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RACE, CLASS AND UNEVEN DEVELOPMENT
IN MALAYSIA

presented by

J EYARATNAM SUNDRAM

has been accepted towards fulfillment
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Master of Arts degree in Sociology

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RACE, CLASS AND UNEVEN DEVELOPMENT
IN MALAYSIA

BY

Jeyaratnam Sundram

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF ARTS

Department of Sociology

1989

 

@043b

ABSTRACT

RACE. CLASS AND UNEVEN DEVELOPMENT
IN MALAYSIA

BY

Jeyaratnam Sundram

This paper examines the nature and causes of uneven
development and racial conflict in post-independence Malaysia
and their possible consequences for the future. It is based
on a secondary analysis of documents.

Uneven development and racial conflict to be fully
understood, must be seen within the context of the historical
penetration of capitalism, and its consequent impact on the
social formation in Malaysia. It must also be seen within the
context of world historical development of capitalism as well
as the state and the changing influence of the various classes
class fractions and ideologically and politically cohesive
social groups on it.

It is emphasized that racial conflict is directly
connected to uneven development and class relations in
Malaysia. Uneven development and differences in political
power among the various races is utilized by the dominant
classes within these racial groups to woo support for
themselves and in the process they polarize the population and

intensify racial antagonism and conflict within the society.

ACKNOWLEDGMENTS

To the members of my thesis committee, Dr. Melissa
Barker, Dr. Kevin D. Kelly, and especially, the chair of my
committee, Dr. Richard C. Hill, I offer my thanks for all the
support and invaluable advise in the preparation of the
thesis.

To all my friends who provided support and good cheer,
to lighten the load along the way, I. offer my sincere
gratitude.

Most of all, my thanks to Pav, for her constant

encouragement and help in this endeavor.

iii

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION

Malaysia: The Land and Its People
The Research Question

The Methodology

CHAPTER 2; THE ANALYTICAL FRAMEWORK
An Overview
Social Relations
Development and Uneven development
The Framework
Prelude
Class
Race and Race Relations
Capitalist Relations of Production
The State
World Market and Capitalist Accumulation
Relations of Production and Capital Accumulation

CHAPTER 3: A HISTORICAL PERSPECTIVE
Pre-Colonial Era
Social Formation and Class Relations
The State
Development and Uneven Development
The Colonial Era
Social Formation, Class and Race Relations
The State .
Development and Uneven Development

CHAPTER 4: THE POST INDEPENDENCE PERIOD

1957 - 1969/70
Social Formation, Class and Race Relations
The State
Development and Uneven Development

1970/71 Onwards
The State
Social Formation, Class and Race Relations
Development and Uneven Development

CHAPTER 5: CONCLUSION
Consequences for the Future

APPENDIX
BIBLIOGRAPHY
LIST OF TABLES
LIST OF FIGURES

iv

LIST OF TABLES

Table 1.1: P. Malaysia: Labor Force Participation
by Ethnic Group and Activity - 1957.

Table 1.2: P. Malaysia: Labor Force Participation
by Ethnic Group and Activity - 1970.

Table 1.3: P. Malaysia: Labor Force Participation
by Ethnic Group and Activity - 1985.

Table 2.1: P. Malaysia: Incidence of Poverty by
Rural-Urban Strata - 1970.

Table 2.2: P. Malaysia: Incidence of Poverty by
Rural-Urban Strata - 1984.

Table 3: P. Malaysia: Distribution of Household
Income Per Month by Rural-Urban Strata - 1957,
1970 and 1987.

Table 4: P. Malaysia: Distribution of Household
Income Per Month by Ethnic Group - 1957, 1970
and 1987.

Table 5: Malaysia: Ownership and Control of the
Corporate Sector - 1970, 1980 and 1988.

Table 6: P. Malaysia: Population Distribution
Between Rural and Urban Areas by Ethnic Groups
- 1970 and 1980.

Table 7: P. Malaysia: Incidence of Poverty and
Mean Monthly Household Income - 1984.

Table 8: Regions of P. Malaysia: Basic Data - 1985
Table 9: Malaysia: General Elections - At Federal
Level and for the Key States of Penang, Perak and
Selangor - 1964 and 1969.

Table 10.1: Malaysia : Public Development Expenditure,
by Sector, in MS Millions - 1956 to 1970

Table 10.2: Malaysia : Public DevelOpment Expenditure,
by Sector, in MS Millions - 1971 to 1985

Page

115

116

117

118

119

120

121

122

122

123

124

124

125

126

Map 1
Map 2

Figure 1

LIST OF FIGURES

: Far East.
: Peninsular Malaysia and Malaysia.

: Malaysia: Race and Class.

vi

Page

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CHAPTER 1
INTRODUCTION

In order to understand the causes of uneven development
and racial conflict in Peninsular Malaysia today, and their
consequences for the future, a study of the evolution of class
and race relations and uneven development in Malaysia is
necessary. This is a major undertaking which is obviously not
possible within the limited'scope of this paper. Hence the
historical perspective provided in this paper must of
necessity be very limited and generalized and will not cover
the great variety and intricate differences that reflect the
actual circumstances and events that occurred in each state
and the different regions and which led to the particular
structure of class and race relations and uneven development
in each of the states and regions.

Instead, this paper will provide a very generalized
approach to catch the main circumstances that affected
developments in Peninsular Malaysia (P. Malaysia), so as to
understand the overall relationships between and within
classes and races in Malaysia today as well as the structure
and causes of uneven development. This will be used, as a base
to try and anticipate the likely future changes in class and
race relations and.development and.what these conSequences are

likely to be for the Malaysian society as a whole.

4 .
This paper will be divided into five chapters. Chapter 1,
including this introduction, will provide a brief overview of
Malaysia and its people, the aims of, and general background
to, the research question and the methodology to be used. The
analytical framework for this paper will be presented in
Chapter 2; it will be divided into two parts. The first part
will present a brief outline of the various approaches taken
by scholars to social relations and development and uneven
development in Malaysia, as well as a brief explanation of the
approach taken in this paper. The analytical framework for the
paper will be presented in the second part; it will explain
the basis of class and race formation and reproduction and
their role in development and uneven development within a
world wide capitalist system. In Chapter 3 the origins and
evolution of uneven development and of racial conflict in
Malaysia from pre-colonial to colonial times will be traced.
This section too will be divided into two parts; part one will
cover pre-colonial times and part two colonial times. Chapter
4 will examine the state of uneven development and race
relations at the time of Independence (1957) as well as the
causes for the perpetuation of uneven development and racial
conflict in the post-independence period. This period too will
be examined in two parts; the first from 1957 - 1969/70 and
the second from 1970/71 onwards. This is because 1969 - 1971
marks a watershed in the post-independence period, when the

race riots of 1969 occurred and were followed by the

5

implementation of the New Economic Policy in 1971. The aim of
these policies was to create national unity through, not only,
the eradication of poverty in the country, but also through
the restructuring of society so as to eliminate the
identification. of race ‘with. economic function. (Malaysia,
1981:1). This was to be done by re-dressing economic
imbalances in income, employment and the ownership of
corporate assets among the races. Chapter 5, the conclusion,
will summarize the study and.ana1yze the possible consequences
of the ongoing social developments for the immediate future
of Malaysian society.

The term Malaya, Peninsular Malaysia and Malaysia will
be used interchangeably in the text to refer to the same
territorial entity, namely Peninsular Malaysia, except where

explicitly stated otherwise.-

Malaysia: The Land and Its People

_ Malaysia, a Federation of thirteen states, is situated
in South East Asia. Eleven of these states are located in the
Malay Peninsular, which is located on the tip of mainland
South East Asia, while the states of Sabah and Sarawak (East
Malaysia) are located in the northern part of the island of
Borneo; nine hundred miles of the South China Sea separate
these two parts of the country. It covers a land area of
128,000 square miles or 329,756 square kilometers; the eleven

states of Peninsular Malaysia make up just under 40 per cent

6
of the land area while the two states of East Malaysia, in
Borneo, make up just over 60 per cent of the land area. The
population of the country in 1986 was estimated at 16.1
million people with 13.3 million people living in P. Malaysia
and 2.8 million people living in East Malaysia.

The population of P. Malaysia, which this paper covers,
is characterized by a complex inter-mixture of races,
languages, cultures and religions. The three main races are
the Malays, Chinese and Indians. The Malays and other
indigenous people make up approximately 57 per cent of the
population while the Chinese and Indians make'up approximately
32.5 per cent and 10 per cent of population. Others, mainly
Europeans and Eurasians, make up the balance 0.5 per cent
(Malaysia, 1987:34).

Each of the main racial groups is predominantly
associated with a particular language, culture and religion.
The Malays are mostly Muslim, and have traditionally spoken
Malay. The Chinese are mostly Buddhist or Confucian and to a
lesser extent Christian and traditionally speak various
Chinese dialects. The Indians areemostly Hindus, but there are
also a considerable number of Muslims and Christians, with
most of them traditionally speaking Tamil. This, however, can
be; misleading; for even within each racial group
differentiation occurs because of strong ethnic or local
sentiments based on origin from different parts of China, the

Indian sub-continent or the South East Asian islands.

7
Identification with different educational backgrounds, that
is whether they are educated in English, Chinese, Malay or
Tamil, and to different religions, often further
differentiates people within racial groups. Thus similarities
and differences in race, religion, language and culture, land
of origin and educational background affect the social
relations of the population and influences how the various
groups within.Malaysian society relate and interact with each
other.

The» main races are also associated. with. particular
residential and occupational stereotypes. Most Malays live in
rural areas and engage in smallholder agriculture and fishing
while urban Malays are mainly in the government services, the
armed forces and police and in the lower rung of the
manufacturing and service sectors. The Chinese live mainly in
the urban centers and dominate commerce and industry in the
country. The rural Chinese. are ‘mostly agricultural
smallholders and tin miners. Most Indians also live in rural
areas but within the commercial agricultural enclave of rubber
and oilpalm plantations as laborers and overseers. Urban
Indians are mostly in the professions or in the government
services. These stereotypes are, however, increasingly
becoming inapplicable due to the rapid changes in the
residential and occupational distribution of the races in

recent years. Nonetheless, they are a very generalized

8
indication of the residential and occupational patterns of the

various races (Young, 1980:10-11).

The Research Question

The Malaysian economy and the social formation itself is
characterized by uneven development. Uneven development here
refers to two things. First, it refers to the manner in which
Malaysian development is undermined by its inter-relationship
with metropolitan capital and the world capitalist economy.
Second, it refers to uneven development within Malaysian
society in terms of classes, races, regions and economic
sectors. This uneven development is characterized by greater
productivity and capital accumulation among those classes,
races, regions and economic sectors which are more closely
identified. with. advanced capitalist production. and lower
productivity and capital accumulation among those more closely
identified with those modes of production associated with the
peasant sector.

Thus, the rural sector in general and subsistence
agriculture in particular, the poorer northern and eastern
regions of the country and Malays in general are more closely
identified with those modes of production associated with the
peasant sector and are deemed to be relatively under
developed. The urban areas, the central and southern regions,
manufacturing and commercial agriculture, and non-Malays are

generally identified with advanced capitalist production and

9

are generally deemed to be more developed economically.
Because of this, Malay income and ownership of wealth,
traditionally, has been lower than. non-Malay income and
ownership of wealth. Thus, for example, the mean monthly
income of Malays was only M$172/- (MS 1.00 = approximately USS
2.50) while that of the Chinese and Indians was M8394/- and
M$304/- respectively in 1970 (Malaysia, 1981:56). Similarly,
Malay ownership of corporate wealth in 1970 was only 2.6 per
cent whereas Chinese and foreign ownership at the same time
was approximately 34 per cent and 6117 per cent respectively
(Malaysia, 1981:62; Also refer to tables 2.1, 2.2, 3, 4, 5 and
7 in appendix).

The Malaysian social formation is also characterized by
social tension between the Malays and the non-Malays. The
identification of different races with different economic
functions and geographic locations has led to the isolation
of the races from each other and the creation of a sense of
mutual suspicion. This has led to numerous minor conflicts
sudden periods of tension and was, perhaps, most dramatically
expressed in the post-election violence of 1969 when several
hundred people of all races were killed or hurt in racial
riots between the Malays and the non-Malays ((Comber, 1983:71) .

The aim of this paper is, thus, to examine the nature and
causes of continuing uneven development and racial conflict

in post-Independent (1957 onwards) Malaysia and to analyze

10
what the consequences of these are likely to be for the

immediate future of the country.

The Methodology

.Research for this paper will be based solely on
bibliographic and documentary research. The documents will
consist, primarily; of the various Five Year Development Plans
and Mid-Term Reviews, Annual Statistics reports and the Labor
Ministry and Central Bank Reports. Newspaper and magazine
articles will also be used in addition to various books and
articles on this subject.

This methodology was employed because it serves the needs
of this research best. Interviews might have been a useful
supplement to this method, but will not be employed here
because their contribution would have only marginally improved
the substance of the paper.

However, there are two major limitations that need to be
mentioned. First, the lack of adequate material; especially
relevent Malaysian newspapers and historical government
documents which would have been useful to clarify specific
points and allowed for less dependence on other writers
interpretations. Second, the reliability of Malaysian
Government documents. Government agencies are highly
Paliticized in Malaysia and tend to manipulate data for the
governments own benefit. The lack of alternative sources of

data makes it necessary to use them. Hence the reliability of

11
some of the data and sources mentioned in this paper must be

treated with circumspection.

In

"I

12

CHAPTER 2
THE ANALYTICAL FRAMEWORK
An Overview
- Social Relations

Most pre-1975 studies on social relations in Malaysia
have invariably taken a pluralist and or ethnological
approach. Since 'then, several studies ‘have~ adopted class
analysis.

Those scholars taking the first approach, such as K.J.
Ratnam (1965), R.K. Vasil (1971), R.S. Milne (1967) or M.J.
Esman (1972), assumed that races, had particular physical and
cultural characteristics that were: of socio-economic
significance. Thus, for them racial and cultural categories
were a point of departure in analyzing social relations. They
explained racial conflict and the reproduction of racism in
terms of variations in cultures, habits and ideologies or
primordial instincts. Hence, for them, social relations were
viewed as race or ethnic relations primarily between Malays
and non-Malays and emphasis was given to cultural, religious,
linguistic and racial differences. Economic factors, though
considered as contributing to the social relations between
the races, are not considered of central significance. Thus,
in writing about the Malaysian social formation Ratnam, for

example writes that, There is also a complete lack of

13

cultural homogeneity, each community having its own religion,
customs, languages and habits ... it is also the reason why
certain 'cultural' matters have come to constitute some of
most difficult political issues of present day Malaysia"
(1965:1). Milne, in a similar vein, states, "Everything
political or economic in Malaysia is dominated by
considerations of racial arithmetic" (1967z4). Esman too
states, "Communal pluralism! is the essential reality of
Malaysian society and government" (1972:17).

These explanations for racial conflict in Malaysia are
inadequate and unsatisfactory. This is primarily because these
explanations do not give sufficient emphasis to the
socio-economic circumstances that give race its significance.
The importance of this point was, perhaps, best made by Robert
Miles, in.his book, he Li 1 at'on o ' a e R t' ns‘ Theo
(1982). He explains why races, in and of themselves, do not
have any great socio-economic significance; rather, he says,
it is social circumstances that give race their particular

" It is insufficient to recognize the

significance. He says
social categorization of 'race' if one does not simultaneously
inquire as to why the process of categorization has occurred
only in specific contexts and in specific points in historical
time. The basis of racism is to be found not in the
attribution of meaning to phenotypical difference, but in

identifying the economic, political and ideological conditions

that allow the attribution of meaning to take place" (p. 64).

14
Thus, according to Miles race cannot be taken as the point
of departure in explaining racial conflict but must be seen

as the consequence of other causes. In the same vein, Michael

Burawoy, in.his article, The Capitalist State in South Africa:
Marxist and Sociolggical perspectives on.Race and.Class (1981:

279), states that the .numerous race riots in the 19603
convinced sociologists that the root cause of racial conflict
was not any inherent differences between racial categories but
rather the unequal distribution of resources among races.

This assertion immediately calls for an explanation of
the role of unequal distribution of resources in race
relations. This ultimately leads to a theory of capitalist
development which roots racial conflict in capitalist social
relations of production.

From 1975 onwards several writers, among them B.N. Cham
(19:15), M.H.Lim (1980, 1981, 1985), Martin Brennan (1982),
Amin.&<Caldwell (1977) and Jomo Sundaram (1988), among others,
introduced class analysis to explain social relations within
the Malaysian social formation. In using class analysis they
treat race as a social construction and race relations as
resulting from historical circumstances and class relations
within.Malaysian society. Cham (1975:446) for example, states

of race relations in Malaysia, Its development into a
disruptive and.divisive.force of communalisnrhas its roots not
in the phenomenon of cultural pluralisnibut in the long period

of British 'divide and rule' policy and the extension of this

15
policy to post-independence Malaya and Malaysia". In a similar
vein, Lim M. H. (1980:130-131) states, " It is my fundamental
hypothesis that the crucial relationship between ethnic
communities lie . . . more specifically at the relations of

production and exchange".

- Development and Uneven Development

Various theories and explanations have been put forward
to explain 'uneven development in Malaysia. These can be
divided.into fouerain categories. The first category explains
the differences in cultural terms, that is, in terms of
different.work ethics, attitudes and.business abilities. Thus,
for example, Milne writes "The Chinese .... who made the trip
and survived were extremely hardy and determined .... their
attitudes were and had to be fiercely competitive. This was
in striking contrast to the .Malays, who were eminently
non-competitive ...."(1967:7).

