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Southeast Asian labyrinth : restrictive foreign investment regulatory policies of Malaysia, Thailand… Yee, Ernest 1987

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SOUTHEAST ASIAN LABYRINTH: RESTRICTIVE FOREIGN INVESTMENT REGULATORY POLICIES OF MALAYSIA, THAILAND AND 1970  SINGAPORE FROM TO 1980 By  ERNEST YEE B.A.  (Hons.), U n i v e r s i t y  of B r i t i s h  C o l u m b i a , 1983  A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE  REQUIREMENTS MASTER  FOR THE DEGREE OF OF ARTS in  THE  FACULTY OF GRADUATE STUDIES  (Department o f P o l i t i c a l  We a c c e p t t h i s to  THE  thesis  the required  Science)  as c o n f o r m i n g standard  UNIVERSITY OF BRITISH  COLUMBIA  J u n e 1987 ® E r n e s t Y e e , 1987  4 6  In  presenting  degree freely  at  this  the  available  copying  of  department publication  of  in  partial  fulfilment  University  of  British  Columbia,  for  this or  thesis  reference  thesis by  this  for  his thesis  and study. scholarly  or for  her  Department The University of British 1956 Main Mall Vancouver, Canada V6T 1Y3  DE-6(3/81)  Columbia  I further  purposes  gain  the  requirements  I agree  that  agree  may  representatives.  financial  permission.  of  be  It  shall not  that  the  Library  permission  granted  is  by  understood be  for  allowed  an  advanced  shall for  the that  without  make  it  extensive  head  of  my  copying  or  my  written  ABSTRACT This  t h e s i s examines the  investment Singapore why  regulatory 1970  from  their  p o l i c i e s of  of  each  investment.  1980.  to  policies  comparison  country's  limits  on  investment. that  Malaysia  on  placed  is  political  and  and  greater  argued  that  economic  thesis  each  colonial elites, ethnic factors  economic  domestic  political  minorities. as  p r e v a l e n c e of of  the  It  size  of  use  of  control  of  general  of  operations  of  government-owned  the  over study  in  on  the  Malaysia,  greater  foreign concludes foreign  and  restrictiveness.  The  past  pressures,  also  looks  the  natural  experience of and at  the the  such  resource  i n each  with  a  political presence  of  contributing sector,  o l d t e c h n o l o g y , and  industry  domestic  Thailand  strategies  industries with  f o r e i g n ownership of  foreign  Singapore.  state's  power,  explain  descriptive  restrictions  settings  Malaysia's  examines  the  differences  Singapore explain  and  r e s t r i c t i o n s on  the  comparison,  or  a  to  with  r e s t r i c t i o n s on  the  investment than Thailand It  presents  ownership,  instruments  Based  seeks  deals  foreign  Thailand  policies restricting  foreign  foreign-owned corporations, as  study  discussion  c e r t a i n economic s e c t o r s ,  corporations  It  restrictive  Malaysia,  The  varied.  This  quantitative  l e v e l s of  country.  the  the level  iii  This  thesis  restrictions very  concludes than  different  ethnic  Thailand  domestic  m i n o r i t y , domestic  nationalistic together,  these  restrictions variables,  and  on  ethnic  that or  Malaysia Singapore  setting: pressure  interventionist differences foreign factors  an  placed  because  more  i t had  economically-dominant  for restrictions,  economic s t r a t e g y .  explain  investment. a r e t h e most  a  Malaysia's Of  the  and  a  Taken greater  explanatory  important.  iv  TABLE OF CONTENTS  Page CHAPTER I  Introduction  CHAPTER I I  Comparison  of P o l i c i e s to  Restrict CHAPTER I I I  CHAPTER IV  Foreign  Explanation Greater Conclusion  SELECTED BIBLIOGRAPHY  1  Investment  21  f o r Malaysia's  Restrictions  46 88 101  V  L I S T OF  TABLES  Page TABLE  1:  Summary o f F i n d i n g s  91  vi  ACKNOWLEDGEMENT I Diane  would  like  Mauzy  with  t o thank  and Mark  Zacher.  her  insightful  benevolent  direction.  appreciation  my t h e s i s  I  valuable  also  wish  Jean Laponce  the  s c i e n c e and i n s p i r e d  to  and  express  honours  my  Jackson.  program i n  me t o do g r a d u a t e s t u d i e s i n  discipline. I  would  Mina,  like  Petula  helping  me  around  university.  for  graciously  Political  Mark  assistant.  political  sure  matters  Zacher that  Toronto,  a  I  to  I have  Greig f o r pitfalls  Sylvia  of  Woodcock  discussions  my  been  thesis taught  and g r a d u a t e  research  i n the  I  spent  international  steered  me  back  appeared  to  O t t a w a , a n d Geneva  than  supervisor,  by Mark  level.  assistant  Whenever  sometimes  Betty  t o thank  frequent  go  or doing  patiently  and  t o Nancy  Room.  thanks  f o r him as  gratitude  administrative  like  my  the undergraduate  teaching  Mark  also  tolerating  Zacher.  my  Urbano,  the various  I would  deepest  Professor  worked  Dory  S c i e n c e Reading  My  both  t o acknowledge  Muller,  the  at  helpful  advice,  and R o b e r t  T h e y g u i d e d me t h r o u g h t h e u n d e r g r a d u a t e political  Professors  D i a n e Mauzy was v e r y  comments,  to Professors  committee,  Zacher  I have  and l a t e r t o o much  as a  time  development  t o my  thesis.  spend  more  I d i d on campus.  also  on  work, I am  time  in  I owe a  vii  great over  deal  t o Mark  I wish  the U n i v e r s i t y  remember with  f o r h i s encouragement  and h e l p  the years. Finally,  at  Zacher  my  years  fondness.  t o thank of  British  t h e many f r i e n d s Columbia.  i n t h e Department  I  I have made will  of P o l i t i c a l  always Science  CHAPTER I Introduction Many belief  that  countries George  P.  Economic during  observers the  of  in  next  the  the  1980s  century  Pacific.  Schultz,  in  have  will  be  American  his  message  expressed dominated  Secretary  to  Cooperation  Conference  held  November 1983,  echoed t h i s  view:  the in  by of  Third  Bali,  their the State Pacific  Indonesia  The P a c i f i c i s r a p i d l y becoming t h e w o r l d ' s most dynamic e c o n o m i c r e g i o n . I t s e c o n o m i e s have a c h i e v e d a r e m a r k a b l e r e c o r d of s u s t a i n e d growth over the l a s t d e c a d e , and a r e i n c r e a s i n g l y assuming p o s i t i o n s of l e a d e r s h i p i n our g l o b a l economic system. This p r o s p e r i t y has b r o u g h t u n p r e c e d e n t e d b e n e f i t s t o the people of our r e g i o n . Much o f t h i s s u c c e s s has been a c h i e v e d t h r o u g h a commitment t o f r e e e c o n o m i e s and m a r k e t p r i n c i p l e s , as w e l l a s t o sound management. I t has a l s o been a p r o d u c t o f our g l o b a l f r e e market s y s t e m , w h i c h has a l l o w e d n a t i o n s — p a r t i c u l a r l y those of the P a c i f i c —to expand t h e i r o v e r s e a s m a r k e t s and t o r e a p tljie b e n e f i t s o f t h e i r s k i l l and industry. The  Asia-Pacific  world's  region  population,  has  in  particular,  become  a  centre  with  half  of world  of  the  economic  2 and  political  attention.  the  Asia-Pacific  g r o w t h w h i c h was countries  of  region  During  the decade of the  experienced  an  economic  t w i c e as h i g h a s t h e l e v e l  the Organization  f o r Economic  1970s,  rate  of  a c h i e v e d by t h e Cooperation  and  2  Development  (OECD).  Asian-Pacific  countries  proportion Community the  of  in  global  (EEC).  long-term 1985  trade  economic  from  accounted  the  group,  f o r t h e second  has  the  highest  t h e European  Economic recognized  of the A s i a - P a c i f i c ,  Department areas  a  government  potential  other  as  after  The C a n a d i a n  ordered  reallocate  Moreover,  of  an  External  additional  and  Affairs $10  to  million 3  annually  t o promote C a n a d i a n  While performed 1970s, Gross and  t h e economies  trade with  of  the  s l u g g i s h l y through  Malaysia, Domestic  8.5%,  Thailand  Product  Pacific  industrialized  the tumultuous  and  Singapore  (GDP) g r o w t h  respectively.  countries.  Canada,  years  had  rates  countries of the  real  annual  o f 7.8%,  conversely,  7.2%, had  a  4 corresponding  figure  consideration  that  of  only  economic  3.9%.  growth  Even  tends  t h e more m a t u r e e c o n o m i e s o f d e v e l o p e d achievements Southeast Singapore,  of these Asian  with  three  members  Nations a  $4500,  i s now  (NIC).  The u p g r a d e d c l a s s i f i c a t i o n  lose by  some  trade  considered  preferences  the i n d u s t r i a l i z e d  1980  a  GDP  was a p p r o x i m a t e l y  states.  newly  given  t o slow  into  down i n  s t a t e s , t h e economic of the A s s o c i a t i o n of 5  (ASEAN)  per c a p i t a  taking  are  i n 1980  impressive. exceeding  industrialized has caused  country  Singapore  to developing  Malaysia's  U.S.  to  countries  p e r c a p i t a GDP i n  U.S. $1700 w h i c h p l a c e s  i t among t h e  3  highest  25%  Thailand,  of  however,  as a m i d d l e  importance,  had  a  1970  with  which  from  though  was  1984,  they  about  with are  ASEAN  a r e growing i n  dwarfed  two-thirds  by  Canada's  I n 1980, ASEAN  of  t e n times  $332  million expanded  i n 1980. over  t o U.S. $603 m i l l i o n .  the f i g u r e f o r  larger.  Canada's  Similarly,  the decade  Although  i t grew a p p r o x i m a t e l y overall  billion.  for  $700 w h i c h c l a s s i f i e s i t  total  trade  ASEAN  as  649% f r o m  between an  Canada  entity  Canada's  from  U.S.  other's  global 7  1970 t o 1980.  and  ASEAN  i s Canada's  $87  t r a d e between  C a n a d a and ASEAN r e p r e s e n t s u n d e r 1% o f e a c h  trade,  figure  t h e ASEAN s t a t e s grew f r o m U.S. $57 m i l l i o n i n  t o ASEAN  million  relations  p o p u l a t i o n over  t o U.S.  exports  U.S.  The  t h e U n i t e d S t a t e s and J a p a n .  and a  imports  about  economic even  GDP  Canada  was  countries.  income d e v e l o p i n g c o u n t r y .  Canada's  dealings  developing  was  eighth  In $1.5  largest  g trading  partner,  investment 1984.  surpassing  France  and  Italy.  i n t h e s i x ASEAN s t a t e s  exceeded  thesis  the  Canadian  $1.6 b i l l i o n i n  9  This investment Singapore explain  regulatory from  why  analysis,  is a  1970  their  study policies  to  1980.  policies  the thesis w i l l  of of  restrictive  Malaysia,  The  varied.  d i s c u s s why  study Before  foreign  Thailand will  seek  and to  beginning the  t h e s e s t a t e s and t h i s  4  time  period  e x p l a i n why  were the  three  then o u t l i n e the Although be  for  have  later  Thailand  the  countries  explanatory  they  discussed  Malaysia,  chosen  It  want f o r e i g n  this  countries the  connected  basically  Malay  peninsula  in  form  the  from  Malaysia) to Singapore.  To  Borneo  of  Malaysian  states  countries  have  a  each  the  countries  of  f o r the  Singapore never  were  in  the  territory  to  including  four  which  later  British  War  of  United  the  19th  southern  States in  climate.  of M a l a y s i a .  ties  three  ceded the  to With  became an  i n Southeast the  In  three  addition, with  although with  substantial  early  Britain the  an and  connections  in  areas  All  Thailand,  Thailand  of  (Peninsular  Malaysia  close  powers  three  extension  Sabah.  while  are  non-contiguous  state.  had  Malay  Thailand  and  historical  century. colonial  1950,  Population  has  colonized,  the  in  monsoon  the  study  The  Malaya  are  Sarawak  colonies,  became p a r t  Korean  East  industrialized  formally  Britain  the  to  of  They  Asia.  North-South  Thailand  tropical  English-speaking  long  will  countries  were c h o s e n  Southeast  one  and  examined.  b e c a u s e t h e y have s e v e r a l common c h a r a c t e r i s t i c s . geographically  also  d i f f e r e n c e s which  thesis,  Singapore  will  investment  h y p o t h e s e s t o be  significant  in  and  study.  1900s,  in  start  1909, of  anti-Communist  the ally  Asia. states  tends  to  be  5  geographically settled  on t h e West  Thailand's Central  states.  country's  accounted  the  of Malaysia.  This which  Thailand,  the other  biggest  on  minority  approximately economically  7%  the  will  be  of  Singapore,  dominant,  Chinese, remaining  about  whereas 23.1%.  economically These  and i s t h e  but  and  1%,  Malays  are  preeminent  has had s e r i o u s  later  they  and  the majority  i n the t h e s i s .  had t h e C h i n e s e  the Chinese  as  represented Although  are only  a  its only  they  are  relatively  well assimilated i n Thailand.  76.9% o f t h e p o p u l a t i o n  Malays  Indians,  47% o f  i n Malaysia  also  35% o f t h e  11%, a  i n the  large  Chinese  the population.  s m a l l m i n o r i t y and a r e f a i r l y In  totalled  examined  hand,  group,  53%,  Although  situation  consequences  Malays,  for  minorities  politically,  economically.  whereas  i s significant  i n 1980, w h i l e  Ethnic  dominate  i s a city-state  C h i n e s e made up a b o u t  respectively. population  Malaysia,  a r o u n d Bangkok and t h e  community  Malaysia's  minorities  are largely  o f t h e c o u n t r i e s t o be e x a m i n e d .  Chinese  population  people  of Peninsular  Singapore  populated  ethnic  Malaysia's  are congregated  P l a i n s area.  The  other  coast  citizenry  most d e n s e l y  three  concentrated.  and I n d i a n s  made  The C h i n e s e d o m i n a t e b o t h  i n 1980 were  up most  of the  p o l i t i c a l l y and  i n Singapore. states  practice  variations  of  Western  6  p a r l i a m e n t a r y d e m o c r a c y , even t h o u g h t h e i r  governments  authoritarian  their  cultural  but  significant  traditions. limits not  tendencies, Competitive  on p o l i t i c a l  likely  future,  groups t r y i n g Finally, economies among and  to seize  while  attempt  timber of  also  and  e x p o r t e r and b o t h  exports  Thailand's mining  GDP  rubber, o i l .  communist  foreign  They  rank  investment.  f o r 22% o f GDP  mining  made  the largest  21%  5%,  tropical  e x p o r t e r and p r o d u c e r  had  Manufacturing Thailand  and  biggest  and p e p p e r .  Agriculture  In  i n Malaysia,  up  i s the world's  2%.  a r e market  of the developing c o u n t r i e s  palm o i l ,  i n 1980.  represented  i n s u r g e n t s i n t h e near  orientations.  to attract  Malaysia  t i n , natural  the three are  had t o d e a l w i t h  pro-West  accounted  manufacturing  respectively.  have  industrialized  agriculture  Although  T h a i l a n d and S i n g a p o r e  generally  t h e most  exist.  power.  Malaysia,  with  occur,  t o communist  governments  a l l three  1980,  elections  activity  t o succumb  their  mirroring  have  a  The c o u n t r y  25%  share  contributed  i s an  of  21% and  important  rice  exporter  and i s t h e second  biggest producer  of t i n i n the  world.  The  o i l importer.  In  Singapore,  in  1980, b u t  manufacturing  state  i s an  accounted  agriculture  and m i n i n g  city-state,  Singapore  for  23%  of  GDP  t o g e t h e r made up o n l y has v e r y  few n a t u r a l  2%.  Being  a  resources, but  7  it  i s a very About  large o i l refining 37%  agriculture half The  of  and  those  bulk  of  government has  involved of  the r u r a l  country been last  The  poor  striven  i n growing the global  Northern,  trade.  Many  and v e r y  do s u b s i s t e n c e f a r m i n g .  very  affected  twenty  Thailand,  Singapore  In  stark  has  an  Malaysian Rice  merchandise  people  are  still  i s responsible for  rural  Southern  people  i n the  sections of the  They a r e p o o r and have n o t  by T h a i l a n d ' s  years.  poor.  poverty.  biggest  Thailand  almost  being  and t h e  70% o f t h e c o u n t r y ' s  rice  as  their  Thailand's  involved i n  defines  sector  a r e Malays  the crop.  is  government  to alleviate  been  roughly  Northeastern,  population  i n the a g r i c u l t u r a l  has  and  Malaysia's  fishing.  traditionally  export  40%  of  centre.  economic contrast  growth to  insignificant  over  the  Malaysia  and  agricultural  sector.  The  This  thesis  year  1970  analyzes was  the p e r i o d  chosen  as  a  American  P r e s i d e n t R i c h a r d M. N i x o n  of  withdrawal  the  September profound starting  1969. impact point  instability  of  of  American  from  1970  dividing  line  troops  from  of the United  on  Southeast  Asia  f o r the study.  The  makes  because  announced t h e b e g i n n i n g  The d e p a r t u r e  t h e 1970s  t o 1980.  and  Vietnam States  provides  international  the decade  a  a  in  had a good  economic  particularly  8  interesting oil  period  crisis  of  termination  slumps with  the  growth  and  years.  has  commodity  EEC's by  farmers. GDP  government  in  reasonable  suffered  exchange  affected  economy has  global  trade  subsidies still  2%  i n 1985.  Committee  by  dropping  been  chaired  for i t s  i n j u r e d by subsidies  American  rice  managed a 3.8% suffered In by  a  negative  February  1986,  Brigadier  a  General  Hsien  the  P r i m e M i n i s t e r , i s s u e d a r e p o r t on S i n g a p o r e ' s  economy.  The  Economic  economic  Economic  Committee  through  various  Committee  sought t o stop policy  marked  Industry  rate  Lee  decline  L o o n g , M i n i s t e r o f T r a d e and  GDP  Similarly,  prices  to  from  and a  b a r r i e r s and  Singapore  of  earnings  i n 1986.  the Thai  1986.  combined countries  f o r e i g n debt  0.5%  1970s,  economic  industrialized  low  Thailand  the  commodity p r i c e s  adversely  States'  rate  Economic  have  i n the  agricultural  United  growth  of  Besides  Nevertheless,  economic  growth  Falling  been  exports,  growth  a  economic  approximately  also  various the  1980  foreign  prices.  agricultural  makes  l e d to increased  rate of only has  of the second  Singapore  Malaysia's This  Thailand  of  impressive  i n recent  hurt  The a f t e r m a t h  f o r the a n a l y s i s .  Thailand  exports.  and  decade  growing p r o t e c t i o n i s m  have  the  the  point  After Malaysia,  t o examine.  and  Singapore's  changes.  The  report  t h e end o f t h e S e c o n d  son o f  of the  Industrial  9  Revolution,  a  development  government  in  technology  industries  required  1979.  more  Economic  an  and  was  were  more  by  paid  in  falling  e c o n o m i c slowdown i n t h e  higher  United  and  labour.  that  decline  competitiveness,  the  capital-intensive  stated  a  by  emphasized  highly  report  caused  adopted  strategy  which  skilled  international and  This  Committee's  recession  strategy  The  Singapore's  the  country's  commodity States.  prices,  Singapore's 12  GDP  growth r a t e  recovered  somewhat i n 1986  to reach  Malaysia,  Thailand  and  like  countries  in  modernize. foreign  As  stages  of  countries capital  to  levels  and  be  Product  instability, may  country. sources of  do at quite  investment.  