines (former finance minister, #7, 17 December 2015).

Despite its issues, “inclusiveness” was a useful narrative at the surface, promoted as a symbolism of national unity and nation building, acting as a tool in cajoling the very basic foundation of citizenship, that is, citizens themselves—to forget past issues of ethnic-biasness in Malaysian policymaking. Nonetheless, ethnic-biasness was still prevalent in the early days of Najib’s leadership. For example, one only needed to observe the sovereign unit trust schemes offered right after his election, aptly named

Amanah Saham 1Malaysia (1Malaysia Unit Trust Scheme). Under this scheme, the initial 30-days offer period was in favour of the Bumiputeras, who received 50.0% of the overall allocation, followed by the Chinese,

Indians, and Other ethnic groups (30.0%, 15.0%, and 5.0% allocation respectively) (Abdul Razak, 2009).

This example raises two assumptions: 1) inter-ethnic economic disparity was no longer present in the early days of Najib Administration, but there was a concern on preserving Bumiputera citizens’ vote of confidence in order for the Administration to retain their political hegemony, OR 2) inter- ethnic disparity was still prevalent in Malaysian societies and the continuity

219 of ethnically-biased policies suggested that correcting these issues was still a government’s priority.

To examine these claims, secondary data had been used. During

Mahathir's 22-year premiership, the inter-ethnic gap between the

Bumiputeras and the Chinese were reduced by 10.0% (Abdul Khalid, 2015).

During the term of Abdullah (Mahathir's successor), the Bumiputera-

Chinese economic disparity was further reduced by half from 2004-2009

(Abdul Khalid, 2015). It was during Najib’s first term (2009-2012) that this disparity was widened, “[growing] by 10 per cent […] which is the highest increase since the introduction of the NEP in 1970,” (Abdul Khalid, 2015, p.

95). Similar findings were recorded for the rate of disparity between

Bumiputeras and the Indians. This result thus informs that regardless of the double-meaning indicated by the concept of “inclusiveness” and its actual strategy, Najib’s policies had affected other ethnic groups besides the

Bumiputeras.

An analysis of the Malaysian Economic Planning Unit's Household

Income Survey of various years was useful in corroborating Abdul Khalid's claims. Observing the Chinese:Bumiputera (C:B) and Indians:Bumiputera

(B:I) income disparity ratios could inform the results of different leaders’ efforts in reducing inter-ethnic disparity. True to Abdul Khalid’s claims, C:B income disparity ratio increased during Najib’s first term by 10.0% from

2009 to 2012 but latest figures demonstrated a return to 2009 figure by 2014 which increased to 1.40 by 2016. I:B income disparity decreased from 2009 to 2016 by 3.0%. During Abdullah's term, the figures were strikingly different

220 whereby C:B and I:B income disparity ratios were reduced by 16.0% and

13.0% respectively from 2004-2009.

Surprisingly, Mahathir who was the strongest advocator for

Bumiputera-biased policymaking, had very little changes under his 22-year term, whereby C:B and I:B income disparity ratios only fell by 2.0% each.

Although this could be explained by a significant drop in Other:Bumiputera

(O:B) disparity by 74.0% during Mohamad’s term to a negative figure by

2003, whereby economic opportunities from this group was presumably transferred to Malaysian citizens. Originally the Other category consisted of mostly British nationals who remained in the country after its independence, and later on consisted of various types of ethnic groups besides the main three listed in the constitution (refer to the Second to Sixth Malaysia Plans for further clarification).

Elite interviews were used to explore these figures further. An official at Research Group K (#5, 11 December 2015) explained that current efforts in

FC development could greatly benefit Chinese Malaysians the most, due to their historical economic advantage over other racial groups. However, another interview countered this argument by saying that the issue to focus on is the urban-rural divide, rather than the inter-ethnic one:

There is more a case of level of income than an ethnic one.

[…] The poorer you are, the less you can invest […] It’s a

vicious cycle. (Official at the EPF, #6, 14 December 2015,

emphasis added)

To corroborate the interviewee’s claim, an observation on Urban:Rural (U:R) income disparity was made. Under each leadership, Mahathir, Abdullah, and

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Najib, income disparity increased/(reduced) by 3.0%, (12.0%), and (5.0%) respectively. 47

The increase of U:R income disparity during Mahathir's term could be explained by the widening of the middle-class group and the relocation of citizens from rural to urban areas for employment opportunities (MEPU,

2000; MEPU, 1995; MEPU, 1989). Consequently, this analysis could show that whilst there could be political pretext behind the application of

“inclusiveness,” the reality is that the Malaysian government’s progression is continuously problematised by the same socioeconomic haunting them since four decades ago, i.e., systematic inequality along inter-ethnic and urban- rural lines, which, in 2016, are almost statistically equal.

Although historically, the rhetoric of inclusion had always been somewhat problematic. While inclusion in policymaking makes more of an appearance in developmental policymaking, the early 2000s saw an expansion of what could be termed as "neoliberal inclusion," in which efforts are being placed by policymakers to encourage ordinary citizens in becoming autonomous and empowered economic actors. In 2003, UN General

Secretary Kofi Annan addressed inclusion in this rhetoric, when he mentioned the exclusion of billions of people globally from financial services appropriate to their living needs (United Nations, 2003). This framing of finance as a necessity in citizens’ lives encouraged a transformation in global

47 The figures used for Mahathir were the averages between 1979 and 1984 (2.055) and between 2002 and 2004 (2.11) as he began and ended his premiership in 1981 and 2003. The figures used for Abdullah were the averages between 2002 and 2004 (2.11) and 2009 (1.85) as he began and ended his premiership in 2003 and 2009. The figures used for Najib were 2009 (1.85) and 2016 (1.76) as he began his premiership in 2009 and was still in office. All figures were taken from the Department of Statistics, Malaysia. The latest statistics available are from the 2016 household census.

222 financial policymaking, the most obvious being the inception of a global policymaking network called the Alliance for Financial Inclusion. The

Alliance is responsible for knowledge exchange focusing on the intermediation of financial services to citizens regardless of class, employment status, and/or income levels (Alliance for Financial Inclusion

(AFI), 2009).

This global progression could attribute to modern day’s focus on finance as a citizen’s right (Kear, 2013) or a social responsibility (Preda,

2001). Accesses to finance had since been suggested by prominent political and financial policy elites, for example, PM of the Republic of Kenya Raila

Odinga; as integral in providing equitable social development (AFI, 2009).

The justification behind this statement is that the desired access to finance and its activities could ensure that citizens are not only able to save but also to invest and multiply their earnings, thus eradicating modern day’s pressing issue of inter-class, socioeconomic inequality.

Similarly, policy discussions in Malaysia use financial inclusion under this framing, pushing for the development of FC as defined in this thesis, as democratic and inclusive. This definition could be useful for Malaysian political and financial policy elites’ modern programme of FC, especially if the democratic concept of inclusion could simultaneously assist in correcting the socioeconomic and nation building issues outlined above and in the previous chapter.

Nonetheless, providing access and skills to participate in complex financial arenas such as the stock market does not actually provide the ability for citizens to participate in the first place. This ability simply refers to the

223 disposable income needed for citizens to invest in the first place. For example, when elite interviewees were asked to comment on the main issues of spreading access and skills of complex financial markets for ordinary citizens, these answers sum these issues:

You have to be in the position of having […] enough assets.

(Former finance minister, #7, 17 December 2015)

If you want them to participate, there must be savings.

(Former finance minister, #13, 5 April 2016, translated from

Malay, emphasis added)

The combination of household statistical data and interview findings demonstrate that the “life savings” issue that Malaysian citizens face—as explained in Section 6.2.2—goes beyond general consideration of concepts of savings and retirement. Instead, specific to the Malaysian case is an ingrained and increasing inequality that not only exists between classes, as is prevalent in other countries but also on an inter-ethnic and urban-rural divide. Promoting stock market investment to households with the justification that it would benefit citizens by aiding their financial planning does not address these pressing socioeconomic issues. This disconnect between government’s financial policies and society’s needs contradicts

Najib’s idea of “inclusiveness,” as many citizens, of a certain type and income level, are automatically excluded from financial markets due to their lack of financial viability:

[The] kind of people who would be able to afford to actually

invest in the stock market tend to be the top 2, top 5 per cent

of the population. […] kind of pointless to start asking

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[citizens] to invest […] when they can’t even put aside RM10

RM50. […] People just do not have enough money. (Official

at the EPF, #6, 14 December 2015, word in brackets added

for clarity)

When we say we are serving the nation but there are only 1%

of adult population in the capital market... (Official at

Research Group K, #5, 11 December 2015)

For both elite interviewees, their perceptions were surrounded by the idea that the real danger behind promoting certain types of financial activities such as stock market investment to citizens is viewing it in a democratic and inclusive light. Doing so ignores the majority of Malaysian citizens who are still financially incapable to participate in even the most basic of financial activities. This would, as feared by these interviewees, further deepen the urban-rural divide, excluding them from many economic and financial opportunities rather than including them, regardless of how financially-informed or empowered they are.

6.4 Chapter Conclusion

The discussions in this chapter have helped build on the emerging idea that

FC development is constantly shaped and re-shaped with the assistance of place-specific policy initiatives, actors, and events. In the discussions that have been outlined, the chapter has demonstrated the difference between historical and modern programmes of FC development. This difference lies in

225 the serious attempt to shift financial and economic responsibility from the government to the citizens by focusing on the issue behind citizens’ life savings. By framing the responsibility unto citizens, political and financial policy elites had begun to use what they perceived as a more democratic and inclusive means in FC development, which is to disseminate and encourage

FLE initiatives at a nationwide level.

However, the discussions in Section 6.3 have managed to problematise the current development in FC by observing the different types of actors involved in its formal efforts. The chapter questions the motivations behind different elite groups, political elites or elites responsible in financial policymaking, in their effort to financialise citizens. Albeit having slightly different justifications to conduct FC, nearly all the elites interviewed harboured reservations against the democratic manner in the normalisation of complex stock market activities in the everyday lives of citizens. A system intended to be democratic and inclusive, promoted using vehicles such as

FLE, might not work due to deeply-ingrained systematic income disparity already faced by citizens in the country. Some elite interviewees were clearly aware of these disadvantaged groups, effectively excluded by contemporary

FC initiatives. Yet this had not been an obstacle to the promulgation of the policies, even while it inevitably limited their effectiveness.

Furthermore, to better understand this issue is to bring in citizens' perspectives and experiences in this development, which is so far omitted from this thesis. In the next chapter, which uses real-life experiences of financial citizens through interview findings, could add depth to the

226 understanding of financialization and citizens, and further assist in resolving the thesis’ queries.

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Chapter 7

Chapter 7: The Role of Citizens in FC

7.1 Introduction

In Chapter 5, the thesis observed the historical development of FC, and with it, the role of political and technocratic elites in the process. Furthermore, the purpose of the chapter was to build the argument that financialization is place-specific, shaped by various events, conjectures, and strategic actors. As such, the processes of financialization differ, influenced by the localities they are shaped under. Using the analysis in Chapter 5, Chapter 6 continued the observation of FC development into contemporary time. Empirical findings from elite interviews of various positions (political elites, elites involved in financial policymaking, and business elites), assisted in critically understanding the motivation behind formal initiatives in the development of FC and the issues and outcomes faced.

The findings and analysis in these two chapters were important in answering RQ1: “What roles do political and financial policy elites play in

Malaysia’s FC development?” and its sub-questions. The chapters found that

228 elites, especially from political and financial policy backgrounds, had had a long history of playing a role in the arrangement of formal initiatives intended to transform Malaysians into financial citizens. With this transformation is the motivation that citizens with access to financial markets and skills would become more empowered and responsible over their life savings. These visions are observed to be very neoliberally influenced, especially with the connection of certain policies to global policy discussions such as the implementation of nationwide FLE initiatives.

Additional to this aspiration, however, is to align FC development along wider nation building goals. Interview findings with elites demonstrated that the process of FC development is complex, riddled with issues and results that differed from expectations. Different elites and the institutions they belong to might sometimes view the motivations of FC in contradictory manners, thus, causing complications in the efficacy of its implementation.

Furthermore, there might be a gap between how elites envision FC as benefitting citizens and the actual needs of citizens.

This chapter now turns to discuss citizens’ experiences in FC development. It observes citizens who invest in the stock market, otherwise referred to as financial citizens, and the roles they play in FC development.

The discussion in this chapter is used to resolve RQ2: “What roles do financial citizens play in Malaysia’s FC development?” and its sub-questions:

 RQ2a. How do financial citizens’ behaviours relate to

the formal initiatives in FC development?

 RQ2b. Has the outcome of FC development

demonstrated that financial citizens' behaviours align

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with the objectives envisioned in elites' formal

initiatives?

 RQ2c. How do financial citizens’ behaviours in stock

market investment differ from neoliberal

assumptions that citizens should take control of their

personal security in an individualised and self-acting

manner?

Interview findings with Malaysian financial citizens are used to guide the analysis of this chapter. When relevant in supporting the analysis conducted, elites’ interview findings and secondary data will also be used.

The chapter is organised as follows. Firstly, the characteristics of the financial citizen interviewees are provided in Section 7.2, the data of which would be integral to subsequent analyses in other sections in the chapter.

Section 7.3 is used to answer parts of RQ2a using the observation of financial citizens’ perspectives on elites’ FC initiatives. The initiatives observed are not limited to the modern initiatives as described in Chapter 6, but also include some of the precursor initiatives mentioned in Chapter 5.

Section 7.4 is used to address parts of RQ2a and RQ2b. It observes

Malaysian financial citizens’ motivations and rationale behind stock market investment. Through this observation, the section manages to demonstrate that financial citizens’ behaviours while investing in the stock market does align with elites’ FC objectives, insofar as creating citizens who are financially-responsible and autonomous. Financial citizens invest with the purpose of financial security, which also shows that they are acting responsibly about their finances. They also express a sense of empowerment

230 through stock market investment; however, this notion of empowerment differs from neoliberal assumptions. In the Malaysian case empowerment is conditioned by cultural and social factors rather than purely economic rationale.

Section 7.5 extends the analysis of Section 7.4 and is used to address

RQ2c. It argues that while neoliberal modes of governance (as an underlying rhetoric in FC development) have encouraged citizens to consider finance in an individualised, self-acting, and economically-rational way; the thesis’ findings have instead shown that this is not necessarily the case. In Malaysia, there is a cultural and social phenomenon arising from investment, whereby financial citizens could engage in stock market not only for individual gains, but also for ethical, moral, religious, and communal ones; which is best demonstrated through the case studies of shariah investment and financial intermediaries.

Section 7.6 acts as a reflection on the interview findings by providing a commentary that serves as a reflection on the findings gathered from interviews with financial citizens. It problematises the inclusive notion of FC, by arguing that only selected groups of Malaysian citizens could be privileged in reaping the advantages of formal FC development. The chapter then concludes.

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7.2 Characteristics of Financial Citizen

Interviewees

The characteristics of financial citizen interviewees are outlined in Table 3.