The second set of explanations suggest that the causes
lie in differences in economic opportunities such as colonial
government policies and exclusive practices by the Chinese and
other groups. Thus Mahathir Mohammad, the present Prime
Minister of Malaysia, has written (1970:56), " Chinese
business methods and the extent of their control of the
economy of the country is such that competition between their
community and other communities is quite impossible. Their

close knit communal tie-ups ...... constitute an impregnable

16
barrier against any substantial encroachment by other

". These two types of explanations were put

communities
forward by the same group of writers taking a pluralist and
or ethnological approach to social relations.

The third explanation comes from the nee-classical school
as represented by Lim Chong Yah (1967) and representatives of
international aid agencies, such as Kevin Young and Parvez
Hassan (1980) of the World Bank, among others. They explain
uneven development in terms of differences in productivity
resulting from the use of different technologies, and
differences in capital intensiveness and the size of
productive units used in the traditional and modern sectors.
Thus Lim Chong Yah explains the causes of poverty as follows,
" The root cause of poverty boils down to .... population
growth on the one hand and technological progress and opening
up of new land on the other hand" (1967:173).

The fourth category explains economic differences in
terms of various theories of uneven development and world
capitalist development which suggest that development within
Malaysia is the consequence of the integration of the
Malaysian economy into the world capitalist economy. This type
of explanation was put forward by those writers using class
analysis to explain social relations in Malaysia. Thus, for
example, Martin Brennan (1982:188) in his opening statement

says, "The Malaysian social formation is a recent and complex

phenomenon which came into existence as a direct result of

imperialism and colonialism. ...... This penetration of the
capitalist mode of production was uneven and restricted; thus,
while parts.of.Malaysia became fully integrated into the world
economy under the sway of plantations and mining capital,
other areas remained virtually untouched."

Malaysian underdevelopment in relation to the
metropolitan economies has been explained by nee-classical
economist/sociologists' such as Lim Chong Yah, and the World
Bank Economists likes Kevin Young in terms of 'diffusionist
theories of development' while those using class analysis such
as Brennan, Sundaram and Lim Mah Hui have explained it in
terms of 'theories of underdevelopment“. Diffusionist theories
of development emphasize the positive effects of capitalist
development on newly developing countries. There are many
variations of the diffusionist theme, some emphasizing
'democracy and growth' while others emphasize 'nationalism and
growth' and probably the most important variation emphasizing
'linear stages of growth' or 'modernization theory' most
commonly associated with Walt W. Rostow (Chilcote, 1984:11),
which emphasizes growth based on the western model of
development. These diffusionist theories are mostly inspired
by the functionalist perspective which.either ignores the role
of classes in the developmental process, or when they do
acknowledge it, see classes as playing complementary roles
rather than being contradictory and having conflicting

interests. Thus diffusionist theories have inherent

18
limitations which do not allow them to analyze class
contradictions and class struggle and hence make them
inadequate, as theories, to explain the full measure of the
developmental process.

Theories of underdeveIOpment emphasize the negative
effects of capitalist development on peripheral countries.
These theories have many variations and most of them have an
underlying class analysis of the developmental process, and
can be grouped under the Dependency, World Systems, and Modes
of Production schools of thought.

The Dependency School has its origins in Latin American
scholars like-Prehisch, Sunkel and Cardosa and has many
variations. Its central theme, however, as presented in the
work of Andre Gunder Frank is that, certain countries and
regions are underdeveloped by those countries and regions on
which they are dependent. The general thrust of the argument
is that metropolitan (center, first world, monopoly) capital
in collusion with local capitalists exploits the producing
classes of the dependent (satellite, periphery, third world)
countries and regions. This exploitation, which is deemed to
have taken place continuously from the time most of these
countries were colonized by metropolitan nations is said to
lead to a considerable outflow of surplus from the dependent
countries to the metropolitan countries. It is this constant
outflow of surplus that is supposed to be the root cause of

the impoverishment of these dependent nations. The concept of

19

surplus extraction used in most of this type of analysis
provides a basis for 'class analysis'. However the utility of
this type of analysis is limited because dependency theorists
simply talk in terms of dominant and dependent relations
between metropolitan and satellite nations and exploitative
relationships in a very generalized way without rooting them
in specific class relationships within nations and between
nations where these classes are located. Hence the utility of
this type of analysis, though useful, is limited' and
insufficient to explain the full measure of the process of
uneven development.

The World Systems School has many variations of its main
theme and consequently is difficult to discuss in general
terms. Hence, its main thrust and limitations are discussed
here, very briefly, within the work of probably its most
prominent contributor, Immanuel Wallerstein. According to
Wallerstein, a single world capitalist social system has
emerged since the sixteenth century within which production
takes place for exchange. He contends that different levels
of technical knowledge, labor organization and control by the
dominant classes in sovereign states within particular
geographic locations gave rise to a geographic division of
production divided into three sectors which he termed the
core, semi-periphery and the periphery. The core has the
highest technical knowledge and organization and the periphery

the lowest. He explains how three key elements, namely, the

20
existence of a single world market, state structures that
distort the capitalist market and the appropriatiOn.of surplus
labor, influence class formation as well as the relationship
of classes, to each other, in these three sectors (Chilcote,
1984:97). He suggests, that the relative strengths of the
dominant classes, located.in the different states, reflect the
relative strength of the states within the world system.
According to Wallerstein, states primarily serve the interests
of the dominant classes and since state power is used to
distribute products among different zones in the world.market,
the dominant classes within the stronger core states gain
while those in the weaker periphery states lose in the
exchange. Thus, Wallerstein's model involves two important
determinisms. " First, socio-economic structure is determined
by the technical production options in the world.market chosen
by the dominant class. The second determinism, related to the
first, reduces state structures and policies to determination

by the dominant class interests (Skocpol as quoted in
Sundaram 1988:307). Thus, for Wallerstein, class relations are
not so much the consequence of historical development from
previous contradictions conditioned by prevailing market
situations, but rather, market determined with the dominated
classes being passively manipulated by the dominant classes
according to market needs. Thus he views class relations in

an over deterministic manner where the dominant class makes

history in circumstances that are somewhat beyond the

21
influence of the dominated classes. Similarly, the state is
not considered the arena of class contention but rather the
tool of the dominant class.

Moreover, Wallerstein's 'World Systems' theory implies
that the transition from feudalism to capitalism was a smooth
and linear process (Brenner as quoted in Chilcote, 1984:99).
Thus, "the significance of the emergence of free labor in
capitalism which could be exploited without extra-economic
coercion .... is lost in this approach" (Sundaram, 1988:307).
Moreover, the fact that class contention is specific to
particular class relations, and it is the particular nature
of the class struggle arising out of class relations which
affects the further development of class relations is ignored
within this approach. Thus, these limitations make this an
inadequate analytical tool. This is not to say that there are
no useful concepts - for the concept of a world social system
within which production and exchange and capital accumulation
and expansion takes place and.within which class relations are
to be understood makes enormous sense.

The 'modes of production' school has its roots in Marx's
emphasis on the material basis of society as well as Trotsky's
suggestion of the need to examine the modes of production in
juxtaposition with each other (Chilcote, 1984:125). However
it only gained prominence in recent years as a response to the
limitations of the theories of Dependency and Uneven

Development. This school is generally identified with the

0"

(”1)

22
French Structuralists and especially with Althusser and
Balibar. A.mode of production according to Balibar (1970:215)
consists of the laborer, the non—laborer and the means of
production combining with a 'property connection' and a 'real
or material appropriations connection'. Here social relations
are ultimately determined by economic factors which also
generate ideological and political 'structures of dominance'
necessary for the continuation and viability of the mode of
production. Balibar (p.273), however, complicates his model
by talking in terms of two models, a transitional model and
an implied stable model of production. He seems to say that
the stable model has an internal cohesion between the
"property connection" and the "material appropriations
connection" which allows for the modes continued reproduction
imla.manner very similar to a functionalist perspective; there
is little contradiction between them. The stable model thus
lacks dynamism and begs the question of how it changes, even
to the transitional stage. Thus the ' mode of production'
model too is limited in its analytical adequacy ( Sundaram,

1988:305-309).

The Framework
- Prelude

In my analysis of social relations and development in
Malaysia I will use class analysis. However, I will emphasize

not merely the economic aspects of class analysis but also the

23

political and ideological aspects of it. Thus considerable
emphasis will be placed on the role of the state as well as
on ideologically and politically cohesive social groups, such
as racial/cultural groups, that cut across class lines. This
is because I believe that many scholars using class analysis
have been too heavily influenced by the polemical and
adversarial nature of Marx and Engels writings and their
strong emphasis on the economic aspects of class analysis
without taking into account the circumstances under which they
wrote. Thus, Engels wrote near the end of his life, " Marx and
I ourselves are partly to blame for the fact that the younger
people sometimes lay more stress on the economic side than is
due to it. We had to emphasize the main principles vis-a-vis
our main adversaries, who denied it, and we had not always the
time, the place or the opportunity to give their due to the
elements involved in the interaction." ( as quoted in Mills,
1987:75).

This is not to say that the writers using class analysis
to describe the Malaysian situation have not taken the role
of the state or ideological aspects into account; they have;
having come late to the subject, they have not made this
mistake. Thus the difference here will be, merely, one of
emphasis and approach.

The theoretical framework for this paper is based

primarily upon the analytical framework presented by Jomo

Sundaram in his book A guestiop of Class: Capital, the State

24
and Upeven Development in Malaya (1988). His framework draws
mainly from the 'Dependency', 'World Systems', and 'Modes of
Production' schools of development and uneven.development, and
is crafted specifically to explain. Malaysian. social and
economic development resulting from. the impact of world
capitalist development on class formation and economic growth
in Malaysia over the last century. An adaptation of his
framework is used below, though. amended occasionally to
reflect my viewpoint more closely. There is; however, one
point where this paper's analytical framework differs from
Jomo Sundaram's; and that is on the question of race/ideology.
Jomo Sundaram acknowledges that there is a political and
ideological aspect to class theory that needs to be considered
but then.goes on to say that since the economic is predominant
he would concentrate on that. My contention here is that even
though the forces of production are, without doubt, the
primary basis of social relations, nonetheless, the relative
importance of the forces of production as the basis of social
relations vary considerably from society to society; and in
some societies, such as Malaysia, where racial differentiation
is institutionalized within the constitution, other forces,
such as ideology and politics based on race and culture, play
a considerably more important part in social relations and
development than.in most other societies; and sometimes in the

short run, even tend to transcend the forces of production.

25
This needs to be explicitly stated within the theoretical
framework.

Thus, the analytical framework is based on the idea that
social relations and development, in a capitalist society, are
primarily the consequence of the forces _of production.
However, the actual configuration of social relations and
development will vary from society to society and will depend
on the relative influence of the more rapidly developing
forces of production and the more slowly developing social
relations of production, as well as the political and
ideological forces within that society'. Thus social relations
and development can only be fully understood within a
historical perspective and in the context of world historical
development of capitalism and its stage of development within

the society.

- Class

Within this framework, classes exist when owners/
controllers of the means of production expropriate labor value
from producers, usually through some means of coercion. Thus
social relations of production reflect not only exploitation,
but also domination.of the producers by the owners/controllers
of the means of production. Hence, their class interests are
necessarily opposed. Class relations here is defined
primarily, but not exclusively, in terms of the social

relations of production; they are not deemed to be identical

26

because classes not only have economic but also political and
ideological aspects as well. Here the political and
ideological factors are deemed not only to have their roots
in the forces of production but also to have other intrinsic
aspects that have evolved, from within, over time and in the
process have created particular relationships that are, to
some extent, independent of the influences of the forces of
production.

Moreover, classes, though they have commonalities, such
as their relationship to the state or to the means of
production, that unite them, are not homogenous; rather they
consist of fractions, coalescing around common ideological or
political interests and tend to have their own particular
agenda. Thus class fractions having their own agenda could
come into contention. Hence, class contention and
contradiction is not only extant between classes but also
between and among fractions of classes. And it is this
contention and contradiction between and among classes and
fractions of classes that are significant for social change;
and.in this process class fractions sometimes cooperate across
class lines to attain their own particular agenda as opposed
to those of other class fractions. Hence, the nature of social
change and development are influenced by a dialectical
relationship between and among classes and fractions of
classes. This change occurs gradually except at specific

historical junctures, when there is a marked divergence

27

between the relations of production, ideology and politics,
and the forces of production. which. gives rise to class
awareness and organized movements, resulting in social
conflagration. Such historical junctures may give rise to
radically new class configurations. Thus class relations are
never reproduced without change, with some classes and class
fractions expanding, remaining the same, or contracting. In
other words, the historical transformation of classes or class
formation is a continuous process and reflects change
resulting from class contradictions and conflict between and
among classes and class fractions.

Thus, in Malaysia, for example, the current governing
class fraction, the bureaucratic-bourgeoisie, had its origins
in the immediate post-independence period as the
representatives of the foreign interests as well as the local
aristocracy in running the Malaysian government. It used the
power of the state and its resources to advance its own
interests. After imposing 'military' rule from 1969-1971, in
the aftermath of the race riots of 1969, it used its control
of the state to pursue capital accumulation and political
power on its own behalf through the instrument of the 'New
Economic Policy'. Consequently its increasing control over
economic resources as well as state power, over the years, has
made it the most powerful and influential class fraction in

Malaysia today.

28

- Race and Race Relations

In critical theory, class relations are defined in terms
of ,the social relations of production. This definition
includes not only the economic but also the political and
ideological aspects of the social relations of production.
Here, politics and ideology are so defined as to have a direct
dialectical relationship to the forces of production; people
of particular classes are implicitly implied to have
particular sets of values, arising out of, and reinforcing,
the social relations of ;production that bind them
ideologically and politically. But in so defining the role of
politics and ideology in class relations it provides only a
partial and inadequate expression of the full scope of
politics and ideology; for politics and ideology, in all their
forms, express the full range of ideas, experience and needs
of social groups, including classes; and the forces of
production, though by far the most important, are still but
a part of all the forces that influence ideology and politics.
The other forces, to name some of the main ones are race,
culture» nationalisniand religion. Though.these forces too are
influenced by the forces of production they also have
independent aspects, intrinsic: to themselves, which. have
evolved over time and hence often tend to influence social
relations independently of the forces of production and in

this way often transcend class relations.

29

Thus, social relations within this framework is seen to be
influenced not only by the forces of production and their
concomitant politics and ideology but also by 'broader
ideological and political forces that often tend to transcend
the influence of the forces of production and are based on
other influences such as race, culture, nationalism and
religion. In what follows I will only concentrate on the
influence of race.

Within this framework, 'race' is seen as a social
construction which varies from place to place and over time.
Thus, racial categorization, based on phenotypical features,
is seen to have only assigned social significance. Its
importance only lies in the significance given to it by the
people within a society. As Robert Miles says, " it is
important to recognize that this process of racial
categorization is rarely an end in itself, but rather a means
to an end" (1982:10). However, it must be noted that, once
racial categorization takes on a particular configuration
within a society, on an everyday level, it begets concrete
social groups having opposing goals and interests resulting
in racial stratification and conflict. Hence, racial
categorization in any society reflects the political,

ideological and economic interests and needs of social groups,

and their relative power and influence, within the society

30

These racial groupings, once they become concrete social
groupings, are'within themselves, stratified.along class lines
and are dominated by those class fractions within these
groupings who make up the ruling elite. Thus it is here that
race and class get moSt intricately intertwined; with the
dominant classes within each race utilizing ideology and
politics, based on race, for their own agenda. Therein lies
the root of racial conflict.

Hence, in a society, like Malaysia, where accessibility
to economic opportunity and political power have become
institutionalized along racial lines, economic and political
interests based on ideological and phenotypical similarities
become of considerable importance. This is because coercive
state policies are instituted by class as well as political
and ideological interests, so that overt coercion in the form
of quotas and legislation, among others, are used to affect
the amount of surplus that can be extracted or redistributed
from members of the different races.

In this way, one race or group of races gain, in that,
less surplus is extracted from the working class of that race
while the other race or group of races lose, in that, more
surplus is extracted from the working class through direct
coercion. This, however, holds true only where racial
stratification is along horizontal lines. In the case of
racial stratification along vertical lines, that is, where the

distribution of races among the different classes in society

31

is comparatively even, as in the case of Malaysia, it is not
just a case of more or less surplus being extracted from
workers of the different races but also of redistribution of
surplus through coercive means, such.as quotas or legislation,
from the dominant classes of one race to that of the other.

This raises the stakes in the social relationship between
races and thus creates a greater tendency towards
identification along racial lines and consequently creates a

greater potential for racial conflict.

- Capitalist Relations of Production

Capitalist production is based on commodity production
for exchange. It presupposes the existence of commodities and
the sale of free labor power as a commodity. Commodities have
both use and exchange value, but it is only in the exchange
process that social relations are manifested. Thus where
commodity production has been generalized, the purpose of
social production is realized only through exchange.

Capital itself has two key aspects within this context.
Firstly, the tendency to accumulate, and secondly, in the
process of accumulation to involve particular social
relations. Total social capital is the aggregate of particular
capitals which exist in both the production and commercial
spheres. In the process of accumulation capital enters
different circuits and acquires various forms. In the sphere

of commerce it takes the form of usury and commercial capital

32
while in the sphere of production it is constant capital when
it takes the form of means of production and variable capital
when it reflects the cost of reproducing the labor force.
Commercial capital is not involved in organizing production
but accompanies and creates the spread of commodity production
and exchange. Production capital on the other hand has direct
control over the production and the labor process. Within
capitalist relations of production, labor does not own the
means of production, but must sell its labor power as a
commodity on the market to the owners of the means of
production. This is necessary for survival and so must be
considered to be coercive in nature. However, this and the
exploitative nature of wage labor, where payment is made for
labor power than for labor rendered, is obscured by the
apparently equal nature of exchange between capitalist and
wage laborer. The difference between the value of the labor
rendered and the labor power paid for is the extent of the
exploitation or 'social surplus' appropriated by the

capitalists.