with  local  capital The  rate  believe  that  capital,  In  the  that  domestic  they  desire.  to  state's  a  political  uncertainty  people  from  them  capital  is  reach  and  concerning  investing  therefore,  help  early  developed  enough  relative  states,  to  thus,  less  Moreover,  together  deter  have  and,  brings  the  low  (GNP).  it  markets.  not the  Developing of  to  development,  industrialize  National  governments  because  access  developing  industrialize  their  usually  may  to  needed  economic  profitability,  foreign  is  transfer,  savings  economic  want  result,  (LDCs)  Domestic  their  a  investment  technology  Gross  general,  Singapore,  1.9%.  the  initially  look  in to  desired used  to  10  build  up  infrastructure,  transportation adequate in  networks,  and  infrastructure  turn  incentive  lead to  investment  to  to  as  electricity,  communication  increased  alleviate  domestic  the  which  savings  need  capital  Once  expand,  domestic  Theoretically,  water,  systems.  i s in place, profits  both  invest.  such  for  and  foreign  shortfalls  will  13 gradually  decline.  Technology countries gained  transfer  want  through  and  production.  an  entire  overseas foreign  techniques  Without  adequate  developed  suited Thus, can  sought of  be  c o u n t r i e s may  available, for  causing their  investment  are  by  them  needed  considered  control  unaware  foreign  sources  at  the  Both  types  the  where  economy.  production  Moreover,  of  technology and  are  states,  dominate  properly utilized.  t o buy  management organize  technologies,  be  often  to  developing  circumstances, from  both  technologies  production  even  developing  technology  making a p r o d u c t .  control  cannot  skills  process  that  involves  production  are  methods  technologies  The  for actually  technologies  traditional  investment.  management  while  used  reason  investment  industrial  technologies,  of  The  i s another  the  that a  technology i s not  premium  i s desired  less  well  price.  because i t 14  l e a d to the t r a n s f e r of v a l u a b l e i n f o r m a t i o n . L a s t l y , market a c c e s s i s a c r u c i a l f a c t o r c o n t r i b u t i n g  11  t o t h e g e n e r a l p e r c e p t i o n among d e v e l o p i n g require begin  foreign  investment.  industrialization  through  a  achieve  degree  the  developed limited  import  most  states  import  markets  especially  generate the  capital  materials,  to  such  provide  networks  access  to  developing  However,  of  as  beyond  their  to  the  equipment  of  other  Furthermore,  allow  established  markets  less  ones.  which  to  scale,  exports  industrialization.  (MNCs)  Hence, most  markets  expand  promoting  exchange,  corporations and  to  industrialized  goods,  essential  domestic  economies  by  foreign  usually  substitution.  efficient  they  countries  supplying their  g e n e r a l l y attempt  domestic  countries, exports  of  by  Developing  states that  LDC  and  to  other  Multinational global  developed  trading  countries.  states t r y to a t t r a c t m u l t i n a t i o n a l  15 corporations. Dependency t h e o r i s t s g e n e r a l l y a r g u e t h a t t h e development the  past  the  because  powers. on  of  i t was  Therefore,  exporting  Foreign  and  the  According the  to  based  Third  natural  countries. stifled  developing  on  of  the  dominated a  to  domestic  be  been  needs o f  to  theorists,  economies  has  economies  resources  investment  dependency  the  World  formation  p e r i p h e r a l LDC  states  this  economic  stymied  the  in  colonial  focussed  mainly  industrialized these  economies  business  class.  situation  caused  dependent  on  the  core  12  industrialized  economies.  As  result,  economies  suffer  economies  a n d do n o t have t h e power  this  relationship.  perpetuate LDCs  the  have  warnings still  foreign  MNCs of  to  generally  feel  modernization  countries,  market  and T h a i l a n d ,  industrialize  Central  and  large  Singapore  like  modernization  they  that  foreign  shown in  Fund,  most  require Although  t o draw  their  order  to  countries  investment and  other  investment  they  a  of the  by  developing  of accumulated  attempts  to  a r e aware  as  The  requires  developing  because  the c a p i t a l , technology  modernize.  Provident  countries  o f c o n t i n u e d d e p e n d e n c y . """^  foreign  supply  Despite the  economies.  of foreign  outweigh t h e c o s t s  access  that  headquarters  the benefits  i t provides  relationship  developing  dependency,  departures,  encourage  that  relatively  MNC  MNCs  alternatives  Although  to alter that  in their  that  of  argue  states.  most  that  corporate  that  Malaysia  fund,  and  attract  rapid  and  believe  effects  prevent  believe  LDCs  do n o t e x i s t .  destabilizing  dependent  to participate  dependent  i n t h e dominant  theorists  writers,  the  independently  the i n d u s t r i a l i z e d  investment  investment  desire  Dependency  o f dependency  want  o f changes  inequitable,  with  governments  its  the effects  a  in  transfer, order  Singapore  domestic  to  has a  capital in  government-managed foreign  they  investment  pension mainly  13  for  the  market  latter access.  investment varying why  do  did  exist  than  and  For  in  thesis  place its  purposes  this  transfer  investment. of  factories  capital and  individual. entails  securities,  like  shares  person.  "Restrictions"  specific  types  limits  on  economic  of  sectors,  a  foreign  investment, of  capital  and  on  be  ownership,  foreign-owned  c o r p o r a t i o n s , and  the use  corporations  as  of  and  involves assets,  the  such  as  corporation  or  other  the  hand,  purchase  the  of  company  d e f i n e d as  general  on  1980?  both d i r e c t  or  four  quantitative  restrictions  restrictions  to  investment"  a foreign  narrowly  actions:  instruments  states,  the  through  b o n d s , by  will  ASEAN  "foreign  of  question:  1970  through  in  foreign  investment  by  policy  foreign  thesis,  foreign  on  period  v i a the a c q u i s i t i o n  forwarding  central  fellow  the  Direct  Portfolio  the  the  and  although  restrictions  supplied  properties,  on  countries,  asks  during  of  transfer  restrictions  more  be d e f i n e d as c a p i t a l  portfolio  technology  neighbouring  Singapore,  the  of  a l l three  This  Malaysia  Thailand  reasons  Nevertheless,  degrees.  investment  will  two  on  certain  operations  of  o f government-owned  control  over  foreign  investment. This hypotheses  thesis  will  put  f o r examination.  forward The  various  study  will  explanatory argue  that  a  14  country power  w h i c h has been d o m i n a t e d e c o n o m i c a l l y is  more  investment and  than  reasons  refers  likely other  of  general  pattern  of  by  citizens  the  want  colonialism,  exert  security  rationale control vital,  experience  colonial The elites  follow  nationalism  i s based  intervention flip  sectors  whose  an  economic  favourable  i s more  elites  interventionist  toward  not  economic  last  the  of  in their the  of view,  national desire which  to are  and mass c o m m u n i c a t i o n ,  argue  heavy impose  by  a  restrictions. a  based  country  whose  on  economic  government  economic  restrictions.  i s t h e argument a  has n o t had  economically  that  strategy  strategy  LDCs  vestiges  If a country  follow  economic  The  economy  t o impose  to  elites  prevailing  the government's of  to  likely  hypothesis do  the  power.  dominated  further  foreign  which a country's  Similarly,  on  being  will  side of this  nationalism  s u c h as u t i l i t i e s  of  and  Economic  independence and,  power i t i s l e s s l i k e l y study  nationalism  the  to the s t a t e ' s n a t i o n a l s e c u r i t y . the  economic  colonial  destiny.  over  to  i f i t i s one  eliminate  own  on  have  ownership  their  their  considered  of h o s t i l i t y  colonial  restrictions  security.  former  to  control  regain  due  population  corporate  domination  impose  states  national  to the f e e l i n g  and/or  to  by a  that  a  country  nationalistic  is less  likely  to  The  and impose  15  restrictions. perceives  In  that  pressure  i t  from  restrictions, restrictions does  not  pressure likely  perceive  that  i t  that  which  economic ethnic  can  foreign  economically  investment  likely  resource mineral have  to  study  proportion to  invoke group  domestic i s less  of natural  These  at  minority,  secondary  effect  ethnic  secondary  argue  industries,  as  group,  effect  of  to occur.  that  resource  restrictions  t o economic  of  I f a c o u n t r y does n o t  a  country  industries i s  in  the  natural  exemplified  e x t r a c t i o n and a g r i c u l t u r e , a r e r e l a t i v e l y value  ethnic  redressing  large,  i s less likely will  is  economically  minority  the  also  legislate  sector.  symbolic  of  consider  but  the  dominant  foreign  more  to  will  aimed  investment.  restricting  the  thesis  vis-a-vis  have  having  high  vulnerable  action  action  a  likely  dominant,  government  with  advocates  I f the governing  this  imbalances  groups  restricting  Moreover,  is  political  i n a c o u n t r y where t h e m a j o r i t y  government  an  more  group  restrictions.  subordinate,  have  domestic  n a t i o n a l i s t s , the country  politically  also  is  investment.  is  domestic  to  governing  nationalist  country  hypothesis  proposition  state's  vulnerable  economic  to invoke  perceived  i f a  economic the  from  group  is  on f o r e i g n  Another the  addition,  by  visible,  n a t i o n a l i s t s e n t i m e n t , and  16  raise  basic  questions  often  depletable, integrated  either  the  jobs. low  into  the  GDP  or  state's large  These  small  of  is  resource  and  local  natural  is  dominate employ  low  skill as  prices  side  country  less  often  resources  whose  a  are  to  in  flip  that  sector  they  workers  The  natural,  frequently  products,  contention  of  economy, t e n d  markets.  the  natural  addition,  to export  primary  world  ownership  exports,  i n d u s t r i e s tend  by  hypothesis  In local  numbers  value-added,  dictated  foreign  resources.  poorly  relatively  about  of  this  which  likely  are  has  to  a  impose  restrictions. A a  further  country  the  which  restrictions foreign  development  likely  a  to  parts,  consequently others,  of  to  the  their  possibly  the  view  fairly likely i n the  bargaining  even t h e  readily  to  country's  invoke  value  power  host  of  economic and  country,  I f a c o u n t r y does not old  that  i n d u s t r i e s where  decline  i n d u s t r i e s with  technology,  have i t is  restrictions.  thesis  with  of  more  of  in  is  and  is  enterprise.  impose  this  country  old  perceptions  that  examined  prevalence  contributions  prevalence  Lastly, that  and  car  to  operate that  high  less  relatively  due  perception  could a  is as  high  be  a  such  firms'  to  has  technology  accessible,  the  hypothesis  high  will  put  foreign  forward ownership  the of  proposition industry  is  17  more not  likely have  likely  high  central  more  Malaysia  of  industry,  does  i t i s less  argument  of  in  the study  foreign  i s the  investment  i t s neighbouring  fellow  contention  occurred  ASEAN  in  states,  and S i n g a p o r e , b e c a u s e o f t h e i r d i f f e r e n t d o m e s t i c  political  and  ownership  r e s t r i c t i o n s on than  Thailand  found  foreign  I f a country  t o pass r e s t r i c t i o n s .  The that  to l e g i s l a t e r e s t r i c t i o n s .  and economic  situations.  These  differences  i n economic s t r a t e g i e s , domestic p o l i t i c a l  t h e economic  differences,  position  ethnic  of ethnic  factors  form  are  pressures,  minorities.  t h e paramount  Of  these  explanatory  variable. The  rest  chapters.  of  The  comparison  next  o f each  investment.  thesis  chapter  country's  The  quantitative certain  this  limits  on  corporations  as  differences settings,  in which  III will on  the have  will  a  three  descriptive  restricting  foreign  deal  general  ownership,  with  r e s t r i c t i o n s on  and t h e u s e o f government-owned  instruments  restrictions  present  into  r e s t r i c t i o n s on t h e o p e r a t i o n s o f  corporations,  Chapter  divided  policies  foreign  foreign-owned  greater  will  discussion  economic s e c t o r s ,  investment.  is  of seek  foreign  domestic been  control  over  to explain  investment political  affected  by  foreign  Malaysia's  by  analyzing  and  economic  each  state's  18  experience  with  a  colonial  power,  strategies  of the p o l i t i c a l  pressures,  and by t h e p r e s e n c e  will the with  also  look  natural  a t such  resource  o l d technology,  industry  i n each  elites, of  ethnic factors  p r o v i d e a summary o f t h e k e y f i n d i n g s forward  some  conclusions.  political It  as the s i z e o f  of foreign  Finally,  economic  minorities.  the prevalence  and t h e l e v e l  country.  the  by d o m e s t i c  contributing  sector,  by  the l a s t  of  industries  ownership of chapter  of the thesis  will  and p u t  19  NOTES CHAPTER I 1.  Centre for Strategic and I n t e r n a t i o n a l Studies, Issues F o r P a c i f i c Economic C o o p e r a t i o n : A Report o f the Third Pacific Economic Cooperation Conference B a l i , November 1983. (Jakarta: Centre f o r S t r a t e g i c and International Studies, 1984), p.5.  2.  F o r the purposes of t h i s d i s c u s s i o n , the c o u n t r i e s of the Asia-Pacific region include Japan, China, Malaysia, Thailand, Singapore, Indonesia, the Philippines, Brunei, Hong Kong, South Korea, and Taiwan.  3.  Roman L e p i e s z a , "Canada And The C h a n g i n g Economy o f The Asia-Pacific Basin," paper presented a t the Conference on Canada and International Trade, I n s t i t u t e o f I n t e r n a t i o n a l R e l a t i o n s , Vancouver, June 1983, p . l ; and D a v i d Stewart-Patterson, "Canada's trade focus worries ASEAN," The G l o b e and M a i l ( T o r o n t o ) , November 4, 1985, p . B l 4 .  4.  D o n a l d K. C r o n e , "The D i v e r s i f i c a t i o n S t r a t e g y o f t h e ASEAN S t a t e s : I m p l i c a t i o n s f o r C a n a d i a n E c o n o m i c T i e s with Southeast Asia," paper presented at the Conference on Canada and International Trade, I n s t i t u t e o f I n t e r n a t i o n a l R e l a t i o n s , Vancouver, June 1983, pp.2-3.  5.  T h e member s t a t e s o f ASEAN a r e M a l a y s i a , Thailand, S i n g a p o r e , I n d o n e s i a , t h e P h i l i p p i n e s , and B r u n e i .  6.  B r i a n Wawn, The E c o n o m i e s o f t h e ASEAN Countries: Indonesia, Malaysia, Philippines, Singapore and T h a i l a n d ( L o n d o n : M a c m i l l a n P r e s s , 1 9 8 2 ) , pp.38, 104 and 135.  7.  Crone,  8.  P a c i f i c B a s i n E c o n o m i c C o u n c i l , B r i e f i n g Book f o r t h e C a n a d i a n Committee 1 8 t h A n n u a l M e e t i n g May 13-16, 1985 Auckland, New Zealand. (Ottawa: Pacific Basin E c o n o m i c C o u n c i l , 1 9 8 5 ) , p . ( 2 ) 3.  9.  Stewart-Patterson,  " D i v e r s i f i c a t i o n , " p.4.  p.Bl4.  20  10.  Wawn, pp.38,  40, 106, 137, 153, 155 a n d 156.  11.  Wawn, pp.57-58 a n d 154; a n d F a r E a s t e r n Review, 23 J a n u a r y 1986, p . 6 9 .  12.  FarEastern Far Eastern  13.  H i k o j i Katano, " F o r e i g n C a p i t a l , T e c h n o l o g y and Market Access i n East and S o u t h e a s t Asian Development I n t e r n a t i o n a l E c o n o m i c I n t e r a c t i o n s i n t h e 1980s," Two Decades of Asian Development and O u t l o o k f o r t h e 1980s, e d s . T a k a h i k o Haseyama, A k i r a H i r a t a , a n d T o r u Y a n a g i h a r a (Tokyo: I n s t i t u t e o f D e v e l o p i n g Economies, 1 9 8 3 ) , pp.301-304.  14.  Ibid.,  pp.305-306.  15.  Ibid.,  pp.308-309.  16.  Donald K. C r o n e , T h e ASEAN States: Coping Dependence (New Y o r k : P r a e g e r , 1 9 8 3 ) , pp.19-22.  E c o n o m i c Review, E c o n o m i c Review,  Economic  1 May 1986, pp.24-28; a n d 2 A p r i l 1987, p . 7 4 .  With  21  CHAPTER I I Comparison  of P o l i c i e s  Malaysia, foreign  Thailand  investment  However,  at  restrictive differing  same  measures  policies  foreign  ownership,  sectors,  restrictions  as  instruments  II w i l l areas  on  the  use  of  than  Thailand  Malaysia's  greater  to  also  will  look  imposed  at  to each  quantitative limits on  certain of  foreign-owned corporations  restrictions  Singapore. will  Chapter in  on  certain foreign  Explanations be  on  economic  more r e s t r i c t i v e  restrictiveness  1980.  though  f o r e i g n investment.  more  and  encouraged  1970  government-owned  was  placed  from  operations  of c o n t r o l over  generally  a l l  investment,  general  restrictions  Investment  three  chapter  regarding  the  investment  all  foreign  argue t h a t M a l a y s i a and  period  time,  This  country's  Foreign  Singapore  the  on  extents.  and  and  during  the  corporations,  to R e s t r i c t  put  forward  for in  Chapter I I I . General  Q u a n t i t a t i v e L i m i t s on  Malaysia ownership adopted  in  in  set the  general New  Foreign  Ownership  quantitative  Economic  Policy  limits  on  (NEP)  1971. The a d o p t i o n o f t h e New E c o n o m i c P o l i c y l e d t o p o l i c i e s w h i c h were g e a r e d toward a r e d u c t i o n i f not of the r o l e , at l e a s t of the share, of f o r e i g n p a r t i c i p a t i o n i n t h e economy. However, M a l a y s i a ' s a t t i t u d e t o w a r d  foreign  which  was  22  f o r e i g n i n v e s t m e n t r e m a i n e d one o f 'welcome' b u t i t by and l a r g e d r o p p e d i t s l a i s s e z - f a i r e economic p o s t u r e f o r one w h i c h i t s p o l i c y - makers c a l l 'economic n a t i o n a l i s m ' . The  objectives  Malaysia Plan, has  set  Malays  a  least  30%  the  NEP  1971-1975, w h i c h  target  and  of  that  other  within  were  stated a  that  period  indigenous people  of the t o t a l  s e t out  commercial  will  and  i n the  "The  of  Second  Government  twenty  years,  manage and  industrial  own  at  activities  2 in  a l l categories  trying  to  and  regulate  redistribute and  other  NEP  the  goal  had  Malaysian  (largely  foreigners equity  in  in  1970  ownership  to  growth  that  terms,  so  was  of  equity  occur  in  foreign shrink  from  in  40%  in  with the  an  30%  60.7%  to  owned  30%.  by this  would  Ministry  to  of  were  The  ownership  the The  expand  share  and  state  redistribution high  grow  Trade  of  balance of  federal  of  of  Other  to  in  to the bumiputra  Ministry  order  bumiputra  was  while  environment  relative  was  i n 1990.  