Firstly, the sample is composed of mostly male investors (66.7%) compared to female investors (33.3%). This finding of 2:1 is slightly higher than a set of data provided by an elite interviewee, which illustrated that the ratio of male to female Malaysian individual investors in the stock market is approximately 1.5:1.48

To explain this slight difference, financial citizens’ interview findings could be used. Many interviewees mentioned that in their households, male figures (with “husbands” being the most commonly-cited male figure) are usually responsible for financial planning, in which stock market investment falls under. This finding could be corroborated by Zaimah, Masud, Haron,

Sarmila, and Awang's (2015) study, which stated that in large Malaysian dual-income families, husbands (male-identifying) were likely to take responsibility in financial decision-making that involved large expenditure with high commitment, such as stock market investment.49

48 Due to the confidential nature of the data provided by the specific elite interviewee, the only data that was allowed to be used for this thesis are gender ratios of retail shareholding in the stock market. 49 On the other hand, the study found that wives were more responsible for financial decision making involving the needs of family-related daily expenses. The authors’ findings contrasted that of Iwao's (1998), which found that women were integral in Japanese household financial decisions, or Marsden's (2012), which found that in contemporary Britain, women were increasingly taking control of household financial decision in couples under 45 years old.

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The second finding is related to investing experiences. Out of the sample, 43.3% of interviewees have been involved in direct and indirect participation in the stock market, while 56.7% have only been involved in one type of investment channel in the stock market (direct participation or indirect participation). As mentioned in Footnote 1 of Table 3, direct investment refers to the direct purchase and selling of stocks through a stock market platform while indirect investment refers to participation in the stock market through the purchase of unit trust schemes which are professionally managed. There are only two interviewees out of the sample that are no longer investing. Additionally, in the sample, more financial citizens are participating in the stock market through indirect (80.0%) rather than direct channels (13.3%).

The finding above correlates with the third finding, which is the main influence to invest in the stock market. While there are financial citizens who demonstrated their own initiatives in pursuing stock market investment (for example, one interviewee claimed to be mainly influenced by private investment classes, while five cited their own interest and research as the main influencing factor), many others expressed that they were encouraged by two types of influences: family and/or friends and licensed intermediaries.

It is the latter group which would make an interesting evaluation in this chapter, explained in Section 7.5.

Two interviewees from the sample have cited licensed intermediaries as influential to their decision to invest in the stock market, while the other twenty-two cited family, spouse, or friends. Interestingly, among these

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Table 3: Demography and Characteristics of Financial Citizens

Frequency Per Cent Gender Female 10 33.3 Male 20 66.7 30 100.0

Current experience investing in the stock market1 Mostly investing directly 4 13.3 Mostly investing indirectly 24 80.0 No longer investing 2 6.7 30 100.0

Experience in types of stock market investment channels Have invested in both stock market investment 13 43.3 channels (directly AND indirectly) Have invested in only one type of stock market 17 56.7 investment channels (directly OR indirectly) 30 100.0

Main influence Private investment classes 1 3.3 Self-research 5 16.7 Friends 7 23.3 Family/spouse 5 16.7 Licensed intermediaries 2 6.7 Friends/family who are licensed intermediaries2 10 33.3 30 100.0

Investors who are also licensed intermediaries2 Yes 10 33.3 No 20 66.7 30 100.0 1 Direct investment refers to the direct purchase and selling of stocks through a stock market platform while indirect investment refers to participation in the stock market through the purchase of unit trust schemes which are professionally managed.

2 Licensed intermediaries are actors who play a formal role at intermediating investors with the stock market. Remisiers are the well-known term in Malaysia for licensed intermediaries in direct stock market selling and purchasing; while in the unit trust industry, they are recognised as unit trust consultants.

234 twenty-two interviewees, ten have, without the researcher’s initiation, expressed that the family or friends responsible for their decision to invest are also acting as licensed intermediaries, specifically as unit trust consultants. Additionally, 33.3% of the sample also act as unit trust consultants.

In addition to the findings outlined above, it might be interesting to note that all, but two financial citizens had fallen under the Malay category.

Nonetheless, the sample in this thesis had not been big enough to capture whether this demography reflected on the successes of the historical FC development, especially in terms of the New Economic Policy’s ethnic prioritisation strategy. As such, a more in-depth discussion of these findings cannot be made, at least within the scope of the thesis' RQs and objectives.

The chapter now turns to provide discussions on interview findings while resolving RQ2 and its sub-questions. The immediately following section specifically seeks to resolve RQ2a by providing financial citizens’ response to formal FC initiatives.

7.3 Financial Citizens’ Response to Elites

This section focuses on resolving RQ2a. “How do financial citizens’ behaviours relate to the formal initiatives in FC development?” To do this, financial citizens were first given information on current FC initiatives (many of which were discussed in Chapter 6) that are more publicly aimed at citizens. These included Bursa MKTPLC, Securities Commission’s

235

InvestSMRT, investment classes provided by the Securities Commission and

Bursa, and investment classes provided by the Federation of Investment

Managers Malaysia. Afterwards, they were also given information on past initiatives, such as the usage of licensed intermediaries and shariah investment.50 At this point, they were explained that the initiatives described had been conducted by financial policy elites from public financial institutions with the support of political elites. Then, they were asked four questions related to elites' past and current initiatives:51

1. Are you aware of these initiatives?

2. Have you participated in these initiatives?

3. Do you think that these initiatives have influenced your

decision to invest in the stock market?

4. Have you ever felt like your financial investments can help

the country develop economically?

The sample of financial citizens gave mixed responses to the first question about their knowledge of elites' initiatives. While 50.0% of them said that they knew about various current and/or past initiatives, the source of information had not been from formal sources, rather, through friends, colleagues, and/or family members. Only a few interviewees from the sample expressed their own interest in finding out information about elites’ initiatives, for example, by using online search engines or enquiring from financial institutions (public and/or private).

50 Shariah-compliant funds are investment products that comply with shariah (Islamic) laws. Refer to Chapter 5 for more information on this subject. 51 As in-depth, semi-structured interviews were carried out, follow up questions differed based on the financial citizen interviewees’ personal answers, and thus were not included in this list.

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As for the second question, only two from the sample of financial citizens (7.0%) said that they have participated in post-2009 initiatives. For the third question, twenty-three from the sample (nearly 90.0%) felt that they had not been influenced by any contemporary or historical initiatives in their decision to invest in the stock market. Financial citizens who cited financial intermediaries as their main influential source to invest in the stock market did not appear to realise that the financial intermediary system is an elites’ initiative. More specifically, the interviewees did not know that the financial intermediary system was set up by financial policy elites and so, claimed that they had not been influenced by elites’ initiatives.

Lastly, interviewees were asked if whether their decision to invest in the stock market had also been a response to a specific elites’ motivation in

FC development, nation building. Only four financial citizens (13.0%) answered positively to this question, among which, the responses had been as follows:

Yes. I mean… it’s nothing. That thing is something that is

embedded. When I’m doing certain things, I’m always

thinking about the benefit of the government—. No, the

benefit of the nation. (Financial Citizen #25, 23 November

2016, some words translated from Malay, original emphasis)

So far, I do want to help Malaysia too. I can’t be helping

other country’s economies because this is my tanah air.52

52 Translation: Tanah air could be understood as “country,” but a direct translation of the phrase is “soil and water,” a reference to the land in which one belongs to. It is a very patriotic term and is used with nationalistic tendencies, such as in patriotic Malaysian songs. One example is a popular patriotic song Perajurit Tanah Air (Our Country’s Soldiers), which glorifies love and duty to the motherland.

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Whatever happens, I live here, and this is my country. So,

when I’m investing, I do look at whether the funds are

related to Malaysia or not. (Financial Citizen #29, 23

December 2016, translated from Malay and emphasis added)

The quotes above indicated that some financial citizens had considered nationalism when investing in the stock market. The quotes also illustrate that there are Malaysian citizens who invest in stock market for reasons beyond their own individualistic economic benefits. This contrasts the views of orthodox finance in which investors are hypothesised as investing rationally based on the consideration of financial risks and rewards.

Contrarily, most financial citizens did not consider patriotism or nationalism when investing in the stock market. More than three-quarter of the interviewees expressed a lack of interest in supporting elites' nation building objectives; several others highlighted their unwillingness to do so.

For these financial citizens, their reasoning behind this specific behaviour is related to their hostility towards the incumbent Malaysian political and financial policy elites at the time of the interview.53

In the political realm, high-ranking politicians such as former PM

Najib and his close-knitted network of elites (a mixture of political, technocratic, policy, and business elites) had been under public scrutiny from

2014 until 2017.54 These elites were accused (and had since been investigated) of mismanaging government-related investment funds

(Vasagar, 2016). This included the worldwide-known case of 1MDB which

53 It should be noted that the Najib Administration had been since replaced with a second Mahathir Administration as of May 2018. 54 Since the time when the interviews were conducted.

238 had been argued as affecting public financial institutions such as the EPF who manage citizens’ life savings (Ghazali, 2015). Simultaneously, the global economic downturn and an increase in the cost of living had weakened citizens’ confidence in Malaysian political and policy elites, at least in the spaces of how their policymaking and governance could directly impact

Malaysian citizens. Fluctuations in global oil prices during the period also affected public finances which, as mentioned in the previous chapter, were heavily dependent on oil and gas revenues (Ng, 2014). This brought allegations of questionable political moves such as the mishandling of financial institutions’ assets for the purpose of bailing out government institutions that were in financial troubles (Idris, 2015).

This tumultuous political and economic background had incited fear in the study’s sample of financial citizens who worry for the safekeeping of their life savings. As such, financial citizens claimed that their reason for taking control over their financial planning by investing in the stock market was a way for them to manage the uncertainty in their lives that came from external factors, such as politics and the wider economy. This could be demonstrated by various interview findings:

A factor that’s affecting most Malaysians is whether their

funds are safe with the current government as we tend to

assume that EPF money is used for bailouts. (Financial

Citizen #1, 27 September 2016)

I don’t necessarily trust the government to be handling my

money. (Financial Citizen #3, 26 September 2016)

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I see all that. The efforts from the government to help

citizens. But in terms of investment, I don’t know. I see that

they’re losing our money instead […] I feel that sometimes

with the EPF, they are just lying to us. (Financial Citizen

#21, 31 December 2016, translated from Malay and emphasis

added)

The real reason I invested in private unit trusts is because

[…] of the scandals and whatnot. I fear that if I were to leave

all my money in my EPF, it would be dangerous. (Financial

Citizen #28, 24 December 2016, emphasis added)

With the quotes above, it appeared that the topmost concern that financial citizens had was related to their life savings in the EPF. To many of these financial citizens, they believed that EPF officials, a group of financial elites responsible for the policies and management surrounding their life savings, were not independent of political elites. This perception made them feel that their life savings were in danger if it was kept in and managed by institutions connected to these groups of elites, such as the EPF. Relating to this matter, several financial citizens admitted to favouring the option of investing in private unit trust schemes through an EPF fund-transfer scheme.

The scheme is a collaborative effort of the EPF and the private unit trust industry, with regulatory supervision conducted by the Ministry of

Finance. It allows contributors (Malaysian citizens who are also employees) to transfer a certain amount of their contribution to approved, private unit trust schemes (official at EPF, #6, 14 December 2015). Specifically, the scheme was developed to assist citizens in becoming more financially-

240 independent by transferring their employment contributions into (regulated and EPF-approved) private unit trust investments that provide better returns than EPF’s. As such, this scheme appeared to fit the motivations of FC development, as far as creating autonomous and self-acting financial citizens.

Ironically, financial citizens’ resistance to political and financial policy elites seemed to have connected them even closer together. The security they perceived to have obtained by transferring their money into private unit trust schemes, in fact, was indirectly reinforced by the same elites they were resisting. Thus, in their reaction of resistance, carried out through their investment behaviours, financial citizens had indirectly and positively responded to elites’ motivations in FC development.

This indirect response had also been evident in financial citizens' experience with licensed intermediaries. As mentioned in Section 7.2, there is a significant finding in licensed intermediaries' influences on financial citizens’ decision to invest in the stock market. As a reminder, the licensed intermediary system had been created in the early 2000s through the CMP1.

This initiative was conducted to provide more access to stock market investment among citizens, which falls within the context of FC development.

As a result of this initiative, Malaysian citizens could obtain stock market intermediaries’ licenses, acting as remisiers or unit trust consultants to promote stock market investment (SCM, 2017).55 As such, when interviewees

55 The difference between remisiers and unit trust consultants are not just in the type of stock market products they are related to, but also the kind of regulated activities they carry out. While unit trust consultants’ role is solely related to promotional services (i.e., to promote unit trust products to investors), remisiers could also carry out regulated dealing activities, that is to carry out purchasing and selling transactions for their clients. More information about financial intermediaries can be found in Chapter 5.

241 refer to licensed intermediaries as being influential to their decision to invest in the stock market, they might not realise that they are positively responding to elites’ initiatives in FC development.

Nonetheless, as far as the interviewees were concerned, they did not want to associate their financial behaviours with elites’ efforts. This connection was also not in the conscious knowledge of financial citizens, who remained sceptical of elites, admitting that a large part of their investment in the stock market could only be connected to elites if this action was viewed as a resistance to this specific group of actors.

So far, what the findings of the interviews have shown is that financial citizens’ role in FC is very much ambiguous. In resistance to certain types of elites, those who are often political, they had indirectly reinforced the agency needed to drive FC development. This was done through their active consumption of stock market activities and their transformation to become more financially-responsible and autonomous. Nonetheless, this resistance also meant that very few of Malaysian citizens, at least as per the sample acquired in this thesis, would like to contribute to nation building aspirations in FC development.

In the following sections, the chapter continues to discuss the findings of the interviews through financial citizens’ perception of financial responsibility and autonomy within stock market investment settings.

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7.4 Financial Responsibility and Autonomy among

Citizens

In Chapter 3, the thesis justified the need to view individuals as citizens in this thesis, as it implies the relationship of responsibilities between elites and citizens within the context of FC. Through this viewing, the thesis has since observed the effort placed by Malaysian elites to make its stock market more inclusive, by providing Malaysian citizens with the autonomy and empowerment needed to be able to participate in the market’s activities.

Chapters 5 and 6 demonstrated that Malaysian elites’ FC efforts have been influenced by a very neoliberal undertone, which calls for citizens to become more responsible and autonomous over their financial security.

This thesis now turns to observe how financial citizens’ behaviours in stock market investment inform the outcomes of FC development. It does so by addressing parts of RQ2a (how financial citizens respond to elites’ FC development initiatives) and RQ2b (whether the behaviours of financial citizens align with formal FC objectives).

To resolve these questions, interviews were used to observe financial citizens’ perceptions on how stock market investment had assisted them in feeling more secure and confident; whether it also helps them meet their financial planning expectations; and whether they feel comfortable to act as an autonomous financial actor such as a rational investor. As such, three

243 main questions were asked (follow up questions differed according to the answers given): 56

1. Do you feel that besides the income and savings you have, stock

market investment has helped you improve/sustain the standard

of living you desire?

2. Do you feel that stock market investment has helped you feel

more secure?

3. Do you feel that you are a confident investor?

Answers to the first question resulted in a complex finding. Firstly, most financial citizens admitted not having experienced an improvement in their current standard of living since they started investing in the stock market.57 This, however, was not perceived negatively by them. They argued that their investment was for the long-term, and thus such rapid material improvement was not something they had placed as an economic goal.