- The State

The state, in this framework is seen as having three
aspects. Firstly, political control of the state is seen as
the object of class contention. Secondly, the structures and
institutions of the state are seen as the product of class

contention for power and influence within the state. Thirdly,

33
the way in which the state operates and the actions that it
takes are seen to help determine the outcome of class
contention.

Thus, the state is neither neutral nor the tool of the
ruling class nor determined by the structural imperatives of
the socio-economic system. The state is, relatively autonomous
but subject to economic constraints. Its primary logic is to
maintain and perpetuate itself; and state policies to some
extent reflect 'this. Thus the state is not an unchanging
monolith but is historically transformed through class
contradiction and conflict. Different aspects of the state
will thus attain different significance at different points
in the conflict between classes.

Thus, at any particular point in time, those in control
of the state, at that time, will act to protect, maintain and
enhance, if possible, a particular set of social relations,
relations of production and state appropriations which serve

the interests of that particular class/social group over that

of other classes and social groups.

- World Market and Capitalist Accumulation

The capitalist economy embraces the whole world in that
it is the arena for all commodity production and for capital
accumulation. Capital accumulation itself has to be seen
within the context of different phases of capital expansion,

the tendency towards monopoly and the social division of labor

34

that corresponds to the different phases of capital
accumulation. All three aspects have important implications
for the analysis of uneven and combined development and the
associated process of class formation. Different phases of
capital accumulation correspond to a changing social division
of labor, as well as changing political and ideological
awareness, on a global scale.

In the expansion of capital two distinct components need
to be noted. Firstly, the simultaneous process of capitalist
accumulation and non-capitalist accumulation of economic
surplus and secondly, the trend towards development of
monopoly capital resulting from the concentration and
centralization. of capital within capitalist relations of
production. These two components of uneven development
interact with each other in concrete historical conditions to
give rise to specific changing forms and conditions of uneven
development.

In the process of capital accumulation, the spread of
commodity production, in the form of families, as a unit,
engaging in production for exchange in pre-capitalist
societies, has normally preceded the capitalist relations of
production in the form of wage labor, while commercial capital
has preceded production capital into these societies. This is
because when the initial spread of commodity production for
exchange takes place within the pre-capitalist economy it

leads to the expansion of commercial capital within these

35

societies. This may eventually result in the domination of
these societies by commercial capital as the sector moves
increasingly towards production for exchange and. becomes
increasingly dependent on the commercial interests to purchase
their output. Commercial capital, however, is incapable of
transforming non-capitalist relations of production into
capitalist relations of production, that is, where labor power
itself will become commoditized, though it may result in new
non-capitalist social relations of production. It is only
production capital, which directly controls the means of
production that is capable of transforming non-capitalist
relations into capitalist relations of production.

It must also be noted that even though commercial capital
is more prevalent in the periphery it is nonetheless

subordinate to production capital in the world economy.

- Relations of Production and Capital Accumulation

The social relations of production in the world can be
divided into those directly organized by capitalists as well
as the state, such as modern industry, utilities and
plantations and those not organized by capitalists or the
state such as the peasant economy but which are, nonetheless,
still under the influence of commercial capital. Thus all
production is dominated by capital and subject to its
accumulation on a world scale. This is however ameliorated by

the role of the state which acts to preserve its own

36

legitimacy by acting to reduce concentration through state
policies. Furthermore, the manner and extent to which
production is subject to domination by capital depends on
their specific relations to production and commercial capital
involved. Thus where domination in pre-capitalist societies
is limited to commercial capital, new non-capitalist
relations of production may result which may not be similar
to social relations of production in these societies, prior
to capitalist intervention. Where production capital is
involved capitalist relations of production result. But if an
adequate supply of free labor has not emerged from preceding
social relations of production, as has normally been the case
during the early phase of integration into the world
capitalist economy, obtaining a labor force becomes
imperative. This has normally been achieved by reorganizing
the existing social relations of production or relying on
immigrant labor supply. However, the increasing integration
into the world economy then tends to encourage the emergence
of free wage labor. This is because, even in the non-
capitalist sector, surplus accumulation tends to be the
initial result when it integrates into the world economy. This
surplus accumulation which usually leads to land concentration
will thus lead to the increased proletarianization of the
peasantry.

Thus, it is not only the nature of pre-capitalist

relations of production but also the manner of its integration

37
into the world economy which are important in influencing the

emerging class and race configurations and uneven development.

38

CHAPTER 3
A HISTORICAL PERSPECTIVE

Peninsular Malaysia is strategically located in the
crossroads of the trade routes between India. and.iChina.
Archeological finds and historical documents in India and
China suggest strong Indian and Chinese influences in the
Malay Peninsular starting from before the 10th century
A..D.(Tate, 1971:28-39; Windstedt, 1953:13-31; Ryan, 1965:
1-13). However, the full extent of these influences are
unknown. Recorded history about pre-colonial Malaya is
limited. The earliest recorded history can be traced back to
the Malacca sultanate in the early 15th century.(Wang,
1965:100). However, even where the records exist, they are
often limited, serving a particular viewpoint, or sometimes
even contradictory (Sundaram, 1988:3-5). Thus any study of
social relations in pre-colonial P. Malaysia must be taken
with some circumspection. However, an understanding of the
history of social relations and economic conditions in
pre-colonial Malaysia is necessary if one is to understand
the impact of capitalist penetration into the Malaysian social
formation and its continuing influence on social relations

and uneven development today.

39

Pre-Colonial Era

Present day P. Malaysia was not a single political entity
in pre-colonial times. It was made up of several independent
states or sultanates. Most of these states were comprised of
a collection of riverine basins and their immediate
hinterland.(Wang, 1965:99-112; Sadka, 1968:1-37; Kennedy,
1970:133). At various times in their history they came under
the influence and suzerainty of empires like Siam, Majapahit,
Srivijaya and Malacca, among others. (Tate, 1971:28-39;
Winstedt, 1953:13-31). Today, many of the ruling houses, in
the various states, trace their origins back to the Malacca
sultanate which influenced much of the Malay Peninsular at the
time of the Portuguese conquest of it in 1511 (Sundaram,
1988:4). Thus the last great influenceeon.most of these states
was Malacca, though in the northern states Siam continued to
hold sway. These empires left their mark on the various states
in terms of the structure of the state and their laws and
customs. Thus each.state's structure, laws and customs varied,
not only because of local customs and practices, but also
because of the nature of their contact with these various

empires.

- Social Formation and Class Relations
All the states in the Peninsular were characterized by
two main modes of production - tribute paying and the slave

mode. In iboth. cases surplus was extracted. through. extra

40

economic coercion, but the manner in which it was done
differed. Hence, the nature of social relations between the
ruling class and the working class varied according to the
mode under which production took place (Hua, 1983:13). At the
same time some capitalist influence, in the form of commercial
capital, was taking place, especially in states like Malacca
and along the coastal areas where trade of surplus production
and some production for exchange was taking place. (Sundaram,
1988:6; Hua, 1986:13).

Production, in the tribute paying mode, which was the
main mode of production, was primarily based on agriculture
and fishing. And "the basic unit of production tended to be
the family, although regular and irregular activities were
organized on a wider, sometime village basis for specific
purposes of communal tasks" (Sundaram, 1988:5). A portion,
normally a tenth of the agricultural production, was paid as
tribute to the territorial chiefs and the sultans. The origins
of this tribute, nor why it was generally placed at ten
percent of the production is unclear; though Sundaram
(1988:12) seems to suggest that it might have its origins in
Islamic practices.

In addition to the tribute, the sultan and the
territorial chiefs often extracted forced labor from the
peasants. This was normally for the creation of public works
but often for the private projects of the sultan and the

chiefs. The extent to which forced labor could be levied

41
depended on the relative strengths of the sultans and chiefs
as well as the ability and willingness of the peasants to
migrate and live under the protection of some other ruler.
(Sundaram, 1988:9; Hua, 1986:12).

In addition to tribute and enforced labor the ruling
class also earned additional income by taxing riverine and
coastal traffic and trade as well as other industries like
tin mining. In the 19th century, with the rapid expansion of
the tin trade, especially in the states of Perak and Selangor,
this taxation became a major source of income especially for
those chiefs in whose district the tin was extracted. This
made them extremely powerful as compared to the sultans of the
state (Sundaram, 1988:15; Hua, 1986:13).

In the slave»mode of production, slaves and debt bondsman
worked entirely for the benefit of their masters who took
their entire production and left them with just enough for
subsistence. Slaves and debt bondsman differed only in that
debt bondsman were muslims and they could not be enslaved,
even in lieu of debts, according to the Islamic religion
practiced in these states; only non-muslims could.be enslaved.
Thus, they were still free men but their production was
dictated and controlled by their creditors to offset their
debt{ Most sultans and chiefs had considerable numbers of
these slaves and debt bondsman to work in their households and
retinues or to work for others to earn an income (Sundaram,

1988:7-8; Hua, 1986:13).

42

The extent of slavery and debt bondage varied from state
to state. There is no clear idea of how extensive this mode
of production was but it appears likely it did not involve
much more than five percent in any of the states (Sundaram,
1988:8).

Thus class relations in pre-colonial Malaysia were
dictated by the two modes of production. In the slave mode
the ruling class had direct and complete control over the
labor power of the working class while in the tribute paying
mode, the subordinate classes worked independently, but
nonetheless were subject to extra-economic coercion in the
form of tribute, enforced labor and taxation. At the same time
the social formation was characterized by the subordinate
classes being distributed.in three strata.- the peasants, debt
bondsman and the slaves while the dominant class, though
nominally hierarchically distributed were in effect made up
of class fractions centered around regional Chieftains who had
independent economic resources as well as military control of

their regions.(Amin 6 Caldwell, 1977:19; Hua, 1986:14).

- The State

The state structure was dominated by the sultan, his
family.and court as well as the district or territorial
chiefs. Though the practices varied from state to state,
generally, the village chiefs would be answerable to the

district or territorial chiefs, who in turn, would be

43

answerable to the sultan. This did not mean that the sultan
was the wealthiest or the most powerful man in the state. The
sultan's income was derived from a portion of the income of
each district as tribute; and often the full measure was not
delivered because if he did not have the strength he could not
enforce it. Hence the district or territorial chiefs in those
territories with greater wealth production could often be as
wealthy or wealthier than the sultan. This often led to
conflict between ruling houses and the territorial chiefs for
domination of the state and its territories. Thus there was
no strong central government or bureaucracy, but rather a very
decentralized government structure. The extent of
decentralization varied from state to state and over time
(Sundaram, 1988:6; Amin 6 Caldwell, 1977:26; Hua, 1986:14).

The fight for domination of the state was thus not
between classes but rather between fractions of the ruling
class. At the same time, the peasants and slaves had little
or no input into the workings of the state. Thus, during this
period, political and economic power were concentrated in the
hands of the same class (Hua, 1986:13). It was this
decentralized.nature of the state and the fight for domination
among the fractions of the ruling class that allowed the
British.to exploit the differences among the various fractions

of the ruling class to gain control of the Malay states.

44
- Development and Uneven Development

Production in pre-colonial times was not based on wage
labor but rather on family units. Thus production, on the
whole, was not for exchange but rather for consumption. There
was, however, an excess of production which was traded, as
evidenced by the riverine and coastal traffic and trade. This
trade was, however, based on surplus production and not on
production for exchange.

Among the ruling class itself the wealth accumulated in
the form of tax and tribute was invested in capital. Usury
capital was highly profitable and was operated in conjunction
with the institution of debt bondage. Thus the debt bondsman
themselves became a form of capital investment. This capital
was seldom used as mercantile capital; thus there was some
surplus accumulation in these societies but not the expansion
of capital itself (Sundaram, 1988:5-9).

After the 16th century, with the coming of the European
traders to the region, and the conquest of Malacca by the
Portuguese in 1511, the influence of commercial capital began
to be felt, though in a very limited way. There was an
increase in surplus production as well as production primarily
for exchange. By the early 19th century this production for
exchange primarily took the form of spices and tin; and these
were mainly in the hands of foreigners like the Chinese and

Arabs who worked these concessions in collaboration with the

45
Malay ruling class, to whom they paid a tribute or tax in
return for their protection. (Lim, 1980:132-134).

Alien groups, rather than the local populace, entered
into the modern sector of the economy because of the nature
of the Malay society prevailing then. Land was abundant and
freely available subject to the paying of tribute and hence
most families worked independently on the land. At the same
time the most impoverished section of this peasantry, which
was only a very small portion of the populace was enslaved or
became debt bondsman. Consequently, there ‘was inadequate
availability of proletarianized labor to work for the ruling
class in either tin extraction or laboring in spice
plantations (Sundaram, 1988:15-19).

Therefore one of the primary consequences of the
introduction of production capital was the influx of alien
labor and entrepreneurship into the Malay states, especially
from China. It also lay the foundation for the accumulation
of capital by the Chinese immigrants which would then be
reintroduced as commercial and production capital and lead to
an even greater influx of Chinese immigrants to work as wage
labor in the Malay states. "It would also encourage greater
peasant production for exchange, increase their reliance on
purchased commodities for both production and consumption and
thus stimulated the growth of both conunercial and usury
capital in the peasant sector of the economy" (Sundaram,

1988:35: Lim, 1980:136-137).

46

A further consequence of the introduction of capital was
the differential development of the various regions and
sectors of the Malayan economy. This was because its influence
was felt most keenly in the western and southern states of
Perak, Selangor, Negri Sembilan and Johore which were closest
to the Straits Settlements from where the penetration of the
Malay mainland emanated and less so in the other states. Thus,
for example, in 1922, 73.3 percent of the rubber estates were
located in these four states while government revenues in 1921'
for the Federated Malay States and Johore was MS 62.1 millions
whereas for the states of Kedah, Kelantan, Trengganu and
Perlis together it was only M$ 7.4 Millions (Lim,

1967:p.330,352).

The Colonial Era

The British established themselves in Penang in 1786,
Singapore in 1819 andealacca in 1824. These three settlements
together became known as the Straits Settlements. The British
used the Straits Settlements to control the trade of the
Malayan hinterland as well as the India-China trade. At the
same time they encouraged Chinese settlement to spur the
development of these settlements and make them more viable.
Chinese entrepreneurs from the Straits Settlements and
individual district chiefs and sultans ‘made arrangements
between~ themselves to mine for tin and establish spice

plantations on the mainland. The normal arrangement was for

47

the miners and plantation owners to pay a tribute to the
'chiefs and sultans in return for protection. The produce from
these enterprises, as well as surplus production and
production for exchange fronithe peasant economy was then sold
to the British trading houses which were located in the
Straits Settlements ( Purcell, 1948:143; Emerson, 1964:84;
Comber, 1983:2; Amin 6 Caldwell, 1977:19; Gullick, 1969:44).

In the mid 18th century civil unrest among the Chinese
settlements in P. Malaysia, resulting from secret society
activities, became serious and disrupted trade. The British,
who at this time, were looking for greater control of the
mainland, to ensure greater stability for their trade as well
as to facilitate investment, especially in the face of the
expansion of other European powers in the region, used this
as an excuse to interfere in the affairs of the Malay states.
They used.military force to quell these disturbances. Between
1874 and 1877, by agreeing to provide military protection to
the sultans or by aiding rival chiefs to topple the existing
sultan and gain control of a state they imposed British
'advisors' on the states of Perak, Selangor and Negri
Sembilan. The advise of these 'advisors' was to be followed
on all matters except those pertaining to religion and custom.
In 1888 Pahang was similarly brought under British control and
these four states were then formed into the Federated Malay
States in 1895 and governed centrally from Kuala Lumpur. By

1914, following the same pattern, the British gained control

48

of all the other Malay states in the peninsular. These other
states comprising Kedah, Kelantan, Trengganu and Johore
remained outside the Federated states and were known as the
Unfederated Malay states. Thus, though the British dominated
all the Malay states in the Peninsular these states were not
ruled as a single unit until the time of the Japanese
occupation in the 19405. Hence, the manner and extent of
British domination and consequently of capitalist influence
on the local society varied according to whether the states
belonged to the Straits Settlements, Federated Malay States
or the Unfederated States. (Ryan, 1965:112-115, 138-141; Hua,
1986:25-28; Amin. 6 Caldwell, 1977: 13-21; Emerson,
1964:114-134).

After World‘War Two the British returned and immediately
set about re-establishing their authority. They proposed the
establishment of a Malayan Union comprising all the states
within which citizenship would be granted to all the races.
This was strongly opposed by the Malay ruling classes, because
it would lead to reduction of states rights and thus in the
influence of the Malay ruling classes. They also feared the
economic power of the Chinese as well as their lack of control
over them. This resulted in the formation of The United Malay
National Organization (UMNO), in 1946, to organize Malay
support against this proposal. This, in turn, led to’the
formation of other race based.political parties. The Malaysian

Chinese'Association (MCA) and the Malayan Indian Congress

49

(MIC) were formed.in the late 19405 to represent the interests
of the Chinese and Indians respectively. This was the
beginning of racial politics in Malaysia. However, these
parties were led by and organized around the Malay aristocracy
and large landowners, the Chinese towkays and the Indian
professionals and merchants respectively and hence essentially
represented their class interests within the larger society
(Amin & Caldwell, 1977:216, 249; Hua, 1986:76-77, 98-99).

At the same time there was strong labor agitation for
better working conditions. To ensure the continuation of their
cheap labor policy, the British legislated that all trade
unions~ should be registered in 1947. Within a year they
de-registered the two main labor unions in the country, The
‘Pan Malaysian General Labor Union and The Pan Malayan
Federation of Trade Unions. They also deported striking
workers as undesirable aliens; in 1949 alone they sent back
over 10,000 such workers thus breaking the back of the labor
unions as well as the only organizations that were class based
and cut across racial lines (Amin 6 Caldwell, 1977:190).