ownership  investment  the  bumiputra  1990,  planned  and  NEP  in particular.  to  Chinese)  mainly NEP  the  i n 1970  from  The  but would  licenses  to  fall  Registration and  1.9%  ethnic  to  governments.  increasing  from  1970  was  ownership  The  to Malaysians i n general  of  assets  23.5%  of operation."  indigenous peoples)  corporate  from  the  wealth  (Malays  scales  and  necessary  of  economic absolute 3 portion. Industry for  new  23  investment  in  existing  manufacturing  companies.  consideration, NEP  ownership  after 30%  1972  held  During  for  investment  the  time  to  expand  period  under  the M a l a y s i a n government sought objectives  to  by  and  meet  by o r d e r i n g a l l c o m p a n i e s  the  bumiputra,  to reach  general 40%  by  ownership  the  licensed  requirements  o t h e r M a l a y s i a n s , and  30%  of by  4 foreigners  before  guidelines  were  to  economic  foreign  official  later  capital  limits  registration  with  during  the  foreign foreign the  The  foreign  and  1986  ownership  largely  serious  decade.  due  ownership  as  sources  Department  of  preferred  restrictions  There in  were  no  Malaysia.  simply  required  Commerce  of F i n a n c e ' s Bureau of Revenue.  government g e n e r a l l y  and  the  N e v e r t h e l e s s , the  j o i n t v e n t u r e s between  Thais  foreigners.^ Similarly,  Singapore  d i d not  overseas  capital.  Totally  limit  were p e r m i t t e d , a l t h o u g h be  1990.  r e l a x e d i n 1984  on  from  and  of  c o n v e r s e l y , p l a c e d few  Investments  Ministry  end  recession.  Thailand, on  the  registered  ventures foreign exist,  were  with  but  investment  the  promoted.  takeovers the  of  attempt  Singaporean  Council  on  significantly  foreign-owned  companies  i n manufacturing  registration Specific  to  board  and  legislation corporations  Security  had  Industries  to  joint  regarding did  not  oversaw  24  corporate on  takeovers according  Open-bid  government,  Stock at  differentiate Restrictions In  On  invest  Despite  the  set  Certain  public  certain  Malaysian  ownership  the  to  the  30%  foreign  other  hand,  80%-99% sold  of  overseas,  parts  goods then  investment  stated  in  was  have  was the  51%-70% exported.  100%  foreign  enterprises  materials  have  30%-55%  using  aimed  at  existed  or  renewable  up in  Companies  goods,  on  ownership  a l l production  ownership  foreign  total  permitted  export  If  Act,  available,  foreign  were  (1975)  obtainable.  economy.  produce  not  The  firms  not  was  that  readily was  were  Act  enterprises  i f similar  to  utilities. there  companies,  of  to  Export-oriented could  new  ownership  could  the  openness,  involved  sectors  not  permitted  sectors.  mandatory  technology  imported  of  utilized  import-substituting utilizing  officially  economic  market  did  investors.*'  Industrial Coordination  was  Malaysian  i f the  the  Sectors  where  manufacturing  technology  However,  areas  restricted  on  if  because  supposedly  foreign  were  position  of  focussing  domestic  Code  i n a l l i n d u s t r i e s , except p u b l i c  lists  the  Economic  Singapore  Merger  principle,  foreigners  Moreover,  out  in  general  and  between d o m e s t i c and  directly  allowed.  Purchase  least  Malaysia,  unpublished  to the  was  if was  allowed.  Malaysian  ownership  the  raw  contingent  25  on  the  fulfillment  Finally,  to  various  non-Malaysians  corporation's and  of  share  other  were a l l o w e d  equity  i f the  30%.  a  time-table  Companies  did  not  have  formed  establish account  the  existing  to  objectives  facilities  of  of  or  to  their  were  and  manufacture  of  they  thus,  a  to NEP)  equity  and  encouraged  to  any new  had  the  Malaysian  NEP,  of  ownership  s t r a t e g i e s which  the  45%  export-oriented  (and,  they  corporate  up  criteria.  m a t e r i a l s , but  1970  levels  Nevertheless,  long-range  own  decrease  prior  required  employment.  to  to  f i r m was  u s e d n o n - r e n e w a b l e d o m e s t i c raw formulate  market  took  into  expansion products  of  were  7 subject  to the  The  Thai  certain  of  the  was  The  1979,  required  activities and  not  their  of  Thai  industries. were  this  significant  Law  largely  in  During  the  had  major  ownership  but  the  because  foreign  of  on  invest-  relaxed  companies  in in  restricted  business  agriculture, trade,  services,  p e r i o d of c i v i l i a n were  i n a number o f b u s i n e s s  majority  span,  w h i c h was  o w n e r s h i p by  Thais.  government,  forced  to  enterprises in o  to achieve  restrictions  in Malaysia  1972,  These  (1975).  time  as  some f o r e i g n c o r p o r a t i o n s  interest  Act  placed  during  activities  majority  handicrafts.  1973-1976,  as  A l i e n Business  particular  also  sectors  specified  ment.  Coordination  government  economic  legislation few  Industrial  reduce order  26  Singapore, capital  on  the  i n a l l economic  Although  foreign  brokering,  other sectors  investment  and t r a d e  hand,  permitted  except  public  i n banking,  required approval  foreign utilities.  insurance,  from t h e a p p r o p r i a t e  government department o r s t a t u t o r y board, S i n g a p o r e impose  restrictions  on  particular  stock  economic  d i d not  sectors to the  9 extent  done by M a l a y s i a  Restrictions The  employees and  Industrial  manufacturing  M$500,000  to obtain  foreign-owned  a  These  conditions  the  o f t h e NEP.  goals  with  and w h i c h license  from  by  f o r each  firm  The M a l a y s i a n  Non-Malaysians,  managerial population. to  induce  hold  expertise This foreign  not  policy  the  Industrial process  among o t h e r  specific  Development and  reviews.  things, the area  were  which  demanded  found  among  to t r a i n  Trade  of achieving  usually  only  technical the  o f M a l a y s i a n i z a t i o n was  investors  skilled positions."^  out  f o r example,  positions  o r more  the operations of  as a means  r e g u l a t i o n s covered,  to  equity  setting  Operating  allowed  shareholders'  the M i n i s t r y of  (MIDA) managed t h e l i c e n s i n g  jobs.  (1975)  had t w e n t y - f i v e  Authority  of  Thailand.  Act  licenses restricted  corporations  operating  Coordination  companies  or greater  Industry.  degree,  Operations  Malaysian  required of  On  and, t o a l e s s e r  Malaysians  or  domestic designed f o r more  27  A by  further  foreign-owned  non-residents of  the  over  total  of  loans.  i f the share  of  locally  their  and  from  these  banks  to  Controller  1974,  own  50%  Permission surpass  before  of t h e i r  the  and  to  they  f i r m ' s combined foreign  utilize  a  large  secure  loans to if  capacity.  lending  the  had  institutions  financial  needed  could  generally  borrowing  non-residents also  they  was  could  financial  sufficient  1  foreign  firms  Investment  a  Malaysian and  over  permission  M  of  the  agency  dealing  with  1  had  which  foreign  to  have  Committee  (FIC)  company.  The  administered  investment  central  conformed directed  the  before  FIC,  the  a l l other  investment.  FIC  they  NEP  and  the  bodies  guidelines regulated  actions  led  that  was  government  so  ultimately  could  ensure  o f c o r p o r a t e a s s e t s , m e r g e r s , and  these  of  established in  g u i d e l i n e s to with  approval  the a c q u i s i t i o n that  with  long-term  domestic  incorporated  residents  before  i n v e s t o r s had  capital  involving  created  foreign  borrowing  o f F o r e i g n Exchange. ' '  Foreign over  Exchange  reserves,  foreign  had  Moreover,  take  concerned  Corporations  locally.  equity,  Malaysian  $100,000  Foreign  l o a n d i d not  at l e a s t  Transactions  the  of  $500,000  Usually,  amount  operations  as m a j o r i t y owners r e q u i r e d t h e a u t h o r i z a t i o n  M  forthcoming  on  companies.  Controller  borrow  be  restraint  to  an  takeovers  increase  in  28  Malaysian, Committee  particularly also  aimed  exports,  diversify  training  for  acquisitions, FIC  the  mergers,  that their  o r more  t o use  Parties  needed  FIC g u i d e l i n e s covered of the assets  of assets valued  a  through  a  to  generate  involved  The expand  jobs in  and  planned  to convince  the  would e v e n t u a l l y b e n e f i t M a l a y s i a  purchases firm  investment  and  or takeovers  activities  ownership.  foreign  economy,  Malaysians.  economically. 15%  bumiputra,  f o r e i g n purchases  of a Malaysian over  company  M $1 m i l l i o n .  technical  assistance  of  and any  Takeover of agreement  or  12 management  c o n t r o l was a l s o s u b j e c t t o t h e g u i d e l i n e s .  Lastly,  the  significantly being  constrained.  discussed,  commercial Foreign prior  banks  banks, to  centre, all  activities  except  independence,  which  was  commercial  required  to  agricultural  Like  banks, a  foreign  t h e end  of  f o r those were  enterprises,  10%  other  only  countries. in  one  Lumpur.  to  8%  of  Malaysia business  In a d d i t i o n , ones,  their  housing,  span  thirty-eight  foreign-owned of  were  the time  established  i n Kuala  minimum  in  allowed  including  of  banks  Malaysia's  incorporated  situated  direct  bumiputra-owned  At  seventeen were  of  were  loans  to  17%  to  and  businesses."'"^  Malaysia,  Thailand  measures a g a i n s t t h e a c t i v i t i e s  imposed  various  restrictive  o f f o r e i g n companies  during  29  the  period  through  the  preclude a  and  if  company In  the  mats,  fishing  into  jute  that  Ministry  of  had  car  parts,  the  the  power  expansion  of  product  Industry,  the  The  particular  lines  canned  included  pineapple,  M i n i s t r y made i t s d e c i s i o n s  Thai  market  Factory  Act  to  apply  Motorcycles,  to of  from t r o u b l e d domestic producers  Industry  requirements.  1962,  manufacture  Industry  to requests  M i n i s t r y of  company o r  the  products,  product.  of  1970s, t h e s e  The  i t concluded  The  Act  o f a new  late  nets.  response  certain  Control  formation  current  plastic  consideration.  Factory  the  products.  in  under  for  was  saturated  also  authorized  domestic  example,  by  had  or a the  content  to  have  70%  14 domestic content Under 1973,  the  the  in  auspices  Thai  counterpart,  1979.  regulated  Companies w i t h  for  least  price freedom price rice,  of  of  the over  the  also  controls sugar,  placed  on and  goods, under  Alien  similar hiring  to  its  practices  The  on  foreign  M i n i s t r y of essential  energy.  However,  car  price  batteries, controls.  of  Malaysian of  foreign Thais  Government  corporations'  Commerce products,  in  Act  to h i r e  positions available.  supposedly  like  Employment  t e n e m p l o y e e s had  impinged  operations.  manufactured were  half  controls  the  government,  firms. at  of  managed such  practice,  tires,  and  Finally,  as  even  cement, foreign  30  corporations  had  they  repay  could  to gain  the  capital  interest,  and  been  f o r a minimum o f  held  c e n t r a l bank's a p p r o v a l  royalties  or  remit  overseas. two  profits, If  years,  an  20%  before  dividends,  investment of  the  had  dividends  15 could  be  remitted  In t h e  annually.  area  of banking,  the  operations  the  Bank  the  entry  for  f o r e i g n banks were awarded  period  of of  a  conclusion  of  commercial the  banks,  central  for  Foreign for  bank  they  sector  could  this  for  to  study.  issue  either and  to  flowing  90%  of  were  given  operate."^  by  of  only  a  the Thai  compared  branches.  All  were r e q u i r e d  their  loans funds  the  with  the  or  by  concerns. conduits  overseas. niche  by  to  Cooperatives  from  the  became  sixteen  business  small  of  toward  t o f u n c t i o n m a i n l y as  Thailand  licenses  end  deposits,  depositing  agricultural  limited  Banking  commercial  13%  the  were  Agricultural  into  addition,  new  sector  There  with  banks were p e r m i t t e d  banks  f r o m 1977  economic  banks  to  restricted  In  No  i n c l u d i n g f o r e i g n ones,  lending  capital  foreign  in  accounting  Agriculture  directly  Bangkok.  into Thailand.  decade.  foreign  agricultural Bank  the  to  government  c e n t r a l bank) g e n e r a l l y  restricted  banks,  fourteen  (the  discussed  Thai  banks  f o r e i g n banks  being  commercial  foreign  Thailand  essentially  to  of  the  within  Thus, which  31  Singapore, restrictions  on  investment. created  on the  other  on  foreign-owned Wages C o u n c i l Singaporean  of  always  employees  followed.  Thus,  wages.  Under  policy  Revolution, high  the  f o r example,  wage s t a n c e  more  serious  categories license,  license business  banks,  transactions. license confined other  and  of  the  employers  actually set  Second  had  Industrial t o adopt a  three  license,  license  to wholesale the preserve  offshore  banks  capital  Their  transmitting  domestic  banking  had  were  only  of c a p i t a l of  one  financial of  full  generally  f o r on-lending  system  no  Restricted  were p e r m i t t e d  was  basic  restricted  banks  operations.  limited  overseas  and  B a n k i n g , however, had  full  hand,  banking  National  r e s u l t e d i n a 13% g r o w t h i n  commercial  Finally,  securing  countries.  outside  the  Full  were  Retail  banks. to  of  banks:  on t h e o t h e r  policy,  including  The  and  Singapore  offshore.  centre  on wage  government  the f o l l o w i n g year.  on r e g u l a r  Council,  t h e government d e c i d e d  f o r commercial  restrictions  the  limitations.  and  Wages  wage i n c r e a s e s w h i c h t h e  accepted  i n 1979 w h i c h  average earnings  foreign  salaries.  recommended s p e c i f i c  few  of  a l l companies,  to negotiate  government  very  conditions  t h e government  freedom  ones,  had  of the National  to advise  the  hand,  operating  The d e c i s i o n s  i n 1972  impinged  the  to  occurred Singapore.  32  Although a  the r e s t r i c t e d  license  restrained operational  status  was  introduced  new  l i c e n s e s f o r foreign-owned  status, in  from  F o r e i g n banks were l e f t created  i n 1973.  from both  a restricted  Singapore  T h a i l a n d and M a l a y s i a Singapore's  twenty-six  out  foreign.  At  of  full  banking  economic s e c t o r .  end  financial  of  differed  significantly  because foreign-owned  thirty-seven  the  As i n T h a i l a n d ,  or  any  o n l y w i t h o f f s h o r e s t a t u s , w h i c h was  However,  dominated  license,  as  when i t  d i d n o t award  restricted  1973 t o 1980.  became v i r t u a l l y  intended  f o r f o r e i g n banks  i n 1971, t h e g o v e r n m e n t  banks  Singapore  was o r i g i n a l l y  sector. full  In  license  the decade,  banks  the  1970,  banks  were  figures  were  17 twenty-four  out of t h i r t y - s e v e n .  Government-Owned The  Corporations  Malaysian  government-owned over  foreign  1980. which  corporations  investment  F o r example, created  it  sole  in  Malaysia.  into  rights  extensive  instruments  the period  the Petroleum  use  Therefore, and  control  covering  1970 t o  Development  A c t (1974),  o i l company PETRONAS,  granted of o i l  f o r e i g n o i l c o m p a n i e s had t o e n t e r production-sharing  i n the country.  Chairman  of  of  t o t h e e x p l o r a t i o n and e x p l o i t a t i o n  exploration  PETRONAS  made as  during  t h e government  PETRONAS t o o p e r a t e then  government  Tengku  contracts  The g o v e r n m e n t ,  Razaleigh,  e v e n went  with l e d by so f a r  33  as  to  propose  authority  to  in  obtain  companies  in  equivalent  o f 500  system have  1975  companies foreign  to  effective  desire  nonimplementation  joint  of  this  involvement  in  demonstrated  the Malaysian  established PERNAS  business,  as  wholly-owned another  engineering,  each.  the  Through  shares"  a  would  of a l l foreign o i l negative  reaction  of  government  proposal,  caused  the  attempt  at  government  increasing  bumiputra  i t s subsidiaries  instruments.  further  firms  which  securities,  PERNAS  government-funded.  These  real  had  and t r a d i n g .  eight  interests in  subsidiaries  estate,  was  By 1975,  and c o n t r o l l e d  i n turn  companies.  insurance,  the l a r g e s t  government's use o f state-owned  and was  subsidiaries  in  and  i n forty-seven  thirty-nine  involved  for  regulatory  i n 1969  had e q u i t y  worth  surreptitious  o f PERNAS,  responsible  corporations  foreign o i l  the Malaysian  the  the  18  ventures  organization  stock  control  despite  of  "management  capital  allocated  shares"  The h a r s h l y  whose  . .. semi-exproprlation.  these  be  stock  o f common  i n Malaysia.  continued  the  "management  voting,  PETRONAS  PETRONAS  of  shares  investors,  The  1%  special  of weighted  given  that  were  construction,  The company had  joint  19 ventures with  i n various  foreign  firms  sectors.  PERNAS  w h i c h were p r e p a r e d  "preferred to provide  t o work technical  34  expertise  while  allowing  the  Corporation  to  maintain  20 effective  control."  this  between  by  form  joined  favour  these  allowed  hand,  business  became  the state  ventures of  increasingly  common.  e n t e r p r i s e s to garner  advantage  promoted  joint  c o r p o r a t i o n s and c o m p a n i e s owned  by t h e g o v e r n m e n t .  other  t h e 1970s,  government  and t o t a k e  provided the  foreign  the Malaysian  MNCs  During  o f t a x and o t h e r The M a l a y s i a n  these  joint  incentives  g o v e r n m e n t , on  ventures  t o r e c e i v e more f o r e i g n  political  because  investment,  they while  controlling i t . Turning PERNAS  Securities,  investments private in  order  to  into  the  Engineering  in  a  after  the  portfolio  firm  ownership  s e t up  in  of  Engineering  Nippon  capital  intensive,  i t s formation,  corporate  1971,  however,  i n the manufacturing created  Electronic  was m a j o r i t y owner  overseas  labour  bumiputra  ventures  PERNAS  a  invested i n business enterprises  a  joint  c o r p o r a t i o n , PERNAS N E C - M u l t i p l e x ,  Japanese  utilized  subsidiaries,  i n 1971, managed  Engineering,  joint  illustrate,  electronics  The f i r m  increase  PERNAS  entered  formed  wholly-owned  1  o f i t s p a r e n t c o r p o r a t i o n and f u n c t i o n e d l i k e  company.  stock.  To  t o a few o f PERNAS  i n 1973 w i t h PERNAS  venture,  advanced  NEC-Multiplex  which  technology  export-oriented enterprise.  PERNAS  venture  Company.  of the j o i n t  and f o r e i g n  sector.  