Instead, discussions about this matter suggested that financial citizens invested in the stock market with a goal of delayed gratification, which is to be materialised at later stages in their lives. Half of the interviewees had the objective of delayed gratification in preparation for retirement, while many others had the objective of delayed gratification for financial reasons (such as to grow wealth by choosing funds with the best returns). However, many of these interviewees had also expressed that they were unsure of when such delayed gratification would be materialised. Stock market investment, according to them, enabled the feeling of security through the behaviour of

56 The order of these questions and follow up questions vary on the answers given by different interviewees. 57 Given that the thesis is more interested in financial citizens’ perceptive, the concept of "standard of living" was left to their own interpretation.

244 being aware, to be ready for uncertainties in their lives. They set money aside and invest in the stock market with the purpose of multiplying their life savings, which should be used in unexpected events: such as when they became suddenly ill, divorced, or unemployed.

When the sample of interviewees was asked about their perception of how stock market investment could make them feel more secure, this elicited very interesting discussions. They immediately referred to stock market investment as a subset of a more sophisticated level of financial planning, one that was transformative to their identity as individuals. Financial citizens were proud of not only being prudent but also being able to take control of their financial futures by strictly managing their life savings based on different types of complex financial activities. Subsequently, this behaviour enabled their desire to become more secure and responsible. This could be exemplified by a few interview findings:58

I feel more organised. So now I know that my money isn’t

going anywhere, it’s in the unit trust that I’ve set a target for

five years, undisturbed. If I have extra money at least I know

that the savings are there. It’s there undisturbed. In that

sense, I feel a little secure, financially. It’s like I have a

backup. (Financial Citizen #2, 4 October 2016, translated

from Malay with emphasis added)

[Setting money aside] is important because we never know.

We never know about our future, yes? If I could I would like

to have a stand-by. I never know when I would face

58 Words in brackets are added for readability or to assist in translation issues.

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uncertainties. We could see that investment has it’s good and

bad. The good is that maybe it will make us feel more

secure. The bad is that we never know when we will use that

money. When will I be sick? When will I get married?; for

example. The money is just there as a stand-by. (Financial

Citizen #5, 9 October 2016, translated from Malay with

emphasis added, words in brackets are added to assist

sentence clarity)

This finding demonstrates that financial citizens are economically rationalising their lives in pursuit of security while acting in a financially- responsible manner. This includes their choice to compartmentalise their life goals using strategic financial planning behaviour that mimics financial professionals—for example, using portfolio management and diversification.

This makes them feel that they are taking control of their lives by acting entrepreneurially; by minimising risks out of their lives from economic rationalisation.

However, such economic rationalisation is entirely dependent on financial citizens’ confidence over their financial skills. Their choice of investment vehicles is reflective of this point. Financial citizens who only invest indirectly mentioned that they were unsure of direct stock market investment based on the risks involved in this activity. Of course, their uncertainty could be further contextualised once the Malaysian system of stock market investment is further understood.

To clarify, all financial citizens who invest indirectly mentioned that they are only investing in equity-based unit trust schemes with the goal of

246 long-term returns. In Malaysia, such schemes are typically made of collective pools of investment in companies listed locally in the local stock market.

Furthermore, they are professionally managed, although the types of shares purchased or at least industries in which the shares are in are publicised through investment companies' reports. The reason why this point is specific to Malaysia is also due to entry fees of unit trust schemes being much higher

(5-6.0% of total fund invested) compared to brokerage fees for direct selling and purchasing in Bursa (between 0.035-0.15% of total investment transacted) (i3investor.com, n.d.; Tan, 2016). As such, a Malaysian citizen could earn more from investing directly in the stock market by leveraging transaction fees. All they have to do is to imitate unit trust schemes’ investments by purchasing the same type of companies’ shares or investing in the same industries with a long-term goal.

Additionally, when the effects of specific formal initiatives were observed, for example, the dissemination of FLE, findings demonstrated an equally complex result. This was evident through financial citizens’ perception of how financially-informed they are. Most of the financial citizens ranked themselves as being “average” when it came to financial knowledge:

There is of course a lot of room to improve, and a lot more to

learn. There is a lot more that I don’t know. (Financial

Citizen #14, 24 November 2016)

I’m not sure whether I am financially-confident or not.

Because I don’t really spend that much on investing […]? So I

am still what you call, low-risk--. I consider myself a low-risk

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investor. So as long as I get returns, as long as my initial

investment doesn’t get burnt somewhere along the way, I am

fine with it. But I’m kind of a low-risk investor. (Financial

Citizen #4, 24 October 2016)

Under the same premise, many of them did not feel entirely confident when investing in the stock market. While financial citizens appeared empowered to take control of their financial futures, they were unsure that being financially-educated could assist in their confidence when investing in the stock market. Although, this could also mean that financial citizens are demonstrating a deeper understanding that financial markets are highly complex and manipulated environments:

With direct investment I’m actually more afraid because I

never know when I’ll make profit or lose because that is just

based on chance, right? If it’s Public Mutual59 I feel that it’s

safer than direct. […] I’m not sure what to say because all of

these activities are a gamble. [laughs] (Financial Citizen #6, 5

October 2016, translated from Malay)

[…] the way I look at it, the more I know, the less confident I

get. It’s not the other way around. Because as you gain more

and more knowledge you behave more and more carefully.

So uhh, you get hungrier for certainty. Because you gain

more knowledge, you understand the risks involved. There

are so much risks that can come with it—anything can

59 Public Mutual is a private company that offers unit trust schemes, so in this case, the interviewee is referring to their indirect investment in the stock market.

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happen. (Financial Citizen #26, 25 December 2016,

emphasis added)

I’ve become a bit prudent. Sometimes, even if the newly

listed companies are big ones, I would look at the situation.

How is the company doing, is it doing well or not? I’m also

looking at external factors, if the stakeholders of the

company are suitable or not. (Financial Citizen #15, 8

December 2016, translated from Malay)

With these interview findings, could it be claimed that financial citizens’ uncertainty in their own financial skills is showing that elites’ vision of creating financially-responsible and autonomous neoliberal citizens have failed? To a certain extent, it had not, given that this study’s sample demonstrated that financial citizens were actively thinking about their own financial needs and making autonomous decisions based on their perception of market risks and rewards. Furthermore, these financial citizens are acting in a prudent manner, that is, to be careful and responsible not only as individuals but also as financial actors.

However, the next section should extend this argument, by demonstrating that neoliberal assumptions in FC development could be problematised using financial citizens’ experiences in investment. More importantly, it focuses on seeing the differences between neoliberal understandings on financial empowerment which is often highly individualistic, by bringing the Malaysian flavour into the discussion, arguing that financial empowerment could also be culturally and socially conditioned.

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7.5 Problematising Neoliberalism in FC

Development

One of the aspects of FC development is the neoliberal ideal aspiration of individualism in fostering financial empowerment among citizens.

Individualism is important in FC’s case, as it promotes the rhetoric that citizens could act on their own volition, without dependency on external help, more specifically, assistance from the government. As evidenced in Chapter

6, this neoliberal concept of individualism had been important especially in justifying the government’s move to reduce subsidies and to introduce voluntary private retirement schemes. Furthermore, neoliberal assumptions in the modern programme of FC development had been important in allowing elites to implement initiatives with the goal that citizens become empowered to act responsibly and autonomously within a financial setting.

Nonetheless, the analysis of this section is used to problematise the neoliberal notion of individualism, the discussions of which will be used to further address RQ2c. It does so by arguing that financial citizens’ behaviour problematise the concept of neoliberal individualism and empowerment in

FC. Specific to the Malaysian case, financial empowerment is not necessarily individual and personal, but also cultural and social. The following sub- sections discuss these themes by observing financial citizens’ non-economic reasons for investing in the stock market. It shows that for Malaysian financial citizens, religious faith, moral beliefs, and social connections were

250 influential in their decision to invest in the stock market or consider financial planning.

7.5.1 Culturally-Conditioned Financial Empowerment: The Case of Shariah Investment

To explore culturally-conditioned financial empowerment, the interviewees were posed a question that surrounded their views on religious and morality in the context of financial investment:

Would you say that there are moral or religious elements that

affect your decision to invest in the stock market?

The choice to focus on religion was influenced by an interview finding with elite interviewee Former Finance Minister (#7, 17 December 2015), who claimed that shariah-compliant financial activities are important in the spreading of inclusive finance in Malaysia as more than 60.0% of Malaysian citizens are Muslims. External to religious notions, the concept of morality is included in the interview questions as to elicit discussion on other types of faith that have impacted financial citizens’ decision to invest in the stock market. Follow up questions varied based on the religion or ethnic group interviewees are in, as it determined the kind of cultural elements that mattered to specific financial citizens.

As 28 out of 30 (93.3%) interviewees were Malays who are constitutionally Muslim by birth in the country, they were questioned on whether their Islamic faith played a part in their investment decision- making. More specifically, Malay financial citizens were asked if whether the

251 concept of shariah is important in their stock market and financial planning decision-making. All but two Malay financial citizens said yes to this question. Most of these interviewees even argued that if the Malaysian stock market did not provide shariah compliance screening for the investment funds available to them in Malaysia, they would have invested in other shariah-compliant investment vehicles.

Even though one might immediately relate religion to these financial citizens’ choice, interview answers provided a more dynamic picture that could assist in our understanding of culturally-conditioned financial empowerment. Firstly, financial citizens’ choice for shariah-compliant products is deeper than the simple notion that they are simultaneously conforming to the need of taking control of their financial futures while adhering to their religious faith. Instead, this choice could be observed as a demonstration of financial citizens’ agency in projecting their complex notions of identity and morality unto everyday economic activities, such as financial planning.

This finding is more evident when in-depth discussions about shariah-compliance were prompted, whereby several financial citizens shared that their need to comply to shariah was related to the Muslim concept of deen; the way of life. Deen, to many financial citizens, transcends basic religious faith and practices. Rather, to consider deen, one is encouraged to adhere to ethical moral beliefs in every aspect of their everyday life conduct, in which financial planning falls in place. As such, shariah-compliance assisted some financial citizens’ need for deen, by ensuring that not only do their stock market investments meet their

252 economic goals, but also their moral values. Furthermore, when these moral values are met, it appeared that financial citizens felt more confident when investing:

For me, your earnings have to be “clean”. (Financial Citizen

#19, 14 December 2016)

It provides a sense of confidence as you’re doing something

that aligns with your beliefs. (Financial Citizen #1, 27

September 2016)

I would like to know where the source is from. When it’s

shariah, we know that the source is right. So, I don’t feel

sceptical. When it’s shariah it means they have invested in

the right sources. (Financial Citizen #5, 9 October 2016,

translated from Malay)

The “cleanliness” or whereabouts of financial citizens’ investment mentioned in these interview quotes refer to the types of funds allowable under

Malaysian shariah requirements. This requirement is overseen by Securities

Commission Shariah Advisory Council, who is also responsible for the screening process of funds based on the benchmarks they have placed to classify a fund/product as shariah-compliant (SCM, 2016).

There are two benchmark tests that are conducted by the Advisory

Council; business activity benchmark testing and financial ratio benchmark testing. For a business activity benchmark testing, companies having more than 5% of their operations in gambling, liquor-related activities, tobacco- related activities, among others; would be classified as non-shariah (SCM,

2016). As per financial ratio benchmark testing, even if a company has

253 complied with their business activity benchmark testing, should their cash over total assets ratio or debt over total assets ratio (excluding cash or debt using Islamic financing) exceed 33%; they are deemed non-shariah (SCM,

2016). Shariah-compliant funds are placed on a publicly-available list which is updated on a bi-annual basis as the compliance classification of companies could change based on their latest operations and finances.

An elite interview with a former finance minister shed light on the foundation of Malaysian Islamic finance. Financial authorities working with

Islamic finance were given directives to ensure that the system was designed around the principles of societal benefits, based on the teachings of the

Islamic holy book, the Quran, which encouraged ethics and transparency in financial dealings (former finance minister, #7, 17 December 2015).

Interestingly, it is also because of these reasons that many financial citizens claimed to be more confident when investing in shariah products. This could be explained in the case of a non-Muslim interviewee, who decided to discuss at length about the benefits of shariah without being prompted:

I have nothing against religion in terms of investment. But

shariah compliance is actually a better criterion compared to

a lot of conventional investments. Because shariah

compliance itself is very strict in terms of the morals of the

society. So, based on the morals of the society, I know that

my money is being put to good use already. […] It’s got

nothing to do with me being a Muslim or a non-Muslim. It’s

just that I know that shariah is strict about the laws of the

society. That criterion alone is enough to convince me to put

my money in. (Financial Citizen #26, 25 December 2016)

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This example, among others, problematises the purely economic rationale of neoliberal notions that justifies individualism in the promotion of FC development. Financial citizens’ choice for shariah-compliant funds is integral to the observation that the individualised, entrepreneurial investor advocated by elites is much more complex, especially when there are multitudes of faith and belief systems that individuals hold dear to. In the neoliberal vision, citizens are expected to act as rational, responsible investors, to aspire for the maximisation of profits in their financial investments. In this research, however, financial citizens have expressed that it would not matter if their choice for shariah-compliant funds could generate lower average returns in comparison to conventional funds because it was more important for them to stay true to their religious faith and/or moral beliefs.

7.5.2 Socially-Conditioned Financial Empowerment: The Case of

Financial Intermediaries

In this section, the thesis further problematises the neoliberal notion that financial empowerment is individualistic by looking at how stock market investment, in the experiences of this study’s sample, is socially-conditioned.

This finding was not taken from a set of questions that monitored socially- conditioned investment. Rather, it was found from the types of responses that financial citizens provided when asked two questions:

1. How do you deal with the risks that come with stock

investment? (Follow up questions, do you keep track of your

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investments, do you assign other people to keep track of your

investments)

2. What is your main source of information when you want to

make an investment decision? (For example, family and

friends, the internet, professional advisers, government

workshops, private workshops)

From the findings, it appeared that many financial citizens do not rely solely on their personal conviction when making investment decisions, but also, the experiences of others in their communal proximities. Nearly all financial citizens mentioned that actors within their proximity had been influential to their decision to invest in the stock market and/or to begin thinking about financial planning seriously. These actors consisted mostly of family or friends, with their influences stemming from direct encouragement and/or impressionable behaviour. More importantly, financial citizens were open to being socially-conditioned when it comes to financial empowerment.

This could be exemplified in the case of an interviewee who claimed that stock market investment was a “family affair,” introduced to the interviewee by their mother at an early stage of their life:

The investment in IPO60 came naturally because my family

had been doing this since I was small. When I was small, my

job was to fill up forms. By the time I had my own money, I

filled up my own forms. My mom also created a CDS61

60 Initial Public Offering. 61 A CDS account is needed by all individuals who are investing directly in Bursa. It is an electronic account used to track purchase and selling transactions made in the stock market.

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account for each of her children, so it made things easier.

Sometimes, I would do it by myself. Sometimes I used other

people’s names within the family. We would allocate the

money here and there because having more people applying

for the IPO would increase our chance to receive an offer. […]

And now that I’ve started working, it was only natural that I

invested myself. (Financial Citizen #15, 8 December 2016,

translated from Malay)

In Financial Citizen #15’s case, the family influence had been strong, especially when more than one family member was participating in stock market investment. Having stock market investment socialised in such a manner since the interviewee was young had undeniably been integral to the conditioning of their financial empowerment as an adult, proven by the manner in which the interviewee discussed investing in the stock market as a

“natural” behaviour.

However, Financial Citizen #15’s case had been unique to this study’s sample. This is not to say that there had been no other familial examples.