At the same time the Communist Party of Malaya stepped up
its campaign of jungle based guerilla warfare to gain
Independence from the British. The Communists were mainly of
Chinese origin. This strengthened the hands of UMNO in their
negotiations with the British. It also led to the British

planning for Independence and supporting the ruling class led

50
coalition of UMNO, MCA and MIC to take over power from them
at the time of Independence in 1957 (Amin 6 Caldwell,

1977:249).

- Social Formation, Class and Race Relations

The ascendence of British power in the Malay states led
to the decline of the slave and tribute mode of production and
the increasing domination of the capitalist mode of
production. Nonetheless a large peasant economy based on the
rubric of peasant modes of production remained. Production in
this peasant economy, just as in pre-colonial times was
primarily based on subsistence agriculture, especially rice
cultivation and fishing. The basic unit of production still
tended to be the family. However, some important changes took
place that altered the structure of the economy as well as the
social relations of production. Firstly, commercial capital
penetrated this economy and resulted in the establishment of
a commercial credit system and the increased production for
exchange. Secondly the British enacted various legislation
with regards to land which affected land ownership and land
use. The Land Entitlement Act of 1897 required everyone to
have title to the land that they utilized. All other land
reverted to the government. This removed the easy
availability of land for the peasants. Later the Malay Land
Reservations Act of 1913 was enacted in the Federated Malay

States and later in the other states, which forbade Malays to

51

sell their land in specific Malay reservations to non-Malays.
The availability of easy commercial credit and the concurrent
high.interest rates impoverished.many of the peasants who then
had to sell their land to the wealthier Malays very cheaply
as they could.not sell on the open.market. Thus, the wealthier
Malays bought up these cheap lands and became large
landowners. Hence, where most peasants worked their land
independently Ibefore, now' many‘ worked as tenant farmers
working the land of the large landowners or they became free
labor entering into capitalist relations of production (Hua,
1986:36; Sundaranu 1988:85-86, 124-125). Thus, 'whereas 1J1
pre-colonial times there was considerable equality within
villages, as the ruling class did not live within ordinary
villages, in colonial times villages became divided along
class lines with a few large landowners, some independent
producers and many tenant farmers and increasingly some wage
labor too (Hua, 1986:13; Sundaram, 1988:5).

In the larger Malay society, the sultan and the chiefs
no longer had direct economic relations with their subjects.
Their economic relationship was now buffered by the state
bureaucracy through which part of the social surplus was
channelled to them. However, the sultan and the chiefs still
had direct relationships with their subjects with regards to
matters pertaining to religion and custom, where the sultans
word was final. Thus, the dominance of the sultan and the

chiefs over Malay society continued unabated though in a

52
different form. (Amin 6 Caldwell, 1977:26; Hua, 1986:26,
29-30).

Production in the capitalist sector was initially based
on the extraction of tin and the'production of coffee and
spices, and after the turn of the century, primarily in the
production of rubber and the extraction of tin. These
activities were dominated by British and local Chinese
capital. British capital, with the aid of the colonial
government, obtained large grants of prime land for rubber
production and tin extraction at cheap prices and thus
dominated both industries after the turn of the century. The
Chinese with their smaller local capital and lesser influence
on the colonial government owned many smaller tin mines and
rubber plantations (Ooi, 1963:113-114; Amin 6 Caldwell,
1977:22- 24; Hua, 1986:35).

Both these and other activities in the capitalist sector
were based on cheap free wage labor imported from India and
China. Initially an indentured system operated whereby the
workers were tied to their employers until they paid off their
passage. This often took several years and led to poor pay and
working conditions and often indebtedness on the part of the
workers. Later, with increased demand for labor as both the
tin and rubber industries expanded this indenture system was
abolished to make it more attractive for workers to come to

work in Malaya.( Hua, 1986:41; Amin 6 Caldwell, 1977:23-24).

53

Most of the tin fields were located in the west coast
states of Perak, Selangor and Negri Sembilan; at the same time
most of the rubber plantations were located in these states
as well as in.Malacca and Johore. This was because these were
the states closest to the Straits Settlements where the
sources of capital exploiting the resources of the mainland
were located and good transport and port facilities were
available. This resulted in two related situations. First,
these states became relatively more capital intensive than the
other states. Second, Chinese and Indian labor were mostly
introduced into these states and settled here. This led to a
relatively high proportion of Chinese and Indians to Malays,
in these states, as compared to the other states (Ooi,
1963:120-122, 130).

By the 19303 a large immigrant population of Indians and
Chinese had settled on a permanent basis in Malaya and most
of these were in the western states. As they settled an
increasing number of Chinese became independent producers of
commercial cash crops such as rubber and vegetables as well
as middlemen within rural areas. These middleman would become
the source of rural credit and play an important role within
the peasant economy. The high interest rates and the nature
of the credit system that they operated made them relatively
wealthy while impoverishing many of the peasants. This, to

some extent, was the basis of early Malay antagonism towards

54

the non-Malays and the Chinese in particular. (Hua, 1986:130;
Ooi, 1963:.125). A

At the same time, towns were deve10ping to serve the
administrative and business needs of the new society. The
Chinese controlled most of the retail businesses while the
British controlled most of the agency houses that handled the
import-export businesses as well as managed many of the
British plantations. The Indians made up a small community of
petty merchants and money lenders. The government apparatus
was run by the British holding the top positions and assisted
by members of the Malay ruling class who held the middle level
positions. The lower rungs were mainly manned by workers from
India and Sri Lanka. Hence, the urban areas were primarily
settled by the Chinese and Indians with a small number of
Malays and Europeans. (Ooi, 1963:140).

Relations between the races at this point was limited.
This was because each of the races worked at different
economic functions and lived in separate enclaves isolated
fromieach other. Even within towns where they lived and worked
in close proximity, differences in language and culture as
well as concentration in different economic activities, kept
them separate. Moreover, there was no substantial relations
of production between the races; the relations of production
existed mainly within the races themselves or between the
various races and the British. Hence, there was no basis for

conflict. The only place where there was considerable

55
relations of production between the local races was in the
peasant sector between the rural based Chinese middleman and
the Malay peasants. This led to racial antagonism because of
the strong identification of the Chinese with the middleman
function, even though in reality, the basis of antagonism was
class generated. (Hua, 1986:52-54).

The modern sector was, thus, dominated by the British and
Chinese capitalists classes. The dominated classes were mainly
made up of Chinese and Indian labor working primarily in the
tin mines and rubber plantations. At the same time a class of
Chinese independent producers was developing in the
countryside while within towns an independent merchant class
comprising of Chinese and Indians was also developing.(Hua,
1986:52-58). Straddling both.the capitalist and.peasant sector
were the British administrative elite; with the Malay ruling
class making up a small but significant part of this elite.

(Hun, 1986:29—32).

- The State

The ascendence of British power brought about
considerable changes in the Malay states. The very structure
and institutions of the state were changed or reorganized to
meet the needs of the new dominant class. State powers were
centralized and vested in an effective bureaucracy. This was
necessary for efficient revenue collection, control of land

alienation, maintenance of the peace and to operate

56
appropriate developmental and fiscal plans to meet the needs
of the British colonial interests.

In addition, the British abolished slavery and the
tribute system and in its place established a system of
taxation. This allowed for greater centralization and more
efficient revenue collection. In lieu of tributes and slave
income, the sultans and district chiefs were compensated by
payments of state funds to maintain them. This made them
directly dependent on the British. Nonetheless, with the
backing of a centralized government and British power, the
dominance of the sultan and his court over Malay society was
increased; it was no longer tenuous and subject to threat from
district or territorial chiefs. This made British control of
the Malay states even easier and their dominance more
complete. Thereafter state policies mainly reflectedthe needs
of British capital vis a vis the other classes. (Amin 6
Caldwell, 1977:26).

As mentioned earlier, the British took total control of
land alienation. The control of the land allowed the
government to alienate large parcels of prime land to British
capital for development of tin mines and rubber plantations
(Sundaram, 1988:86-87). At the same time, the peasantry who
were switching over to rubber cultivation because they found
it more profitable than rice were discouraged from doing so.
They were discouraged for two main reasons. Firstly, British

capital did.not want competition in rubber growing which could

57

lead to lower prices. Secondly, British capital needed to
expand food supply to meet the increasing demands of the
expanding labor force. Thus various legislation, such as the
Rubber Lands Enactment Act of 1917 and. the Stevenson's Rubber
Restriction Act of 1922 were enacted to discourage them. These
Acts favored the large plantations in terms of production
quotas or subsidies, thereby making smallholder production
less profitable (Mehmet, 1986:104; Hua, 1986:38-39).

At the same time, the easy availability of land which was
customary in peasant society was now curtailed. Further, the
introduction of private rights to land ownership commoditized
land, making it subject to trade. This led to rapid sale of
land to the Chinese and Indians by Malay peasants seeking to
make windfall profits. The British, appreciating the problems
of a landless peasantry put a stop to it. A Malay Land
Reservations Act was passed in 1913 in the Federated Malay
States and slightly later in the other states. This Act
forbade the sale of Malay land in these reservations to
non-Malays. However, this Act in conjunction with the
introduction of the commercial credit system into the peasant
economy, led to increased. inequality within the peasant
sector. Impoverished peasants, in need of money, had to sell
their land to the wealthier Malays leading to the
concentration of landholding. (Sundaram, 1988:60).

Thus, the Malay peasants who were restricted from the

commercial economy remained within the subsistence sector and

58
remained producers and suppliers of cheap food for the
expanding wage labor force. The shortage of cheap local labor
led to government encouragement of immigration of labor from
India and China. In 1907, a government subsidy program for
transportation of workers was set up. This led to the
introduction of Indians and Chinese to the more productive
capitalist sectors, while the Malays remained within the less
productive pre-capitalist subsistence sector. This gave rise
to a particular regional and sectoral distribution of Malay
and non-Malay populations as well as to the identification
of particular types of economic functions with particular
races (Ooi, 1963:115, 120-122).

The working conditions for this inmdgrant labor were
atrocious. At the turn of the century it was common for more
than 10 per cent of the workforce in an estate to die of
disease» However, the transient nature of the labor force, the
control of labor resulting from the indenture system, poor
communication and especially government complacence ensured
that these rubber plantations and tin mines continued to have
an adequate supply of cheap labor. (Amin 6 Caldwell, 1977:24,
45-46).

This led, in the 1930s, to the establishment of trade
unions and increased agitation for better working conditions.
There was no response on the part of the government to enact

legislation to protect the rights of the workers and led to

59
the continuation of the cheap labor policyl. Furthermore,
during this period, Government expenditure mainly benefitted
British capital. The major part of the state budget, other
than military expenditure, was spent on the construction of
infra-structure such as roads, railroads and ports which were
useful for the transport and export of production from the
rubber estates and tin mines. This led to the rapid
development of the modern, urban sectors at the expense of the
traditional, rural sectors where hardly any funds were spent

for development (Amin 6 Caldwell, 1977:24; Lim, 1981:214-215).

- Development and Uneven Development

The rapid industrialization of Europe and America during
the 19th and 20th centuries led to a vast demand for raw
materials and a search for new markets for the large
quantities .of products that were spewing out of these
factories. The capitalist penetration of Malaysia and the
British domination of the Malay states, to be fully
understood, must be seen within this context. The aim was to
create stable political conditions to facilitate trade asrwell
as gain control of the resources of the mainland so as to
produce raw materials to meet the needs of the factories of
Europe and America (Amin 6 Caldwell, 1977:14-15; Hua,

1986:25).

 

1 Refer to earlier discussion on page 48.

60

The huge demand of the world markets for raw materials
demanded the creation of vast sources of supply. Production
on an independent basis was no longer adequate to meet the
need for raw materials. Thus production had to take place on
a more structured and organized basis. This could be done most
efficiently on the basis of wage labor which would allow for
the organization of production based on a division of labor
and thus lead to cheaper production costs and higher profits.

Therefore politi'cal control of Malaya provided the stable
conditions as well as the control over resources that was
necessary for the large scale production of raw materials.
The importation and exploitation.of Chinese and.Indian workers
provided the cheap labor while restrictive government policies
ensured the production of cheap food supplies for the labor.
Hence, investments in rubber and tin production made huge
profits, sometimes as much as 200 per cent a year at the
expense of the working class and the peasantry. Part of these
profits were then reinvested to make more profits while part
was repatriated to Britain in terms of profits, interest,
dividends, expatriate salaries, or reserves. The government
too repatriated part of the taxes it collected as payment for
military services, civil servant salaries and. government
reserves. This constant outflow of funds from.Malaya resulted
in the stunting of the economic development of the country.
At the same time the inflow of these funds, in combination

with other funds from other colonies, into Britain and the

61

consequent multiplier effect on Britain's economy would
help to enhance British development (Mehmet, 1986:100-103;
Amin 6 Caldwell, 1977:24, 45-55; Sundaram, 1988:61-63). This
was be the primary cause of the relative underdevelopment of
Malaya within the world economy.

Within the Malay states, production took two distinct
forms - capitalist and pre-capitalist. Within the capitalist
sector the relations of production was based on wage labor
while within the pre-capitalist sector it was based on family
units working at tenant farming, sharecropping or independent
production.

Within the capitalist sector, the availability of cheap
imported labor and the government's substantial expenditure
on infrastructure and cheap land policies enabled the
capitalists to enjoy high profits and thus accumulate capital
at a very rapid rate. Part of this capital was reinvested
leading to a rapid expansion of the Malaysian capitalist
sector and a concentration of wealth in the hands of a few
capitalists. Thus, even a dozen years after Independence, in
1969, a small class of British capitalists controlled more
than 60 per cent ofthe Malayan corporate economy, while
another small, but more widely dispersed, class of Chinese
controlled most of the remaining corporate sector (Amin 6
Caldwell, 1977:24; Hua, 1986:42-43; Sundaram, 1988:264).

Within the pre-capitalist sector, surplus accumulation

was much slower. This was primarily because of the use of

62

traditional production techniques and because most of the
production in this sector was for direct consumption.
Productivity was low and production for exchange was, thus,
limited and hence surplus accumulation too was limited. The
presence of the middleman and the commercial credit system too
led to an outflow of capital from this sector. Nonetheless
economic surplus creation took place. The large landowners
took a share of the tenant farmers crop as payment for use of
their land. The wealth that was accumulated in this way was
then used as usury capital and.not as commercial capital. This
process, in combination with restrictive land policies, led
to the increased impoverishment of the peasants who normally
borrowed these funds at high rates. The end result of this
process was the increased concentration of land ownership and
the creation of increasing numbers of tenant farmers and free
wage labor and the reduction of independent producers
(Sundaram, 1988:48-51).

This resulted in uneven development in Malaysia taking
particular forms. Uneven development was primarily evident
between thermodern and traditional sectors as evidenced by the
differences in relative per capita income and output between
these sectors; for example, in 1960, the per capita gross
output of labor in padi production was only MS 576/- annually
as compared to MS 2,754/- for labor in rubber production (Lim,
1967:30). Furthermore, the distribution of modern and

traditional sectors within the Malaysian states also resulted

63

in the occurrence of regional uneven development. Thus, the
western and southern.states of Perak, Selangor, Negri Sembilan
and Johore as well as Penang and Johore were more highly
capital intensive and so relatively more developed then the
eastern. and northern states of Kedah, Perlis, Kelantan,
Trengganu and Pahang. Thus, for example, the former states had
72 per cent of all the rubber estates in P. Malaysia as
compared to only 17 per cent in the latter states in 1962
(Lim, 1967:330).

Moreover, modern production.methods were identified with
particular industries such as manufacturing, mining and
commercial agriculture while traditional production was
identified mainly with padi and fishing. Thus productivity
and capital accumulation within these industries varied
considerably, leading to uneven development according to
economic activity. Moreover, the non-Malays were identified
with the modern sector while the .Malays were primarily
identified with the traditional sector. This led to greater
productivity and capital accumulation.among the non-Malays and
lower productivity and capital accumulation among the Malays.
This led to the identification of uneven development along

racial lines (Young, 1980:3-4).

64

CHAPTER 4
THE POST-INDEPENDENCE PERIOD
1957 - 1969/70
- Social Formation, Class and Race Relations

During colonial times the British were unquestionably the
dominant class and all others subordinate to them. Just below
them were the Malay aristocracy and bureaucrats, the Chinese
towkays and the Indian professionals who in various ways
served the needs of British capital. After Independence,
British political dominance was replaced by a combination of
these same class fractions through their control of the
Alliance Party which comprised the United Malay National
Organization (UMNO), the Malayan Chinese Association (MCA) and
the Malayan Indian Congress (MIC) (Amin 6 Caldwell, 1977:31,
249).

The coming to power of the Alliance Party , was to some
extent, made possible by the colonial government's repressive
actions against the more militant nationalists and class
based organizations. As mentioned earlier, in 1947, the two
largest and most militant trade unions, the Pan Malayan 'Irade
Union Congress and the Pan Malayan Federation of labor were
deregistered and the most radical workers deported as
undesirable aliens. In 1948' the radical Malay Nationalist

Party was banned and an 'Emergency' was declared against

65

communist insurgency. With the working class organizations
and radical movements destroyed or made illegal, the Alliance
Party, representing ruling class interests had no problem
mobilizing the necessary support to win the 1955 elections
which were carried out under the auspices of the colonial
government as a prelude to Independence. (Amin 6
Caldwell,1977:249; Hua,1986:89-91).

The Alliance, however, came to power on the basis of
negotiated understanding between the partners as well as the
colonial government. The non-Malays would be granted
citizenship rights and unencumbered freedom to pursue their
economic interests in return for special privileges for
Malays. These special privileges, included among others, the
preservation of the special position of the sultans, political
hegemony of the Malays, special quotas for the Malays in terms
of employment in the public sector and in scholarships, and
the acceptance of Malay as the national language and Islam
as the state religion. In brief, the contract called for
Malay political dominance in return for non-Malays enjoying
continued economic' dominance. (Hua, 1986:102-107; Amin 6
Caldwell, 1977:249-251).