received  Soon a big  35  supply  contract  from  Telecommunications,  the  Malaysian  which p r o b a b l y  Department  indicated  some  of  political  22 favouritism. same way, in  s t r o v e to  mining,  for  Established  8.9%  with  i n 1973,  PERNAS M i n i n g ,  i n c r e a s e bumiputra  special  emphasis  of Malaysia's t o t a l  on  i n the  financial  interests  t i n , which  accounted  e x p o r t s and  4.9%  of  i t s gross  23 domestic  product  foreign-owned prospecting coasts  of  later,  the  in  1980.  c o r p o r a t i o n , was and  extraction  Perak,  Penang,  Malaysian  Conzinc  Riotito  awarded  in principle  rights  and  for  Selangor  government  the  Malaysia,  removed  the t i n  seabed  i n 1969. these  a  off Two  the  years  rights  and  l a t e r b e s t o w e d them t o PERNAS. In 1974, PERNAS M i n i n g discovered t i n i n the Perak coastal seabed. PERNAS C h a i r m a n Tengku R a z a l e i g h d e n i e d a l l e g a t i o n s t h a t p o l i t i c a l 24 motives  were b e h i n d  This  more  investment late  v i a government  amounts  in  especially  ventures  shares those  companies  PERNAS c h a n g e d  joint  of  withdrawal.  a g g r e s s i v e approach  1970s when  mainly  the r i g h t s  in  to  certain  involved  the  NEP  particularly  required  one  in  sectors  of  of  very  over  foreign  large  corporations,  in plantations.  successful  control  i n the  participating  buying  foreign-owned  where  foreign  became d o m i n a n t  i n t i n and  more  restricting  i t s policy  M a l a y s i a n government d e c i d e d t h a t of  to  The  implementation the and  economy, domestic  36  investors PERNAS  were  appeared  takeover  bids  In  to  target they  i t s economic  frequently were  1975, f o r example,  unwilling  PERNAS  International,  T i n , which  However,  was  a  tried  to take  multinational  Panel  of  imposing  Industry  Britain,  state  establishing  Consolidated.  and  the  joint  venture  a  company,  T i n i n 1977.  second  biggest  28.65%  complicated  takeover  following  year  v e n t u r e between called  maneuver  bought  interests  i t s mining  ownership  the  corporation  PERNAS  and M e r g e r  o f New  of the mining  i n Malaysia  stock.  Tradewinds  concerns  by  PERNAS  involving  effective  h o l d i n g s t o New  venture's  by  Charter the  control of  C h a r t e r C o n s o l i d a t e d , which  mining  of the j o i n t  majority control  sold  the  Stock  n o t a c c e p t a b l e t o PERNAS.  a joint  British  London  then  were  Singapore  Takeover  blocked  responded  In  win c o n t r o l o f  the Singapore  which  a  corporation  through  New T r a d e w i n d s , and  Haw  government,  Council  company  over  t i n company.  effectively  conditions  Securities  to the  biggest  E x c h a n g e , t o g e t h e r w i t h t h e London C i t y  Tin,  to yield  for  the world's  the Singaporean  Securities  The  corporations  i n S i n g a p o r e , and u s e i t t o , i n t u r n ,  London  policies.  wishes.  Brothers  based  supportive of  because  government's  Par  not  had t h e  after  London  Tradewinds f o r  PERNAS, t h r o u g h i t s and, t h u s ,  o f London  effective  T i n and C h a r t e r  37  Consolidated,  owned  corporation.  New  the of  Malaysian  global  total  based  in  companies  soon  t i n output,  companies  controlled  in  and by  began t o t r a n s f e r t h e i r  It  66%  was  of  the  and  In  Malaysian  corporate  over  25%  output  of  1977,  the  Mining  gained  15%  a l s o had  headquarters  s t a t e c a p i t a l i s m , thus  renamed  almost  corporation  Nigeria. the  production  controlled  about  new  tin  afterwards  Malaysia,  This  Thailand  PERNAS, u s i n g  biggest  Corporation.  t i n production.  holdings  world's  Tradewinds  Mining  Malaysia's  foreign  the  of tin  mining  Corporation to  Malaysia.  c o n t r o l of  one 26  of Malaysia's A  key  further  government's  export  prominent  more  foreign  investment  PERNAS'  takeover  Sime  Darby  concerns China.  had  Malaysianize of and  the in  not  Sime  1976 over  subject  a  with  i n an  Darby's  new to  with issue  the  the  provided  and  was  industrial Kong  Sime  and  goals  cooperative  Capital Darby  authority  and  government  f u r t h e r the not  by  company.  to restructure  Malaysian  Committee's  regulating  i n Hong  to  stock.  Malaysian  based  Malaysian  attempt  management  of  was  British  i n order  the  to  span  holdings  industries. the  interests  mid-1970s,  corporation  clashed  a  plantation  the  Sime  time  Darby,  along  of  approach  this  Sime D a r b y  the  NEP.  Committee was  of large  with  illustration  during  Throughout  natural resource  aggressive  in Malaysia  negotiated  and  Issues felt  because  it the  38  company  was  Capital  Issues  Ali, for  incorporated in Britain. Committee  responded pirates  by  and  shares  must  be  expect  t h o s e who  and  Bank  a statement business  listed  buccaneers they  in this  Chairman  Negara,  which s a i d  before  operate  The  Tan  can  be  country  the  S r i Ismail  "There  in this  of  i s no  place  country...All  dealt  with.  We  t o comply w i t h  our  27 regulations." owned  a  majority  shares. at  the  N e i t h e r PERNAS n o r  After end  positions  a  major  to  take  over  the  NEP. In  to  and  bumiputra  government  corporation  with  engineering,  i t s shares 1980,  comply  i n an  v o t e s , PERNAS  succeeded  to  Malaysian  half  of  the  including  the  government  had  corporation  implementing  Boustead,  to  company's  of D i r e c t o r s ,  The  r e c e s s i o n , government  plantation,  in  while  capitalized  Malaysians  before Malaysia f e l t  corporations  of  in electing  government-owned  investment  Shortly a  1976  chairmanship.  used  foreign  widely  Sime D a r b y ' s B o a r d  corporation's again  the  a s t r u g g l e f o r proxy  of  on  of  Sime D e r b y ' s management  the  to  NEP.  the moderating  agencies  one  of  the  NEP.  trading bodies  a g g r e s s i v e move  to  effects  even went s o the  first  Boustead, company,  i n 1976.  organizations  control  took  of  f a r as foreign  a  British  offered  30%  Nevertheless, control  further  the  of  the  goals  of  2 8  contrast,  Thailand's  use  of  government-owned  39  corporations by  was  Malaysia.  intention  n o t as  Although  was  to  f a r - r e a c h i n g as the Thai  focus  on  government's  private  economic development, government business  ventures.  manufacturing,  1975,  t h e government  the  Thai  Shell  and  government-owned Thailand,  portion  of  Petroleum  the  despite  a  of  the  state-owned  ventures  of  the  formal  in  achieve manage  banking, in  did  enterprise  businesses,  a  informal  the  though  receive  Similarly,  industry.  overseas  venture  i t to  participated  government  and  joint  awarded  1976.  free  with  a  Shell,  Thailand  operated  partners  stated  Moreover,  Organization,  petrochemical  companies  yielded  and  s u b s i d i a r y of  government's  venture  Company,  Mining  concession  the  involved i n  taken  the o f f s h o r e t i n concession of  Carbide,  of  to  did directly  processing.  Mining  Union  Authority  development  amount  revoked  Offshore  Billiton  bodies  sugar  E x p l o r a t i o n and  between  joint  and  often  enterprise  The g o v e r n m e n t was  paper  the a c t i o n s  the  in  the  Therefore, orientation,  particularly  investors. fairly  leverage  a  as  Joint  considerable over  foreign  29 investors. The u t i l i z a t i o n prevalent economic the  in  Singapore,  philosophy  1970s,  the  o f government-owned  which  government  where  the  advocated had  c o m p a n i e s was government  a  major  mixed equity  had  economy. holdings  very an In in  40  petrochemicals, government resources  construction,  emphasis i n the  corporations. 1968 the  with end  government  as  the  period  plantation  securities.  influence gained  and  over  by  the  undertaking foreign  Development Singapore Nomura held  By  the  real ten  Nomura  of  DBS  with end  estate  the  and  (DBS)  until  Securities  Securities  of  t i m e span b e i n g  The  informally  exert  Singaporean control  over  had  robotics,  services,  a  was  enterprises  turn  1981.  owned  35%  venture  International, from  1971  e x a m i n e d , DBS real  joint  to  1983.  sixteen  estate  firm,  financial  obviously investors  DBS  a  had  associated  of with  Similarly,  government  in  government-owned  joint  Japan  Some  shareholdings  49%  foreign  and  wholly-owned  public  in  eight  gone  corporations  associated  s u b s i d i a r i e s , and  companies.  Intraco  in By  companies.  minority  Banking,  Japan,  Daiwa  government  established  seventeen  the  human  shareholder.  foreign  illustrate,  Merchant  of  travel  through  s u b s i d i a r i e s , an  financial  had  of  Singapore  of  was  associated  actions  of  Daiwa  of  Intraco  To  Securities  50%  venture  Bank  example,  development,  ventures  companies.  activities  As  and  company t o c o m p u t e r s ,  government  joint  estate.  technology  i t s biggest  twenty-one the  real  under c o n s i d e r a t i o n ,  a simple t r a d i n g  subsidiaries  to  d i d the  the  and  corporate  1980s, so  for  from being resource  shifted  Intraco,  of  and  could through  41  joint  ventures  were  and  unlikely  their  to  be  government  wielding control 1981  of  minority willing  connected  when  the  its  The  head.  through  and  has  as  reached  This to  i t s zenith  with  the  a l l the  of  instruments  Singapore  official  one  part-owners.  of  had  1976,  in  Investment  Prime  Minister  investments  of  as the  intention  of  investing  majority Thai  policies  of  Malaysia,  several  certain  economic  even  forced  in  restrictions both  while  on  other  sectors.  From  investors  companies  Nevertheless, Act on  (1975),  on  the  Singapore  in particular,  so  that  Malaysia,  had  specific and  on  the  foreign  Malaysia  restrictions  banking  some  particular  Coordination  Malaysia  quantitative limits  on  corporations,  regarding  Only  countries,  general,  significant  foreign-owned However,  of  areas.  general  ownership p r e v a i l e d .  range In  four  three  holdings  i t s Industrial  extensive  the  All  Thailand  their  in  official  restrictions  reduce  sectors.  examined  investment.  had to  under  the  Singapore  i t s NEP  foreign  to  has  chapter  Thailand  1973  and  manages  i r e of  firms  . . . 3 0 i n f o r e i g n companies.  This  hand,  created  GISC  or  probably  Foreign  the  companies  Government  (GISC) was  raise  partners  investment  Corporation  . , mainly  to  government-owned  foreign  government  shareholdings.  the  most  economic  Thailand  had  operations  of  had  quite  a l l three  few.  states  42  imposed the  substantial limits,  most  restrictive.  government-owned them  to  nevertheless, extensively corporations  the  was  four  the  the  only  areas  one  to u t i l i z e  overall  countries.  Thailand  studied. on  the  countries  Malaysia, foreign  of used  via  joint  Malaysia, the  takeovers  and  perhaps  area  especially  government companies. than  acting  shareholdings.  to undertake h o s t i l e by  in three  investment,  minority  restrictive  restrictions two  foreign  and  Singapore  Lastly,  corporations,  control  ventures  more  with  of  stock  foreign-owned  Malaysia Singapore  therefore,  investment  market  was in  clearly three  placed  than  the  of  more other  43  NOTES CHAPTER I I 1.  J . Saravanamuttu, The Dilemma o f I n d e p e n d e n c e : Two Decades of Malaysia's Foreign Policy 1957-1977 (Penang, M a l a y s i a : P e n e r b i t U n i v e r s i t i S a i n s M a l a y s i a , 1983), p.121.  2.  Q u o t e d i n R.S. M i l n e , "The P o l i t i c s o f M a l a y s i a ' s New E c o n o m i c P o l i c y , " P a c i f i c A f f a i r s , 49 (Summer 1 9 7 6 ) , 240.  3.  C e n t r e f o r S t r a t e g i c and I n t e r n a t i o n a l S t u d i e s , I s s u e s For Pacific Economic Cooperation: A Report of the Third Pacific Economic Cooperation Conference Bali, November 1983 (Jakarta: Centre for Strategic and I n t e r n a t i o n a l S t u d i e s , 1 9 8 4 ) , p.94; N.D. Karunaratne and M.B. Abdullah, "Incentive Schemes and Foreign Investment i n the Industrialization of Malaysia," A s i a n S u r v e y , X V I I I (March 1 9 7 8 ) , 263-264; and M i l n e , p.240.  4.  Centre,  5.  C e n t r e , p.98; and D o n a l d K. C r o n e , The ASEAN S t a t e s : Coping With Dependence (New York: Praeger, 1983), p.113.  6.  Augustine Tan, "Changing Patterns of Singapore's F o r e i g n T r a d e and I n v e s t m e n t s i n c e 1960," S i n g a p o r e : T w e n t y - f i v e Y e a r s o f Development, eds. Poh Seng You and Chong Yah Lim ( S i n g a p o r e : Nan Yang X i n g Zhou L i a n h e Zaobao, 1 9 8 4 ) , p.74; C e n t r e , p.97; Mee-Kau Nyaw and Chan-leong Chan, "Structure and Development Strategies of the Manufacturing Industries in S i n g a p o r e and Hong Kong: A C o m p a r a t i v e S t u d y , " A s i a n S u r v e y , X X I I (May 1 9 8 2 ) , 459; and C r o n e , p . 1 1 1 .  7.  C e n t r e , p.94; C r o n e , p.105; and Darwood I n t e r n a t i o n a l C o n s u l t i n g I n c . , Canada-ASEAN I n d u s t r i a l C o o p e r a t i o n O p p o r t u n i t i e s , V o l . I I : M a l a y s i a ( O t t a w a : CIDA, 1 9 8 2 ) , pp.20-21.  p.94.  44  8.  Chulacheeb Chinwanno and Somsak Tambunlertchai, "Japanese Investment i n T h a i l a n d and I t s P r o s p e c t s i n the 1980s," ASEAN - J a p a n R e l a t i o n s : I n v e s t m e n t , e d . Sueo Sekiguchi (Singapore: Institute o f Southeast A s i a n S t u d i e s , 1 9 8 3 ) , p.195; C e n t r e , p.98; a n d C r o n e , p.113.  9.  Centre, p.97.  10.  C e n t r e , p.94; Darwood, pp.20 and A b d u l l a h , pp.263-264.  11.  K a r u n a r a t n e and A b d u l l a h , and C e n t r e , p . 9 4 .  12.  Darwood, pp.19-20, pp.119-120.  13.  Darwood, p . 4 0 ; a n d B r i a n Wawn, The E c o n o m i e s o f t h e ASEAN Countries: Indonesia, Malaysia, Philippines, Singapore and T h a i l a n d (London: Macmillan Press, 1 9 8 2 ) , pp.65-66.  14.  I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n a n d D e v e l o p m e n t , T h a i l a n d : I n d u s t r i a l Development S t r a t e g y i n T h a i l a n d . ( W a s h i n g t o n : I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n a n d D e v e l o p m e n t , 1 9 8 0 ) , pp.22-23 a n d 36.  15.  I n t e r n a t i o n a l Bank, pp.35-36; Wawn, pp.139 a n d 159; Koji Taira, "Colonialism i n Foreign Subsidiaries: L e s s o n s From J a p a n e s e I n v e s t m e n t i n T h a i l a n d , " A s i a n S u r v e y , XX ( A p r i l 1980), 389-390; C l a r k D. N e h e r , " T h a i l a n d , " P o l i t i c s I n The ASEAN S t a t e s , e d . D i a n e K. Mauzy ( K u a l a Lumpur: M a r i c a n & S o n s , 1 9 8 4 ) , p . 3 4 ; a n d C e n t r e , p.98.  16.  Wawn, pp.161-162; F a r E a s t e r n E c o n o m i c R e v i e w , 5 A p r i l 1984, pp.82 a n d 84; a n d I n t e r n a t i o n a l Bank, p . 5 1 .  17.  Wawn, pp.126-127 a n d 132-133; L e e S h e n g - Y i , "Money, Banking and Finance in Singapore," Singapore: T w e n t y - f i v e Y e a r s o f D e v e l o p m e n t , e d s . Poh Seng You and Chong Yah L i m ( S i n g a p o r e : Nan Yang X i n g Zhou Lianhe Zaobao, 1 9 8 4 ) , pp.111-113 a n d 131; a n d F a r E a s t e r n E c o n o m i c R e v i e w , 24 December 1982, pp.30-31.  18.  C e n t r e , p.53; a n d S a r a v a n a m u t t u , pp.117-118.  Crone,  a n d 25; a n d K a r u n a r a t n e  pp.263-264; p.105;  Darwood, p . 2 5 ;  and Saravanamuttu,  45  19.  Milne,  pp.245-246.  20.  Bruce Gale, Politics Malaysia. (Singapore: 1 9 8 1 ) , p.108.  and Public Enterprise in Eastern Universities Press,  21.  Ibid.  22.  Gale,  23.  W i l l i a m L. B a l d w i n , The W o r l d T i n M a r k e t : P o l i t i c a l P r i c i n g and E c o n o m i c C o m p e t i t i o n (Durham, N.C.: Duke U n i v e r s i t y P r e s s , 1 9 8 3 ) , pp.42-43.  24.  Gale,  25.  F a r E a s t e r n E c o n o m i c R e v i e w, 16 A u g u s t G a l e , pp.109 and 129-130.  26.  Gale, pp.116-117, 119-121, 123 and 126; and John Thorburn, M u l t i n a t i o n a l s , M i n i n g and Development: A S t u d y o f t h e T i n I n d u s t r y (Westmead, E n g l a n d : Gower P u b l i s h i n g Company, 1 9 8 1 ) , p.83. Besides being an attempt to c o n t r o l f o r e i g n investment, these a c t i o n s were part of a complicated b i d by the Malaysian g o v e r n m e n t t o f o r m a " t i n ramp," o r i n t e r n a t i o n a l t i n cartel. The f a i l u r e o f t h e t i n ramp i n 1981-1982 probably caused a m a j o r d r o p i n t i n p r i c e s and the c o l l a p s e o f t h e t i n m a r k e t i n 1985. The c o l l a p s e l e d t o t h e shutdown o f 314 o f M a l a y s i a ' s 488 t i n m i n e s i n 1986. M a l a y s i a n government b o d i e s l o s t m i l l i o n s o f d o l l a r s as a r e s u l t o f t h e f a i l e d t i n ramp. See D i a n e K. Mauzy, " M a l a y s i a i n 1986: The Ups and Downs o f S t o c k M a r k e t P o l i t i c s , " A s i a n S u r v e y , XXVII ( F e b r u a r y 1 9 8 7 ) , 233; and F a r E a s t e r n E c o n o m i c Review, 7 A u g u s t 1986, pp.45-47.  27.  Quoted  i n Gale,  28.  Ibid.,  p.188.  29.  Wawn, pp.139 and  30.  Linda Low, "Public Enterprises in Singapore," S i n g a p o r e : T w e n t y - f i v e Years of Development, eds. Poh Seng You and Chong Yah L i m ( S i n g a p o r e : Nan Yang X i n g Zhou L i a n h e Zaobao, 1 9 8 4 ) , pp.267-268 and 272-274; F a r E a s t e r n E c o n o m i c R e v i e w, 6 December 1984, pp.75-76; and F a r E a s t e r n E c o n o m i c R e v i e w, 19 J a n u a r y 1984, pp.90-91.  pp.102-103; and  pp.105-106 and  S a r a v a n a m u t t u , p.118  fn.  117. 1984,  p.70;  and  pp.127-128.  156-157.  46  CHAPTER I I I Explanation This placed  1980.  chapter  more  Thailand  f o r Malaysia's Greater will  attempt  restrictions  and  Singapore  The  argument  on  explain  foreign  during will  to  time  be  put  of  three  states  restrictiveness. past  experience  domestic  importance  of  ownership  of  the  also  be  are  national  Past  Control  significant  experience is  that  a  a colonial  at  with  a  country  the  and  the  each  country's  strategies,  presence size  of  and  and  the  level  Various  ethnic  political prevalence of  foreign  hypotheses,  economic c h a r a c t e r i s t i c s  key  This  chapter  explanatory  will  under  conclude  variable  among  country's  past  settings.  variable  colonial which  settings greater  s e c t o r , the  state.  examined.  the d i f f e r i n g  One  the  natural resource  ethnic factors  Colonial  and  with o l d technology,  will  analyze  to  important  economic  power, e c o n o m i c  look  i n d u s t r y i n each  that  than  1970  Malaysia's  will  pressures,  to the p o l i t i c a l  discussion, that  chapter  a colonial  It will  industries  related  with  political  minorities.  