Instead, these examples had crossed over with another finding: the influence of financial intermediaries.62 As mentioned in Section 7.2 (Table 3), out of the

22 financial citizens who claimed that they were influenced by family members, friends or colleagues; 10 of these said that their influential family member(s), friend(s), or colleague(s) also acted as a licensed intermediary.

62 The reason why these two findings are distinguished from one another has much to do with financial citizens’ perception of formal initiatives in FC development, as discussed in Section 7.3.

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Nearly all of the ten interviewees mentioned that the licensed intermediary they are referring to are unit trust consultants.

This finding might be related to the fact that virtually any citizen could be licensed as a unit trust consultant.63 As per financial citizens’ answers, many of them found this system useful in making stock market investment appear less intimidating than what they previously perceived, given that the actors responsible for mediating their participation in the stock market, are those coming from their proximity, such as friends, colleagues, or family members:

It does help a lot. The majority of us, we’re just average,

right? We’re just simple, right? When we have agents, what

kind of people are they? Some of them are just simpletons,

dispatches maybe. So in that sense we know if they are able

to do stock market investment, that means we could too. It

means that it’s not just professionals who can invest. Just

from that we are like, oh, even “normal” people can do it!

[…] If you noticed, [unit trust consultants] with average

education usually could explain the products in ways that are

easier to understand using laymen terms. […] Clients end up

understanding more about the products. Plus, they won’t be

shy to ask for more information compared to asking

professionals, right? For example, if you were to go to a

remisier, they will usually talk about investments in a

professional manner, using professional terms. […] We

63 Chapter 5 explained the lack of requirement to become a unit trust consultant, given that the system is made for purely promotional purposes, in comparison to remisiers who could also act as dealers of stock market funds.

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would become shy and embarrassed to ask more, you don’t

want to look stupid. (Financial Citizen #28, 20 December

2016, translated from Malay and emphasis added)

Actually, the consultants, they’ve fixed their language so that

normal people would understand better. They’re able to

explain how the money will grow or whatever, in much easier

ways. I think that’s maybe more important for those who are

not used to investing, to start investing. If there are too many

technical terms, I don’t think it’ll attract people. (Financial

Citizen #8, 30 September 2016, some sentences translated

from Malay)

The biggest source of information that I use is my agent. My

friend, he’s an agent64 too. And before this my sister-in-law,

she was an agent too. So these are my points of reference. We

all shared information together. (Financial Citizen #29, 23

December 2016, translated from Malay)

Above interview findings demonstrate that unit trust consultants had become central figures in many financial citizens’ lives. These formal actors disseminate knowledge about stock market investment, enticing and encouraging financial citizens to begin thinking seriously about financial planning, and eventually involving themselves in the stock market. As such, unit trust consultants, as a subset of financial intermediaries, are integral to the process of FC development, playing important roles to bridge the gap between elites’ aspirations and the needs of financial citizens.

64 Unit trust consultants are also widely known as “unit trust agents”.

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Nonetheless, the relationship that unit trust consultants have with respective financial citizens is fascinating, given the lack of professional boundaries that could have existed (between the consultants and financial citizens), which is only enabled by the unit trust consultant system specific to

Malaysia. Such systems advocate the penetration of finance within everyday socialisation in stock market setting. This thus complicates our understanding of why certain financial citizens invest in the stock market.

For example, many of them expressed that rather than being influenced by the information on stock market investment disseminated by their licensed intermediaries, they invest in the stock market to support these licensed intermediaries instead. This “support” refers to the licensed intermediary system itself, in which through subscription of promoted investment funds, intermediaries would be able to earn brokerage fees or commissions.

Consequently, it was found that many financial citizens would choose licensed intermediaries who were also related to them either via platonic or familial relationships. In doing so they feel that they could invest to earn additional wealth for themselves while assisting actors in their proximity earn income:

For unit trust, which started in 2008, I was more influenced

by a friend who became a unit trust agent. I saw that they65

had just started becoming an agent, so I wanted to support

them. I compared keeping my money in a simple savings

account, or in [public unit trust schemes]. Private unit trusts

65 The genderless pronoun, “they”, will be used in interview quotations when original interviews were held in Malay. This is because the Malay language makes no use of grammatical gender.

260

in comparison had a much better performance. So, I thought

why not support his business and at the same time earn

some income. (Financial Citizen #10, 29 September 2016,

translated from Malay with emphasis added)

Influential.66 But in terms of actually investing, I’m not really

depending on him because my decision to invest was actually

to help him. Many unit trust agents have approached me to

invest but the reason why I chose him is because I wanted to

support him—that’s all. (Financial Citizen #28, 24 December

2016, emphasis added)

To help extend our understanding of the socially-conditioned notion of financial empowerment, Financial Citizen #28’s answer above could be used. In the interview, Financial Citizen #28 was insistent that they are independent when making stock market investment decisions. Repeatedly, the interviewee claimed that external influences (for example, elites’ formal initiatives) were unimportant to them. Nonetheless, the interviewee also claimed that they had given full control to their friend (who is a unit trust consultant), to manage what they said was “ninety-nine per cent” of their unit trust investments.

This specific example supported the notion that financial empowerment is not only individualistic but could also be socially- conditioned. On the one hand, Financial Citizen #28 valued their autonomy, insisting for their independence in financial decision-making. They claimed that they are confident and responsible in financial planning, doing so for

66 The interviewee was discussing how influential their friend (a unit trust consultant) to their stock market investment decisions.

261 their personal benefits. On the other hand, this interviewee also valued trusting kinship in the space of personal finance, values which had not been captured in the global discussions of FC. To Financial Citizen #28, personal independence and autonomy are important; however, equally important is the maintenance of proximate and trusted social relationships.

The concept of trust is prevalent in the observation that financial empowerment could be socially-conditioned. Several financial citizens described how having the right licensed intermediaries was important because ironically, in a system that rewards its agents based on commission, finding a licensed intermediary that would act in one’s best interest is difficult. This echoes a claim made by an elite interview:

[A] lot of these unit trust companies employ agents that are

paid on commission. […] Their incentive is to sell products

that give the highest commission. Not necessarily the

products that are best for their clients. So, there’s very little

independent advice out there. (Official at EPF #6, 14

December 2015)

Reflecting on the quote above, several financial citizens mentioned their worry that licensed intermediaries could only be promoting investment for their personal gains. To these interviewees, such behaviour is an additional risk that they needed to consider when making decisions in stock market investment. These risks, rather than being characterised by market factors, are instead influenced by social factors. Managing them, therefore, are done through trust, experiences, and kinship in social relations.

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Additionally, this finding could explain why certain types of stock market investments are preferred over others. For example, unit trusts seemed to be the more popular choice among financial citizens compared to direct stock market investment. This could be explained by the growth of the unit trust consultant system from 2002 onwards (FiMM, 2016, see more in

Chapter 5), which would make it a more common occurrence for anybody’s sibling, friends, or even parents whom they personally know and trust to also act as their licensed intermediary.

Concluding this section, it seemed that while the government’s envisioning of financial empowerment and individualism stemmed from neoliberal tendencies, cultural elements specific to Malaysia had made the outcome of FC far from this idealism; therefore, making it unique to the country. Nonetheless, although financial citizens’ experiences differed slightly from formal initiatives’ motivations, they demonstrate that the initiatives had been successful to some extent. Specifically, while financial citizens might not act as the individualised, entrepreneurial, and economically rational citizens envisioned by formal initiatives, they are positively responding to elites’ visions by actively engaging in stock market investment and financial planning, even if they are doing this via more cultural and/or social routes.

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7.6 The New Networks of Privilege: Inclusion vs.

Exclusion

This section acts as a reflective commentary on the interviews conducted with the study’s sample of financial citizens. Before going further into the analysis, the section first begins with a case study of interviewee Financial

Citizen #16, a new investor-cum-unit trust consultant in their early 20s.

When Financial Citizen #16 was asked how they became encouraged to invest in the stock market, they responded with an inspiring tale of friendship:

He makes you want to have dreams. He talks about taking

his parents for Hajj.67 He talks about wanting to have a good

car. Things that you think you could only achieve in your

forties. So, those were the values that he brought in. it wasn’t

as if he was trying to show off, but he made me think, why

can’t I achieve these goals now? (Financial Citizen #16, 20

December 2016, translated from Malay, original emphasis)

In Financial Citizen #16’s story, the “best friend” in question also acts as a unit trust consultant. The best friend is a figure who would commonly elicit conversations felt extraordinary for two youths, at least in the perception of

Financial Citizen #16, one which would make the interviewee consider the question of “What are the most important values in my life?”.68 This specific example of Financial Citizen #16 is an apt introductory tale which illustrates

67 This is referring to the Muslim’s pilgrimage duty which is important to many Malaysian Muslim citizens. 68 This is a direct quote from the interviewee.

264 a common denominator in all of the financial citizens’ objective to invest in the stock market: to aspire for personal betterment.

The aspiration for personal betterment disproves the assumption that financial citizens' behaviour in financial spaces is purely conditioned by economic rationalities. Despite the types of access they have for financial markets and skills, financial citizens place symbolic notions in financial investment, having multitudes of motivations that are often complex and sometimes contradictory to one another.

To engage in this discussion, interview findings with financial citizens regarding their motivations to invest in the stock market could be used. For many of them, consuming complex stock market activities do not necessarily promise rewards in the form of additional wealth and income. Rather, the activity is consumed to provide financial citizens with the ability to have future goals and dreams. This point demonstrated that stock market investment could act as an enabler to financial citizens’ agency. This agency is used by financial citizens not only for security but also to afford a more meaningful and comfortable way of living, as if their freedom is tied to financial risks and rewards. Finance thus, makes up a large portion of the study’s sample of financial citizens’ lives, as many of them claimed that financial worries often stop them from living the way they want, which includes their inability to take up their dream jobs, to spend more time with family, or to carry out non-economic philanthropic work.

Financial worry also appeared to be temporal, as according to interview findings. Financial citizens constantly cite that there is a need to focus on financial planning now more than ever:

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When I think about my lifestyle in KL, if you see a person

with a minimum salary of RM4,00069—they can’t survive

here. Because of the transportation, the rent, the loans, the

credit cards; etcetera, etcetera. When their salary increases,

they increase their expenses as well. They’ll think; “my salary

is this, so why don’t I just get another credit card?” Initially,

they think they could manage but finally they can’t manage. I

think this is why the government is seeing the pattern; how

Gen-Y especially, are losing themselves in spending instead

of savings. […] I’m seeing this. Even among the fresh

graduates. […] If you’re a fresh graduate, with a salary of

RM3,000—having a credit card, a car, and a personal loan;

how are they going to manage it? (Financial Citizen #18, 19

December 2016, original emphasis)

Currently, the Malaysian inflation rate is averaging 3-4%

according to the government. But we must realise that living

in Kuala Lumpur, it is more than that. The inflation in Kuala

Lumpur is about 7-8%. We use more money than the average

Malaysian use. So, when I’m investing I’m definitely getting

more returns compared to my previous investments, but it

has to be kept for long-term. If I haven’t changed where I’ve

invested, I would just earn 5-6%. That kind of returns can’t

even beat the inflation since in Kuala Lumpur, it’s about 7-

8%. In fact, I might be losing -1 or -2%. (Financial Citizen

#24, 20 December 2016, translated from Malay)

69 RM4,000 is approximately £748 at the time of writing. The salary referred here is on a monthly basis.

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The temporal element of financial needs has been echoed multiple times in other interviewees' answers. Among the sample, many financial citizens demonstrated the perception that financial planning is much more important today, in comparison to previous periods, for example, the time when their parents or grandparents had grown up in.

This perception might explain why the majority of interviewees regarded elites as important in carrying out the role to ensure that Malaysian citizens are equipped with the right skills to be able to invest in financial markets. When prompted with the question if they regarded access to financial markets and/or access to financial skills as equivalent to a citizen’s rights, many of them had said “yes”. Interestingly, many regarded that elites have the responsibility to implement such accesses as formal initiatives; however, equally important are citizens’ responsibility to engage in these formal initiatives and to change their behaviour by thinking about financial planning more seriously. This seems to suggest that financial citizens are engaging in FC development within the context of citizenship institution, in that, while there are actors with the duty to construct and provide rights to citizens, citizens too have the duty to act in a certain manner to afford these rights.

However, the question above (on rights for access to financial markets and skills) also shed light on an issue prevalent in the development of FC: the privilege of a certain few over the greater others. This could be exemplified by this study’s own financial citizens’ sample, in which, nearly all financial citizens were urban professionals and predominantly living in Kuala Lumpur, the capital of Malaysia. This finding illuminated the main concern addressed

267 by several elite interviewees in Chapter 6, that resolving equality issues and nation building aspirations through the development of FC could create further inequality.

This comment is especially true in the way that elites’ initiatives, especially in contemporary times, have ignored the fact that many Malaysian citizens simply do not have the financial viability (in the form of excess income) to respond to these initiatives and thus participate in the process of

FC development. As per this study alone, a simple observation could be made that citizens need disposable income to invest and access to the internet just to enter the stock market. These two features might not be afforded by certain groups of citizens, for example, those who are: living below certain income lines, unemployed, rough sleepers, and/or living in rural areas. This comment could further be analysed by observing the differences in income between the states of Malaysia (Table 4). There are thirteen states and three federal territories in Malaysia, with Kuala Lumpur being both a federal territory and a national capital of Malaysia. The difference between states and federal territories in Malaysia is dependent on its administrative divisions, with state governments responsible for the former and the federal government responsible for the latter. The mean monthly gross household incomes of Selangor, Kuala Lumpur and another federal territory, Putrajaya are used to calculate the average income of the state of Selangor and its enclaved territories arriving at RM10,903 (£1,944).70 The state with the least and highest income disparity compared to Selangor and its enclaved federal

70 The 2016 figure is used as it is the latest and most holistic publicly-available data on mean household income.

268 territories are Labuan and Kelantan, with a mean monthly income of

RM8,174 (£1,457) and RM4,214 (£751), respectively.

Table 4: Mean Monthly Household Income by State for 2016 (£ and RM)

£ (RM)*

2016

Malaysia 1,240 (6,958)

State:

Kuala Lumpur 2,084 (11,692)

Putrajaya 2,060 (11,555)

Selangor 1,689 (9,463)

Selangor and enclaved 1,944 (10,903) territories**

Labuan 1,457 (8,174) Johor 1,235 (6,928) Melaka 1,221 (6,849) Pulau Pinang 1,207 (6,771) Negeri Sembilan 1,049 (5,887) Terengganu 1,030 (5,776) Sarawak 960 (5,387) Sabah 954 (5,354) Perak 903 (5,065) Pahang 893 (5,012) Perlis 891 (4,998) Kedah 886 (4,971)

Kelantan 751 (4,214)

Currency exchange was taken from the average historical rate for 2016, where £1 = RM5.61 (www.ofx.com) ** Selangor and enclaved territories figure is the average of the sum of mean monthly household income of Kuala Lumpur, Putrajaya, and Selangor

Source: Department of Statistics Malaysia (2017)

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If the urban areas of Kuala Lumpur and its surroundings are considered (as nearly all financial citizens are located in the urban areas of

Kuala Lumpur and its surroundings), data demonstrated that the average income of the federal territories and the state of Selangor is at least 1.33 times higher than other states (to the maximum of 2.59 times). Furthermore, statistics collected from the Malaysian Department of Statistics demonstrates that income disparity between urban and rural areas as of 2016 is at 1.76:1

(DoSM, 2017). This data is illuminating as residents of Selangor and its federal territories clearly have a bigger advantage and financial viability to participate in stock market activities. This could probably inform why, as mentioned by an elite interview, that 50.0% of stock market participation in

Malaysia is concentrated in the state of Selangor and the federal territory of

Kuala Lumpur. The combination of financial citizens’ findings and official statistics problematise the democratic notion of FC development, as in the

Malaysian case, there exist social networks of privilege composed of urban professionals who are aspirational to one another, acting as self-referencing individuals in the development of FC. These networks could be exclusive as it reaches actors in only in social proximities, thus disadvantaging Malaysian citizens who are external to these networks.

