The Malaysian State and the Régulation of Labour: From Colonial Economy to K-Economy Donna Turner B. A. (Honours) Curtin University This thesis is presented for the degree of Doctor of Philosophy Murdoch University 2006 Abstract This thesis explores the state-labour nexus emerging out of the processes through which governing authorities have attempted to maintain or regain political stability and rates of accumulation in Malay(a)sia. Existing studies usefully highlight the extent to which repressive industrial relations legislation and ethnic communalism have weakened the trade union movement and segmented the labour force delivering the relative industrial peace attractive to foreign investors. Some suggest labour’s discontent at this repression has been successfully contained by Malaysia’s relatively strong economic performance. These approaches, however, only partially acknowledge the extent to which labour’s social reproduction under capitalist relations generates political and economic contradictions. After an initial failure to address these contradictions in the early post-colonial era, the Malay-dominated government has since developed avenues through which to deliver economic and cultural concessions in a selective and paternalistic fashion. This economic paternalism has contributed to social stability but has diverted funds from economic development and now runs contrary to structural reforms that seek to address Malaysia’s declining international competitiveness. The transition towards a knowledge-based economy, referred to locally as the k-economy, therefore embodies efforts by the political elite to contain political and societal tensions emerging out of the reform process. This thesis demonstrates and analyses the dynamic, contingent and uneven nature of these efforts as the government seeks to establish new bases of legitimacy more closely linked to household consumption concerns than iii ethnicity. Despite the relative absence of industrial disputation, labour’s location in Malaysia’s system of capitalism remains a contradictory one. Politically motivated social policies, although under pressure and likely to take new forms, will nonetheless remain pivotal in the attempt to resolve the tensions that threaten accumulation and political stability. iv Acknowledgements Principal supervision throughout was provided by the current Director of the Asia Research Centre (ARC), Garry Rodan, with assistance in the earlier stages from Jane Hutchison in Murdoch University’s School of Politics and International Studies. Each embodies the commitment to scholarship that underpins the ARC’s well deserved international reputation for critical analysis. Fellows of the ARC, including David Brown, Dick Robison, Khoo Boo Teik, Sally Sargeson and Kanishka Jayasuriya, were helpful with their comments. Del Blakeway and Tamara Dent provided much appreciated practical assistance and support. I sincerely hope my fellow postgraduates realise how valued, and valuable, they are. Thanks in particular to Lee Jae Hyon, Fay Davidson, Sid Adams, Jane Sayers, Miyume Tanji, Jerry Clode, Tsukasa Takamine and Kathleen Turner. To the current researchers and postgraduates in the ARC, my best wishes for your future undertakings and my thanks for the warm welcome during my stay with you. Jan Sinclair-Jones at Curtin University helped shape the intellectual framework through which I have pursued my interest in labour studies. Chris Lloyd at the University of New England (UNE) provided useful feedback. Colin Barlow of the Australian National University (ANU) took a lively interest in my work, providing me with many helpful contacts in Malaysia. Chris Manning, also at ANU, and Amarjit Kaur of UNE, encouraged me to take a more historical view; the broader perspective this provided was invaluable. Trish Todd at the v University of Western Australia and David Peetz and Georgina Murray at Griffith University provided friendly encouragement, resources and feedback. In Malaysia, I was fortunate to be associated with the Institut Kajian Malaysia dan Antarabangsa (IKMAS) of the National University of Malaysia under the Directorship, initially, of the late Professor Ishak Shari, and more recently, Professor Ragayah Haji Mat Zin. Thanks in particular to Professors Abdul Rahman Embong Norani Othman and Rajah Rasiah. To Kho Suan Gaik, whose personal and practical support provided a myriad of insights into Malaysian life and politics, thankyou. Assistance was also received from Professor Maimunah of Universiti Teknologi Mara and Professor Anantaraman of Multi Media University, and from former and current staff from the Ministry of Human Resources and the Ministry of Education who must remain anonymous. Thanks to the staff and officials of the Malaysian