of  The  and  caused  Malaysia  covering  forward  i n the n a t i o n a l p o l i t i c a l  why  investment  span  differences the  Restrictions  has  is  power.  each The  related  been d o m i n a t e d  power i s more l i k e l y  hypothesis  economically  t o impose r e s t r i c t i o n s  by  than  47  one of  that  has n o t , due  national  feeling  security.  of  to  toward  sectors  security.  economically  by  a  t o impose  Malaysia  nationalism  the  power  economy  led  to a  ownership  a  former  63%  of  in  the  colony  in  era.  investment  through  for  60%  of  British  mining, the  Japan  a process  In 1970,  had  75%  foreign of  the  72% o f m i n i n g , and  59%  of  i n t e r e s t s were p r e e m i n e n t  period, of  foreign  of feedback,  companies,  agriculture  was  in  were  every major s e c t o r o f  i n Malaysia,  limited  interwar  period  approximately  business  and  i n Malaysia  however,  dominated  i t s foreign  resulted  nationalism.  and f i s h e r y s e c t o r  commerce,  In  1970s,  i n turn,  accounted  commerce,  vital  i t i s less  and  pre-1970  This  i n economic  manufacturing."'"  of  to the d e s i r e to  i n the past,  British  nature.  which,  agricultural  a  restrictions.  in  rise  to  pattern  has n o t been  o w n e r s h i p and d o m i n a t i o n o f v i r t u a l l y the  reasons  refers  prevailing  I f a country  policies  laissez-faire  and  o f t h e economy c o n s i d e r e d  colonial  was  investment  nationalism  national security alludes  c o n t r o l over  national  likely  Economic  hostility  ownership, while regain  t o economic  during  over  British  become  the  the  colonial  of  foreign  70%  origin. biggest  By source  the of  2 overseas Then  investment PETRONAS  i n Malaysia. Chairman  Tengku  Razaleigh  voiced  the  48  o f many e c o n o m i c n a t i o n a l i s t s when he s a i d i n 1 9 7 5  feelings that  "Foreign  people.  firms  The  are not responsive  time  has  come  t o t h e needs o f t h e  f o r Malaysians  to  free  the  3 nation  from  Similarly,  Minister  when  he w r o t e  exercise than  full  allow  Affairs  i n an a r t i c l e  nations,  of  s e c u r i t y aspect  of Foreign  i n 1 9 7 5 that  Review  domination  the national  then  World  foreign  that  sovereignty  over  economy."  was p u t f o r w a r d by  Tengku  Ahmad  Rithauddeen  f o r the Far Eastern  "Malaysia,  believes  the  in line an  with  a s i t u a t i o n to develop  other  independent  i t s natural where  Economic Third  state  resources  i twill  must rather  be a t t h e  4  behest article, foreign the  of  multinational  Tengku  Ahmad  investment  was  corporations."  Rithauddeen still  desired  also  In  the  same  reiterated  that  by M a l a y s i a ,  despite  government's simultaneous wish t o c o n t r o l t h e c o u n t r y ' s  economy: Foreign investment i n Malaysia i s a l w a y s welcome s o l o n g a s t h e o p e r a t i o n s of f o r e i g n entrepreneurs a r e i n a c c o r d w i t h t h e aims o f o u r New E c o n o m i c P o l i c y (NEP). Indeed, t h e o u t l i n e Perspective Plan recognizes the continuing r o l e of foreign investors and a s s u r e s them a 3 0 % s h a r e o f e c o n o m i c a c t i v i t i e s by 1 9 9 0 , a r e d u c t i o n from t h e preponderant 62% e x e r c i s e d a t p r e s e n t . I t has o f t e n been f o u n d t h a t many f o r e i g n companies pay o n l y l i p - s e r v i c e t o t h e NEP, p a r t i c u l a r l y i n r e g a r d t o p a r t i c i p a t i o n by b u m i p u t r a s .  49  The  Malaysian  hypothesis  situation,  stated earlier  Thailand, though  it  century,  had  urban  centres  avoid  giving  powers  in  to  of  the  Southeast  Thailand.  deal  of  ceded  large  directors  the  was  formed.  formed  ventures with  support  investment  appointed  of was  of The  with  important  achieved.  gain  in  flowed great  Foreign  and  bureaucrats  and  the  senior  boards  brought  in  of as  A  symbiotic  business  community  investors of  a  These  were  Thai  the  itself  trade  businesses.  increased flows the  With  of containment  to  and  foreign  seizing  Thailand a l l i e d  began  to  colonial  century.  1950s.  corporations  relationship  foreign  to  land  government.  the  were  partners  the  Thai  in order  of  many i n f l u e n t i a l  during  and  Hence,  States  19th  opened i t s  for  to  major  more p r o s p e r o u s  this  the  pretext  The  shareholders  joint  tracts  of  in  interests  any  i n 1950,  United  the  colonized,  and  and  officials of  Treaty,  American a i d , investment,  officers  government  Britain  States to f o l l o w a p o l i c y  companies coopted  military  supports  formally  with  powers  years  i n f l u e n c e over  domestic  never  commercial  K o r e a n War  Asia.  into  clearly  section.  Bowring  colonial  early  the U n i t e d  the  foreign  even  the  was  relations  with  the  and  outbreak with  close  very  in this  conversely,  starting  control,  thus,  capital  urban middle  and and  became trade.  class  for  50  Most  foreign  manufacturing in  the  which  investment  sector,  which  e a r l y 1960s. formed  the  In  the  backbone  in  Thailand  went  accounted  for  past,  agricultural  of  the  the  Thai  only  to  10%  the  of  GDP  sector,  economy, had  little  7 foreign  investment.  generally Thais  not  owned  during  very  69.2%  the  Moreover, significant of  and  in  the  registered capital  interval  Europeans,  foreign  from  1960  Japanese  to  1973,  accounted  for  investment  was  pre-1970  period.  in  country  their  while  Americans,  5.0%,  5.9%,  and  g 11.5%,  respectively.  million  of  obtained  foreign  U.S.  $116  Thailand  investment million  and  received  in  merely  1971,  whereas  Malaysia  procured  U.S.  $39  Singapore U.S.  $188  million. Except to  1948  f o r two  and  1973  i n t e r l u d e s of  to  1976,  Thailand  from  1932  to  alignment  with  the  United  development the  of  American  the U n i t e d  which  was  manner  States  completed  acquired  considered  crucial  by  military  1980.  basically  resulted  economic  from  1976. of  The  the  Thai  various  for national security presence.  governed  in  the  American  infrastructure.  Vietnam,  1945  anti-Communist  Thai  t o remove i t s t r o o p s  control  to the American m i l i t a r y  government,  Thailand's  States  Thailand's  withdrawal  asked  the  civilian  government  from  Thailand,  government economic and  After  in  this  sectors  developed  due  51  Displays  of T h a i  economic n a t i o n a l i s m i n the  were d i r e c t e d  largely  at Japanese  relatively until  big  the  the  a  not  American  between  Thailand  M a l a y s i a was  ownership from  was  was  foreign  investment 40.8%  in  while  in this  in  Singapore.  Japan States  alone and  occur  never did  the  not  Thailand  reason  investment.  In  and  foreign  1972,  capital  80.4%  was  a  until  i s one  colony  for  the  the d i f f e r e n c e  aspect  i t s economy.  accounted  United  and  British  sources  the  i n 1950.  toward f o r e i g n  former  prevalent  not  infrastructure  expanded  Malaysia  a  did  T h a i l a n d was  s i d e of the hypothesis  more r e s t r i c t i v e  Singapore  Japan  economic  presence  and  However,  f o r e i g n o w n e r s h i p , and  developed  flip  from  Malaysia,  d o m i n a t e d by  military  the  capital  Unlike  relatively  supports  of  1960s."'"''"  c o l o n y , was have  flow  investment.  mid-1970s  of  total  responsible  EEC  supplied  for 12.7%  12 and  10.4%, r e s p e c t i v e l y .  react  to  Malaysia  Nevertheless,  f o r e i g n economic domination b e c a u s e o f a few  Singapore  had  Singapore  i n the  did  not  same manner  as  mitigating factors.  substantial  economic  difficulties  after A  World  War  Southeast began  to  II.  It  A s i a , but decrease  had by  functioned  the  end  to  have  direct  of the  i n comparative  of economic n a t i o n a l i s m i n the links  with  as  the  entrepot  1950s, e n t r e p o t  terms because of  region.  their  the  of  trade rise  Countries preferred  trading  partners.  In  52  addition, rate  of  highest and  from  i n the  largely as  in  world  Singapore  population, a t the  government  time.  industrialization.  were  investors. markets  Singapore  market  was  Most  the  MNCs  not  world  large  government  and  switched  of  of  the  to  The  the decade  to  overseas, the  state  Singapore's  trade  through had  established  small  support  foreign  foreign  a  strategy  domestic  policy  investment  government, p a r t i c u l a r l y  its  annual  1950s.  from  Singapore's  Hence,  the Singapore  late  involved  enough  import-substitution. welcomed by  base.  strengthened  the  one  to u t i l i z e  or  around  4.3%  was  i n the  created of  a  investment  intermediate manufacturing  ties  which  a t t h e end  New  into  had  T h e r e f o r e , unemployment  concern  decided  by MNCs, f l o w e d  an  1957,  became a m a j o r  Singaporean on  to  increase  housing  focus  1947  to  when  of was the  export-oriented  13 industrialization Because and  small  national  of  i n the mid-1960s. their  market,  the  survival foreign  Yew  put  February  lack  Singapore  depended  consequently, lucidly  country's  the  natural  government  on  investment.  forward  of  resources  believed  that  industrialization  and,  Prime M i n i s t e r  Kuan  government's  1968: C o o p e r a t i o n between e d u c a t i o n a l l y n o t a d v a n c e d and i n d u s t r i a l l y u n d e r d e v e l o p e d c o u n t r i e s can o n l y produce m i n i s c u l e economic g a i n s t o be d i v i d e d between l a r g e  Lee  reasoning  in  53  numbers o f p o o r and h u n g r y p e o p l e To make p r o g r e s s w h i c h can be more q u i c k l y f e l t by t h e p e o p l e , the underdeveloped c o u n t r i e s o f S o u t h and S o u t h e a s t A s i a must be a s s o c i a t e d w i t h t h e most i n d u s t r i a l l y a d v a n c e d and p r o s p e r o u s t o b o r r o w on f a i r l y generous terms not o n l y t h e c a p i t a l and e q u i p m e n t , but a l s o the e x p e r t i s e i n management, t e c h n o l o g i c a l and i n d u s t r i a l techniques^^education and t r a i n i n g m e t h o d s . The  hypothesis  refuted colony the  by  the  and  was  state's  wanted  put case  unique  earlier  in  Singapore, by  overseas  circumstances.  was  Although  for  investment  toward  section  capital,  Singapore's  foreign  this  which  investment,  need  proclivities  of  dominated  foreign  overriding  forward  a  former  because  Malaysia  perception offset  of  also  of  any  substantially restricting  is  its  historic  capital  from  overseas. Economic S t r a t e g y The economic pressure. country economic economic  variables  Two whose  Domestic  being  strategy  of  elites  intervention  that  elites  The a  flip country  in this and  are  follow and  Pressure  examined  hypotheses  nationalism  restrictions. argument  and  economic  favourable  side  domestic  relevant.  an  is  section  more of  whose  to  elites  is  strategy heavy  that  based  a on  government to  impose  hypothesis do  the  political  One  likely this  are  not  is  follow  the a  54  nationalistic likely that  t o impose r e s t r i c t i o n s .  a  country  vulnerable  impose  whose  to  nationalist to  and i n t e r v e n t i o n i s t  advocates  that  group  political  pressure  economic n a t i o n a l i s t s ,  from  i s also  I f the governing  i t i s vulnerable  i s less  i ti s  economic  more  group  t o domestic  the country  argues  perceives that  of r e s t r i c t i o n s  restrictions.  perceive  The o t h e r h y p o t h e s i s  governing  domestic  economic s t r a t e g y i s l e s s  likely  does n o t  pressure  from  likely  to invoke  restrictive  foreign  restrictions. Malaysia's investment reflected  shift  factors  which  the  new  from  areas  the  Soviet  will  prevailing  Union's  Third  and  Malaysia  posture  Malaysia  Together  be d i s c u s s e d environment  t o mid-1970s  With  still World  coincided with  espousal  began  of  United to  important  lean  the shaping of  Britain's  withdrawal  i n t h e mid t o l a t e a  policy  States' more  of  orientation  a fairly was  departure toward  pro-West  emphasized.  1960s,  peaceful  a  o f n e u t r a l i s m and non-alignment. maintained  domestic  the transformation  influenced  strategy.  the  with  later,  E a s t o f t h e Suez C a n a l  co-existence,  a  elites.  the i n t e r n a t i o n a l  policy  i n the e a r l y  a change i n t h e dominant economic s t r a t e g y o f t h e  governing  Vietnam,  more  regulatory policies  state's  of  to  from foreign  Although  foreign T h i s new  policy, stance  t h e coming t o power o f a new g r o u p o f p e o p l e  55  in was  the United  Malays  t h e dominant  (called  National  political  the A l l i a n c e  governing  Malaysia.  party  Party  and  A  change  foreign  investment p o l i c i e s  The new  leadership  economic  capitalist) This Minister  followed  nationalism  Organization  and  i n t h e permanent later from  the  an e c o n o m i c mixed  which  coalition  the National  o f t h e pre-1970  a  (UMNO),  Front)  laissez-faire era  strategy  occurred. advocating  (interventionist  and  economy.  economic Tun  strategy  Razak  "Southeast A s i a ' s  was  p a r t l y explained  i n September  Natural  1974  at a  by  Prime  conference  R e s o u r c e s and t h e W o r l d  on  Economy":  ...We i n M a l a y s i a b e l i e v e i n economic n a t i o n a l i s m i n guiding the e x p l o i t a t i o n of our n a t u r a l resources i n such a way t h a t o u r p e o p l e and c o u n t r y w i l l obtain the greatest b e n e f i t . We b e l i e v e t h a t p r i v a t e e n t e r p r i s e , w h e t h e r d o m e s t i c o r f o r e i g n has an important r o l e t o p l a y i n our development. Our o b j e c t i v e i s t o b r i n g a b o u t an e f f e c t i v e and e q u i t a b l e m i x t u r e o f d o m e s t i c and f o r e i g n e n t e r p r i s e on t h e one hand, and p r i v a t e and p u b l i c e n t e r p r i s e on t h e o t h e r , so t h a t o u r n a t i o n a l i n t e r e s t c a n be a d v a n c e d t o t h e c o n t e x t o f an e x p a n d i n g , stab"J.g and e q u i t a b l e w o r l d economic o r d e r . Malaysia  practised  democracy  with  legislative it  was  a  version  of  elections, political  assembly.  politically  Western  p a r t i e s , and a  Some UMNO p o l i t i c i a n s advantageous  parliamentary  to  appear  may  have  hard-line  felt in  56  public  and  inflame  to  use  nationalist  sentiments  stemmed  domination  by  a  basically  investment the  the  from  country's  the power  Although  gain  and  continued  p u b l i c statements  probably  pressure  caused  to take  political  the  to  desire  government  decision  to  had  try  foreign  this  period,  of  economic  to  feel  some  stance.  some  to  over  in Malaysia  advocates  likely  economic  concerns  group  to  These  past  a more n a t i o n a l i s t  pressure  government's  of  order  votes.  with  the governing  and  in  f o r development purposes throughout  nationalism  domestic  and  pro-West  provocative  political  rhetoric  sentiments  colonial  economic c o n t r o l . was  nationalistic  This  influence  control  on  foreign  investment. Tengku R a z a l e i g h , who Tun  Hussein  Onn  and,  served  for  Mahathir  a  as F i n a n c e  while,  Mohamad,  under  Minister  Dr.  prominent  h a r d - l i n e economic n a t i o n a l i s t .  t o have used n a t i o n a l i s t honorary  title  of  Malaysian  Economy)  Commerce,  where  Razaleigh the the  UMNO. 1970s,  was  he  Bapa in  Besides Tengku  Ekonomi 1975  was  elected the  was  statements  as  and  one  of  (Father  also  seemed  Malay the  of  same  as  the  of  year,  Vice-Presidents  served  the the  Chamber  p o s i t i o n s a l r e a d y mentioned,  Razaleigh  most  a c t i o n s to gain  In  three  Prime  the  Razaleigh  the  Chairman.  current  perhaps  Malaysia  from  M i n i s t e r under  of  during  original  57  Chairman  o f PERNAS  and t h e C h a i r m a n  o f PERNAS S e c u r i t i e s ,  17 PETRONAS, Chamber  and Bank  o f Commerce  statements countries their  have  has  period  hypotheses  into  on  said  themselves  Razaleigh,  position  he  other  t o ensure  to  pressure  must  foreign  consideration  "If  that  t h e hands o f o t h e r s ,  Political  like  under  when  t o t h e Malay  epitomized h i s  and r e g u l a t i o n s  do n o t f a l l  resources."  government's  In a speech  1975, R a z a l e i g h  f o r Malaysians 18  nationalists,  for  this  legislation  come  nation's  in July  during  economies  time  Bumiputra.  control  from  have  the  economic  affected  the  Thus,  both  investment.  in this  the  section  are  valid  Malaysia. In  followed  Thailand,  on t h e o t h e r  an e c o n o m i c  strategy  m a r k e t economy o r i e n t e d . have  been  experiments altered  very  hand, which  changes  with  democracy),  little  in  half-century  leadership but these  the conservative  elites  was a n t i - c o m m u n i s t and  "Over t h e p a s t  numerous full  the governing  outlook  there  (including changes  have  o f t h e Bangkok  19 government."  Coups  senior military  officers  holding threat  positions of  Thailand's Even  any  the  were u s u a l l y u t i l i z e d  a s a method o f c h a n g i n g  leadership.  dramatic  abiding  during  of  i n Thailand  political  anti-communist, 1973-1976  "There rupture  was or  pro-Western  interregnum  of  by  the people never  changing  any of 20  ideology." democratic,  58  civilian  government,  economic  policies  when were  government  adhered  In  1975,  Prime  mark  the  August  speech  to  Advisory  Council  unequivocably  to  a  fairly strategy  "This  for  strong,  the  of  a  Board  nation  on  Kukrit  formation the  demands  based  Minister  for  that  public  an  nationalist elites  open  Pramoj, Foreign  of  in  economy. during  a  Investment  Investment,  r e a l i z e s that  we  In  speech  said  cannot  do  21 without  foreign  gathering Kukrit  In  of  the  heads  of  this  foreign  same  chambers  of  to  a  commerce,  went f u r t h e r : I am r e a l i s t i c enough t o u n d e r s t a n d t h a t i t i s u n r e a s o n a b l e t o ask f o r e i g n c o m p a n i e s t o i n v e s t l a r g e amounts o f money and t o e x p e c t them t o g i v e management c o n t r o l t o T h a i n a t i o n a l s . That i s a r i d i c u l o u s request... T h a i l a n d has no i n t e n t i o n o f a s k i n g foreign investors with large investments to turn over t h e i r management, o r t h e m a j o r i t y o f t h e i r equity s t r u c t u r e , to Thai n a t i o n a l s . What we ask i s t h a t f o r e i g n c o m p a n i e s s h o u l d work h e r e as p a r t n e r s , so t h a t y o u r i n v e s t m e n t s h e r e c a n be m e a n i n g f u l i n t e r m s o f f i n a n c i a l g a i n s and a t t h e s a n ^ ^ i m e t h e y s h o u l d b e n e f i t my country.  