Furthermore, these social networks do not necessarily respond to elites’ FC development initiatives and sometimes are hostile to the initiatives based on their perception of the underlying authorities responsible in this process. Thus, these networks are often disconnected from the authorities and uphold their autonomy over authoritative forces external to the networks. As such, their action sometimes contradicts their perception, as it

270 is unclear to what extent does their decision to consume stock market investment are self-acting or influenced by their social proximities or the forces external to these (for example, different types of elites and the institutions related to them).

Additionally, it seems that the privilege enjoyed by these social networks have been taken for granted. Some financial citizens did not recognise that stock market participation is not a freedom afforded to every

Malaysian citizen. For example, when asked if they viewed the stock market as an arena exclusive for the wealthy, many responded as never having thought of the stock market in such a way:

I don’t think so. Because you can start with RM500 if you

want to. It doesn’t--. Yeah, I’ve never felt intimidated by

that. It’s not as if you need a large amount. (Financial

Citizen #3, 26 September 2016, emphasis added)

I don’t agree to those kind of ideas. To me, it’s just about the

knowledge. Maybe most people think it’s for the rich, the

well-connected. But if they know things like small-cap

companies listed on the bourse, perhaps, maybe, they would

start considering investment in those private stocks. To me,

it’s just a problem of people not being well-educated.

(Financial Citizen #11, 13 October 2016)

It doesn’t depend on whether someone is rich or has the

finance to invest, actually. It depends on their perception of

investment. If they are focusing on the family, on wanting to

save for the long-term, they would do it. They will not think

about whether they have money or not. But if they keep

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thinking they can’t afford it, then they won’t be able to do it.

(Financial Citizen #29, 23 December 2016, translated from

Malay)

Several financial citizens also admitted having seen a change in the way they perceived the stock market, with some saying that access to the arena had become easier over the years:

Before this, the stock market, if I recalled ten years or maybe

even fifteen, twenty years ago when I used to follow my dad

to the remisier, the people who was sitting in the lounge—

because you didn’t have internet access back then—you can

see that the people sitting in the lounge watching these

screens are mainly elderly people. And you can also, whether

you like it or not, you can almost segment it to a certain race,

which is the Chinese community. […] So, with the slicing of

the lot size and with the internet; as you can see a number of

investors, maybe I’m wrong, is becoming younger. […] I can

almost say that it might not be as intimidating as before.

(Financial Citizen #1, 27 September 2016)

Before I started unit trust, I was using EPF. At the time, I just

started working. I was like; can I do this? And then my agent

told me that you don't necessarily have to use EPF (allocating

it into unit trust funds). That I could also use cash or lump

sum? So, I did. I took the minimum. I paid RM1000.71

71 RM1000 is equivalent to approximately £193.42 on the interview date (Source: www.xe.com).

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(Financial Citizen #5, 9 October 2016, translated from

Malay)

The answers above are interesting because none of the financial citizens demonstrated some level of empathy or awareness that there might be

Malaysian citizens who simply do not have the ability to access the stock market.

Furthermore, this raises another question on whether FC development in Malaysia has exacerbated different and exclusive accesses to financial resources. The growth of unit trust consultant memberships to approximately 54,000 people as of 2016 seems to suggest that this might be the case (figures were recorded when the interviews were conducted; latest figures as of February 2019 is at 60,500 people) (FiMM, 2019). This could also be exemplified in the growing network of celebrity investors and investment gurus whose entire careers are dedicated to organising popular investment:

You can see there are more investment gurus that are

providing teaching to youngsters how to invest in the stock

market. […] And you can see those people attending the

classes are younger. (Financial Citizen #1, 27 September

2016)

In 2012, if you’ve heard of Doctor Rias,72 he used to do

classes, right? […] In 2014 when I just started “taming”

myself with stock investment, I saw his ad on Facebook and I

straight away joined. 2014 was the year that I learned a lot

72 The name is given a pseudonym for privacy purposes.

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about stock market investment. (Financial Citizen #7, 30

October 2016, translated from Malay)

Interestingly, several financial citizens who also acted as unit trust consultants while having regular everyday employment also admitted to being "investment specialists" with multiple followers on social media.

Financial Citizen #9 claimed that they had formerly been an engineer who decided to switch careers into financial advisory, despite not having a professional qualification or long-term experiences in professionally managing financial portfolios. Currently, the interviewee has a substantial following on social media for financial planning recommendations. Similarly,

Financial Citizen #14 claimed to have started a wealth management firm from the stock market investment profits they earned. This interviewee too, has a substantial presence on social media with tens and thousands of subscribers, along with a network of financial planners, responsible for the conduct of well-known private financial planning classes in Malaysia.

These examples and outcomes demonstrated that formal initiatives in

FC, designed with an inclusive and democratic view which are promoted with the neoliberal concept of individualism, is misfired to some extent. This section demonstrated that these formal initiatives could only benefit certain types of citizens, who have, from their social networks, whether existing or newly created; have the privilege of access to financial arenas and skills external to formal initiatives which could enable them to continue to reap the benefits of FC development in an unequal, uneven manner.

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7.7 Conclusion

The findings and analysis of this chapter have greatly demonstrated the active roles they play in the Malaysian FC development, although this role is often ambiguous and sometimes contradictory. Financial citizens' behaviour is aligned to elites’ objectives in FC development, in the way they are carefully considering their financial futures in a responsible and autonomous manner. On the other hand, the motivation behind this behaviour is sometimes contradictory to formal objectives. This could be found in the way they invest for the purpose of feeling empowered in a religious and moralistic sense, rather than for purely economic purposes. Empowerment is also rewarded through stock market investment due to the communal and social benefits that it brings to financial citizens. This finding contradicts the neoliberal assumption behind FC development, in which individuals are envisioned to be individualistic in order for them to be responsible and autonomous in their personal finances.

The results of this chapter demonstrate that financial citizens do not necessarily play a straightforward role in FC development. In their perception, they might not necessarily directly and consciously respond to formal initiatives. Nonetheless, they continue to influence and shape the outcomes of this development. More and more citizens are clearly becoming aware of financial planning as promoted by formal initiatives. They are also becoming more interested in the access to complex financial arenas and sophisticated financial skills for the purpose of acting on the aspirations of

275 their financial futures. To this extent, formal initiatives have been successful in changing the behaviours of Malaysian citizens. On the other hand, and as discussed in Section 7.6, there had been a discrepancy between aspirations of formal initiatives and outcomes. While the formal initiatives of FC were constructed with a foundation of democracy, social networks of privilege have instead been a striking result. These networks are composed of urban professionals, who are self-acting and influential to one another, but more importantly, they are exclusive from social groups external to them.

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Chapter 8

Chapter 8: Conclusion

8.1 Concluding Remarks

After four years and seven chapters, the thesis has reached its conclusion.

The motivation for this thesis arose from my observation of a specific investor euphoria that occurred in my home country, Malaysia, one involving its citizens actively engaging in stock market investment in everyday life setting. To begin this research, I have situated myself within the fields of financialization from the everyday life angle, a field that focuses on observing the intrusion of financial activities in the intimate spaces of individuals’ lives.

Additionally, the research has been narrowed as to observe financialization from a very specific angle, FC development, a language used to discuss the need for formal actors (such as political and policymaking elites) to address the exclusionary nature of the financial system.

This chapter synthesises this thesis together, discussing how its objectives and RQs that have been posed in the earlier chapters are

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addressed by the findings outlined in the later ones. As such, the chapter is

organised as follows. Firstly, Section 8.2 acts as a reminder of the important

literature that guides the identification of the thesis’ objectives and its RQs

(as explained in Chapters 2 and 3). Section 8.3 synthesises the findings

outlined in Chapters, 5, 6, and 7 while explaining how the findings address

specific RQs. It demonstrates what has been found in the Malaysian case of

financialization through FC development, why these findings matter to

theory, and the unique context of the Malaysian case in relation to studies of

financialization and FC development. Following this, Section 8.4 acts as a

finalising commentary of the thesis, outlining the limitations of this thesis

and presents implications for future research.

8.2 Summary of Thesis

This study began by identifying limitations in existing literature that focus on

financialization of everyday life as well as literature which focus on FC. The

first limitation relates to the geographically “anaemic” nature of existing

financialization studies, which tend to focus on Anglo-American or European

contexts (Christophers, 2012). Despite the recent growth of non-Anglo-

American or European examples of financialization (Ashman et al., 2011;

Bonizzi, 2013; Demir, 2009; Karwowski & Stockhammer, 2017; Klink &

Denaldi, 2014; Rethel, 2010, 2018), the studies are often conducted from a

macroeconomic angle with the application of secondary longitudinal datasets

or policy document analysis. The rarity of studies in the global south or

278 emerging economies which take into account the context in which finance has intruded everyday life opened up an opportunity for this research. An exception should be noted of geographical work on Singapore (Lai, 2017,

2018; Lai & Tan, 2015); although, a mention of only one or two authors highlights the exceptionally ignored area of financialization studies in eastern countries, especially those coming from emerging economies. The case study on Malaysia thus presents itself as a response to this limitation.

In the thesis, FC development is chosen as a lens in which to view financialization. The choice for FC development relates to the usage of the concept as a language that advocates the expansion of access to financial markets and skills among ordinary citizens (Leyshon & Thrift, 1995). The thesis argues that FC as a language assists in the process of making finance grow to become more important in everyday life for ordinary citizens, thus making it an apt lens for observing financialization. Furthermore, the choice of FC helps in addressing the second limitation of existing studies; the lack of multidimensional empirical analysis in financialization. Due to the presumed dichotomous relationship between elites and citizens in FC, the present study constructs its RQs by reflecting on this relationship, addressing the need to observe the perspectives of both elites and citizens in FC development.

The choice to approach this study from a CPE angle is apt for this multidimensional viewing of FC. The thesis uses Best and Patterson’s (2010) approach of CPE, which is about bringing together “cultural dimensions of the economy, the economic aspects of culture, and the political character of both,” (p. 3). This view of CPE benefited this thesis by allowing an observation of financialization as place-specific and as such, is impacted by

279 both political and cultural factors. From a political angle, the approach had been useful in allowing for in-depth analyses to be conducted of Malaysia’s postcolonial past, the development of FC policies that have encouraged financialization, and the elite actors and the roles they play in FC development. From a cultural angle, the thesis adopted the view that culture is to be defined as shared identity, customs, national institutions, social behaviours, and common interpretations. This viewing of culture allowed the thesis to provide a multidimensional perspective on the roles that both elites and citizens play in financialization. It is through this cultural lens that an observation could be made on the agency that exists in everyday life, which influences and/or expedites the processes of financialization.

It is also important here to recall how FC was understood in this research. Firstly, earlier work on FC had been important in establishing understanding of FC in academic terms. Leyshon and Thrift’s (1995) paper mentioned the concept briefly in its concluding remark, referring to the concept as an opportunity to create conversation on how to make finance more inclusive and democratic. The concept of “citizenship” was chosen as it represents a dichotomous relationship in a membership of responsibilities, such as between the state and citizens. In this case, the authors are referring to the actors who are responsible for the construction of the financial system

(in this thesis, political and financial policy elites) and actors who are responsible for sustaining the financial system through their financial behaviours (in this thesis, citizens).

As such, Leyshon and Thrift have been important in opening discussions from an academic angle on the efforts to make financial systems

280 more inclusive for financially-marginalised groups. However, subsequent years, discussion of financial citizenship itself has been limited, with the exception of a few papers that observe FC normatively as an expansion of rights among ordinary citizens to access financial markets and skills, regardless of their professions, educational background, or income status

(with exception, Dymski, 2005; Dymski & Li, 2003). Post-GFC has seen the emergence of more critical engagement, with studies conceptualising FC in a more analytical way, taking into account the efficacy and consequences of FC development (Berry, 2015; Kear, 2013; Lai & Tan, 2015).

This study’s choice to study financialization through FC comes from the need to add depth in the conceptualisation of FC and to provide empirical work that would assist in this conceptualisation. As such, the thesis views FC through its earlier description; as a programme of disseminating formal efforts aimed at widening access to financial markets, skills, and products, among citizens. Additionally, it aims to problematise this programme by paying attention to the processes that drive FC development (including motivations behind the process, issues and obstacles that have arisen, and its outcomes) and the actors that help construct and sustain the programme

(elites and citizens).

The literature review conducted in Chapters 2 and 3 assisted in the formulation of the thesis’ RQs:

RQ1: What roles do political and financial policy elites play in

Malaysia’s FC development?

RQ1a: What types of historical developments in terms of

policies and initiatives could be identified as

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encouraging the involvement of citizens in the stock

market?

RQ1b: What are the current events and policies that

shape the modern development of Malaysian FC?

RQ1c: Have FC formal initiatives met elites’

expectations?

RQ1d: What are the obstacles faced by political and

financial policy elites in the development of FC?

RQ2: What roles do financial citizens play in Malaysia’s FC

development?

RQ2a. How do financial citizens’ behaviours relate to the

formal initiatives in FC development?

RQ2b. Has the outcome of FC development

demonstrated that financial citizens’ behaviours align to

the objectives envisioned in elites’ formal initiatives?

RQ2c. How do financial citizens’ behaviours in stock

market investment differ from neoliberal assumptions

that citizens should take control of their personal

security in an individualised and self-acting manner?

The methodology chosen in addressing the RQs above was explained in Chapter 4. It justified the choice of pragmatism as an epistemological foundation of the thesis due to its focus on the research process above all else, thus celebrating flexibility in research tools employed. As such, the research design of the thesis was MMR, in which documents and datasets analyses, as well as sequential semi-structured interviews with elites and citizens who

282 invest in the stock market, are chosen. The findings of the research conducted using these tools were elaborated in Chapters 5, 6, and 7 and will be explained further in the next section.

8.3 Findings of the Thesis: Chapters 5, 6, and 7

The findings of this thesis have been analysed and discussed in Chapters 5, 6, and 7. In this section, these findings are outlined to show how RQs 1 and 2 and its sub-questions have been addressed. The discussion on the thesis’ findings begins in Chapter 5, which addressed RQ1a using secondary data gathered from document and dataset analyses. It should be noted that the summary of RQ1a’s discussions in Chapter 5 is longer under this section compared to the summary of the discussion on RQ1b-RQ1d. The reason for this is because the findings for RQ1a (the historical context of Malaysia’s FC development) has been absolutely important as a foundation on which the semi-structured interview questions used for the data collection of RQ1b-1d and RQ2 and its sub-questions rests. The next sub-sections outline the thesis’ findings based on which RQs (or sub-questions) are being addressed.