However, there was a significant problem inherent in this
arrangement. Only a small number of Malays actually held
political power while only a small minority of non-Malays held
considerable economic assets. Hence, the interests of the

majority of the people were not considered within this

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67

arrangement. The interests of the dominant groups would,
however, be maintained through repressive legislation, such
as the Internal Security Act (ISA) and intermittent
declarations of 'Emergency' rule which could be used to
repress any opposition. Thus, for example, parliamentary rule
was dissolved in 1969, following the race riots which resulted
in the deaths of hundreds of Malays and non-Malays after a
relatively poor showing of the Alliance Party in the general
elections. (Brennan, 1982:204-209; Clutt'erbuck, 1985:294-296) .

UMNO itself was dominated by three main fractions, the
traditional Malay aristocracy, the large rural land owning
class and the senior Malay bureaucrats and bourgeoisie. At the
time of Independence, the leadership of UMNO rested with
members of the aristocracy. However, as the government took
on new functions and its size increased, the number of Malay
senior bureaucrats increased. At the same time the greater
opportunities available to Malay businessman after
Independence resulted in the number of Malay bourgeoisie in
urban areas increasing and becoming more politically active.
Thus the balance of power within UMNO shifted away from the
aristocratic fraction towards the Malay bureaucrats and petty
bourgeoisie.' (Brennan, 1982:196-197, 209-210; Lim,
1985:49-56).

At the same time the policies followed by the government
benefitted the big capitalists and not the petty bourgeoisie

or peasants. This led to an increased demand within UMNO for

68

changes in policy. The demand for changes in policy rested
on three1main factors. Firstly, the policies of the government
was alienating the working class and peasantry on whom the
bourgeoisie depended for political power. Secondly, the
bourgeoisie and the bureaucrats wanted to build an economic
base for themselves commensurate with their political power;
.but this was again being inhibited by government policy.
Thirdly, the nationalistic and ethnocentric minded leaders of
UMNO wanted to break the stranglehold of the British and
Chinese capitalists.on.thelMalayan economy. However, the close
working relationship between the old guard in UMNO and the
Chinese' and British capitalists inhibited change (Lim,
1985:43-44).

This led to an increasingly vocal public rhetoric on the
part of the bourgeoisie and bureaucrats about Chinese
economic oppression of the Malays and the need for change.
This was because the Chinese controlled the non-monopoly small
business sector which was the only kind of businesses the
Malay petty bourgeoisie could reasonably hope to enter. The
British who were involved in the more monopolistic businesses
were not included in this rhetoric. (Sundaram, 1988:253; Lim,
1980:54-56).

At the same time, the English speaking business owners
and professionals of the MCA and MIC respectively, who had
traded away the non-Malay rights to a vernacular education and

language in return for greater freedom. to pursue their

69

business interests, were losing support among the general
non-Malay population. The non-Malay working classes,
increasingly disappointed with government policies which
downgraded vernacular education and language, turned towards
opposition parties for leadership. At the same time the
government's land policy and preferential treatment for Malays
in government employment, and provision of certain business
licenses, and scholarships further aggravated them as it
reduced their- employment opportunities. This led to an
increasingly public expression of dissatisfaction by the non-
Malays of Malay political oppression and unequal treatment
(Cham, 1975:449-450; Clutterbuck, 1984:293).

In this. way, class and racial interests became
intertwined in the years leading up to 1969. The 1969 general
elections were held amidst charges of racial oppression. The
Malays charging economic oppression while the non-Malays
charging political oppression. The Alliance party won; but
less convincingly then in the previous election in 1964. The
MCA and MIC, in particular, did poorly indicating lack of
non-Malay working class support for the Alliance party
(Clutterbuck, 1984:294-296; also refer to table 9 in
appendix).

The heightened tensions and anger’ generated. by the
elections led to race riots in which hundreds of people were
killed. It also led to the implementation of a state of

'Emergency' and the dissolution of parliamentary rule.The

70
riots were blamed on Malay frustrations over Chinese
domination of the economy and Malay poverty. This led to a
demand for greater opportunities for Malays to participate in
the economy. Consequently, it led.to the implementation of the
New Economic Policy in 1971 which was primarily'a policy aimed
at improving the lot of the Malays vis-a-vis the other races.
Thus 1969 marked a watershed in race and class relations in
Malaysia. The comparatively good relations between the races
before 1969 was replaced by suspicion and distrust, and
politics and government policy became increasingly racialized
(Snodgrass, 1980:54-56; Hua, 1986:142-149; Lim, 1980:147-149;

Clutterbuck, 1984:297-302).

- The State

The granting of Independence in 1957 resulted in changes
in the relative influence of the ruling classes on the state.
As mentioned earlier, political power now rested with the
leaders of UMNO, MCA and the MIC. However the implementation
of a«democratic electoral process resulted in the ruling class
becoming dependent on the votes of the peasantry and the
working class to stay in power. Consequently UMNO, which
represented the Malay majority, became the dominant party in
Malaysia; and the dominant fractions within UMNO became the
major influence within the Malaysian state. (Hua, 1986:109).

At the same time, the British who no longer retained

direct political power still controlled a major part of the

71

corporate economy. As late as 1969, they controlled 61.7 per
cent of the corporate assets of the country while the
non-Malays controlled another 34 per cent. (refer to Table 5
in appendix). Thus the local government was still dependent
on the British and Chinese business interests for state
revenue from taxation and duties. This gave the British and
Chinese business interests a considerable say in government
policy. Within the civil service, members of the Malay
aristocracy, who had held middle level positions under the
British. now' became the senior officials in the various
government departments, suggesting and implementing policy.
At the same time, senior British civil servants were retained
in key positions, for several more years , to help in planning
and implementingpolicy (Amin 6 Caldwell, 1977:265).

Thus a combination of continued British and Chinese
economic dominance, a state bureaucracy run by old colonial
hands and the retention of political power in the hands of the
traditional local elite led to a continuation of state
policies inherited from colonial times (Lim, 1981:216).

Consequently a laissez faire economic policy was
followed, with minimum regulation of banking, commerce and
industry. All development plans before 1970, such as the
First and Second Malayan Five Year Plans, covering 1956-1965,
as well as the First Malaysian Five Year Plan from 1966-1970
stipulated that the role of the government should be

primarily as providers of adequate facilities, such as

72 ‘

communication, infrastructure, utilities, trained labor force
and finance to the private sector (Lim, 1981:211).

Nonetheless, (the state also carried. out some rural
development and industrialization policies such as import
substitution aimed at decreasing dependence on the‘
international economy. However, because of the lack of
adequate regulation these policies worked to the advantage of
metropolitan capital. They simply 'used the tariff walls
erected to protect local industries and other tax incentives2
to go into these import substitution industries and thus
control the local market. Thus Malaysia's industries became
increasingly enmeshed with metropolitan capital (Lim,
1981:211-216). Similarly, rural development.plans were limited
by class interests. The Malay Reservations Act of 1913
remained intact because of the interests of the large
landowners to maintain it. Similarly, rural and agricultural
development expenditures, in the First and Second Five Year
Plans between 1956-1965, accounted for only 23 per cent and
17 per cent respectively of the total expenditure of
approximately MS 3.66 billions whereas expenditure on
infrastructure for the same period accounted for 52 per cent
and 47 per cent respectively (refer Table 10.1). At the same

time, of the limited amount spent on agriculture during the

 

2 These tax incentives were created in the "Pioneer
Industries Act of 1956" and "Investment Incentives Act of
1968".

73
First Five ‘Year Plan, 55 per cent was spent on rubber
replanting which benefitted the plantations rather than the
peasantry. Thus these policies continued to serve the needs
of the capitalists interests and were inimical to the
development of the peasantry and the working classes (Hua,

1986:131-134; Lim, 1981:211-214).

- Development and Uneven Development

After Independence, local capital expanded at a much
faster rate than during colonial times, as the new local
ruling classes sought to increase their participation in the
economy. New industries, banks and insurance companies were
set up with local capital. However, due to the insufficiency
of Malay and Indian commercial capital most of the expansion
in the larger businesses took place within Chinese capital
with the involvement of a very few'wealthy Malays. Most of the
Malay and Indian participation came at the petty bourgeoisie
level. At the same time British capital continued to dominate
the economy, controlling almost 62 per cent of the corporate
economy as late as 1969. This was made possible by the
government's laissez faire economic policies which allowed
them to continue investing in the Malaysian economy and
transfer profits, dividends and reserves back to the
metropolitan center without any hinderance. (Tan,

1982:137-191).

74

At the same time, the government development policy
continued to be aimed at facilitating development within the
modern sector rather than the peasant sector. Thus during the
period 1956-1970 the government spent only MS 1.9 billion on
rural and agricultural development, out of a total of
approximately MS 7.85 billion, even though the majority of
the population, approximately 73 per cent in 1957, lived in
rural areas and most of them were Malay peasants. Further, as
mentioned earlier, even out of this expenditure almost 50 per
cent went for rubber replanting which benefitted the large
rubber plantations rather than the peasant smallholder.

At the same time approximately 50 per cent of the
government expenditure was spent on infrastructure for the
benefit of the large plantations, tin mining companies and
other industries (Hua, 1986:112-115).

Furthermore, the continuation of the Malay Reservations
Act and the increasing influence of commercial credit on the
peasant sector continued to impoverish the peasants and lead
to land concentration. Thus according to the 1975 Malaysian
Treasury Report (p.102), as quoted in Lim, (1980:148) "....
every’year almost 10,000 peasants become landless whereas only
about 31,000 famdlies were resettled. in government land
development' projects over a 20 year period between 1956-1975."
Thus this period, 1957-1969, was characterized by the
continuation of high degrees of poverty and racial and class

inequality in wealth. Snodgrass, (1980:83-84) states, that

75
during this period all three racial groups shared
significantly in aggregate income growth, but the general
trend was one of increasing inequality. He indicates that
whereas in 1957/58 the intra group inequality was highest
among the Chinese and lowest among the Malays, by 1970 this
ranking was reversed. Snodgrass, also states that at the end
of this period the average Malay household income was still
half the non-Malay household income (refer to tables 3 and 4
in appendix). Similarly, Tan Tat Wai (1982:120) shows that in
1957/58 the top 10 per cent of Malays, Chinese and Indians
accounted for 27.6 per cent, 31.5 per cent and 29.5 per cent
of the income share of each racial group. However, by 1970,
the top 10 per cent of each group accounted for 36.2 per
cent, 37.1 per cent, and 39.6 per cent respectively.
Similarly, the bottom 40 per cent of the Malays, Chinese and
Indians accounted for 19.5 per cent, 18.1 per cent and 19.7
per cent respectively of each racial groups income share in
1957. By 1970, their respective shares were down to 12.7 per
cent, 13.9 per cent and 14.3 per cent. In fact, during this
period the actual standard of living of the bottom 40 per cent
of the Malaysian population in general fell by 13 per cent
from MS86/- per month to M$75/-. At the same time the
employment situation in the country deteriorated. Official
unemployment figures showed an increase in' the number
unemployed from 6.5 per cent in 1965 to 8.0 per cent in 1970

(Malaysia, 1971:102). Thus, the period 1957-1970 reflected not

76
only increasing class inequality but actual decline in the

standard of living of a large section of the population.

1970/71 Onwards
- The State

The general elections and race riots of 1969 showed the
general public's disillusionment with the Alliance government.
The MCA and MIC leadership, especially were discredited
because of their poor showing in the general elections. At
the same time, within UMNO, the old leadership lost influence
and.power and the bureaucratic and bourgeoisie class fractions
gained power. This fraction soon led the Alliance parties to
form a broader governing coalition in 1974. Opposition parties
that had gained increased popularity and state power in some
of the states were co-opted to join the ruling coalition to
form a new governing coalition called the National Front3.

Among the opposition parties joining the coalition was
the only effective Malay opposition party, The Partai Islam.
At the same time the lack of support for the MCA and the MIC

during the 1969 elections and the incorporation. of new

 

3 Of the parties from P. Malaysia, the National Front
comprised of the three Alliance parties of UMNO, MCA, MIC,
and the Gerakan Rakyat, which had won in Penang, the Peoples
Progressive Party in Perak and the Parti Islam, which formed
the government in Kelantan in December 1972.

77

parties into the coalition increased the dominance of UMNO
within the ruling coalition. Thus opposition to the ruling
class was again effectively eliminated by co-optation (Hua,
1986:148-153; Cham, 1975:450; Clutterbuck, 1984:302-305).

The increased dominancelof UMNO and the cowing of ;public
opposition through the imposition of martial law allowed UMNO
to dictate changes in economic policy which had not been
possible earlier. They immediately implemented a scheme that
would not only build them an economic base but also help
stabilize their political support among the rural poor. This
scheme was the New Economic Policy (NEP) and it was integrated
into the Second Malaysian Five Year Plan (1971-1975). The two
main aims of this policy, as mentioned earlier were, to
eradicate poverty, irrespective of race and to restructure the
economy, so as to eliminate the identification of race with
economic functions. The euphemistic terminology of the policy
objectives disguised the primary intent of the policy; it was
to use the state apparatus to help accumulate wealth for the
Malay bourgeoisie. This was stated.in the Second Malaysia Five
Year Plan (Malaysia,'1971:7), as follows:

" The government will participate more directly in

the establishment and operation of a wide range of

productive enterprises. This will be done through

wholly owned enterprises and joint ventures with

the private sector. The necessity for such efforts

by the government arise particularly from the aim

of ..... creating a Malay commercial and industrial
community.”

78
To achieve the first aim, that is, to reduce poverty,
rapid socio-economic development was to take place with

4. In the process Malays

significant participation of the poor
and other indigenous people were targeted to own 30 per cent
of the share capital of the Malayan corporate sector as
compared to only 2.4 per cent in 1970. The share of the other
Malaysians was to increase from 34.3 per cent in 1970 to 40
per cent in 1990 while the share of foreigners was to decline
from just over 60 per cent in 1970 to 30 per cent in 1990. The
second objective called for a restructuring of society at
three levels, that is, employment by sector, employment by
occupation and ownership of equity in the Malaysian corporate
sector, to approximate closely the racial distribution of the
country which at this time was 54 per cent Malay, 35 per cent
Chinese and 10 per cent Indians. The New economic Policy
stipulated that these changes. ‘would result from
redistribution of economic growth rather than redistribution
of existing resources (Lim, 1983:3; also refer to tables 1.1,
1.2 and 1.3 in appendix).

The strategy for poverty eradication included extensive
new land development to resettle the increasing number of
landless in the peasant sector, increased subsidies and

replanting grants for existing farmers and special programs

 

4 The aim was, more specifically to reduce the number of
total poor households form 49.3 per cent in 1970 to 16.7 per
cent in 1990 ( Malaysia, 1981:31 ).

79
for target groups, such as padi farmers, who would be taught
double cropping techniques and given high yielding seeds. It
also included rapid creation of job opportunities in the urban
based industrial, service and government sectors.

The strategy' for restructuring’ society’ included the
development of appropriate education and training programmes
for Malays, the establishment of various financial, industrial
and marketing institutions to provide credit, consultancy
services and administrative support for Malays going into
business as well as to participate directly in business and
other forms of developmental activities. At the same time it
required companies that enjoyed any form of fiscal incentives
from.the government to set aside at least 30 per cent of their
share capital for Malays and to ensure that at least 30 per
cent of their employees were Malays or other indigenous
people (Young et al., 1980:61-70).

The eradication of poverty and the restructuring of
society, therefore, depended on four main elements. Firstly,
that the government use an increasing share of its resources
for developmental expenditure. Secondly, a rapid
industrialization policy be implemented, based on export
promotion, as the local market was limited. Thirdly, a rapid
new land development scheme:needed.to be carried.out to absorb
the increasing number of landless peasants. Finally, a

balanced regional development needed to be emphasized with

80
the provision of infrastructure and other incentives to

encourage advancement in the less developed regions.

- Social Formation, Class and Race Relations

The New Economic Policy (NEP), was introduced in 1971,
as a response to the race riots of 1969. The riots resulted
from Malay dissatisfaction arising out of their greater
relative poverty, their exclusion from the business sector and
the general lack of opportunities for themlwithin this sector.
It also resulted from frustration at the domination of the
Malaysian economy by foreigners and the non-Malays even while
the Malays were politically dominant. The implementation of
the NEP wrought considerable changes in the social formation
and social relations in. Malaysia. To achieve the ‘NEP
objectives, considerable expansion took place in the
government's development expenditure between 1971 and 1985.
The total public development expenditure was MS 81,226
millions as compared.to only MS 7,901 millions in the previous
15 years from 1956 to 1971. Of the total public sector
expenditure for 1971-1985, MS 24,056 million was used for
public sector financing of private investments (Lim, 1981:219;
Malaysia, 1986:209, also refer to tables 10.1 and 10.2 in
appendix). These funds were used by the government to
establish hundreds of federal and state agencies participate
in economic development and capital accumulation process.

Three main types of state agencies were set up. The first

81

type were investment agencies, such as Pelaburan National
Berhad (PNB) or the National Investment Company, which used
state funds to buy into the largest corporations in Malaysia
and to hold them in trust for the Malays until they could buy
them.at a later“ date. The second type, such as the Perbadanan
National Berhad (PERNAS) or National Trust Company, used
state funds to go directly into the commercial, financial and
manufacturing sectors and competed directly with the private
sector. The third type, such as, the Federal Land Development
Authority (FELDA), were those state agencies that were aimed
at rural development and which helped open up and plant
millions of acres of new land with commercial agricultural
crops such as rubber and oil palm, for the export market.
They also helped with the marketing of produce from both this
commercial sector' and. the subsistence» sector. (Malaysia,
1981:223- 225).