Trade Unions Congress, particularly Syed Shahir Syed Mohamud and Mr Rajasekaran. To the representatives of the chambers of commerce and other industry organisations, I offer my gratitude for your frankness and professionalism. Thanks go to my friends and family who, for the most part, forgave my many absences and indulged my tendency to somehow link each and every topic of conversation to Malaysian labour issues. Finally, heartfelt thanks to Graeme who joined me on the journey to thesis completion and provided the support so necessary in the later stages when the conclusion still appears distant. Terimah kasih banyak G. vi Abbreviations and glossary ACCCIM Association of Chinese Chambers of Commerce and Industry Malaysia AFTA ASEAN Free Trade Area AMCHAM American Malaysian Chamber of Commerce APEC Asia Pacific Economic Community APO Asian Productivity Organisation ASEAN Association of South East Asian Nations BN Barisan Nasional, National Front, the ruling coalition BNM Bank Negara Malaysia (National Bank of Malaysia) Bernama Malaysian Government official news agency bumiputera ethnic Malays and indigenous peoples of Malaysia, literally ‘the sons of the soil’. The vast majority are Malays. BT Business Times, supplement to the New Straits Times CUEPACS Congress of Unions of Employees of Public and Civil Services DAP Democratic Action Party Dewan Negara Upper house of the Malaysian Parliament, literally the national house Dewan Rakyat Lower house of the Malaysian Parliament, literally, the people's house EPF Employees' Provident Fund FMM Federation of Malaysian Manufacturers FOMCA Federation of Malaysian Consumers’ Associations FTZ Free Trade Zone GDP gross domestic product Gerakan Malaysia People’s Movement (political party) GSP generalised system of preferences HICOM Heavy Industries Corporation of Malaysia IBRD International Bank for Reconstruction and Development (The World Bank) ICA Industrial Coordination Act ILO International Labour Organisation IMF International Monetary Fund IMP Industrial Master Plan (1985-1995) IMP2 Second Industrial Master Plan (1996-2005) KBE knowledge-based economy KeADilan opposition political party formed around Wan Aziza Wan Ismail, the wife of deposed former Deputy Prime Minister, Anwar Ibrahim k-economy knowledge, or knowledge-based, economy LMW licensed manufacturing warehouse MAPA Malayan Agricultural Producers' Association vii MARA Majlis Amanah Rakyat (Council of Trust for Indigenous People, formerly Rural Industrial Development Authority) MCA Malay(an)sian Chinese Association (member of BN) MCP Malayan Communist Party MEF Malaysian Employers' Federation MHR Ministry of Human Resources MIC Malay(an)sian Indian Congress (member of BN) MICCI Malaysian International Chamber of Commerce and Industry MIDA Malaysian Industrial Development Authority MITI Ministry of International Trade and Industry MPOA Malaysian Palm Oil Association MSC Multimedia Super Corridor MTUC Malaysian Trade Unions Congress NCBC National Committee on Business Competitiveness NDP National Development Policy (1991-2000) NEAC National Economic Action Council NEP New Economic Policy (1971-1990) NITC National Information Technology Council NPC National Productivity Commission NST New Straits Times (national English language newspaper) NVP National Vision Policy (2001-2010) PAS Parti se-Islam Malaysia (previously Pan- Malay(a)sia Islamic Party) PIA Promotion of Investments Act PRM Parti Rakyat Malaysia, Malaysian People’s Party RM Ringgit Malaysia (Malaysia’s currency, earlier, Malaysian dollars) RIDA Rural Industrial Development Authority (from 1966, MARA) SUHAKAM Human Rights Commission Malaysia Star English language national newspaper Sun English language national newspaper UMNO United Malays National Organisation (dominant party in BN) UNCTAD United Nations Conference on Trade and Development UNIDO United Nations International Development Office UNRISD United Nations Research Institute Social Development Wawasan 2020 Vision 2020 viii Contents Page Abstract iii Acknowledgements v Abbreviations and glossary vii Contents ix List of tables and figures xi Preface: The régulation of labour 1 Chapter One: Régulation, the state and the social reproduction of labour Introduction 14 Labour in Malaysia’s political economy 19 Régulation theory and systems of labour control 34 Economic paternalism 47 Sources and limitations 60 Chapter Two: Colonial legacies Introduction 68 Colonial legacies: The segmented labour force 70 Labour and economic development after Independence 87 The contours of control fail 98 Conclusions 104 Chapter Three: Embedding the régulation of labour Introduction 111 Economic development and the régulation of labour 114 Institutionalised compromises and economic conflicts 139 Competing bases of legitimacy