8.3.1 Resolving RQ1: The Roles of Elites in FC Development a) RQ1a: The Historical Trajectory of Malaysia’s FC Development

The story of Malaysia’s historical development of FC begins from an attempt by political and policy elites to depart from the negative legacies of British

283 colonialism. These elites play important roles in this departure, expressed through the construction of policies that have encouraged FC-related motivations, such as the promotion of ordinary citizens’ participation in financial markets. Specific to this thesis is the observation of the stock market as an important arena which holds key details that make up our understanding of FC development in Malaysia today. The stock market which was created by the British Empire began as an explicitly exclusionary site.

Only British companies had been allowed to be floated on the market with the specific purpose of extracting occupied rent from Malay[si]a. This purpose meant that the rights to the stock market (in terms of access and skills) were not only exclusionary to actors of specific class or wealth backgrounds, but those of colonist statuses. At the same time, the British had also segregated the Malay[si]an society by economic functions, causing deeply-entrenched interethnic disparity, especially between the majority

Bumiputera and the minority Chinese groups.

It is through these postcolonial legacies that the Malaysian elites had a unique story to tell, a story which demonstrated policy efforts that assisted in nation building and correcting socioeconomic issues simultaneously. This step was made possible through the introduction of the New Economic Policy in 1970. The Policy assisted elites in mobilising wealth along ethnic lines by connecting its citizens to stock market investment. It is also important to understand that through this strategy, Malaysian elites were able to reclaim the stock market from colonial hold, as they embarked in corporate takeovers to transfer equity ownership from colonial to Malaysian hold.

Furthermore, government investment agencies were set up to manage these

284 equities, which were then sold to the Bumiputeras in an effort to mobilise wealth. It had been the first instance in which ordinary Malaysian citizens were encouraged to purchase unit trust schemes managed by these investment agencies with the promise that such behaviour could create wealth and betterment for their lives. Although such schemes were firstly exclusive to the main ethnic group, the Bumiputeras, they were gradually offered to all ordinary citizens, regardless of their profession, educational level, or income status. The strategy of mobilising wealth through market means has been observed as the first instance of FC development in the country. Although such strategies have not been specifically conducted with an underlying FC rhetoric, it has assisted in expanding access to financial markets among ordinary citizens.

Subsequent policies implemented in the 1980s to 1990s further exacerbated the process of FC development. Similar to the postcolonial period, the policies aimed at nation building while attempting to address socioeconomic issues. Two policies guide this period, Look East and Malaysia

Inc., both of which were implemented under the Mahathir Administration.

During this era, nation building ideologies were used as symbolic promises that societal-wide increase in private wealth could be gained if the country could be transformed into a developed nation. Accompanying the nation building ideologies were efforts to liberalise the economy, using neoliberal policies such marketisation and privatisation. At the everyday level,

Malaysian citizens were encouraged to become neoliberal actors, celebrating individual freedom and financial autonomy through lax market governance among institutions and citizens alike. The result had been favourable to FC

285 development, exemplified by the high percentage of citizens’ involvement in the stock market (represented by retail investors’ figures), who make up

50.0% of the volume of shares transacted in 1996 (Sulong, 2014).

However, Chapter 5 also problematised FC development in Malaysia, demonstrating how historical events had proven that the programme is not as straightforward as envisioned by elites. This was illustrated through the emergence of the AFC, which hindered all economic and financial objectives of Malaysian elites, including that of FC development. National strategies which had been widely celebrated such as economic liberalism were suddenly identified as a hindrance to the country’s development. Malaysia’s neopatrimonial polity, which had been celebrated as the key to Mahathir

Administration’s success, also meant that key political figures (most importantly, Mahathir himself) had an almost autocratic control over the management of the crisis and post-crisis policy directions. As a result, dramatic changes in policy strategies were seen, for example, the move from economic liberalism to capital controls to reembracing neoliberal ideologies in economic policies post-AFC. Such direct control over policymaking spaces meant that there was little intervention by other types of elites (non-political or policy-based) who would question whether FC development could truly benefit citizens in a sustainable manner, especially after the crisis’ negative impact on citizens’ financial well-being. As such, the programme was revisited almost immediately post-crisis.

The transformation of the Malaysian financial system post-AFC was assisted by the construction of the CMP1. Through this formal document which charted policy directions on reforms post-crisis, many changes had

286 occurred which directly affected FC development. Various financial institutions involved in FC development pre-crisis were strategized in different ways to assist in the overarching goal of nation building. Firstly, the

KLSE was demutualised and incorporated as Bursa Malaysia. As a stock exchange, Bursa was responsible for the development of the stock market, although being a private entity also meant that it now had more stakeholders than just the government and society. As a corporation, Bursa was eager to expand and deepen the Malaysian stock market, which included the promotion of the stock market as more inclusive for ordinary Malaysian citizens. Secondly, the Securities Commission continued to play its dual role of regulating and developing the Malaysian capital market (including that of the stock market). They were also given the role of redirecting FC development so that citizens are encouraged to take up stock market investment through indirect ownership. This was conducted through the expansion of the unit trust industry using two main tools: financial intermediaries and shariah investments. b) RQ1b: Post-2009 Modern Programme of FC Development

Following these findings, Chapter 6 observed the modern development of FC, focusing on the post-2009 periods after the election of former PM Najib

Abdul Razak. The empirical findings of this chapter were useful in addressing

RQ1b, 1c, and 1d.

The Najib Administration’s first term (2009-2013) was guided by the

New Economic Model, a ten-year blueprint which strategized on Malaysia’s nation building objectives. How these changes affected FC development is in the manner in which neoliberal undertones had more direct influences on the

287 objectives of the programme. In the past where the elites had taken a more direct control over citizens’ financial responsibility (for example, by managing sovereign unit trusts sold to citizens under government investment agencies), the modern programme was more about shifting this responsibility away from the elites and to the citizens. Through four main steps (reducing broad-based, citizen-focused subsidies; cultivating a culture of financially-responsible citizens; reforming the retirement system; and cultivating inclusion through education), citizens are encouraged to become more autonomous and self-acting over their financial futures.

Semi-structured interviews with elites were used to better understand the motivations, issues, and outcomes of modern-day FC development. The analysis of secondary data used in both Chapters 5 and 6 guided the construction of the interview questions with thirteen (political, policy-based or business) elites identified as having expertise on FC development specific to the Malaysian context. Interview findings revealed that locally, different types of elites involved in FC development were in frequent communication with one another, mainly brought together by the government’s overarching nation building strategy. Citizens were envisioned with the ideology of becoming a group of financially autonomous, independent, and responsible actors. c) RQ1c: Results and Expectations of Post-2009 FC Development

The different views on the contribution of financial citizens by elites did not mean that their objectives contradict one another. In fact, their visions of FC development align with nation building goals; they see financial citizens as contributing to the country’s economy by putting measures that

288 simultaneously ensure safe consumption and growth of financial activities are in place.

Elites’ perspectives on the inclusive notion of FC development further exposed problems with the programme. Despite their involvement with the programme, elites were critical about the benefits of access to financial markets and skills for citizens. They perceived financial markets in general

(not just the stock market), as risky arenas; the normalisation of such arenas among ordinary citizens could cause issues on the sustainability of citizens’ long-term savings. Elites cited the lack of monitored outcomes in FC development as being their main source of concern. They argued that there is a complexity in monitoring FC development’s outcome, as nationwide studies to assess changes in saving and financial planning patterns had yet to be conducted.

More importantly, the nation building element of Malaysia’s FC development raises the question of why citizens are encouraged to normalise financial risks in their everyday life for the benefit of the nation. This is especially problematic when factoring in the fact that many Malaysian citizens are still in the precarious position of not having enough disposable income to even consider the types of activities encouraged through FC development. Attempts to promote FC development alongside nation building only serves to exacerbate income inequality and disunity by excluding the majority of Malaysian citizens from FC development. This simultaneously debunks the inclusive notion of FC.

289 d) RQ1d: Issues in Post-2009 FC Development

The involvement of several groups of elites in Malaysia’s FC development, however, has problematised the ways elites perceive that such financially- responsible citizens could assist in their institutional objectives. Political elites celebrate the idea of responsible, financial citizens who could assist in minimising nationwide financial instabilities and potential financial crises, by ensuring that individuals are using financial products in an informed manner. Financial policymaking elites were inspired by the idea of transforming citizens into financial entrepreneurs, who act like financial professionals, with the ability to adopt complex investment strategies and in doing so, would be able to participate in and deepen the stock market in a sustainable manner. Business elites who did not have a direct control over policymaking along FC development lines, were of the opinion that FC development indeed serve the interests of financial markets rather than citizens themselves.

8.3.2 Resolving RQ2: Telling the Citizens’ Story of FC

Development a) RQ2a. Reinforcing Elites’ Motivations through Resistance

Firstly, to address RQ2a, the discussion explored how the sample of financial citizens’ investment behaviour related to elites’ objectives in FC development.

Despite the citizens’ autonomous choice to become active investors in the stock market, their behaviour did not seem to demonstrate a conscious decision to support elites’ FC development objectives in a direct manner.

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More interestingly is the manner in which financial citizens claimed to have become engaged with stock market investment in spite rather than in support of elites. Their decisions were deliberate and filled with conviction to resist connections with elites, especially those who were political in nature, transforming the stock market into a space of redemption for citizens who desired control over their long-term security and livelihoods.

Of course, this finding might had been greatly influenced by the then political and economic environment, which had become unstable after various allegations of fraud and investment mismanagement by the former

PM Najib Abdul Razak administration ("Fewer than half Malaysians trust the government, study shows," 2015). These background events provide context for explaining the extent to which FC development had worked in Malaysia.

Specifically, financial citizens had demonstrated a sophisticated way of considering not only financial factors in their investments, but also external factors such as politics and the overall socioeconomic conditions of their country—in order to decide on what had been best for their financial security.

In this sense, these citizens are behaving in a self-acting, empowered, and autonomous manner, as per FC objectives. Although, specific to the

Malaysian case, financial citizens’ behaviour did not suggest that they wanted to support elites’ nation building strategies. Rather, they acted in the way that they did in resistance to these formal goals, empowering themselves so that they could make a choice to become autonomous individuals external to elites and their political and/or policy goals.

291 b) RQ2b: Financial Citizens’ Behaviours versus Elites’ FC Motivations

Addressing RQ2b has been helpful in seeing whether citizens’ investment behaviour is aligned to the objectives of elites’ FC initiatives. The sample of financial citizens mostly invested for deferred benefits or risk management, such as for the purpose of retirement, ill health, unemployment and/or sudden death. They saw stock market investment as a sophisticated way of managing their financial planning, in pursuit of financially-prudent and responsible behaviour. However, according to these interviewees, their feeling of financial empowerment were not attributed to elites’ initiatives. In fact, these citizens did not seem to demonstrate any form of confidence in financial investment. The extent to which they exhibited confidence was only in their choice to invest in addition to their general bank savings and mandatory retirement savings. When it comes to making specific financial investment decisions (for example, in the choice of the equities or unit trusts they purchase), most financial citizens admitted to not always having full confidence in acting on their own accord.

This finding problematises the neoliberal assumption behind FC development, which comes with the idealistic image that financialised citizens are ones that are entrepreneurial, individualistic, responsible, and more importantly, self-acting. Furthermore, this finding relates to the types of discussion used to address RQ2c, which argues that in Malaysia there is a specific type of financial empowerment among citizens which is culturally- and socially-conditioned.

292 c) RQ2c: Problematising Neoliberal Assumptions in FC: The Culturally-

and Socially-Conditioned Financial Citizen

Firstly, culturally-conditioned financial empowerment was demonstrated through the case study of shariah investment. Financial citizens chose shariah-compliant investments, admitting that without these choices, they would have opted for a completely different type of investment vehicle. This case study also demonstrated that financial citizens invested not only for the purpose of individual economic/financial gains, but also to project a complex notion of identity and morality in their everyday life activities, including incorporating financial planning.

Secondly, the findings suggest that social influence was also a strong factor in financial citizens’ decision to become active actors in the stock market. Networks of social relationships—formed between families, friends, and colleagues—became informal influences that transformed citizens into financial actors who are self-acting, autonomous, and financially empowered.

Interviewees spoke about the influence of exemplary financial behaviour they saw in their proximate social networks, with positive experiences in the stock market, which then inspired their desire to replicate such experiences for themselves. The ability to know and more importantly trust (through close relationships) that one could benefit from the stock market was perceived as far more important than formal initiatives, even if those initiatives would produce much the same benefits.

Interestingly, financial citizens also demonstrated that for some of them, there is a value in maintaining their social networks, even to the point of becoming involved in a complex financial arena such as the stock market.

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This was evident through the accounts of financial citizens who had joined

the stock market simply because they wanted to support the work and action

of other individuals in their social networks. Interview findings mentioned

how important it had been for them to help their friends or family members

who acted as licensed intermediaries73 to earn commissions by consuming

the investment products that had been promoted to them.

Licensed intermediaries as informal influencers, were in fact a direct

result of early-2000s’ FC initiatives that aimed at transforming citizens into

investment promotional actors, who, as this thesis had observed, had also

been actively involved in the process of FC development. In this sense,

Chapter 7 provided valuable empirical findings to support and demonstrate

the meaning and implication of the assumption that social and financial

forces are inseparable.

8.4 Analysis of Findings

The findings of this thesis can be thematically categorised into three main

sections. The first one discusses how the findings of this thesis have been

able to problematise elite-citizen relations in FC through the notion of

responsibility. Secondly, the thesis provides a strong empirical analysis of the

undemocratic notion of FC, thus problematising its message of inclusivity.

Lastly, the thesis’ findings also demonstrate that, through the findings of FC

73 Actors who play a formal role at intermediating investors with the stock market by promoting (and sometimes managing) direct and indirect stock market products.

294 development in Malaysia, that the processes of financialization at the micro- level are subjected to temporality and the notions of trust. These discussions are outlined next.

8.4.1 Problematising the Relationship of Responsibility in FC

The empirical findings of this thesis help to extend the debate on elite-citizen relations, especially by observing the relationship of responsibility between these two actors in FC development. This notion of responsibility aligns to the dichotomous relationship of membership that is assumed in FC. This assumption assigns specific elite actors (such as the state, governments, technocrats and/or policymakers) authoritative duties to ensure that the financial environment for citizens is democratic, inclusive, and safe (Leyshon

& Thrift, 1995). This viewing of FC refers to the territorial notion of political citizenship; here, groups of actors who are included within the territory of a citizenship are awarded rights which would have not been awarded to those who are external to the territory. Similarly, the concept of FC starts off with the territorial notion that elites within a financial system are responsible for the construction and maintenance of that financial system in a safe and democratic manner. FC promotes the idea that financial rights should be democratically spread across the society, ensuring that financially- marginalised groups have the same access to financial markets and skills as everyone else. In response, citizens of the financial system have an equal responsibility in ensuring that the environment they are in are maintained in a safe and democratic manner through their actions and behaviours.