contrast  elites  business."  in  to  government  interventionist However, substantial  their  Malaysian did  economic  the  adopt  a  the  nationalistic  Thai and  strategy.  governing  political  not  counterparts,  group  pressure  from  in  Thailand  supporters  did of  receive economic  59  nationalism the  in  inflow  economy  the  of  grew  early  foreign  of American  troops  the  the  of  Center  of  Although  NSCT  (NSCT)  targeted  the  Prapat  Charusathiara, of  leaders  military  student  believed  Thailand.  peak  start  boom. was  most  regime it  was  the  when  the  and  the  withdrawal  precipitated  National  Student  in  its political  1970. actions  Thanom K i t t i k a c h o r n  organized against  Japanese  student  the  i n 1969 The  of  l e d by also  of  1960s,  particularly  established  demonstrations  These  intensive  investment,  economic  against  number  Foreign  the  encouraged  from Southeast A s i a  Thai  During  was  However, t h e  Thailand  the  mid-1970s.  capital  strongly.  from Japan, expanded.  end  to  an  Prime  the  student  c o l o n i z a t i o n of  demonstrations Japanese  increasing  what  economic  and  reached  Minister  their visited  23 Thailand  i n January  Concomitant rising  level  population. foreign  other  than  Thais and to  Thai  dealings for  student  their  did  not not  have  among  associates  understand  that from 24  Thailand.  perceived  the  communicate  contributed  believed  in  demonstrations  nationalism  did  Many T h a i s  their  out  the  economic  appears  business  singled  of  investors  nationalism. more  with  Most  xenophobia  1974.  to  The  much  with Some  increasing benefited  ventures Japanese  exploitation  a  general  them.  foreigners joint  was  of  and were  Thais,  60  although  "...the  provoked  more by t h e v i s i b l e a s p e c t s o f  such  as  samurai  the  widespread  flood  movies,  colonialism  of  the Japanese  'Japanese  o f Japanese goods, gaudy  and  in  resentment  swarms  the  of  Japanese  internal  labor  was  presence  1  advertisements,  tourists,  markets  of  than  by  Japanese  25 s u b s i d i a r i e s and The  afiliates  growing  populace  was  in Thailand."  nationalistic  backed  intellectuals.  up  by  Educated  j u s t p r i o r t o and  feeling  the  among  criticisms  Thais  openly  the  of  voiced  urban  many  Thai  their  views  during the p e r i o d of democratic,  civilian  g o v e r n m e n t , 1 9 7 3 - 1 9 7 6 , t h a t T h a i l a n d ' s economy was  becoming  dominated  by  investors  who  development companies in  senior  amount  of  foreign were  of  were  failed  of  unrest  They  joint  economic  and  appeared  intellectuals exploitative  promotions.  Thais  had  the  also felt of  and  Thai  was,  April  foreign  the  labour  1972  them small  through  Thais  who  therefore,  country. that  the  place  urban  Nationalistic  i n the  that  occurred  few and  foreign  assisting  argued  the  ventures in  other  believed that  that  only  disparity  publicly  train  also  transfer  profited  in  were p a r t i c u l a r l y treatment  They  to adequately  technology  Thai  satisfactorily  country.  positions.  partners  c o r p o r a t i o n s and  not  the  investment  increasing number  multinational  the  A  large  Japanese  i n terms  of  intellectual i s s u e of  the  61  Chulalongkorn  University  Social  issue  with  non-Thai  dealt  the  economy.  Criticism  Thailand  and  Japanese  on  focused the  products  on  Science  control  a  The  of  few  A  movement  months  after  whole  Thailand's  the e t h n i c Chinese  Japanese.  formed  Review.  living  to  the  in  boycott  journal's  p u bu-il i• c a t4 . -i o n . 26 All great  this  deal  outpouring of  of  political  pressure  military  r e g i m e o f Thanom and  1973  was  and  During  the  students  three  years  organized  varying  vulnerable economic result,  of the as  1973,  of  the  policies  which  time.  Law  were p a s s e d coup  foreign  in  which  and  strikes  formed the Thai  to  government  government  mid-1970s.  investment,  the A l i e n  1976  and  was  emanating  installed  October  October  government,  "...  from As  such  Employment  by v a r i o u s T h a i g o v e r n m e n t s .  d'etat  Minister  in  democratic  early  and  beleaguered  fell  pressure  o f 1972  a  government.  The  the  put  civilian  coalitions  political in  the  demonstrations  restricting  Business  military Prime  civilian  nationalists  the A l i e n  Prapat,  unstable  frequent  lengths to  of  nationalism on  r e p l a c e d by a d e m o c r a t i c ,  several different for  economic  Tanin  a as Act  However, Kraivixien  submerged  those  27 elements  that  opposed  foreign  investment."  economic n a t i o n a l i s m i n T h a i l a n d The  rise  of  discontent  The  wave  of  subsided.  toward  foreign  investment  in  62  the  e a r l y 1 9 7 0 s was  military  government  criticism by  the  p e r h a p s as much an  of  overseas  growing  domination  and  capital.  economic  of  the  economic  attack  on  Thailand's  structure  as  it  Many p e o p l e were  disparities  military  elite  in  and  a  disturbed  s o c i e t y and their  was  by  associates  the in  28 the  business  sector.  investments,  being  disparities,  became  on  the  offshore result  the  country's  rescinding  of  "Foreign most  a  the  Thai  charges  military  of  officers,  target 29  Exploration  fraud in  and  foreign  symbol o f  economic  for  structure."  in 1975,  t i n concession  of  conspicuous  convenient  economic  business  and  public  The  and  attack  government's  Mining  Company's  f o r example, was  largely a  corruption  addition  to  against  the  certain  more  general  specific  foreign  30 complaints  about m u l t i n a t i o n a l  Restrictive companies c o u l d within  the  military  and  investment "[i]t policy  is  bureaucratic  bureaucratic their  foreign  heading  preferential  taken  against  sometimes a l s o be  Thai  government, associates  measures  corporations.  regulations. impossible  statements  are  to  in  the  The  reverse to  result  a  joint  of  particular  would  was  often of  also true.  degree  economic  in  the  ventures  application  what  struggles  ascendant  in  companies  of  If  was  partners  tell a  polity.  group  foreign  treatment  a reflection  and  receive foreign Thus,  anti-Japanese nationalism...  63  or  whether  they  are  merely  a  reflection  of  fractional  31 strife..."  Nevertheless,  nationalism  had  elites  nationalistic  and  therefore,  flip  the  section did  pressure  from  mid-1970s,  case  of  hypothesis.  The governing  to  economic  state  investment. Singapore  and  had  world  capital  The to  pressure  strategy,  the  was  economy.  concept  upon turn,  of  the  implied to  were  not  Malaysia. Singapore's of  survival. as  an  achievement  of  foreign  believed  free-flow  achieve  the  second  relationships a  be  economic  required  generally  in  to  to  Singapore  the  interdependent  countries  ceased  of  s u r v i v a l of  in  This  early  restrictions  the  group  Therefore,  side  strategy  for  political  interventionist  Singaporean e l i t e s form  given  the  1976.  flip  contingent  which,  in  a  strategy;  to  t h e y were i n  economic on  between  degree  for  as  focussed  growth,  the  follow  governing  restrictions  and  in Thailand  the  the  nationalists for  not  hypothesis  certain  supports  domestic  elites  independent  growing  also  economic  economic  m i l i t a r y coup o f  preeminent  According  a  pressure  the  factors  did  first  Although  Nationalistic  and  important  to  the  that  policies.  government  of  economic  Thailand  strategy  side  react  with  clear  interventionist  domestic  significant  in  is correct.  Thailand  is  some i n f l u e n c e on  Thailand's  this  it  of  economic  that in  a  goods growth  64  and  prosperity.  was  exemplified  Prime  by t h e n  Minister we  from  the i n t e r n a t i o n a l City  Foreign  adherence t o t h i s  Minister  and l a t e r  view  Deputy  S. R a j a r a t n a m i n F e b r u a r y 1972 when he s a i d  "...  Global  draw  The g o v e r n m e n t ' s  sustenance not only  belong  economic  from the r e g i o n  but a l s o  system  we  and w h i c h w i l l  t o which  be t h e f i n a l  as a  a r b i t e r of  33  w h e t h e r we p r o s p e r The d o m i n a n t economy deemed "In  with  or d e c l i n e . " economic  t h e government  appropriate.  essence,  issues  is  strategy  this  based  actively  Survival means  a l s o emphasized a mixed  was  that  primarily  p a r t i c i p a t i n g where  the o v e r r i d i n g  Singapore's  on  the  factor.  perception  assessment  of  of  their 34  relevance Although itself  to  the  economic  the governing  development  People's Action  a democratic s o c i a l i s t  rigidly  socialist  flexible  economic  regarding  Ensuing  from  private  enterprise  maintained. economic  the  the  means  economic and  explained government  used  to  relatively  and  state  occurred. the in  Prime  pragmatic 1980  when  .  attain  ends.  the  PAP  free  encouraged market  amount o f of  was  government business  .  Minister  economic he  quite  ownership  .  a  The PAP was  the  A t t h e same t i m e , a f a i r  planning  (PAP) c a l l e d  i t d i d not follow  strategy,  a  Singapore."  Party  philosophy.  35  enterprises  party,  of  Lee  philosophy  stated  that  Kuan  Yew  of  his  government  65  corporations  played  only  the  "when  over-cautious. venture  state  survive  the  a key r o l e  private The  in particular  entrepreneurs  Singaporean  test  of  were  Government  c a p i t a l . . . [ b u t ] these  sectors, but hesitant  was  willing  enterprises  competition  in  government  was  a  had  or to to  free-market  36 economy."  Hence,  economically, supports  the  but not n a t i o n a l i s t i c .  the f l i p  side  interventionist  The c a s e  of the f i r s t  of  hypothesis  Singapore stated i n  this section. In  terms  of domestic  nationalists,  the  governing  Singapore  practised  democracy  and t h e PAP  election  since  parliament advocating factor.  Singapore the  Economically  is  on  was  from  not  Western  a majority  economic  vulnerable. parliamentary  i n every  general  no o p p o s i t i o n members o f  1981.  Economic  foreign  investment  substantially  strategy  of  their  nationalists were  from  not a  Malaysia  elites  and  pressure.  Dominant E t h n i c M i n o r i t y  of  postulates group  to  of  were  differed  situation  position  There  economic  political  The  has won  1968  pressure  group  form  restrictions  regarding domestic  a  1959.  from  political  being  ethnic  that  in a  analyzed  next  minorities. country  politically  where  dominant,  i s the  The  economic  hypothesis  the majority but  here ethnic  economically  66  subordinate, perceived  government  economic  domestic  ethnic  imbalances  groups  also  restricting  have  an e c o n o m i c a l l y  action  having  investment  greater  11%  population  and  together the  1%,  was  the r e s u l t  1800s, i m m i g r a n t  Peninsular  Malaysia  Ethnic  work  Indian  workers  were  estates.  These  Chinese  and  sojourners,  so t h e B r i t i s h  groups.  dominated  When  politically,  small-scale  agriculture  Large-scale  agriculture,  and  accounted f o r m i n o r i t i e s made taken  e t h n i c breakdown o f colonial  policy.  l a b o u r e r s were  brought  i n t h e t i n mines engaged  Indians  was c r e a t e d  but they  53% . o f  minorities  d i d not attempt  Malaysia  factor. about  of B r i t i s h  indentured  ethnic  investment,  and o t h e r  Chinese  to  foreign  Chinese  This  foreign  explaining  results,  a huge 47%.  government  In  i s a crucial  Malays.  were in  industry,  of  does n o t  of r e s t r i c t i n g  toward  Indians  minority, effect  minority,  occur.  respectively.  represented  In t h e l a t e  to  census  were  35%, w h i l e  population  into  1980  large,  I f a country  ethnic  restrictions  to  approximately up  likely  redressing  the secondary  effect  ethnic situation  According Malaysia's  dominant  less  at  vis-a-vis,  c a n have  t h e secondary  the country's  aimed  f o r e i g n investment.  is  Malaysia's  action  f o r the were  and  rubber  considered  to integrate the i n 1963, M a l a y s  mainly  the  and  employed  civil  in  service.  commerce  were  67  controlled the  by  price  economic  foreigners  of  rubber  and  ethnic  in  the  i n e q u a l i t i e s among  Civil  unrest  These  riots  broke were  domestic p o l i t i c s  out a  major  and  had  1960s  the  with  Chinese.  increased  different  racial  riots  catalyst serious  A big  fall  perceived  ethnic  on  leading  in  May  groups.  13,  to  1969.  changes  ramifications for  in  foreign  investment. After Alliance seats an  a  long  Party  coalition  in Parliament.  election.  celebratory following  A  capital. Rahman  undermine Rahman.  ethnic  the  riots,  UMNO, party  Dr.  became  to  known and  Prime  1969  to  February  Operations Abdul  Razak.  then  as  During  this  in  12.  The  resulted in  Tunku  in the  Abdul  Nationalistic dissidents  and and  used  Datuk Deputy  considered  by  103  parties'  largely  confidence  Malaysia  of  showing  May  march  ruling  out  worst  Prime M i n i s t e r  "ultras",  Mohamad  headed  66  opposition  centered  Minister  1971,  Council  Malay  resign.  r e s p e c t i v e l y , were g e n e r a l l y  the  i n K u a l a Lumpur on  public  Mahathir  1969,  with  party's  Chinese  violence  pressured  the  the  responding  ethnic  After  was  within  a  in  reelected  T h i s was  mainly  day,  campaign  was  parade occurred  wide-spread  later  election  was  period,  in  riots  Tunku  Musa  Prime  Razak  and  who  Minister,  "ultras". by  to  Abdul  Hitam,  Prime  governed  Deputy  the  From a  National  Minister his  May  Tun  advisors  68  decided Malay  that,  although  dissatisfaction  economic When he  power  was  and  economic  measures  the  Economic  New  objective capital  the  of  their  main  30%  was  Policy  of  ethnic  the  by  the  both  Razak a l s o p u t  forth  "ultras".  a  As with  central  of A  country,  approved  Malaysian  the  share  National  representatives  i n the  was  NEP.  from  the  formed  in  Hence,  government  new  result,  a  1990.  by  of  riots.  Razak a p p o i n t e d  total  things,  lack  racial  ownership  i n t e r e s t groups  adopted  the  bumiputra  of  dominant,  group's  formulated  comprised  among o t h e r  for  i n 1970,  was  the  politically  reason  placate  Council,  major  and,  to  increasing  to  various  were  Musa t o h i s c a b i n e t .  Consultative  NEP  about  became P r i m e M i n i s t e r  Mahathir  1970  Malays  as  a  the  way  to  37 regain  n a t i o n a l u n i t y and  The  NEP,  restricting the  NEP,  however,  foreign  sought  ownership  among  Indians),  and  perceived  prevent  the  investment.  t o p r o d u c e an bumiputra,  foreigners  fair  had  share  of  NEP  particularly  aimed t o a l l e v i a t e  that the  identification to the  of  economic  Second M a l a y s i a  Plan  effect  government, in  Malaysians  economic  assets  .  .  Chinese  eliminate poverty function  with  1971-1975;  of  through corporate  (Chinese  bumiputra would  v i s - a - v i s the and  riots.  economic b a l a n c e  ^ country,  racial  secondary The  other  so  future  and  control of  a  their  .  minority.  The  and  the  race.  t o end  According  69  E c o n o m i c b a l a n c e , i n a g r o w i n g and d y n a m i c economy, r e f e r s t o t h e e q u i t a b l e and l e g i t i m a t e s h a r i n g o f t h e r e w a r d s and r e s p o n s i b i l i t i e s o f economic development. The p r i n c i p a l reward of economic development — the g r o w i n g income g e n e r a t e d by t h e n a t i o n a l economy — must be e q u i t a b l y distributed...Balance also r e f e r s to r a c i a l s h a r e s i n management and o w n e r s h i p and i n employment i n t h e v a r i o u s s e c t o r s o f t h e economy. At p r e s e n t , n o n - M a l a y s and f o r e i g n e r s d o m i n a t e t h e m a n u f a c t u r i n g and c o m m e r c i a l s e c t o r s . . . T h e Government has s e t a t a r g e t t h a t w i t h i n a p e r i o d o f 20 y e a r s , M a l a y s and o t h e r i n d i g e n o u s p e o p l e w i l l manage and own a t l e a s t 30% o f t h e t o t a l commercial and i n d u s t r i a l a c t i v i t i e s i n a l l c a t e g o r i e s and s c a l e s o f o p e r a t i o n . To  partly  alleviate  other  Malaysians,  could  occur  caused  by  the  context  of  benefit  at  planned  due  especially  to  the  NEP,  economic the  for  conflicts  the  sources,  relative  share of f o r e i g n  to  30%.  bumiputra  and  to  At  economic  and  Malaysian  of  other  social  absolute  same t i m e ,  which  expected  f o r a l l Malaysians The  including  ownership  and  restructuring  government  and  in  Malaysians  bumiputra Chinese,  foreigners.  expand  the  the  ethnic  investment,  foreign  60.7%  the  expansion,  expense  total  between  was  terms,  supposed  from  but  the  to f a l l  e q u i t y ownership was  to  government  capital  slated  a  to  by  from both  grow  in  39 a b s o l u t e and To  relative  achieve  the  terms. objectives  of  the  NEP,  the  Malaysian  70  government, into  stated  t h e economy.  buy  share  expanded  capital  share  with  holdings  company  acted  earlier,  intervened  substantially  Government  corporations  " i n trust"  f o r the bumiputra.  into a very  ventures  the  as  were  l a r g e conglomerate e n t e r i n g  foreign  corporations  i n both  foreign  as a  surrogate  and  as b e i n g  government  bodies,  Development  Corporations  such  as  and M a l a y s i a n  to  compete  with  Indigenous  Malaysian  in  Peoples 1972  savings.  Similarly,  Industry  established  to  of the equity  Economic believed  and  enough  foreigners.  the Council of Trust f o r up  a  financial  assemble  and  invest  bumiputra  trust  i n order  eventually  transfer  them  to  corporations  usually  State  i n 1974, t h e M i n i s t r y a  h e l d by  set  companies  funds  Through  The g o v e r n m e n t  Chinese  The  (MARA),  industrial  government-owned  and  major  c l a s s was n o t y e t s t r o n g  t h e government, through  consortium  trust  PERNAS  joint  firms.  f o r the bumiputra.  (SEDCs).  the bumiputra business  the  into  owned by b u m i p u t r a was a c t u a l l y  that  Therefore,  PERNAS  acquiring  time p e r i o d under c o n s i d e r a t i o n , t h e bulk  designated  s e t up t o  acquired  fund  t o purchase  to resell  them  bumiputra and  of Trade  or  shares  the shares  of  in  otherwise  individuals..  