The expansion of state agencies created huge fiefdoms
for the leading .Malay bureaucrats, politicians and
businessman who were brought in to run these new agencies and
companies which had budgets often running into hundreds of
millions of dollars. Thus, for example, The Federal Land
Development Agency (FELDA) and the Urban Development Authority
(UDA) spent MS 2.4 billions and MS 423 millions respectively
during the 1971-1980 period, while Pelaburan National Berhad
(PNB) alone spent MS 425 millions during 1976-1980 and an

estimated MS 1.5 billion between 1981-1985 (Malaysia,

82
1981:241). The extensive funds available to these
'administocrats' made them capable of great patronage and
subsequently also provided the basis of extensive corruption.
Most of them would built close working relationships with
leading local non-Malay entrepreneurs as well as foreign
investors to build up private companies for themselves. This

" of the government which

was often done with the " blessing
. sought not only to create a Malay middle class but also a
class of Malay millionaires to match the wealthy Chinese
entrepreneurial class ( Ozay Mehmet, 1988:preface - quoting
the Malaysian Prime Minister, Dr. Mahathir). These fiefdoms
made them an extremely powerful class fraction, with their
own particular agenda and having considerable influence on
society and the developmental process.

The establishment of these state run enterprises also led
to direct competition between the state enterprises and the
private sector for the limited business opportunities
available in the Malaysian economy. The leading local
non-Malay and foreign entrepreneurs, however, were less
subject to the competition as they worked in tandem with the
. new state enterprises. The bureaucratic bourgeoisie fraction,
who did not have much business experience, and the foreign
and especially' the local Chinese capitalists who needed their
influence, worked out mutually beneficial joint-venture
operations and. other " Ali-Saba." deals; that is, deals where

influential Malays fronted for non-Malay businesses to obtain

83

licenses, contracts, and.cheap financing in return for various
free benefits such as shares, salaries or directorships in
companies. Thus, the pervasive government presence in the
private sector and the close working relationship between the
dominant classes of all races as well as the foreign investors
created huge inter-locking corporations with inter locking
directorates which dominate the Malaysian economy.
Consequently, the class of people who were most affected were
the non-Malay bourgeoisie, who did not have much influence in
government circles and hence were left with reduced
opportunities (Hua, 1986:172-177; Tan, 1982:190-191, 301-
307; Mehmet, 1988:112-117).

The establishment of all these agencies led to the
ballooning of government sector employees from 396,000 in 1970
to 820,000 in less (Malaysia, 1981:81; Malaysia, 1986:119).
Since almost 75 per cent of all government jobs were reserved
for Malays, this created a considerable number of jobs for
them at all levels of employment. Furthermore, the expansion
of government spending not only led to the establishment of
numerous government agencies and companies but also led to the
rapid expansion of manufacturing and new land settlement
schemes. For example, employment in manufacturing went up from
386,500 in 1970 to 828,000 in 1985 (Malaysia, 1981:81;
Malaysia, 1986:102). Here again government quotas for Malays
increased employment opportunities for this group. On the

other hand, the quotas restricted non-Malay employment

84
opportunities. Nonetheless, because of their lack of training
and education the Malays ended up holding the lower rung jobs
in industry (Malaysia, 1986:118-121).

At the same time, a rapid expansion in higher education
was instituted by the government to meet the needs of
increasing' employment opportunities. Thus, while: in 1970
there were 10,995 students enrolled in institutions of higher
learning, by 1980 this had increased to 34,000 (Malaysia,
1981:92-94). Of these places over 70 per cent was reserved for
Malays. Here again non-Malay opportunities were restricted.
Those who could afford it had to look to foreign universities
to complete their education and training (Malaysia,
1986:488-491).

The rapid expansion of employment creation in the urban
areas led to rapid urbanization. Between 1971 and 1985 the
urban population more than doubled from 2.6 millions to 5.3
millions. The Malay proportion of the urban population
expanded most rapidly. This substantially affected the pattern
of racial population distribution in the urban centers. The
populationtof Malays in the urban.population went up from 27.1
per cent in 1971 to 41.3 per cent in 1985 while the non-Malay
proportion went down from 72.9 per cent to 58.7 per cent
during the same period (Malaysia, 1986:134; also refer to
table 6 in appendix).

At the same time the lack of adequate housing led to the

rapid expansion of squatter settlements in the fringes of

85

major urban centers. Thus, in Kuala Lumpur alone, some
estimates have put the squatter population at a quarter of
the total population, of one million. Michael Johnstone
(1981:337) states that the Malay component of the squatter
population increased from 25 per cent in 1970 to 38 per cent
in 1975 and was expected to reach 50 per cent by 1980. This
in effect reflects the transfer of rural poverty into
continuing urban poverty. .

The rapid changes in the social formation, political
power, governmental policies and availability of Opportunities
between the various races led to considerable changes in class
and race relations. For the working class non-Malays, the
reduction in political power and influence, as well as in
opportunities for employment, education and business created
resentment against the Malays. The proletarianized Malays who
were rapidly urbanizing and holding lower rung jobs in
industry too were becoming increasingly aware of the disparity
in wealth between themselves and the non-Malays and
increasingly resenting it. These resentments were keyed up
regularly, during the various party and general elections,
when Malay politicians voiced their resentment of non-Malay
economic domination and non-Malay politicians ranted about
Malay political oppression. This has produced a climate of
political and economic uncertainty in Malaysia. (Aznam,

1989:28-33) .

86

At the same time, the increased proletarianization and
urbanization of the Malay peasantry, the increasing land
concentrations in rural areas, and wealth concentration in
general, as exemplified by the fact that the top 40
shareholders out of the 797 largest shareholders of Malaysia's
largest corporations held nearly 63 per cent of the total
shares in these companies in 1983, as well as the obvious
corruption and mismanagement in government has created
increased class awareness and resentment among the Malay
working class and peasantry. This has resulted in an increase
in tension between the dominant classes and the peasantry and
working classes (Mehmet, 1989:112-117, 147-151; Seaward,
1988:56 6 1988:66).

Another feature resulting from the NEP, and the
consequent concentration of power and wealth ownership in the
hands of a small class fraction has been the increasing
repression practiced by this class to maintain their hold on
power and wealth. Thus, in the 19703 when mass protests
resulted from general dissatisfaction, the government enacted
various repressive legislation to increase its control over
the citizenry as well as increasingly used its Internal
Security Act to detain people who in any way threatened their
hold on power. In November 1974, for example, when 12,000
peasants of Baling took to the streets to protest conditions
in the rural sector, resulting in student support and

sympathy demonstrations in the various universities, the

87
government passed the 'Universities and University Colleges
Act' which forbade students from " doing anything that can
be construed as expressing support, sympathy or opposition
to any political party or trade union". Later in 1978, when
the workers of the Malaysian Airlines went on strike, 22 of
their members were arrested and detained under the ISA. At the
same time 10,000-15,000 farmers were demonstrating for higher
prices for padi in the Muda Scheme. There the government
arrested 92 of the-farmers and charged them in court. (Halim,

1982:272).

- Development and Uneven Development

The government's anti-poverty strategy called for rapid
industrialization as well as rural development. At the same
time the government's restructuring program called for greater
Malay ownership of corporate assets. Hence, the government's
entry into the private sector resulted in the taking over of
‘the large, mostly British owned, foreign companies such as
Sime Darby, Harrisons and Crossfields and Malaysia Mining
Corporation. The owners of these companies were paid their
full value, which usually ran into the hundreds of millions
of dollars, such that foreign investors' faith in the
Malaysian.Govermment and the Malaysian investment environment
was maintained. At the same time, it resulted in. considerable
outflow of capital from the country. (Hua, 1986:185-186; Lim,

1980:46-47; Clutterbuck,1984:307).

88

This outflow of capital funds was balanced in two ways.
First, extensive foreign borrowing took place to finance the
development plans. Thus foreign borrowing increased from MS
701 millions in the 1966-70 period to MS 5,990 in the
1971-1980 period (Lim, 1981:221; Malaysia, 1981:132) and
increased further to MS 14,436 in the 1984-1986 period
(Malaysia, 1987:226). Second, foreign investment was
encouraged. It was seen, not only, as a source of funds, but
also of new technology and was encouraged as a. means of
expanding the industrial sector rapidly and creating
employment for the vast rural unemployed. This foreign
investment was wooed by the provision of various incentives.
These incentives included: various tax benefits such as tax

exemption for the first few years for firms with pioneer

status; maintenance of an open economy , so that capital
funds, profits, dividends, interest payments and salaries
could be easily remitted in and out of the country; the
maintenance of cheap labor policy by keeping trade unions
submissive or banning them; as in the case of the electronics
industry (Seaward, 1988:80) and the provision of
infrastructure and free trade zones. Between 1971-80 an
estimated MS 10,193 millions in net private long term capital
inflows took place (Malaysia, 1981:139:Table 7.1).
Consequently, even though the foreign share of the local

corporate sector declined from almost 62 per cent in 1970 to

25.5 per cent in 1985, the actual value of foreign investments

89

increased from approximately MS 4 billion in 1970 to
approximately MS 19 billion in 1985. (Malaysia, 1986:122).

The increased foreign.borrowing and investments, in turn,
led to the increased outflow of capital from Malaysia in the
ensuing years, in the form of interest, loan repayments,
profits and dividends. This became an even more serious
problem. in the second half of the 19805 when foreign
currencies like the Yen, the Deutschemark and the British
Pound, appreciated sharply against the Malaysian Ringgit
leading to a sharp rise in foreign dethand consequently to
very high repayment ratess. Foreign debts rose sharply from MS
37.2 billion in 1984 to MS 42.3 in 1985 and MS 51 billion in
1986. At the same time, the debt service ratio to export
income rose sharply from 11.8 per cent to 15.8 per cent and
17.6 per cent during the same period. The outflows of profits
and dividends alone, for 1985 and 1986, amounted to MS 5,665
and MS 5,101 respectively (Malaysia, 1987:227). This rapid
outflow of funds put increasing pressure on the government to
woo foreign investment to offset the capital outflow, and
hence continue to provide increasingly attractive investment

incentives. Thus the cycle continued (Malaysia, 1986:172-173) .

 

5 Exchange Rates ( equivalent Malaysian S )
1985 (Dec.) 1988 (June)

1 US Dollar 2.43 2.67
1 Br. Sterling 3.51 4.50
1 Duetschemark 0.97 1.43

100 Yen 1.19 1.99

90

This led to two consequences. First, the cheap labor
policy and all the other incentives were maintained as a
mainstay of attracting foreign investment, leading to
increased inequality between classes within the country as
local capitalists too enjoyed the benefits of cheap labor and
other incentives. Secondly, Malaysia continued to be
underdeveloped in relation to the metropolitan centers as
foreign companies continued to make exorbitant profits and
'remit them back to their home countries resulting in the
multiplier effects of income generation being felt in the home
countries rather than in Malaysia where the income was
produced (Malaysia, 1986:353-354; Tan, 1982:245).

Furthermore, the government's industrialization and new
land development schemes were export oriented because of the
limited local market. This led to an increasingly open
economy. Whereas in 1970 the ratio of exports to gross
domestic product (GDP) and imports to GDP were 44.5 per cent
and 39.3 per cent respectively, by 1980 they were 51.8 per
cent and 53.8 per cent respectively (Sundaram, 1988:154) . Thus
the Malaysian economy became more tightly enmeshed within the
world economy and hence more liable to exploitation by
metropolitan capital.

Within Malaysia itself, the government's
industrialization and regional development policies reduced
regional, sectoral and racial uneven development. This was

because these policies were developed in such a way as to

91

encourage regional development. This was done by providing
infrastructure and incentives, such as the 'location
incentives' which.gave some tax relief for locating in various
less developed regional centers and opening up new land
schemes in the less developed, land rich, eastern states
(Malaysia, 1988:171-183; Malaysia, 1986:320).

All this resulted in a number of related consequences.
The provision of infrastructure and incentives to locate in
less developed regions led to industrial dispersal. Whereas
87 per cent of industrial output came from the states of
Johore, Selangor, Penang and Negri Sembilan in 1970, 20 out
of the 76 industrial estates established during the decade
and 28 per cent of all factories developed by the government
were situated in the states of Kedah, Kelantan, Perlis and
Trengganu. At the same time, nearly 17 per cent of a total of
730,000 hectares of new land development schemes were located
in these states while another 30 per cent was developed in
Pahang alone (Malaysia, 1981:110-113). Thus the ratio of per
capita income to the Malaysian average for the Eastern region
went up marginally from 82 per cent to 83 per cent while for
the northern region it fell from 87 per cent to 84 per cent
between 1980 to 1985. During the same period the wealthy
central region went down marginally, from.143 per cent to 142
per cent (Malaysia, 1986:171-174; refer to table 8 in the

appendix).

92

The development of rural sectors have also been helped
considerably by government policies. The creation of
employment for Malays in the urban sectors and new land
development schemes have reduced unemployment and under
employment in the peasant sectors sharply. Furthermore, the
opening up of 730,000 acres during the 1970-80 decade helped
resettle over 70,000 families into commercial agriculture
thereby increasing their income levels. At the same time the
provision of subsidies, agricultural credits, training
programs, replanting grants, marketing assistance and improved
irrigation and drainage facilities have improved
productivity. Thus rural median incomes increased from MS
139/- in 1970 to MS 596/- in 1984, thus going up from 52 per
cent of the urban income of MS 265/- to 58 per cent of the
urban income of MS 1,027/- in 1984 (Malaysia, 1981:56;
Malaysia, 1986:99).

Inter racial inequalities too are on the decline. The
quotas for Malays in employment and education helped Malays
to gain employment in the better paying urban sectors. At the
same time the provision of business licenses and easy credit
as well as quotas on corporate ownership helped the Malays
enter into business and gain control of a greater share of the
corporate assets of the country. Malay control of corporate
assets went up from 4.3 per cent in 1970 to 17.8 per cent in
1985 while non-Malay control of corporate assets went up from

34 per cent to 56.7 per cent (Malaysia, 1981:62; Malaysia,

93
1986:107). At the same time, Malay median income went up from
MS 120/- per month in 1970 or 44 per cent of the Chinese
median income of MS 268/- to MS 581/- per month in 1984 or 56
per cent of Chinese median income of MS 1,024/-. (Malaysia,
1986:99; Malaysia, 1981:56).

However, even though regional, sectoral and racial
uneven development was reduced within Malaysia, intra-ethnic
class inequality increased considerably and especially among
the Malays. This is because, government aid, especially, in
terms of subsidies and marketing assistance, in rural areas,
helped the larger landowners more than the poor ones.
Furthermore, the large business undertakings of the government
benefitted mainly the few educated and influential Malays who
had political influence whereas the majority of the Malays
were employed in low income, lower rung jobs in industry and
government. Thus the ratio of mean to median income among the
Malays went up from 1.43 in 1970 to 1.50 in 1979. It was the
same among the non-Malays, where the leading businessmen had
a working relationship with the influential Malays and the
Government and hence continued to expand their holdings;
while, the working class non-Malays had to compete for the
remaining jobs, after the Malay quote was filled, as well as
face the cheap wage policy of the government. Here again the
ratio of mean to median income increased from 1.47 to 1.51
for the Chinese though it decreased from 1.56 to 1.45 for the

Indians for the same period 1970-1979. The exception in the

94
case of the Indians can probably be explained by the high
commodity prices experienced during this period and the fact
that the income of the estate laborers, where Indian labor is
predominantly located, is tied to the price of the commodity

( Mehmet, 1988:135-152; Lim, 1985:46-58; Malaysia, 1986:3).

95

CHAPTER 5
CONCLUSION

The beginnings of the uneven development of Malaysia
within the world economy as well as within Malaysia between
economic sectors, regions and races can be traced to the
capitalist penetration of the Malay states in the late 19th
century and the subsequent imposition of colonialism in these
states. These events led to the integration of the Malaysian
economy into the world capitalist economic system. It thus
became an integral part of the ever expanding, exploitative
world wide capital accumulation process, dominated by
metropolitan capital, with its tendency towards centralization
and concentration, and the division of labor and production
according to comparative advantage. Thus during the colonial
era, the land, labor and fiscal policies of the government
were aimed at maximizing the exploitation of Malaysian
resources for the benefit of metropolitan capital at the
expense of the interests of the local populace and Malaysian
development in general. This exploitation.was carried out with
the aid of the co-opted Malay aristocracy and the local
Chinese capitalists and.was done by creating a rigid Malaysian
economy based on the production of primary commodities, such
as rubber and tin, for the world.market, with the aid of cheap

imported Chinese and Indian labor.

96

This led to high profits, especially for the dominant
British capitalists, who repatriated the profits back to
Britain. At the same time the colonial government repatriated
most of the surplus revenues to Britain as reserves. Hence
Britain enjoyed the beneficial effects of the 'multiplier
effect' at the expense of the local Malaysian economy. At the
same time, the rigidification of the economy meant that
industrial growth in Malaysia was stunted, and hence high
priced manufactured goods based on high priced labor had to
be purchased from the metropolitan centers, especially
Britain. This unequal exchange further aided in the continuing
under development of Malaysia (Halim, 1982:260-261; Mehmet,
1978:100-101).

Even after Independence colonial style policies continued
to be implemented. This was because of two main reasons.
Firstly, the new nation was still dependent for revenues on
the plantation and mining sectors which were still dominated
by metropolitan capital. Secondly, because the new dominant
classes had vested interests in maintaining them; many of the
new leaders in government. were themselves large land,
plantation and mine owners who benefitted from this
policy.(Brennan, 1982:195; Lim, 1981:211-216).