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What the Malaysian case brings to the understanding of the relationship of responsibility in FC is that the interaction between elites and citizens is not straightforward. Complexity arises specifically due to the multiplicity of FC objectives implicit in Malaysian elites’ efforts. FC in

Malaysia has origins from a long history of postcolonial nation building objectives, which sees the cultivation of financially-responsible citizens as beneficial for the socioeconomic advancement of the country through the mobilisation of specific financial practices. This finding is similar to Lai and

Tan’s (2015) study of Singapore, whereby citizen subjects are expressed as contributing to a stronger and more competitive national economy through the transformation of their financial practices. However, in this present study this finding is much more complex in relation to more contemporary, post-

2009 FC initiatives.

In the past, the cultivation of everyday financial practices has been heavily assisted through paternalistic policies such as the New Economic

Policy, which encourages wealth growth through government-managed unit trust funds. In contrast, the modern programme of FC is much more about transferring responsibilities from government to citizens. FC has been promoted with the idea of ensuring citizens are granted the right skills and tools to facilitate their behaviours in acting responsibly, thus making sure that the financial system could be sustained in a safe and stable manner.

Nonetheless, in both cases, nation building objectives continue to act as a foundation of FC development. In this aspect, citizens are seen as important components of the deepening of the national financial markets to ensure the country could reach its economic goals. As such financial citizens seem to

296 have been entrusted with a greater responsibility, not only for their own financial welfare, but also for the welfare of the nation beyond the territories of the financial system.

This finding nods to the comment that financialization has “helped to blur the categories of inclusion/exclusion, citizen/subject, autonomy/coercion to the point where they no longer map onto each other in straightforward ways,” (Cruikshank, 1999 referred to in Kear, 2013, p. 936).

Kear sees FC as a problematic financial government, a misrecognition of how to organise risky, marginalised populations (Dymski, 2005) without

“threatening the security and autonomy of financial markets,” (Kear, 2013, p.

942). Although in addition to Kear’s comment, the Malaysian case demonstrates the importance of financial markets to national development.

It problematises FC by highlighting how Malaysian elites have misrecognised citizens’ needs as an opportunity for nation building.

When those who require rights (citizens) exercise their rights, it affects not only the environment in which they live in, but also the future of those who grant these rights (governing actors) (Marshall, 1950). Similarly, the nation building goal of Malaysian FC development means that when financial citizens exercise their “rights to finance” (by acting in the manner expected of them, such as actively investing in the stock market and planning for their financial futures), they impact the aspirations of political and financial policy elites (in this case, the deepening of the financial system and consequently, the expansion of the nation’s economy). This finding suggests that the Malaysian case is much more complex than the simple notion of inclusion in FC development, as it responsibilises citizens as fundamental

297 contributors to the sustainability and growth of the national financial system as well as for their own personal development. Even if only some citizens at the moment can invest in the stock market, the collective scale of these investment flows are significant and may economically benefit and contribute to market development, proving FC to be valuable for nation building.

8.4.2 The Undemocratic Spread of FC

This brings us to the next theme that the Malaysian case has highlighted, the undemocratic spread of FC. The misrecognition of FC as a simultaneous solution for nation building and the betterment of citizens’ lives is that it still does not address the existing inequalities in the financial system. Financial citizens’ findings demonstrate that there are networks of citizens that have been privileged by FC efforts over others, which raises the question of whether FC efforts are only helping to entrench the inequality that already exists in financial systems. In particular, the potential to create a democratic system is obstructed by the ongoing inability of many Malaysian citizens to participate in even the most basic of financial activities, let alone complex ones such as stock market investment. Such findings problematise the notion that FC could lead to an inclusive, non-discriminating, and democratic financial arena, without other kinds of redistributive policies in place. The democratic notion of FC ignores deep-routed socioeconomic issues that have been riddling Malaysia in the long-term, such as interethnic, interclass, and/or urban-rural income disparity (see for example, Abdul Khalid, 2015 and Khazanah Research Institute, 2016).

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Furthermore, the types of efforts placed by elites do not guarantee the safety of the financial system that citizens are encouraged to engage with (in the sense that their interests are protected once they enter the financial system). Instead, the responsibility to ensure that the financial system should run in a stable manner is entrusted unto the citizens themselves, rather than other types of financial actors such as private financial institutions. Citizens are given an expectation that by providing them with access to the financial system, they should behave in a way that would ensure the stability of the said system. However, this effect is difficult to achieve as citizens’ individual capabilities are extremely limited in highly complex financial markets, which is made more complicated by the fast speed of financial innovations and the intricate practices of larger (often institutional) financial actors (Ertürk et al.,

2007). If citizens are unable to sustainably and profitably remain in the financial markets, it is thus problematic to assume that FC efforts could transform citizens’ behaviours in a way that would contribute to macro-level nationwide objectives.

The notion of inclusion in FC might be a potential contradiction in the

Malaysian context, as elites had used it with the aim to resolve socioeconomic and nation building issues by transforming citizens into financial actors.

More explicitly, the question to ask is if FC is an elite project intended for the betterment of the country’s economy or its citizens? If it is for the former, a quick review of critical literature on the GFC brings reminders of how the unsustainable deepening of financial markets capitalises on the personal security of everyday individuals (Aalbers, 2008; Christophers, 2016; Dymski,

2010; French & Kneale, 2009). If the objective of FC was the betterment of

299 citizens, the question is whether financial markets are the best technologies to be used.

8.4.3 Time and Social Influences of Financialization

In Chapter 7, it was found that though financial citizens behaved in a financially-responsible manner as advocated through the programme of FC, their motivations are shaped by an explicit attempt to resist connections between themselves and elites for whom they have little respect. This suggests that the normalisation of finance in everyday life and financialization as a whole are highly affected by notions of temporality and social influences. Firstly, the notion of temporality and how it affects the processes of financialization is presented through specific events that influence financial citizens’ response to FC development initiatives. The resistance that financial citizens demonstrate reflects the political and economic instability at the time of the research. As such, financial citizens have unintentionally reinforced elites’ FC motivations; the transformation in their financial practices is thus not an expression of their responsibility assumed in the binary coding of membership. This point is especially interesting given that elites’ post-2009 efforts to build FC is also transpired by a need to shift financial responsibilities from elites to citizens, in response to contemporary economic pressure arising from external and domestic factors.

The notion of social influences has been explored in this thesis through financial citizens’ findings. For financial citizens, their trust in the actors responsible for managing their finances shapes their financial

300 practices significantly. They prefer to choose advice from personal connections and private financial institutions over actors who they perceive as being connected to political scandals. This finding extends existing studies by adding empirical nuances that support the notion of how social influences help finance become normalised in the intimate spaces of citizens’ everyday lives. These social influences are prominent in helping financial citizens manage the uncertainties in their life by prompting them to take individualised control over their finances. More interestingly too, is how these social influences had also been mechanised through the financial intermediary system, which exploits social relations for the purposes of FC development.

8.5 Thesis Contributions

This section discusses the academic and policy contributions based on the findings of the thesis. The academic contributions take two forms: 1) a postcolonial approach in studying financialization and FC, and b) the multidimensional methodological approach in studying financialization of everyday life. In terms of policy contributions, the thesis suggests that the normalisation of finance in everyday life must be considered in relation to critical socioeconomic issues affecting citizens that could hinder the efficient implementation of FC initiatives. Furthermore, the thesis suggests the need for a more comprehensive household/citizens’ data collection exercise that

301 can give a clearer picture on the result of FC initiatives to assess how they have been taken up and with what outcome.

8.5.1 Academic Contributions

a) Postcolonial Approach to Study Financialization and FC

A central theme that this thesis has highlighted is the importance of studying financialization from a postcolonial perspective. As Pollard et al. (2009) explained, a postcolonial approach is more than just studying geographies that has been affected by colonialism or studying geographies external to the

Anglo-American or European focus. A postcolonial approach refers to a call to examine the multiplicity of worlds in which economic practices are produced, it is about recognising not only how “western” ideologies such as neoliberalism travels, but about how “indigenous actors have responded to and remade economic policy,” (Pollard et al., 2009, p. 139). The thesis responds to this call by not only studying financialization and FC from a

Malaysian context, but to ensure that the findings tell a different story that responds and adds to western theorisation of these subjects. Providing a historical perspective on the Malaysian context assists in this objective. This highlights for example, the importance of colonial legacies in shaping the inequalities in the Malaysian financial system.

Additionally, demonstrating the changes in policies in FC has also highlighted the types of pressures affecting how we observe and understand the spread of global policies from a national context. For Malaysia, these

302 pressures could come externally, for example, to legitimise the country’s membership to intranational policymaking institutions, such as in the case of

Bank Negara’s adoption of globally-approved FLE policies from the early

1990s until today.

Empirically, the thesis also provided a strong case study from a postcolonial perspective. It highlighted the uniqueness of locality in observing financialization by providing in-depth commentary on the historical and cultural contexts of financial practices. This was evident during the conceptualisation of FC from a Malaysian perspective, which took into consideration the legacy of colonialism to the country, which is its deeply plural society post-independence. Understanding these long-term pasts has been useful in presenting how the stock market became integral for

Malaysia’s nation building, in which economic success of individuals were used to overcome deeply-routed socioeconomic woes, such as inter-ethnic and inter-class wealth disparities. The findings of this thesis thus have enriched the notion of citizenship within the context of financialization. b) A Multidimensional Empirical Contribution

The thesis’ multidimensional approach in understanding FC is an important contribution to existing studies as it adds depth to our understanding on the interactions between elites and citizens. Conducting this research through semi-structured interviews rather than building an argument through secondary data brings a whole set of nuances often missing from financialization studies.

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As far as elites’ FC development, this thesis provided important empirical analysis that financial policymaking related to citizens are often made complex due to the plethora of elite actors involved in the process. In

Malaysia, the existence of multiple types of elites—political, policy, business—with various motivations for FC development, further complicate the efficacy of the efforts implemented. Citizens who were targeted by formal initiatives did not seem to realise that such initiatives were in place or the reasons behind them. This could be due to financial and regulatory institutions taking individual and diverse approaches to FC, which leads to scattered results that were often difficult to monitor.

This is of course not unique to the Malaysian case. In different countries, the existence of multiple elites and institutions in finance often results in a culture of a policy muddle influenced by the multiple interests and systems. However, the thesis’ provision of elites’ perspectives humanises their different roles in financialization, helping us to understand the complexities in its processes at a greater detail. Furthermore, elites have been given dimensionality when the interviews manage to capture their concerns about how their policies might impact citizens in a negative manner.

Conducting interviews with financial citizens tell greater stories about how financialization is impacted by everyday practices. It is only through their stories that the thesis is able to demonstrate that financial practices could be culturally- and socially-influenced. As such, financial citizens’ perspectives add dimensions to these group of actors, adding agency to their actions, rather than painting them as seemingly victimised by the processes of financialization.

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8.5.2 Contributions to Policy

From a policy angle, financialization studies have been important in providing greater understanding of how financial markets grow to become more relevant and complex in modern societies. In this thesis, observing financialization through the lens of FC development helps in problematising the ideologies of neoliberalism in inclusive finance efforts (efforts to make financial markets more accessible; not to be confused with financial inclusion, which is currently reduced to the concept of “banking the unbanked” or providing access to credit among individuals in policy discussions (see Dev, 2006; Dymski, 2005).

Specific to Malaysia, the complexities in delivering FC might seem familiar, given the country’s historical experiences in the AFC. Complex financial markets, such as the stock market, are a remarkably unpredictable environment even to the best of professionals, as an elite interviewee noted.

The objective to deepen financial markets using everyday life citizens is at the very least unsustainable, and as history reminds us, could also be catastrophic, resulting in even more socioeconomic troubles of unemployment, homelessness, economic downturn, among others. The objective to promise financial security for citizens using the stock market is at the very least misinformed; as access to financial markets and skills do not guarantee that citizens would be in the position to profit from these arenas in a way that would guarantee their financial futures.

Furthermore, it is not enough to simply implement certain formal initiatives that connect citizens to financial markets. Policymakers should continue to monitor the effects of their initiatives, especially to observe if

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their efforts had unwanted results, for example, a deepening in certain types

of disparities, as the finding of this thesis had shown through the social

networks of privilege in urban areas. One way of doing this is to start

collecting household balance sheet data, which had been nearly non-existent

in the Malaysian case. As discussed in the next section, the absence of

important national datasets that encapsulates the true picture of citizens’

financial consumption patterns—only serves as an obstacle in having a full

understanding of citizens’ financial needs, as well as being a practical

limitation for undertaking research into FC. Abdul Khalid (2015) who was

inspired by Thomas Piketty’s work, urged authorities to begin focusing on the

importance of collecting statistics on household assets—as it would better

determine the degree of economic issues that citizens are facing. In addition

to such efforts is a need to rethink about the types of redistributive policies

that should be conducted along with FC initiatives, for example, a better

government-led welfare system that is efficiently targeted to financially-

marginalised groups of citizens.

8.6 Limitations of the Thesis

The limitations of this study have been identified in three different areas,

which results in implications for future research. The first limitation is the

lack of publicly-available data on citizens and the extent of their participation

in the stock market in Malaysia, whether directly through buying and selling

in Bursa or indirectly through managed unit trust funds. The only available

306 data that could remotely paint a picture on how much Malaysian citizens are involved in the stock market, is the 2013 Household Sector Balance Sheet statistics. This data was estimated by Bank Negara and published in its 2013

Annual Report (BNM, 2013a, pp. 70–73).

In this data, total Malaysian household assets by components were outlined and divided by classes of assets: deposits, insurance, EPF contribution, housing wealth, and unit trust and equity. However, the estimate was only given in a small graph with very little detail on how the data was compiled and the exact figures used to arrive at the final statistics.

Upon further requests through the Bank Negara, including the usage of their official request portal and a request from an official interviewed for this thesis, it was learned that detailed information regarding the household balance sheet was not meant to be publicly-available at the time of request as it was still being investigated by Bank Negara.

The lack of high-quality publicly-available national datasets made it difficult to analyse the degree of which Malaysian citizens are participating in the stock market. This relates to the second limitation of this study, which is the lack of available resources in the form of funding and time. A larger scale of research funding and time might allow the researcher to carry out a systematic, large-scale sampling procedure that could provide an important outlook on citizens’ participation in the stock market. This outlook could include data on how much citizens are participating in the stock market directly versus indirectly; their geographical location within the country; and the composition of citizens who are investing in the stock market based on their gender, educational background, profession, ethnicity, among other

307 demographic labels. Even though the thesis did attempt to reduce the amount of limitation by introducing likely biases by looking at the 20-39- year-old group (who were identified as being the targeted citizens by elites in

FC development), a wider access for citizens’ participation could have added to the quality of findings and improved the researcher’s critical analysis on

Malaysia’s FC development. As such, future studies could seek to obtain such information either directly, through a large-scale quantitative study using questionnaires, direct negotiations with elites who possess such information, or to conduct wide-scale contextual qualitative data on citizens’ attitudes and behaviours in FC development.

The third limitation of this study is a lack of diversity in the sample of financial citizen interviewees. This reflects discussion in Chapter 5, which described how the development of FC could be traced back to a socioeconomic policy aimed at correcting inter-ethnic balance, but also to this study’s conceptualisation of FC, in which Malaysia’s ethnic plurality or the legacy of post-colonial ethnic segregation had been integral in the way the country’s citizenship institution was constructed. However, there had been a lack of datasets from Bursa to demonstrate the extent to which its financial activities are being consumed by different Malaysian ethnicities. Having this data would provide a more thorough picture of how the modern development of FC had occurred and whether issues faced in the 1970s are still prevalent today. Considering these factors would be integral to the critical analysis of the democratic and inclusive rhetoric of FC, which often only considers inter- class wealth disparities.