bumiputra  and  The  investment  foreign-owned  40 companies. In  Malaysia,  ethnic  f a c t o r s were  the c r u c i a l  reason  71  for  restrictions  Malaysian policies between of  on  foreign  government aimed  increased  at redressing  Malays  and e t h n i c  restricting  Malaysia  wanted  investment.  foreign  supports  foreign  Chinese  imbalances  had t h e s e c o n d a r y Thus,  the  investment,  p e r c e i v e d economic  ownership.  the  Although  the  hypothesis  postulated  i n contrast,  differed  effect  case for  of this  section. The from  that  Chinese, about and  Thai situation, faced  by M a l a y s i a .  the biggest  According to estimates, the  minority  7% o f t h e p o p u l a t i o n .  assimilation  started majority  group,  1700s.  of the Thai  middle  Major  class  Thais  Prior  t o 1970, d i f f e r e n t  aimed  a t reducing the domination  in  mining,  In a d d i t i o n ,  the early  the Chinese  living  in  the  Thai  1950s,  bureaucrats  Government  with  officials  Chinese  agriculture,  regimes  the  a  made  up t h e  commerce,  and  fishing. laws  of the business sector  i n Thailand. military  immigration  i n government p a s s e d  t h e u n r e s t o f economic  established  relationship  much i n t e r m a r r i a g e  and d o m i n a t e d  t o mid-1970s was d i r e c t e d  and  accounted f o r  By 1970, C h i n e s e  while  Chinese.  controlled  only  Moreover,  has o c c u r r e d .  i n the l a t e  considerably  a t both  nationalists the Japanese  Nonetheless, beginning  officers,  sort  by  of  Chinese  s a t as d i r e c t o r s  politicians,  informal, business  and  symbiotic community.  o f company b o a r d s o r  72  acted  as  business  economic  partners  interests.  financial  in return for supporting  These  backing,  which  officials the  felt  Chinese  they  Chinese  needed  provided  the  them,  in  41 order  to strengthen The  a  Chinese,  relatively  ventures.  Thai  Significant imbalances  the  t o 1980  In  politically  and  population  in  accounted  for  political  and of  most  restricting  resource  section sector  in  of  who  the  had  contrast  occur  in  hypothesis. was  76.9%  both of  and  the  Indians  The  national  was  composed  received  local  i n Singapore to  they  redressing  group  Singapore  quite  business  d i d not  About  circumstances  stark  Malaysia,  government's p o l i c i e s  and  uphold ethnic toward  investment.  S i z e of N a t u r a l Resource This  elite  their  23.1%.  only  strong,  Malays  remaining  i n f l u e n c e the  foreign  ethnic  were  were  aimed  Chinese  dominant.  ethnic Chinese 42  d i d not  the  for  action  Chinese.  the  The  and  economically  majority  were  business  In  Thailand  Thailand supports  the  of  situation,  officials  vis-a-vis  1980  hypothesis.  factors  were  economically  Western e d u c a t i o n . the  power.  government  period.  Singapore,  largely  they  in  government  economic 1970  minority  Although  many  political  u n l i k e the Malaysian  small  assimilated. coopted  their  Sector  discusses  the  the  countries.  three  size  of The  the  natural  hypothesis  73  here  postulates  natural  that  resource  agriculture, natural  a  country  industries,  is  more  resource  symbolic  value  basic  questions  raise and  often  often  depletable,  poorly  dominate  low  prices this a  jobs.  as  are  low  dictated  hypothesis  small  by  local GDP  industries  tend  primary  markets.  they  sector  is  are to and  workers  to export n a t u r a l products, The  less  and  tend  local  flip  contention that a country  resource  the  natural,  exports,  l a r g e numbers o f  world  of  economy, or  and  occurs  sentiment,  ownership  of  visible,  Furthermore,  the  value-added,  i s the  natural  nationalist  country's  These  in  are r e l a t i v e l y  resources.  employ r e l a t i v e l y  skill  resources  the  restrictions  foreign  into  proportion  increased likelihood  economic about  high  pass  industries  integrated  either  frequently in  to  a  as m i n e r a l e x t r a c t i o n  to  This  because n a t u r a l r e s o u r c e have  such  likely  sector.  with  whose side  which  likely  to  of has  impose  restrictions. In  1980,  Malaysia's 21%. in  GDP,  agriculture  government natural Malaysia.  mining  whereas m a n u f a c t u r i n g  Approximately  agriculture  and  and  37%  was  of M a l a y s i a ' s  fishing.  categorized half  resource  accounted  The of  industries  bulk  them as were  for  27%  of  responsible for  people  were  employed  were M a l a y s poor. highly  As  a  and  the  result,  salient  in  74  The  Malaysian  stated  that  export  items  Industrial  companies were  using  imported  permitted  51%-70%  80%-100% o f t h e p r o d u c t s have  100%  exported. raw  foreign  foreign  on  ownership  export-oriented, natural  but  utilizing  were  required  a  to plan  was  Malaysian  allowed  i f  were  could  production  30%-55%  company  non-renewable  foreigners  and were  ownership i f  renewable  Significantly,  resources,  ownership  hand,  (1975)  and t h e y  total  using  Act  to manufacture  foreign  i f  firms  the other  ownership.  parts  were s o l d o v e r s e a s  Export-oriented  materials,  Coordination  domestic  permitted  a schedule  was  only  45%  t o decrease  43 their  share  equity  t o 30%.  Natural  those  employing  depletable  particularly more  restrictions  manufacturing  firms  overseas markets. The  actions  Chapter  I I , give  section. all  regarding using  parts  ownership  This upholds the hypothesis. of  PETRONAS  and  f u r t h e r weight  shares".  resulted  exploration they  PERNAS,  as  through  in foreign  operate  cited  to the hypothesis  Moreover  and p r o d u c t i o n could  than  t o make goods f o r  I n 1975, PETRONAS u n s u c c e s s f u l l y t r i e d  "management  before  industries,  raw m a t e r i a l s , had  foreign  imported  f o r e i g n o i l companies  PETRONAS  resource  the proposed the  act  this  to control creation of  which  created  having  to sign  agreements w i t h  PETRONAS  o i l companies  sharing  of  in  i n Malaysia.  Similarly,  seabed  75  tin  prospecting  foreign took  Sime  Malaysian  with  rights  c o r p o r a t i o n and g i v e n  over  London  and e x t r a c t i o n  Darby,  plantation  a  t o PERNAS  Another  i n 1980  even  and  a  PERNAS  with b i g  foreign-owned  British-controlled  though  from  i n 1971.  i n 1976  p l a n t a t i o n s i n M a l a y s i a , Boustead,  government  removed  B r i t i s h - b a s e d company  holdings,  T i n i n 1977.  were  company  was a c q u i r e d by t h e  t h e company  had  fulfilled  44 NEP  ownership  requirements  and  PETRONAS  quite  investment is  clearly  important 27%  of  accounted involved  natural  i n Thailand. the  f o r 21%.  About  i n growing  Nevertheless,  GDP  Thailand  Business  of  measures taken  1972  agricultural were  section.  The h y p o t h e s i s  also  large  and m i n i n g  1980,  imposed  business  generally very  refutes  was  while  very  resource  and  represented manufacturing  the  Thai  activities. weak  few  significant  sector.  required majority  by t h e M a l a y s i a n  somewhat  foreign  rice.  i n the natural  various  restrict  70% o f T h a i l a n d ' s p o p u l a t i o n was  restrictions Law  sector  in  to  PERNAS  of Malaysia.  Agriculture  country's  earlier.  industries.  by t h e c a s e  resource  years  sought  i n natural resource  shown t o be v a l i d The  four  compared  The  Alien  ownership i n However,  Thai  to the actions  government.  The c a s e  hypothesis  postulated  of Thailand for  this  76  In 1980,  Singapore, but  agriculture  Singapore  Singapore  The  the and  The  situation  a  industries  where  readily  foreign  due  to  firms'  development  and  the p e r c e p t i o n that could a  operate  high  less  prevalence  likely Like  generally fairly  that  readily  labour-intensive restrictions  were n o t  is  invoked.  prevalence  relatively  more  the  in their  others, possibly  prevalence  likely  to  enterprise.  i s the  is  contributions  decline  old  with  of and  to  invoke  i n the  value  country's  economic  b a r g a i n i n g power  even t h e h o s t  and  country,  I f a c o u n t r y does not  industries  o l d technology,  have i t is  restrictions. countries,  technology  that  available.  in  Malaysia's  was  relatively  Manufacturing  products.  described  2%.  unimportant  high  a  developing  used  only  resources.  a  of  of  natural  in  study p o s t u l a t e s the  perceptions  t o impose  most  with  technology  consequently  for  GDP  Technology  d i s c u s s e d next  available  of  the h y p o t h e s i s .  country the  23%  s m a l l and  w i t h o l d t e c h n o l o g y . The  that  restrictions  no  restrictions  supports  being  up  accounted  s e c t o r was  significant  hypothesis  of  mining  of I n d u s t r i e s with O l d  industries  fairly  made  with almost  natural  case of Singapore  Prevalence  of  and  is a city-state  Consequently, in  manufacturing  the  Turning previous  industries old  and  focussed  once chapter,  again one  on to  finds  77  that  the I n d u s t r i a l  Malaysian  ownership  domestic  market  readily  accessible.  obtainable, foreign  or  obligatory  of Malaysia If  A c t (1975) made i n companies  the  technology  along  only  The o p e r a t i o n the  same  permitted  managerial  firms  expertise  not  a t the  involved  was were  not  was  easily  allowed  30%  o f f o r e i g n companies  were  lines.  to hold  complete  aimed  i f the technology  import-substituting  ownership.  regulated usually  Coordination  Non-Malaysians  jobs  which  found  were  needed t e c h n i c a l  among  the  domestic  45 population.  Malaysia,  Thailand's technology.  Act  authority  to  expanding parts.  of  also  the  sector, Thailand  manufacturing Control  industries Because  agricultural  t h e r e f o r e , upholds the hypothesis.  until of  gave  prevent  new  Ministry  acted  restricted, relatively general,  where  or  o l d and Thailand  of  of c e r t a i n items, whenever  not  develop Factory  involved  have  the  from  such as c a r that  The  the  or i n product  companies  industries  technology.  the  firms  by a p a r t i c u l a r p r o d u c t 46  accessible did  country's  the  i t decided  companies.  old  Industry  existing  f o r e i g n and d o m e s t i c  occasionally  the  In T h a i l a n d ,  response t o submissions from T h a i targeted,  utilized  d i d not s i g n i f i c a n t l y  firms  d o m e s t i c m a r k e t was s a t u r a t e d  lines  of  the M i n i s t r y  into the production The  strength  t h e 1960s.  1962  usually  were using  However,  in  technology-related  78  restrictions the  that  hypothesis.  tended  to  adopted  higher  in  development  Industrial  Revolution.  technology  industries  required  more  inducements, offered  a  1979,  than the  T h i s new which  the  either  known  refutes  other  were  or  government  as  the  Second higher  capital-intensive Rather  array  hand  Malaysia  s t r a t e g y emphasized  labour.  Byzantine  on  Singapore  strategy  skilled  Thailand  industries  technology  Moreover, a  in Malaysia.  Singapore's  use  Thailand.  occurred  of  than  tax  and  negative  incentives  t o f o r e i g n i n v e s t o r s t o e n c o u r a g e them t o  was  invest in  47 high  technology  relatively less  industries  fewer  restrictive  i n Singapore.  industries than  with  Malaysia;  old  Singapore  technology  had  and  was  t h e r e f o r e , i t supports  the  hypothesis. Level  of F o r e i g n Ownership of The  foreign  last  ownership  that  a  more  likely  not  country  have  likely In  situation  to  of  with  to  manufacturing  high  in  The  is  related  f o r e i g n ownership restrictions.  ownership  the  level  of  hypothesis  is  of  If a  of  industry,  owned  about  industry is country i t  does  is  less  of  the  restrictions.  Malaysia, and  analyzed  industry.  foreign  invoke  agricultural  being  legislate  high  Industry  foreigners  fishing 1970.  s e c t o r , 72% This  75%  of mining,  high  level  and of  59%  of  foreign  79  ownership  resulted  government  encouraged  of  incentives  to  in  and  used.  previously  Act in  (1975) s e t  out  the  become p a r t i a l l y certain  raw  shareholdings  Industrial  owned  that  multitude foreign  were  In  required to  had  wholly-owned  to  firms  such  as  Malaysian  reduce  became  to  operate  cases,  non-renewable  investors  allowed  Wholly-owned  were  some  also  Coordination  i f t h e y wanted  companies u t i l i z i n g  so  a  between  enterprises.  sectors.  foreign  gave  inducements  corporations  Malaysian  materials,  and  Malaysian  f o r e i g n ownership  industrial  industrial  export-oriented  the  l e v e l s of  foreign  The  ventures  Negative  detailed,  d i f f e r e n t types of of  ventures joint  Malaysians.  subsidiaries  in  joint  promote  investors As  restrictions.  their  companies  48 where f o r e i g n e r s  retained  Government-owned established operate sign  exploration  the  state  ventures  foreign  during  restrictions. Malaysian  corporations  the  production-sharing  o i l company.  that  position.  1970s.  To  f o r e i g n o i l c o m p a n i e s were r e q u i r e d  and  like  demonstrated  the  and  They were e s s e n t i a l l y f o r c e d  companies,  face  a minority  companies  joint  in Malaysia,  PETRONAS. with  many  only  London  Tin  PERNAS' and  foreign-owned Moreover,  government  as  acquired  into  joint  takeovers  Sime  firms  contracts  were  pointed Boustead,  Darby, more out  to  with  ventures of  major further  likely  to  previously,  even  though i t  80  was  30%  owned by M a l a y s i a n s .  B e c a u s e f o r e i g n e r s were  still 49  majority Hence,  owners,  the  Malaysian  Thailand  had  Historically,  foundation  significant. country  high  foreign  therefore,  the  hypothesis.  10%  sector,  former  of  had  owned  69.2%  t o 1973. which  general  was  in  The  foreign large Most  pre-1970 not  capital  T h a i l a n d d i d not  restrictions.  the  rulers. the  have  Malaysia  case  of  to the  was  have a  registered  existed  in  little  colonial  of  went  GDP  which  During  in  industry.  Thailand  for only  self-employed.  fewer  very in the and,  Thailand  hypothesis.  capital  from  investment  ownership  of  Singapore  had  This  by  ownership  had  the  owned  f r o m 1960  had  refutes  in  economy,  investment  Singapore  total  ownership  agricultural  Thais  their  1972,  takeover.  s u b s t a n t i a t e the  accounted  were  foreign  supports  for  f o r e i g n ownership of  Thailand's  sector  farmers  period,  targeted  U n l i k e M a l a y s i a , T h a i l a n d d i d not  plantation Thai  low  foreign  The  of  investment.  fairly  which  1960s.  was  examples  most  manufacturing, early  Boustead  a  high  of  f o r e i g n sources in  Singapore.  industry, few  level  f o r e i g n ownership.  In  accounted  for  of  Despite  high  especially  restrictions.  The  in case  80.4%  foreign  manufacturing, of  Singapore  s e v e r a l domestic  political  hypothesis.  chapter  has  analyzed  81  and  economic s i t u a t i o n s  in  order  to  restrictions  explain  on  countries.  examined.  foreign  were  power,  the  economic  past,  supported refuted  Two domestic  second for in  somewhat  also  has  was  the  for  economic put  with  a  hypothesis, power  i n the  The c a s e o f  their  forward. and  domestic by  hypotheses. economic  (although in  ethnic in  strategy  the  intervened  The  political  terms Thais)  of and  commercial in related  first  the  circumstances supported  They  has  were  always  they  the not  vis-a-vis  reserving  such  been  certain  were  sector  sectors,  The  pressure  strategies  Thailand  and  interventionist  by a l l t h r e e c o u n t r i e s .  supported  two  nationalistic  interventionist  validity  experience  T h a i l a n d and S i n g a p o r e  these  investments  occupations  Singapore  upheld  was  in  were  involving  states.  nationalistic  the  colonial  to a n a t i o n a l i s t i c  proposition,  foreign  concerning  pressure  relating  of  that  two  to  by M a l a y s i a and T h a i l a n d .  s t r a t e g y , was  side  found a  other  the hypothesis.  restrictions,  flip  their past  by  the  greater  related  state's  domination  political  the three  and  Singapore  placed  than  hypotheses  study  hypotheses  hypothesis, economic  investment  a t each  regarding  Singapore  Malaysia  postulated  Looking  was  why  Explanatory  differences  colonial  o f M a l a y s i a , T h a i l a n d and  not  (although as  with  82  government  housing  construction). domestic  on  for Malaysia's hypothesis  presence proven  of  valid  economically  an by  an  had  higher  level  postulated  economically each  of  than  the  either  economically  three  were  partial  situation  ethnic  cases.  of  the  minority  was  Malaysia was  had  dominant  minority  an  substantially who  ethnic  did  group.  restrictions  on f o r e i g n  unique e t h n i c  situation.  t h e r e f o r e , were a key  reason  for  Malaysia's  restrictiveness.  The the  pressure  T h a i l a n d or Singapore,  from i t s f a i r l y  factors,  domestic  and  restrictions.  the  dominant  investment  greater  nationalistic  had  of  for  most s i g n i f i c a n t  stemmed  restrictions.  characteristics  Much o f M a l a y s i a ' s  Ethnic  a  school  significant  impose  d o m i n a n t e t h n i c m i n o r i t y and  more r e s t r i c t i v e have  to  hand,  These  and  experienced  e c o n o m i c s t r a t e g y and  restrictions.  The  not  other  hospital  has  pressures  the  interventionist  reasons  with  Neither  political  Malaysia,  for  and  study  natural  there  was  a  firms  in  the  also  looked  resource greater natural  the  size  sector.  The  hypothesis  likelihood  of  restrictions  resource  high  proportion  of  and  Singapore  supported  refuted i t .  at  natural  sector  resource the  and  i f the  importance stated  but  that  foreign  country  industries.  hypothesis,  on  of  had  a  Malaysia Thailand  83  Turning industries Malaysia  to the hypothesis with  and  old  technology,  Singapore  again  while Thailand refuted i t . with by  the  level  of  foreign  the circumstances  evidence The economic  Finally,  examination  revealed  are  investment  domestic  economically  dominant  and  Malaysia's  ethnic circumstances.  were  paramount  stronger span from  restrictions 1970  to  on  1980.  differences  by  its  restrictions,  arose  The  among on  economic and  an  economic  largely  Malaysia's  investment  and  uniqueness  Therefore, ethnic  for  foreign  the  political  interventionist  pressure  reason  T h a i l a n d , but  minority.  