After 1969, when the bureaucratic bourgeoisie, which had
been developed to manage the state and its operations for the
metropolitan capital and the Malay aristocracy, came to power,

in their own right, they set about building an economic base

97
for themselves while strengthening their political base. This
led them. to implement policies and practices that were
beneficial to capital and Malay interests, in general, and
inimical to labor and non-Malay interests. Thus, they
continued to emphasize production based on comparative
advantage and export oriented. industrialization. based on
semi-finished goods and the expansion of the commercial
agricultural sectors. Furthermore, because of their lack of
business experience, technical knowledge: and capital, they
had to depend on metropolitan capital for these as well as
access to foreign.markets. Hence they continued.to woo foreign
investors, to become joint venture partners with them, with
very attractive incentives such as reduced taxes, provision
of infrastructure, maintaining a cheap labor policy through
trade union repression, and allowing the free movement of
capital in and out of the country among other things. This
led to the increasing internationalization of the most dynamic
sectors of the economy and left local entrepreneurs to mainly
compete in the less productive and less profitable sectors.
It would also lead.to the continuing outflow of capital in the
form of profits, interests, loan repayment and reserves. More
importantly, it left the Malaysian economy extremely
vulnerable to world market fluctuations as evidenced by the
severe recession in the early 19805, resulting from the
decline of world market prices of Malaysian commodities, and

the subsequent decline in the per capita income of the

98
Malaysian population (Brennan, 1982:196; Lim, 1985:46-56;
Sundaram, 1988:256-268; Hua, 1986:154-162; Malaysia, 1989:39).

The concentration on production for export, of cheap
labor-based primary produce and semi-finished goods, has meant
the continued import of expensive labor-based, fully
manufactured goods from the nmmropolitan centers. This has
continued the unequal exchange between Malaysia and the
metropolitan countries. Moreover, to meet the need for funds
to finance numerous projects, Malaysia borrowed heavily from
foreign sources. This too increased the outflow of funds in
terms of interest and loan repayment. Later, in the mid 1980s
the debt burden increased further because most of the foreign
debt was denominated in the world's major currencies which
were rising against the Malaysian dollar. This in turn has
increased the outflow of funds, further compounding the
problem. All these factors have continued to under develop
Malaysia within the world economy (Malaysia, 1988:92-94, 117,
124).

The underdevelopment of Malaysia within the world economy
has also resulted from political and economic uncertainty that
became a feature of Malaysian society since 1969. The
increasing power of UMNO and the corresponding decline in
non-Malay political power, the increasing repression of the
government and its discriminatory policies have led to
non-Malay capital flight and brain.drain. The continuing brain

drain diminishes the small pool of professionals who provide

99

local management, legal, and medical services, and this has
impeded development. Similarly, capital flight impedes
investment and requires greater foreign investment and
borrowing to offset it. This has further impeded growth.within
the Malaysian economy. (Aznam, 1988:28-33).

Within Malaysia the capitalist penetration also led to
the simultaneous development of a Ihighly productive and
technologically innovative, modern capitalist system and the
vaStly less innovativeland.less,productive traditional economy
based on peasant modes of production. The introduction of
production for exchange and a credit system with high interest
rates, financed by the capitalists, into the traditional
sector irretrievably entwined the traditional and modern
sectors. This led to the exploitation of the peasantry by the
capitalists. They purchased produce such as rice, fruits and
fish, based on cheap labor, from the peasants and sold
manufactured goods such as radios, bicycles, machinery and
cars, based on expensive labor, to the peasant sector. This
has led to unequal exchange and to an outflow of capital from
the traditional sector into the modern sector leading to the
underdevelopment of the peasant sector as compared to the
capitalist sector.

Thus, one of the continuing causes of uneven development
today, between economic sectors, regions and races, is the
continued presence of modern capitalist and the rubric of

traditional peasant modes of production, side by side, within

100

the Malaysian social formation. Those economic sectors,
regions, races and classes more closely identified' with
capitalist production tend to be more developed and have
higher incomes while those economic sectors, regions, races
and classes identified.with peasant production tend.to be less
developed and have lower incomes and wealth. The southern and
central regions which were the first to be penetrated by
capitalism and have colonialism imposed on them, continue to
be the regions with higher capitalist production and hence,
higher income and wealth. Similarly, the non-Malays who were
imported into the modern sectors as cheap labor continue to
have greater concentrations working within the capitalist
sector, and hence, as a whole, have greater income and wealth.
Similarly, those working within the commercial agricultural
sectors tend to have higher incomes and wealth accumulation
than those within the peasant agricultural sector (Malaysia,
1981:36-38; Malaysia, 1986:119, 172-175).

The New Economic Policy on the other hand has reduced
uneven development within Malaysia. Between the rural and
particularly the peasant and urban sectors this was done by
the provision of subsidies, special assistance in production
and marketing, improved irrigation and drainage schemes, to
the rural sector which helped increase income and
productivity. At the same time, increased employment creation
in the new land schemes, industry and government, helped to

reduce~ unemployment and under employment in the peasant

101
sector, especially among'thenMalays and thereby raised incomes
among them” This helped to reduce the continued uneven
development between economic sectors, regions and races to
some extent.

However, the New Economic Policy has also helped to
create increased wealth concentration. In the peasant sector
most of the government aid, such as subsidies and marketing
assistance benefitted the richer peasants, who produced for
exchange, rather than the poor peasants who produced for
personal consumption. Thus the rich peasants became richer
while the poor became poorer. Similarly, in the urban sectors
the continuation of the cheap wage policy and the provision
of a great variety of incentives for business have also led
to considerable inequality between the bourgeoisie and the
working class. Thus the mean income of the top 20 per cent of
the population in 1987 was MS 2,752/- while for the middle and
lower forty percent of the population it was only MS 940/- and
MS 370/- respectively (Malaysia, 1989:42).

The capitalist penetration and colonialism are also
partly responsible for the on going racial strife in.Malaysia
today; the colonial government, in sympathy with the
capitalist classes, encouraged the introduction. of cheap
imported Chinese and Indian labor into the capitalist sectors
to meet the labor shortages experienced in these sectors
during the late 18th and early 19th centuries. This left the

Malays concentrated in the peasant sector and resulted in the

102

rates of income and wealth accumulation between the races
being substantially different and in favor of the non-Malays
as mentioned above. It is this difference in income and
wealth, between the races, that is the source of racial
animosity. Today the relative concentration of Malays in the
traditional sector and the non-Malays in the modern sector
continues. This has led to continuing inequality in incomes
between the races and hence continues to be the basis of
racial strife (Malaysia, 1986:134-135).

Furthermore, the colonial government and the capitalist
classes, in their attempt to maintain cheap labor, destroyed
most class based organizations, such as the trade unions and
encouraged race based associations to represent the interests
of social groups. This resulted in the establishment of race
based politics. This race based politics continues in Malaysia
today. The basis of popular support of most of the political
parties is based on racial origin. Hence maneuvering for
political gain within each. party, and during elections,
necessitates strong, racially chauvinistic rhetoric against
the impositions and oppression of the other races. This
continues to be a major reason for ongoing racial antagonism
and social tension.

The bureaucratic bourgeoisie fraction and the New
Economic Policy are also a major reason for the continued
racial strife in the country. The New Economic Policy was

openly discriminatory, in favor of the Malays, in terms of

 

103
employment, education opportunities, business opportunities
and easy credit, creating dissatisfaction among the other
races and defensiveness among the Malays, thereby leading to
increased racial tension.

Moreover, the increasing participation of the state in
the private sector and its direct competition with private
businesses has led to substantial benefits to the leading
members of the bureaucratic bourgeoisie fraction. It also led
to considerable corruption. This has brought the legitimacy
of the government itself into question, not only among the
non-Malays but also among the poorer Malays. In order to
maintain support among the Malays and to inhibit increasing
demands among the non-Malays, the bureaucratic bourgeoisie
increased the level of chauvinistic pro-Malay and
anti-non-Malay rhetoric as well as repression within society.
This has resulted in increased political and racial tension
(Seaward, 1988:66; Mehmet, 1988:150; Aznam, 1988:12).

At the same time, as the dominance of UMNO increased,
power within the state became increasingly vested in the
control of UMNO. This, in combination with reduced
opportunities in the 19805 has made the fight for control of
UMNO, in recent years, increasingly intense. This in turn has
led, again, to an increasingly chauvinistic and
anti-non-Malays rhetoric. Moreover, the continuing decline of
non-Malay political power has increased the frustrations

within the non-Malay political parties and especially in the

 

104
MCA leadership leading to call for changes. All these, in
combination, have contributed to an intensification of

political and racial tension (Aznam, 1988:14).

Consequences for the Future

From the foregoing one draws a general idea about the
formation and reproduction of class and race as well as the
forces influencing development and. uneven. development in
Malaysia. In anticipating the future, some of the more
important factors that need to be kept in mind are:

- the increasing political dominance of the bureaucratic
bourgeoisie fraction and their increasing use of the state
apparatus and its resources for their own benefit;

- the 'democratic' nature of the government and
consequently the dependence of the bureaucratic bourgeoisie
fraction on the Malay electorate to be returned to office;

- the continued dependence of the bureaucratic
bourgeoisie fraction on state revenues, foreign borrowing and
foreign technical and management knowledge to expand its
economic base;

- the rapid expansion of non-Malay capital in the face
of state instituted obstacles;

- the declining political power of the non-Malays and the
continuing discrimination faced by them at the hands of the

state;

 

105

- the continuing high profitability of the export sector,
both in manufacturing and commercial agriculture and the
dominance of this sector by the elites of all the races, the
state, as well as by foreign interests;

- the increasing tendency for multi-national corporations
to locate in newly industrializing countries to utilize their
cheap labor and investment incentives as well as the
increasing competitiveness among the newly industrializing
countries to attract multi-national corporations for foreign
investment;

- the heavy loan repayments faced by the Malaysian
treasury;

- a high population growth rate and the rapid
urbanization of the peasantry.

In seeking' to anticipate the future development of
Malaysia within the world economy three key factors must be
emphasized. They are, first, the heavy loan repayments faced
by the Malaysian government; they are not only a drain on the
treasury, but also restrict further borrowing. This, in turn,
limits the amount of finance available to the government and
hence restricts government financing of the private sector,
which normally tends to be Malay enterprises operated by
members of the bureaucratic bourgeoisie fraction (Seaward,
1988:53-55). This in turn restricts employment creation.
Second, the rapid expansion of non-Malay capital, from 34 per

cent in 1970 to 56.7 per cent in 1985; which is well over the

 

 

106

NEP target of 40 per cent set in 1970. This situation is
politically unacceptable to the Malays. Third, rapid
population growth as well as the rapid urbanization of the
Malays requires substantial employment creation. Thus, at a
time when it is politically imperative for the bureaucratic
bourgeoisie fraction to offset the rapid expansion of non-
Malay capital, as well as create jobs, it is finding itself
short of funds. The only way available to them to offset non-
Malay capital expansion as well as create employment is to
encourage rapid expansion of foreign investment. The 5th
Malaysia Plan (Malaysia, 1986:121) calls for an expansion of
foreign investment in Malaysia so that total foreign holdings
of the corporate sector will expand substantially over the
25.5 per cent share that it enjoyed in 1985. This can be
expected to continue well into the 19905 because the reasons
for expanding foreign holdings of the Malaysian corporate
sector will still hold. However, to increase foreign
investment, the Malaysian government will have to out compete
other regional countries in the provision of incentives. This
would require increasingly generous incentives and the
continued maintenance of a cheap wage policy.

At the same time, to_ attract foreign investment,
continued emphasis on the export sector is necessary, as the
local market itself is very small. The 5th Malaysia Plan
(Malaysia, 1986:23), also calls for a greater emphasis on

export orientation in manufacturing as a source of foreign

107

exchange and employment creation. This too can be expected to
continue well into the 19905. Consequently, an increasingly
open and dependent economy can be envisaged. This would leave
the Malaysian economy increasingly vulnerable to world market
fluctuations and exploitation by metropolitan capital. From
the foregoing, one can expect an increasing outflow of capital
from Malaysia in the form of profits, dividends, interest
payments and reserves over the next few years.

At the same time, the continuation of export oriented
industrialization in semi-finished goods and the expansion of
commercial agriculture, based on cheap labor, will result in
the continuation of unequal exchange. Furthermore, the
continued outflow of funds can be expected to keep the value
of the.Malaysian.Ringgit and consequently its purchasing power
in the world market weak. Moreover, according to the 5th
Malaysia Plan (Malaysia, 1986:73), the terms of trade are
expected to deteriorate by 2.9 per cent annually during the
5th Malaysia Plan because of an expected decline in the world
market price of Malaysian commodities. As the production
emphasis continues to be on the same products, the decline in
terms of trade can be expected to continue well into the
19905. There is already talk of continuing the NEP beyond
1990 and considering the political and economic situation,
this seems very likely. This would mean the continuation of
discriminatory’ practices against the non-Malays in

employment, education and business. Hence a further non-Malay

108
brain drain and capital flight can be expected (Aznam,
1989:28-33). Thus a combination of foreign exploitation of
local resources, a weakening ringgit, continuing unequal
exchange, and non-Malay brain drain and capital flight can be
expected to continue the under development of Malaysia within
the world economy.

In terms of development within Malaysia the key factors
that need to be taken into account, in addition to those
mentioned above, are the bureaucratic bourgeoisie fractions
dependence on the Malay vote to remain in office and their
desire to continue expanding their own economic and political
position as well as the declining political power of the non-
Malays. Thus, the policies that they will pursue can be
expected to be aimed at improving the conditions of the Malay
electorate while improving their own situation. Hence, a
policy of reducing uneven development between races, sectors
and regions can be expected to continue into the future while
class based benefits are retained.

Sectoral uneven development can.be expected.to be reduced
by continued expansion of industrialization and rural
development schemes. These»can.be expected.to provide jobs for
Malays, and lead to the continuing outflow of Malay peasantry
into the higher income urban and commercial agricultural
sectors. However, this will be offset, to some extent, by the
expected reduction in government employment and government

financing of the private sector. At the same time, continuing

 

109
aid to the peasant sector in the form of subsidies, rural
credit, improved irrigation and drainage facilities, high
yielding padi seeds and marketing assistance will further
increase peasant incomes. Furthermore, the increased land
concentrations will result in the expanded use of capital
intensive production methods, again raising income.

Regional uneven development too can be expected to be
further reduced by the continuation.of thelgovernment's policy
of dispersing industrial estates and.rural development schemes
to less developed regions. Finally the continued reduction of
the traditional sector in relation to the modern sector will
reduce its impact on regional uneven development (Malaysia,
1986:340).

These policies can also be expected to reduce racial
differences in income and wealth. Increased urbanization and
industrial employment as well as movement into commercial
agriculture can be expected to increase Malay incomes and put
them more in line with the national average. The continuation
of government quotas in education, business licenses and jobs
should further help to reduce the uneven development (Mehmet,
1988:151).

However, the continuation of special incentives to
business in terms of tax exemptions, provision of
infrastructure and the maintenance of cheap labor policies as
well as the continuation of the " Malay Land Reservations

Act " and government subsidies and government programs which

110
benefit the rich more than the poor can be expected to
increase the concentrations of wealth in the country
(Malaysia, 1989:4-5, 310-314).

Looking at the state of race relations in the future, we
must note two key changes, in addition to the above mentioned
reasons. First, an expected reduction in economic
opportunities in the future, and second the continuing
polarization of the races resulting from. the increasing
emphasis on racial politics. Reduced economic opportunities
are expected because in the 19705 and the early 19805 the
rapid expansion of the economy and consequently of employment
creation.was made possible»by the discovery of petroleum, high
petroleum and other commodity prices in the world market, in
general, and large foreign borrowing. Today petroleum and
other commodity prices are lower, and are not expected to rise
substantially, and large foreign borrowing are no longer
feasible because of existing debts. At the same time petroleum
production is not expanding.'Consequently, neither a rapid
expansion of the economy nor rapid employment creation can be
expected in the future. It also means that state enterprises
must be streamlined and become frugal and accountable. This
in itself can become a source of problems because it would
limit opportunities even among the Malay leadership.

Secondly, even though racial tension initially arose out
of a combination of economic inequality between the races and

race based politics, today it arises also because race based

 

 

111

social relations and politics have become a cornerstone of
Malaysian life and most social tensions within society tend
to be diverted into racial confrontation by politicians to
mobilize support for themselves. Thus, racial tension can be
expected to increase considerably in the future even though
inequality between the races is decreasing (Malaysia, 1989:5;
Malaysia, 1986:15-16; Aznam, 1989:28-33).

Furthermore, with the economy not expanding, the
competition among the dominant classes may become more
intense. Within.this context, the rapidly increasing non-Malay
control of the economy will become a bone of contention. As
the belt gets tighter, demands for increased special
privileges for Malays can be expected; and this can be
expected to fuel further racial tensions (Aznam, 1989:28-31).

Furthermore, UMNO, with its vast resources can be
expected to increasingly dominate the state. At the same time
the reduced opportunities available in the economy will make
the control of UMNO crucial to the various class fractions
vying for control. This will lead to increased demand for pro-
Malay policies and increasingly to anti-non-Malay rhetoric to
win support. Moreover, the increased concentration of wealth
among the Malay leadership and the increased urbanization of
the .Malays can be expected to lead to increased class
awareness and hence put additional pressure on Malay leaders
to channel the class antagonism into racial antagonism. Thus

additional discriminatory practices in employment, education

112

and business against the non-Malays can be expected. This time
all these discriminatory practices can be expected to affect
not only the opportunities available to the working class
non-Malays, but also the non-Malay capitalist class as the
slower expansion of the economy results in a smaller economic
pie to be divided up among the dominant classes. Thus
increasing resentment against the Malays can be expected
(Aznam, 1989:28-33; Seaward, 1988:66-67).

Furthermore, the increased impotence of the non-Malay
political parties in the face of UMNO's dominance can also be
expected to result in increased resentment and anti-Malay
rhetoric thereby further exciting racial tensions. The
simultaneous increase in the‘ political dominance of the
Malays and the economic dominance of the non-Malays can be
expected to lead to increasing racial tensions in the future.