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However, in a country like Malaysia, inter-ethnic complexities have complicated the issue beyond inter-class spaces. This could result in complexities in translating globally-advocated policies such as the neoliberal assumption behind FC, locally. Additionally, the lack of ethnic-based analysis persisted in primary data collection and analysis with financial citizens, as the sample had been predominantly Bumiputera. This had made it difficult for the researcher to conduct ethnic-based observations in FC development.

Furthermore, the researcher’s own ethnic background has made it difficult for her to reach different types of financial citizen networks that are operating on ethnic bases, for example, groups of individual investors who only speak in a certain language. This limitation has definitely caused an obstacle when recruiting interviewees.

To address the limitations of this thesis, several recommendations for future research have been made. These recommendations are outlined in the next section.

8.7 Recommendations for Future Research

To conclude this thesis, three recommendations for future research have been identified. The first recommendation responds to the ethnicity angle of

FC specifically. A suggestion for future research is to consider how financialization and FC are ethnically-influenced, by doing comparisons of citizens and their financial practices in different ethnic groups.

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The second recommendation for future research is to consider how FC development impacts citizens along the urban-rural line. Future research could be conducted either by observing citizens in urban versus rural areas, or by observing how citizens in these different spaces practice finance and how might they behave in response to increasing access to financial markets and skills. Such research should also identify the different reasons that impact their ability to participate in financial practices in the way that is envisioned by elites’ initiatives. These types of research could generate more empirical analyses that support or oppose the democratic notion of FC.

This thesis could also benefit from a further development, for example by doing multi-country comparisons. Such comparisons could be made within or between economic categorisation, for example developing country versus developing country or developing country versus developed country.

Extending this study along economic categorisation line could inform us on whether FC development and/or financialization of the everyday life are more likely shaped by macroeconomic factors (such as state budget, international funding, regional cluster funding) or historical trajectories

(colonised versus colonist), among other factors. Along this line, the research could also be extended to create a regional cluster study, for example, by doing a Southeast Asian region study. This exploration would assist in understanding to what extent history and culture influence the process of financialization.

Lastly, the analysis on the time-trust notion of FC in Section 8.4.3 begs the question of whether the recent political changes in Malaysia would affect our understanding on FC development significantly. More specifically

310 the replacement of Najib Abdul Razak with Mahathir Mohammad in May

2018 is slowly restoring the confidence of Malaysian citizens in their

(political) elites (Edelman, 2018). As such, would their financial practices be affected by these changes and could they be more willing to participate in elites’ FC initiatives and contribute to its nation building motivation more explicitly in the future? Following these questions, a future research that compares financial practices at different times, or between a trusted and distrusted system from financial citizens’ perspective could be beneficial.

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Appendices

Appendix 1: List of Sources of Secondary Data and Documents Used*

 The Malaysian Department of Statistics  Permodalan Nasional Berhad (an investment management institution formed by the government to promote share ownership in Malaysian corporations among citizens)  The Malaysian Economic Planning Unit (a department that falls under the Prime Minister Office’s jurisdiction in charge of economic policymaking and implementation)  Employees’ Provident Fund (pertaining information on the compulsory pension planning for Malaysian employees)  The Malaysian Ministry of Finance (pertaining financial policymaking and statistics related to Malaysian financial markets)  The Malaysian Prime Minister’s Office (pertaining Malaysian economic policies and important speeches by current and previous PMs)  The Federation of Investment Managers Malaysia (pertaining information on the unit trust fund management industry in Malaysia)  Bank Negara (pertaining information on the health of the Malaysian financial system)  Securities Commission (pertaining information on the Malaysian capital market)

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 Bursa (pertaining information on the Malaysian stock market)  Khazanah Research Institute (pertaining information on the economic well-being of Malaysian households)  World Bank (pertaining information on relevant worldwide policy discussions on the subjects observed in the thesis)  The International Monetary Fund (pertaining information on relevant worldwide policy discussions on the subjects observed in the thesis)  Organisation for Economic Co-operation and Development (pertaining information on relevant worldwide policy discussions on the subjects observed in the thesis)

*The list is not exhaustive in nature

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Appendix 2: List of Interview Questions for Elites

1. Having looked at (policy documents relevant to the interviewee’s institution), I have noticed that ever since the millennium, (institution’s name) has highlighted the importance of retail investors in the Malaysian equity market. What do you think is the motivation behind this effort?

2. Malaysia is doing very well in terms of Islamic Finance, being one of the biggest players in the world. I believe that (institution’s name) has put a great deal of effort in making this success happens, and I'd like to congratulate you on this. Do you perceive that such efforts to make shariah- based investment a valid choice in Malaysia, is equivalent to promoting stock market investment for Malaysian citizens? Does that mean that religious values do play a particular role in financial policymaking involving citizens? Do you perceive the usage of shariah-compliant financial activity as being an important factor as to attract retail investors?

3. Do you believe that the implementation process in promoting retail investors in (institution’s name), for example; by enhancing the dissemination of financial education among citizens—would align to the government’s broader socio-economic needs, such as to expand access to financial markets?

4. With recent events unfolding in China, there is a clear limitation in higher retail participation in the equity market. What we can see from this event is that ordinary citizens who invest as retail investors do become emotional in their trading given that the bulk of their investment comes from their life savings. Do you perceive that there is a limitation in financial literacy and financial education, and how do you think (institution’s name) perceives this limitation in terms of the citizens’ ability in taking and responding to market risks?

5. Do you believe that the results of efforts to promote stock market investment to citizens are meeting the expectations of (institution’s name)? If yes/no, why and what would you like to see change/remain the same?

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6. There are a number of global policy debates on the effects of financial deepening, such as increasing wealth or income inequality and increasing household’s financial fragility. Could you please comment on how you are seeing the government or financial authorities or (institution’s name) respond to the possible connection between these types of effects to the promotion of retail investors’ involvement in the stock market? Do we have any measures to overcome these direct or indirect sociological effects as a result of promoting stock investment to citizens?

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Appendix 3: Formal letter for the recruitment of elites

Alliance Manchester Business School The University of Manchester Booth Street East Manchester M15 6PB www.mbs.ac.uk

(Date)

(Official Title and Name of Interviewee) (Official Role of Interviewee) (Official Address of Interviewee)

(Official title of interviewee),

(Subject Line): Permohonan Menemubual Untuk Mendapatkan Maklumat Bagi Tujuan Kajian Ijazah Peringkat Ph.D

(Paragraph introducing the researcher): Adalah dengan hormatnya dimaklumkan bahawa saya, SYAHIRAH BINTI HAJI ABDUL RAHMAN (ID Malaysia: xxxxxx-xx-xxxx) merupakan seorang pelajar tajaan MARA di peringkat PhD di Alliance Manchester Business School, University of Manchester, United Kingdom (ID: xxxxxxxx). Kini saya sedang membuat kajian berkaitan dengan bidang kursus yang akan saya jelaskan di bawah ini.

2. (Intention to recruit for interview): Saya amatlah berbesar hati sekiranya membenarkan saya menemubual Tan Sri bagi maksud bertukar pandangan dan berbincang mengenai rasional di sebalik inisiatif kerajaan menggalakkan pelaburan saham (stock investment) dalam kalangan penabung-penabung golongan kelas pertengahan. Tambahan pula projek kajian ini juga bertujuan memahami bagaimana golongan isi-rumah (household) merancang dan menguruskan wang simpanan mereka.

3. (Explanation of what the expectation of research contribution): Dapatan daripada kajian ini diharapkan menyumbang kepada kefahaman lebih mendalam berkaitan dengan financial inclusion, ketidaksamarataan kekayaan (wealth inequality), dan faktor-faktor sosial yang menyebabkan peningkatan hutang isi-rumah (household debt). Adalah diharapkan kajian ini dapat membantu pembuat-pembuat dasar dalam bidang yang dikaji.

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4. (Explanation of what the interview will be about): Tujuan Temubual: Penyertaan Tan Sri dalam projek kajian ini sangatlah dihargai. Ia diharapkan dapat menjelaskan tujuan disebalik usaha Kerajaan Malaysia mempromosi pelaburan saham kepada golongan pelabur-pelabur kecil kelas pertengahan. Tema persoalan kajian termasuklah perubahan- perubahan dasar mengenai pasaran saham di Malaysia, perubahan-perubahan strategi Bursa Malaysia, peningkatan inisiatif financial inclusion dan pendidikan kewangan (financial education); dan usaha-usaha lain yang berkaitan.

5. (Information on date, time, and location): Tarikh, Masa dan Lokasi: Seterusnya temubual ini boleh di adakan diadakan pada tarikh, masa dan tempat menurut persetujuan bersama.

6. (Information on research ethics): Etika: Sepertimana garis panduan yang diberikan oleh Alliance Manchester Business School dan Universiti Manchester, sekiranya perlu, saya akan patuhi agar nama dan institutisi pihak yang ditemubual tidak akan dinyatakan di dalam versi tesis cetak.

7. (Last words): Saya dengan ikhlas berharap agar Tan Sri tidak keberatan menerima permohonan saya menemubual Tan Sri dalam usaha memahami aspek-aspek sosial dalam pelaburan saham di Malaysia. Saya akan menghubungi Tan Sri melalui telefon atau e-mel dalam masa terdekat bagi mendapatkan pengesahan kesediaan Tan Sri untuk temubual ini. Saya juga sedia dihubungi untuk menjawab kemusykilan Tan Sri. Disertakan juga bersama ini maklumat mengenai projek kajian saya untuk rujukan Tan Sri.

8. (Expression of gratitude): Akhir sekali di atas kerjasama Tan Sri saya dahulukan dengan ucapan ribuan terima kasih

Yang amat ikhlas,

(SYAHIRAH BINTI ABDUL RAHMAN ) Calon PhD, Manchester Business School, The University of Manchester.

Email: [email protected] Telephone: xxxxxxxxxxx

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Appendix 4: List of Elite Interviewees

Elites’ Positions Official Role (Indicator) Interview Status Date Political Former finance minister 17 December No longer (#7) 2015 active politically. In office in the mid-2000s for one term. Currently acting as a technocratic elite. Former finance minister 5 April 2016 No longer (#13) active politically. In office for two terms, in the 1980s and early 2000s. Before and after his appointment, he continued to be a prominent business elite. Financial Policy- Official at Regulator M, a 5 August In office Based financial market regulator 2015 (#1) Official at Regulator M, a 5 August In office financial market regulator 2015 (#2)

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Official at Market M (#3) 28 August In office 2015 Official at Market M (#4) 28 August In office 2015 Official at Research Group 11 December In office K (#5) 2015 Official at EPF (#6) 14 December In office 2015 Official at Malaysian 23 December In office Ministry of Finance (#8) 2015 Official at Bank Negara 23 March In office Malaysia (#9) 2016 Financial-based, Official at Investment 31 March In office business elites Bank H (#10) 2016 Official at International 31 March In office Bank I (#11) 2016 CEO of Wealth 5 April 2016 In office Management Firm C (#12)

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Appendix 5: Recruitment Advertisement for Financial Citizens

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Appendix 6: List of Interview Questions for Financial Citizens

Part A: General Perception on Stock Market Investment

1. How long have you been investing in the stock market? 2. What kind of stock market investment do you have (direct and/or indirect)? Could you please elaborate a rough percentage of your monthly income placed in these investments? 3. What are the reasons behind your choice to invest in the stock market? Have you been influenced by family members and/or friends doing the same thing? Would you say that there are ethnic or religious elements that play into your decision to invest? . Bring in Maisir element… (talk about it in a conjunctural manner) 4. Do you feel that besides the income and savings that you have, stock market investment has helped improve and/or sustain the standard of living you desire? 5. Do you feel that stock market investment has helped you feel more secure, whether financially or in any other way? 6. Do you ever feel intimidated by the idea of stock market investment, due to the perception that it is seen as an exclusive activity for the wealthy and privileged? Why/why not? 7. Do you feel individually empowered when you invest in the stock market?  Elaborate on what this means

Part B: Investing Decisions, Risk, and Rewards

8. What is your main source of information when you want to make an investment decision?  For example, family and friends, the internet, professional advisers, government workshops, private workshops 9. Do you feel that you are a confident investor? Why/why not? 10. 58% of Malaysian Gen-Y has rated themselves as average when it comes to financial knowledge. Do you see yourself as being above or below average? 11. How do you deal with the risks that come with stock investment?  Follow up questions, do you keep track of your investments, how frequently do you make sure that you are making profits or not, etc.

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12. Overall has your investment delivered what you expected? Or do you think it's not?  Or do you think you should’ve made more? 13. Do you feel that the current economic climate has changed your attitudes towards investing compared to [insert year of comparison]? Please elaborate.

Part C: Impact of Government Initiatives 14. Are you aware of initiatives being conducted by Bursa Malaysia, Securities Commission, and or the government on attracting citizens to invest in the stock market?  Could name a few initiatives for prompt 15. Do you think that any of the government's/related financial institutions' effort has influenced your decision to invest in the stock market? 16. Do you feel that it is your duty as a citizen to be responsible in the management of your pension? Why/why not?  Give examples of answers 17. Do you think that the government and employers should instead be responsible for the management of your pension? Why/why not? 18. Do you feel that it is important for a citizen to invest in the stock market in order to elevate your country’s economic status?  Or explain: Do you think that by investing, you could help the government in terms of elevating the country’s economy?

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Glossary

Abdullah Ahmad Badawi the fifth Malaysian Prime Minister who was in administration from 31 October 2003 to 3 April 2009 Bank Negara the Malaysian central bank

Bumiputeras an ethnic group which is a combination of indigenous Malaysians known as orang asli and the Malays Bursa Malaysia the Malaysian stock exchange

Daim Zainuddin a business elite who was also the former Minister of Finance from 1984 to 1991 and from 1999 to 2001 Economic Transformation Programme a programme used by the Najib Administration to carry out recommendations in the New Economic Model using twelve national key economic sectors Look East a bilateral economic policy between Malaysia and Japan in the 1980s Mahathir Mohamad the fourth Malaysian Prime Minister who served a 22- year term from 16 July 1981 to 31 October 2003 Malaysia Inc. an economic strategy adapted from Japan which refers to the strong unity between the state and the private sector Neopatrimonialism a combination of authoritarian politics with personal and informal public norms, for example in the spaces of policymaking Najib Abdul Razak current Malaysian Prime Minister since 3 April 2009

New Economic Model a 10-year economic strategy constructed and implemented by the Najib Administration in 2009 New Economic Policy an ethnically-biased economic policy constructed and implemented in 1970 with the purpose of correcting inter-ethnic income disparity. Much of the policies benefited the Bumiputeras over other ethnic groups Nor Mohamed Yakcop former Special Economic Adviser to Mahathir Mohamad and former Minister of Finance II from 2004 until 2009

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Permodalan Nasional Berhad a government investment agency formed based on the New Economic Policy’s strategy of mobilising wealth using unit trust schemes Securities Commission a Malaysian statutory body entrusted with the responsibility of regulating and systematically developing the capital markets in the country Shariah Islamic laws

UMNO United Malays National Organisation, the largest political party in Malaysia who also held the political hegemony over the country from its independence until 2018 Vision 2020 a 30-year nation building strategy implemented in 1991 with the objective of turning Malaysia into a developed nation by the year 2020

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