In conclusion, if Malaysia is to ensure a more balanced
development and avoid racial conflagration in the future it
must undertake some fundamental changes in its political and
socio-economic practices and policies.

First, emphasis on race based politics must be reduced;
for so long as it is emphasized it is almost certain that
politicians will use‘ it for their own ends and racial
conflagration will almost certainly take place sooner or
later. Hence it is necessary, especially for the governing
party, to move away from race based political parties and

towards a multi-racial based political party system.

 

113

Second, poverty eradication must be directed at all races
and not just the Malays. At the same time the fundamental
causes of poverty such as the size of landholding in the rural
sector, the Malay Reservations Act, the cheap wage policy,
repression.of trade unions, inadequate education.and training,
and lack of adequate technology must be addressed.

Third, state enterprises must make use of management and
planning talent from all races so that the inadequacy of
management and planning will not lead to continuing heavy
losses in investments.

Fourth, corruption must be addressed; for otherwise it
will continue to act as a drain on resources and enervate the
developmental process. 9

Fifth, foreign borrowing must be better managed and used
more prudently. They' must be used in well thought out
developmental projects that benefit society as a whole, rather
than.a small fraction.of influential people. Hence the returns
to society must be greater than the consequent outflows in
terms of interest payments and loan repayments.

Sixth, foreign investment must be directed towards those
areas of production that would allow greater employment
creation, higher wages, as well as, faster transfer of .
technology. At the same time, incentives provided to woo
foreign investment should not include the repression of trade

unions and exploitation of the labor force.

 

114
Finally, government repression of the populace must stop.
It is this in combination with discriminatory practices that
fuels the air of political and economic uncertainty and leads
to brain drain and the outflow of non-Malay capital which

contributes to the stunting of Malaysian development. r

 

 

APPENDIX

LIST OF TABLES

 

 

115

-Table 1.1: P. Malaysia: Labor Force Participation

by Ethnic Group and Activity - 1957

 

 

 

 

Malays Chinese Indians Total

'000 8 '000 t '000 B '000 8
Activity 1957
Agriculture.
Forestry,
Livestock and
Fishing 749.3 74.6 210.4 40.9 174.5 56.8 1244.8 58.5
Mining + -
Quarry 10.3 1.0 40.0 5.3 6.8 2.2 58.5 2.8
Manufacturing 26.6 2.6 97.5 12.8 10.1 3.3 155.7 6.4
Construction ' 21.8 2.2 '32.6 4.3 12.3 4.0 67.8 3.2
Utilities 3.8 0.4 3.0 0.4 4.2 1.4 11.6 0.5
Commerce 32.0 3.2 127.1 16.7 32.8 10.7 195.2 9.2
Transport and
Communications 26.9 2.7 29.2 3.8 16.1 5.2 74.8 3.5
Services 127.6 12.7 110.0 14.5 48.1 15.7 319.8 15.0
Miscellenous
Activities 5.9 0.6 9.4 1.2 2.4 0.8 18.1 0.9
Total 1004.3 100 759.2 100 307.2 100 2126.3 100

 

~Source: Sundaram, 1988:294/295.

 

 

Table 1.2: P. Malaysia: Labor Force Participation

116

by Ethnic Group and Activity - 1970

 

 

 

 

Malays Chinese Indians Total
'000 ~ 8 '000 8 '000 8 '000 8

Activity 1970

Agriculture,

Foresstry,

Livestock and

Fishing 922.3 64.3 292.9 29.7 131.7 6.0 1359.8 49.6
rMiningg +

Quarry 13.3 0.9 37.1 3.8 4.6 1.6 55.3 2.0

Manufacturing 73.1 5.1 164.5 16.6 13.3 4.6 251.9 (9.2

Construction 13.0 0.9 43.1 4.4 ' 3.6 1.3 59.9 2.2

Utilities 9.5 0.7 3.6 0.4 6.4 2.2 19.8 0.7

Commerce 64.3 4.5 179.8 18.2 29.1 10.2 274.6 10.0

Transport and

Communications 41.5 2.9 39.1 3.9 16.7 5.3 98.0 3.6

Services 223.9 15.6 173.5 17.5 66.3 23.2 472.6 17.3

Miscellenous

Activities 74.1 5.2 55.6 5.6 14.3 5.1 145.2 5.3

Total 1435.0 100 990.0 100 286.1 100 2736.4 100

 

Source: Sundaram, 1988:;94/295.

 

 

Table 1.3: P. Malaysia: Labor Force Participation

117

by Ethnic Group and Activity - 1985

 

 

 

 

Malays Chinese Indians Total

'000 8 '000 8 '000 8 '000 8
Activity 1985
Agriculture,
Forestry,
Livestock and
Fishing 1428.8 46.1 318.3 17.4 188.5 38.0 1953.2 35.7
Mining +
Quarry 21.3 0.7 32.5 1.8 6.0 1.2 60.5 1.1
Manufacturing 352.7 11.4 394.1 21.6 75.4 15.2 828.0 15.1
Construction 147.7 4.8 206.4 11.3 20.8 4.2 378.7 6.9
Utilities 27.1 0.9 3.5 0.2 9.1 1.8 39.9 0.7
Commerce 323.3 10.4 460.4 25.2 60.1 12.1 846.3 15.5
Transport and
Communications 147.3 4.7 88.5 4.8 28.3 5.9 264.9 4.8
Services 544.8 17.6 276.6 15.1 89.2 18.0 921.1 16.8
Miscellenous
Activities 108.7 3.5 46.3 2.5 18.8 3.8 175.9 3.2
Total 3101.7 100 1826.6 100 496.2 100 5468.5 100

 

Source: Malaysia, 1986:

103.

 

 

118

Table 2.1: P. Malaysia: Incidence of Poverty by
Rural-Urban Strata - 1970

 

1970

 

Sector Households Incidence Percentage '

Total ('000) of Poverty (8) of total Poor

 

Rural
Agriculture: 852.9 68.3 73.6
Smallholders:
Rubber 350.0 64.7 28.6
Coconut 32.0 52.8 2.1
Padi farmers 140.0 88.1 15.6
Fishermen 38.4 73.2 3.5
Estate workers 148.4 40.0 7.5
Other Agri. 144.1 89.0 16.3
Other industries 350.5 35.2 15.6
Sub-total 1,203.4 58.7 89.2
Urban
Agriculture N.A N.A. M.A.
Mining 5.4 33.3 0.2
Manufacturing 84.0 23.5 2.5
Construction 19.5 30.2 0.7
T'sport and utilities 42.4 30.9 1.7
Trade and Services 251.3 18.1 5.7
Others N.A. M.A. N.A.
sub-total ° 402.6 21.3 10.8
Total 1,606.0 49.3 100.0

 

Source: Malaysia, 1981:34.

119

Table 2.2: P. Malaysia: Incidence of Poverty by
Rural-Urban Strata - 1984

 

 

 

 

 

1984
Sector Households Incidence Percentage
Total ('000) of Poverty (8) of total Poor
Rural
Agriculture: 865.8 46.4 67.4
Smallholders:
Rubber 155.2 43.4 13.9
Coconut 14.2 46.9 1.4
Padi farmers 116.6 57.7 '13.9
Fishermen 34.3 27.7 2.0'
Estate workers 81.3 19.7 3.3
Others 464.2 34.2 32.9
Other industries 763.6 10.0 15.8
Sub-total 1629 4 24.7 83.2
Urban
Agriculture. 37.5 23.8 1.8
Mining 7.8 3.4 0.1
Manufacturing 132.3 8.5 2.3
Construction 86.6 6.1. 1.1
T'sport and utilities 73.9 3.6 0.6
Trade and services 472 7 4.6 4.5
Others' 180 9 17.1 6.4
sub-total 991.7 8.2 16.8
Total 2,621.1 18.4 100.0
Source: Malaysia, 1986:86.

 

120

'.
1:!
V

Table 3: P. Malaysia: Distribution of Household
Income Per Month by Rural-Urban Strata - 1957,
1970 and 1987

 

1957/8 1970 1987

 

All Households

 

"r

 

 

 

 

 

 

 

 

 

 

 

Income Share 8 8 8
Top 58 22.1 28.1 N.A.
Top 208 48.6 55.9 51.2
Middle 408 35.5 32.5 35.0
Bottom 408 15.9 11.6 13.8
Mean Income Ms 215 264 1074
Median Income MS 156 167 738
Gini Ratio 0.41 0.50 M.A.
Rural Households
Income Share 8 8 8
Top 58 19.0 23.9 M.A.
Top 208 44.5 51.0 48.3
Middle 408 37.3 35.9 36.7
Bottom 408 18.2 13.1 15.0
Mean Income MS 172 201 853
Median Income MS 131 145 629
Oini Ratio 0.38 0.46 N.A.
Urban Households

Income Share 8 8 8
Top 58o 20.7 27.5 N.A.
Top 208 49.6 55.0 50.8
Middle 408 33.2 32.8 35.0
Bottom 408 17.2 12.2 14.2
Mean Income MS 307 407 1467
Median Income MS 216 283 1007
Gini Ratio 0.42 0.50 N.A.

 

Source: Sundram, 1988:251/252 - 1957/8 and 1970

figures. Malaysia, 1989:38 - 1987 figures.

 

121

Table 4: P. Malaysia: Distribution of Household
Income Per Month by Ethnic Group - 1957, 1970
and 1987

 

1957/8 1970 1987

 

Malay Households

 

 

 

Income Share 8 8 8
Top 58 18.1 23.8 M.A.
Top 208 42.5 51.3 50.2
Middle 408 37.9 35.7 35.7
Bottom 408 19.6 13.0 14.1
Mean Income MS 140 _ 172 868
Median Income M8 112 122 612
Gini Ratio 0.34 0.46 N.A.

 

Chinese Households

 

 

 

Income Share 8 8 8

Top 58 19.2 25.4 'M.A.
Top 208 46.0 52.6 49.0
Middle 408 35.9 33.5 36.0
Bottom 408 18.1 13.9 15.0
Mean Income MS 302 381 1430
Median Income MS 223 . 269 1021
Gini Ratio 0.38 0.46 N.A.

 

Indian Households

 

 

 

 

Income Share 8 8 8

Top 58. 19.4 28.4 N.A.
Top 208 43.6 53.6 47.2
Middle 408 36.6 31.5 35.9
Bottom 408 . 19.8 14.9 16.9
Mean Income MS 243 301 1,089
Median Income MS 188 195 799
.Gini Ratio ' 0.37 0.47 N.A.

 

Source:' Snodgrass, 1975:84; Sundram, 1988:
251/252 - 1957/8 and 1970 figures. Malaysia,
1989:42. N.A. - Not available.

122

 

Table 5: Malaysia: Ownership and Control of the Corporate
Sector - 1970, 1980 and 1988
1970 1980 1988

MS mill. 8 MS mill. 8 MS mill. 8
Malaysian Res. 1,952.1 36.7 18,493.4 57.1 73,889.2 75.3
Malay total 125.6 2.4 4,050.5 12.5 19.057.6 19.4
Individual 84.4 1.6 1,880.1 5.8 12,751.6 13.0
Trust Agen. 41.2 0.8 2,170.4 6.7 6,306.0 6.4
Other Res. 1,826.5 34.3 14,442.9 44.6 54,831.6 56.0
Foreign Res. 3,377.1 63.4 13,927.0 42.9 24,081.8 24.6
Total 5,329.2 100.0 32,420.4 100.0 97.971.0 100.0

 

Source: Malaysia, 1989:70 for 1988 figures. Malaysia,

1980 figures. Sundram, 1988:264 for 1970 figures.

1986:107 for

Table 6: P. Malaysia: Population Distribution Between Rural and
Urban Areas by Ethnic Groups - 1970 and 1980

 

 

 

 

 

 

'000
1970 1980

Urban 8 , Rural 8 Total Urban 8 Rural 8 Total
Malay 713 27.1' 4,109 63.1 4,822 1,359 32.8 5,025 65.2 6,384
8 ' 14.8 85.2 100.0 21.3 78.7 100.0
Chinese 1.557 59.0 1,717 26.4 3,274 2.234 53.8 1,902 24.7 4,136
8 47.6 52.4 100.0 54.0 46.0 100.0
Indian 338 12.8 640 9.8 978 508 12.3 731 9.5 1,239
8 34.6 65.4 100.0 41.0 59.0 100.0
Others 30 1.1 43 0.7 73 47 1.1 43 0.6 90
8 41.1 . 58.9 100.0 52.2 47.8 100.0
Total 2,638 100 6,509 100 9,147 4,148 100 7,701 100 11,849
(8) 28.8 71.2 . 100.0 35.0 65.0 100.0
Source: Malaysia,

1981:79.

 

 

> 123

Table 7: P. Malaysia: Incidence of Poverty and Mean Monthly
Household Income - 1984

 

 

State Total Mean Income Incidence
Households MS of Poverty

P. Malaysia 2621.1 1095 18.4
Northern

Kedah 253.9 690 36.6

Perak 400.2 883 20.3

Perlis 40.1 692 33.7

P. Pinang 204.2 1183 13.4
Central

Melaka 95.1 1040 15.8

N. Sembilan 132.8 1039 13.0

Selangor 359.2 1590 8.6

Fed. Terr.

of R. Lumpur 242.1 1920 4.9
Eastern

Relantan 206.7 625 39.2

Pahang 190.9 960 15.7

Trengganu 129.9 756 28.9
Southern

Johore 365.8 1065 12.2

 

Source: Malaysia. 1989:45.

124

Table 8: Regions of P. Malaysia: Basic Data - 1985

 

 

Northern Central Eastern Southern Peninsular
Region Region Region Region Malaysia
Total Land Area
(Sq. Em.) 32,258 16,492 63,850 18,984 131,598
Population Size
('000) 4,360 4,093 2,662 1,854 12.981
Population Density
(Persons/Sq. Rm.) 135 248 42 98 97
Total GDP (smillion '
in 1978 prices) 13,789 21,781 8.281 6,163 50.014
Per Capita GDP
(In 1978 prices) 3,162 5,322 3,111 3,324 3,853
Ratio of Per Capita
GDP to P. Malaysia
Average 0.82 1.38 0.81 0.86 1.00

 

Source: Malaysia, 1986:170. Malaysia, 1987:2-4, 29.

Table 9: Malaysia: General Elections - At Federal Level and for
the Key States of Penang, Perak and Selangor - 1964 and 1969

 

 

 

Federal Penang Perak Selangor
Political party 1964 1969 1964 1969 1964 1969 1964 1969
Alliance: UMNO 59 51 10 4 22 18 13 12
MCA 27' 13 6 0 12 1 8 1
MIC 3 2 2 0 1 0 3 1
Total 89 66 18 4 35 19 24 14
Non-Alliance 15 37 ‘6 20 5 21 4 14
Grand Total 104 103* 24 24 40 40 28 28

 

Source: Clutterbuck, 1985:294/296. * Owing to the death of one
candidate during the election campaign one seat was deferred and
is not included in table for 1969.

 

Table 10.1: Malaysia: Public Development Expenditure by Sector

125

in M8 Millions - 1956 and 1970

 

 

1956-1960 1961-1965 1966-1970
Sectors Amount 8 Amount 8 Amount 8
A. Economic
Agriculture and
(Rural dev't. 227.5 22.6 467.9 17.6 1114.1 26.3
Commerce and
Industry 12.1 1.3 59.1 2.5 141.3 3.3
Infrastructure 520.3 51.6 1236.7 46.7 1429.4 33.7
Other M.A. M.A. N.A. H.A. M.A. M.A.
Sub-total 760.3 75.5 1763.7 '66.5 2685.4 63.3
B. Social
Education and .
Training 60.9 6.0 236.5 8.9 329.4 7.8
Health 12.7 1.3 101.0 3.8 146.6 3.5
Community and
Social Services 65.2 6.5 75.2 2.8 276.1 6.5
Sub-Total 138.8 13.8 413.6 15.6 752.1 17.8
C. Administration
and Defense
General Admin .73.0 7.3 167.1 6.3 138.1 3.3
Defense and
Security 35.0 3.4 307 3 11.6 668.8 15.7
Sub-total 108 0 10.7 474.4 17.9 804.9 19.0
Total 1007.0 100.0 2652.0_ 100.0 4242.4 100.0

 

Source: Lim. 1981:214'for 1956-1970.

126

Table 10.2: Malaysia: Public Development Expenditure by Sector

in MS Millions

- 1971 and 1985

 

 

1971-1975 1976-1980 198151985
Sectors Amount 8 Amount 8 Amount 8
A. Economic
Agriculture and
Rural dev't. 2129.1 21.7 7585.2 23.6 8714.4 11.8
Commerce and
Industry 1618.2 16.5 3205.2 10.0 20211.6 27.3
Infrastructure 3316.5 33.8 10599.1 33.0- 26643.1 36.0
Other 36.5 0.4 111.0 0.4 208.4 0.3
Sub-total 7100.3 72.3 21501.4 67.0 55777.6 75.3
B. Social
Education and
Training 675.8 6.9 2116.2 6.7 4687.6 6.3
Health 173.9 1.8 529.7 1.6 736.5 1.0
Community and
Social Services 497.9 5.1 2915.1 9.1 4556.1 6.2
Sub-Total 1347.7 13.7 5561.0 17.4 9980.2 13.5
C. Administration
and Defense
General Admdn 348.7 3.6 1229.3 3.8 810 6 1.1
Defense and
Security 1024.2 10.4 3784.0 11.8 7494.6 10.1
Sub-total 1372.9 14.0 5013.3 15.6 8305.2 11.2
Total 9820.8 -100.0 32075.7 100.0 74063.0 100.0

 

Source: Lim Mah Hui, 1981:214 for 1971-1980. Malaysia,
1986:226/227 for 1981-1985. Note : Amounts may not add up exactly

because of rounding up of figures.

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