strategy  the  domestic  major  for  ethnic  upheld  greater restrictions  and  pressure  hypothesis,  i n d u s t r y was  national  explained  nationalistic  that  hypothesis.  of  foreign  the  found  of  the hypothesis d e a l i n g  ownership of  Malaysia's  strategy,  chapter  supported  the three c o u n t r i e s .  a  the  r e f u t e d the  characteristics  regarding  to the prevalence  i n b o t h M a l a y s i a and  i n Singapore preceding  related  from factors  placing  d u r i n g the  of time  84  NOTES CHAPTER I I I 1.  J . S a r a v a n a m u t t u , The Dilemma o f I n d e p e n d e n c e : Two Decades of Malaysia's Foreign Policy 1957 - 1977 (Penang, M a l a y s i a : P e n e r b i t U n i v e r s i t i S a i n s M a l a y s i a 1 9 8 3 ) , pp.128, 130-131, 133 a n d 1 4 1 .  2.  Brian Wawn, The E c o n o m i e s o f t h e ASEAN Countries: Indonesia, Malaysia, Philippines, S i n g a p o r e and Thailand ( L o n d o n : M a c m i l l a n P r e s s , 1 9 8 2 ) , pp.52-53; and D o n a l d K. C r o n e , The ASEAN S t a t e s : C o p i n g W i t h Dependence (New Y o r k : P r a e g e r , 1 9 8 3 ) , pp.104 a n d 1 2 1 .  3.  Quoted  4.  F a r E a s t e r n E c o n o m i c Review,  5.  Ibid.  6.  F r a n k C. D a r l i n g , " P o l i t i c a l F u n c t i o n s o f t h e U n i t e d States Embassy i n Thailand," Asian Survey XVIII (November 1 9 7 8 ) , 1193-1194; a n d P a s u k Phongpaichit, "The Open Economy a n d I t s F r i e n d s : T h e 'Development' of Thailand, Pacific Affairs, 53 (Fall 1980), 444-445, 450 a n d 457 - 458.  7.  Wawn, p.150.  8.  S u r a S a n i t t a n o n t , "The R o l e o f J a p a n e s e I n v e s t m e n t i n T h a i l a n d , " Readings i n T h a i l a n d ' s P o l i t i c a l Economy, ed. Vichitvong Na Pombhejara (Bangkok: Bangkok P r i n t i n g E n t e r p r i s e Co., 1 9 7 8 ) , p . 2 6 1 .  9.  Wawn, pp.50, 115 a n d 1 4 5 .  10.  Ibid.,  11.  S u r a , pp.254 a n d 256.  12.  Augustine Tan, "Changing Patterns of Singapore's F o r e i g n T r a d e a n d I n v e s t m e n t s i n c e 1960," S i n g a p o r e : T w e n t y - f i v e Y e a r s o f D e v e l o p m e n t , e d s . Poh Seng You and Chong Yah L i m ( S i n g a p o r e : Nan Yang Xing Zhou L i a n h e Zaobao, 1 9 8 4 ) , p . 7 4 .  i n C r o n e , p.104. 29 A u g u s t 1975, p . ( F o c u s ) 3 .  p.138.  85  13.  Mee-Kau Nyaw a n d C h a n - l e o n g Chan, " S t r u c t u r e and Development S t r a t e g i e s o f t h e M a n u f a c t u r i n g I n d u s t r i e s in S i n g a p o r e and Hong Kong: A C o m p a r a t i v e Study," A s i a n S u r v e y , X X I I (May 1 9 8 2 ) , 456-457; C h i a Siow Yue, " S i n g a p o r e ' s T r a d e a n d D e v e l o p m e n t S t r a t e g y and ASEAN Economic Cooperation with Special Reference t o the ASEAN Common A p p r o a c h t o F o r e i g n E c o n o m i c R e l a t i o n s , " ASEAN i n a C h a n g i n g P a c i f i c and W o r l d Economy, e d . Ross G a r n a u t ( C a n b e r r a : A u s t r a l i a n N a t i o n a l U n i v e r s i t y P r e s s , 1 9 8 0 ) , p.246; a n d Seah Chee Meow, " S i n g a p o r e , " Politics I n The ASEAN S t a t e s , e d . D i a n e K. Mauzy ( K u a l a Lumpur: M a r i c a n & S o n s , 1 9 8 4 ) , p.198.  14.  Q u o t e d i n L e e Boon H i o k , " C o n s t r a i n t s On S i n g a p o r e ' s F o r e i g n P o l i c y , " A s i a n S u r v e y X X I I ( J u n e 1 9 8 2 ) , 529.  15.  D i a n e K. Mauzy, "Malaysia," Politics I n The ASEAN S t a t e s , e d . D i a n e K. Mauzy ( K u a l a Lumpur: M a r i c a n & Sons, 1984), pp.161-163; Saravanamuttu, pp.128 a n d 130; B r u c e G a l e , P o l i t i c s and P u b l i c E n t e r p r i s e i n Malaysia (Singapore: Eastern Universities Press, 1981), pp.28-29; and R.S. M i l n e , "The P o l i t i c s o f M a l a y s i a ' s New E c o n o m i c P o l i c y , " P a c i f i c A f f a i r s , 49 (Summer 1 9 7 6 ) , 235.  16.  Quoted  17.  M i l n e , pp.240, 244, 249-250 a n d 257; Mauzy, p.179; a n d G a l e , pp.108-109.  18.  Quoted  19.  P a c i f i c B a s i n E c o n o m i c C o u n c i l , B r i e f i n g Book f o r t h e C a n a d i a n Committee 1 8 t h A n n u a l M e e t i n g May 13-16, 1985 A u c k l a n d , New Z e a l a n d ( O t t a w a : P a c i f i c B a s i n E c o n o m i c C o u n c i l , 1 9 8 5 ) , p . ( 2 0 ) 1.  20.  Far Eastern  21.  Quoted i n Koji Taira, "Colonialism in Foreign Subsidiaries: Lessons From Japanese Investment i n T h a i l a n d , " A s i a n S u r v e y , XX ( A p r i l 1 9 8 0 ) , 389.  22.  Ibid.  23.  S u r a , p.256; and C l a r k D. N e h e r , " T h a i l a n d , " P o l i t i c s In The ASEAN States, ed. D i a n e K. Mauzy (Kuala Lumpur: M a r i c a n & S o n s , 1 9 8 4 ) , p . 2 6 .  i n Saravanamuttu,  i n Saravanamuttu,  Economic  p.117.  p.119.  Review,  20 November 1985, p . 3 4 .  86  24.  Sura  25.  Koji,  26.  N e h e r , p.53; S u r a , p.257; and K o j i ,  27.  Neher, p.53.  28.  Phongpaichit,  29.  Sura,  3 0.  Wawn, p.15 6.  31.  Crone,  32.  Linda Low, "Public Enterprises in Singapore," S i n g a p o r e : T w e n t y - f i v e Y e a r s o f D e v e l o p m e n t , e d s . Poh Seng You and Chong Yah L i m ( S i n g a p o r e : Nan Yang X i n g Zhou L i a n h e Zaobao, 1 9 8 4 ) , pp.267-268 and 276; and L e e , p.526.  33.  Q u o t e d i n S e a h , p.317 f n .  34.  Pacific,  35.  Low,  36.  pp.256-257.  f  p.378. p.378.  p.451.  p.257.  p.114.  p . ( 1 8 ) 2.  p.276.  Quoted p.44.  i n Far Eastern  Economic Review, 1 August  37.  Mauzy, pp.161-163; Saravanamuttu, G a l e , pp.28-29; and M i l n e , p.235.  38.  Q u o t e d i n S a r a v a n a m u t t u , pp.114-115.  39.  C e n t r e f o r S t r a t e g i c and I n t e r n a t i o n a l S t u d i e s , I s s u e s For P a c i f i c Economic C o o p e r a t i o n : A Report o f t h e Third P a c i f i c Economic C o o p e r a t i o n Conference Bali, November 1983 (Jakarta: Centre for Strategic and I n t e r n a t i o n a l S t u d i e s , 1 9 8 4 ) , p.94; N.D. Karunaratne and M.B. Abdullah, "Incentive Schemes and Foreign Investment i n the I n d u s t r i a l i z a t i o n of Malaysia," A s i a n S u r v e y , X V I I I (March 1 9 7 8 ) , 263-264; and M i l n e , p.240.  40.  M i l n e , pp.143, 240, 244-246, p.179; and G a l e , pp.108-109.  249-250  pp.128  and  and  1980,  257;  130;  Mauzy,  87  41.  N e h e r , pp.34-36; M i l t o n O s b o r n e , S o u t h e a s t A s i a : An Introductory History, 2nd ed. (Sydney, Australia: G e o r g e A l l e n & Unwin, 1 9 8 3 ) , pp.90 and 95-97; C r o n e , p.113; and K o j i , p.378.  42.  Howard M. F e d e r s p i e l , " I s l a m and N a t i o n s o f ASEAN," A s i a n S u r v e y , 809, 812, 814-815 and 819.  43.  Darwood I n t e r n a t i o n a l C o n s u l t i n g I n c . , Canada - ASEAN Industrial Cooperation Opportunities, Vol. II; Malaysia (Ottawa: CIDA, 1982), pp.20-21.  44.  Centre, p.53; Saravanamuttu, pp.117-118; Gale, pp.105-106, 116-117, 119-121, 123 and 126; and J o h n T h o r b u r n , M u l t i n a t i o n a l s , M i n i n g and D e v e l o p m e n t ; A S t u d y o f t h e T i n I n d u s t r y (Westmead, E n g l a n d : Gower P u b l i s h i n g Company, 1 9 8 1 ) , p . 8 3 .  45.  Darwood, pp.20-21 and 25; K a r u n a r a t n e pp.263-264; and C e n t r e , p.94.  46.  I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and D e v e l o p m e n t , T h a i l a n d : I n d u s t r i a l Development S t r a t e g y i n T h a i l a n d ( W a s h i n g t o n : I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and D e v e l o p m e n t , 1 9 8 0 ) , pp.22-23 and 36.  47.  T a n , pp.50-51; and Nyaw and Chan, pp.459 and 465.  48.  Darwood, pp.20-21 and 47.  49.  S a r a v a n a m u t t u , pp.117-118.  Development XXV (August  and  i n the 1985),  Abdullah,  88  CHAPTER IV Conclusion This  study  has  foreign  investment  Thailand  and  have  neighbour  each  Southeast  Asia  during  ethnic  Singapore  they  and  restrictive  of  Malaysia,  1980.  to  The  same  They  geographical  a r e members  era.  The  area  o f ASEAN.  states  forms  of  are considered  among  t h e most  industrialized  market  economies of the  countries.  Malaysia,  Thailand  investment.  They  industrialization.  vital  but  T h e y a l s o have g e n e r a l l y p r o - W e s t have  that  The  foreign  Singapore to  governments  investment  t o markets.  f o r rapid  and want  i n the a c q u i s i t i o n  access  a  Western  countries  results  have  Thailand  three  believe  Britain  each  Malaysia,  modified  in  A l l three  a u t h o r i t a r i a n governments,  own  democracy.  three  community.  fairly  three  characteristics.  The  developing  and  of  c o l o n i e s o r had c l o s e t i e s w i t h  their  orientations.  the  Chinese  have  practise  parliamentary  in  and t h e y  the c o l o n i a l  significant and  other  common  levels  policies  1970  from  several  British  the  regulatory  Singapore  countries  were e i t h e r  examined  of  these  technology  elements  industrialization.  foreign  modernize  i s essential  of c a p i t a l , These  encourage  through countries because i t transfer,  a r e judged  Even  when  the  t o be three  89  countries sources,  placed they  The  concerning certain  limits  sectors,  government-owned foreign  limits  on  through certain  corporations,  foreign  range.  Both  restrictions  on  corporations.  Except  where few  i t set  perhaps  significant  second  chapter  Malaysia  foreign-owned government Malaysia  found  the  engaged  had  had  Thailand  sector  specific  most  in  restrictions, on  to  extensive  corporations  on  While  the  a l l three  more  stock had  restrictive  most  placed  major  banking,  Singapore  had  Finally,  the  states  foreign  hostile  on  the  of  a l l three  control  Malaysia  foreign-owned  operations.  although  control  restrictions  Malaysia and  of  extensive  in  the  that  considerably  that  of  companies  companies.  was  for  use of  only  on  operations  the  operations  restrictions  government-owned only  but  1980.  policies  the  found  existed  Malaysia  the  on  instruments  countries  sectors,  to  of  restrictions  and  was  investment A l l three  economic  extensive  It  1970  country's  ownership,  as  overseas  degrees  from  restrictions  investment.  i t s NEP.  differing  each  corporations  from  investment.  period  foreign  foreign-owned  over  the  evaluated  on  economic  investment  imposed  during  chapter  on  t o want f o r e i g n  states  measures  second  of  continued  three  restrictive The  restrictions  used  investment,  takeovers market  of by  restrictions, than  Thailand  90  and  Singapore  Thus,  i t was  i n the areas concluded  restrictions  on  assessed  by t h e s e c o n d  that Malaysia  foreign  chapter.  generally placed  investment  than  Thailand  more and  Singapore. Chapter  III  restrictiveness domestic  sought  by  political  countries  looking and  (see t a b l e  1  state's past experience explanatory  to  hypothesis  explain  at  Malaysia's  differences  more  likely  nationalism  to  has  n o t been  the  past,  of  below).  The  analyzed  study  a colonial  postulated that  impose  power.  proposition  of national  was  likely  supported  Thailand,  b u t r e f u t e d by  Singapore  government's  overriding  need  influences The of  countries. that  a  chapter  and The  country  then  domestic first whose  the  related  w h i c h has  to  economic  If a  of  country power i n  of  This  Malaysia  i n Singapore. its  investment  and The  country's  offset  historic  restrictions. analyzed  political hypothesis  elites  each  restrictions.  cases  perception  foreign  due  three  i n the past  by a c o l o n i a l  the s i t u a t i o n  toward s i g n i f i c a n t  third  elites  for  The  power  security.  t o impose by  the  a country  restrictions  dominated e c o n o m i c a l l y  i t i s less  various  situations  with  and r e a s o n s  i n the  economic  been d o m i n a t e d e c o n o m i c a l l y by a c o l o n i a l is  greater  t h e economic s t r a t e g y pressure  in this  follow  an  in  the  section  economic  three argued  strategy  TABLE 1 Summary o f F i n d i n g s Hypothesis 1.  Past c o l o n i a l  Malaysia control—restrictions  or no p a s t c o l o n i a l 2.  3.  4.  Supports  Domestic p r e s s u r e f o r r e s t r i c t i o n s — restrictions or lack of domestic pressure f o r restrictions—openness E c o n o m i c a l l y dominant e t h n i c m i n o r i t y — restrictions or l a c k o f e c o n o m i c a l l y dominant e t h n i c minority—openness  Singapore Refutes  Supports  control—openness  N a t i o n a l i s t i c and interventionist economic strategy—restrictions or l a c k o f n a t i o n a l i s t i c and interventionist economic s t r a t e g y — o p e n n e s s  Thailand  Supports Supports  Supports  Supports  Supports  Supports  Supports  Supports  Supports  TABLE 1 - C o n t i n u e d  Hypothesis  Malaysia  Thailand  5.  L a r g e s i z e and i m p o r t a n c e o f n a t u r a l resource s e c t o r — r e s t r i c t i o n s or S m a l l s i z e and u n i m p o r t a n c e o f natural resource sector—openness  Supports  Refutes  Prevalence of i n d u s t r i e s with o l d technology—restrictions or s c a r c i t y of i n d u s t r i e s w i t h o l d technology—openness  Supports  High f o r e i g n ownership of i n d u s t r y — restrictions or low f o r e i g n o w n e r s h i p o f i n d u s t r y — openness  Supports  6.  7.  Singapore  Supports  Refutes  Supports  Refutes  Supports  93  based  on  economic  government  economic  restrictions. argument  a  nationalistic to  supported  country  impose  care,  it  is  likely  housing,  three  to  heavy  to  impose  hypothesis  elites  do  The  not  follow  creation  of  industrial  The s e c o n d h y p o t h e s i s  to  that  included  whose g o v e r n i n g domestic advocates  not was  interest  to  construction  of  estates, in this  health section  pressure  that from  is  more  I f the governing group  does  to domestic  n a t i o n a l i s t s , the country The  i t was  restrictions  i t i s vulnerable  restrictions.  was  group p e r c e i v e s  political of  was  intervention great  a  i s less  Singapore  sectors,  of  i s the  hypothesis  Although  not  areas  t o impose r e s t r i c t i o n s .  hypothesis  i s less was  pressure likely  upheld  to  by a l l  states. Turning  ethnic in  likely  Singapore's  were  These  nationalist  economic  impose  this  countries.  that  a country  perceive  from  areas  vulnerable  economic  not  in  that  whose  Moreover,  and e d u c a t i o n .  stated  of  restrictions.  investors.  cost  i s more  i n t e r v e n t i o n i s t i n some  nationalistic.  low  side  favourable  and i n t e r v e n t i o n i s t e c o n o m i c s t r a t e g y  economically  foreign  flip  by a l l t h r e e  generally  and  intervention  The  that  likely  nationalism  t o t h e s i t u a t i o n o f an e c o n o m i c a l l y  minority,  the study  put forward  a c o u n t r y where t h e m a j o r i t y  ethnic  dominant  the hypothesis  that  group i s p o l i t i c a l l y  94  dominant,  but economically  subordinate,  aimed a t r e d r e s s i n g p e r c e i v e d economic large,  minority,  secondary If  a  effect  country  of  also  does  not  minority  ethnic  secondary  effect  likely  to  domestic  ethnic  group,  groups  an  This  action  vis-a-vis  can  have  foreign  action  dominant  having  f o r e i g n investment  hypothesis  was  the  investment.  economically  government  of r e s t r i c t i n g  occur.  imbalances  restricting have  government  also  the  i s less  supported  by  each of t h e t h r e e c o u n t r i e s . The  study  then  natural  resource  with  a  high  more  likely  sector. that  a  sector.  proportion t o pass  The f l i p country sector  Malaysia  and  is  of natural  restrictions  has a less  Singapore  refuted  i t .  resource  hypothesis  small  likely  and to  supported Although  Thailand  restrictions  passed  Even  though  Thailand's  the  the  resource country  natural  restrictions.  hypothesis, required  business  sector.  sector did  while  majority  activities,  few  t o t h e measures taken  natural  economy,  impose  very  i n the n a t u r a l resource  were q u i t e weak r e l a t i v e  i s the contention  Thailand  in  is  resource  unimportant  the  i n various agricultural  country  industries  i n the n a t u r a l  Thai ownership general  and i m p o r t a n c e o f t h e  I t was p o s t u l a t e d t h a t a  side of t h i s  which  resource  Thailand  examined t h e s i z e  significant Thai  actions  by M a l a y s i a .  was  crucial  not  have  to the  95  overwhelming As  a  foreign  result,  not  a  the  highly  ownership  natural visible  that  resource target  existed  sector for  in  Malaysia.  in Thailand  foreign  was  investment  restrictions. The  situation  industries  with  old  hypothesis  that  industries  where  fairly  of  foreign  country the  to  firms'  a  high  hypothesis, ownership,  technology  their  refuted  to  lower  hand,  Singapore  such  is  relatively likely  government  decline  If  invoke  i n the  value  economic  and a  and  to  country's  power,  of  old  in  the  country  does  industries  with  old  t o impose r e s t r i c t i o n s .  i t . much  upheld  of  the  Similar lower  Malaysia,  level  Singapore  i n f o r m a l means o f as  of  more  Singapore  correspondingly  and  prevalence  enterprise.  likely  Thailand's  the  high  bargaining  the  and  relative  hypothesis,  is  prevalence  i t i s less  although  a  the  not  Thailand  the  to  running  whereas  postulated  contributions  of  Malaysia  study  a  difficulty  again,  of  of  in  technology,  prevalence  The  the  perceptions  development,  have  was  with  available  due  next  technology.  a  readily  restrictions  discussed  government  the  previous  level  of  foreign  partly  explained  the  higher  On  flip  did  the  side  utilize  p r e s s u r i n g MNCs w i t h imposed  hypothesis,  to  restrictions.  supported  Once  wages  old  its other  of  the  indirect  technology,  and  personal  96  persuasion The last  by  government  level  of  foreign  ownership  ownership  hypothesis. had  factors  a  market  and  government  high  majority almost and  and,  Moreover,  through setting  and  of  government  wage  offset  natural  Because Singapore  tendencies  levels, such  with  and as  a  The  links  to  domestic has  a  Singapore  depended the  on  developed  investment.  over  did  foreign  foreign  personal the  toward  It  survival  but  country  small  The  government  in  supported  industry,  economy.  influence  impose  refuted i t .  resources.  economic  shareholdings  was  Thailand  of  foreign  to  Singapore  high  legislate  high  likely  the  related  with  to  have  any  national  Singapore  officials,  likely  ownership  therefore, foreign  minority  country  and  of  city-state  that  informal  a  was  The  f o r e i g n investment.  strong  the  III.  less  service-based  industrialization,  indirect  to  no  believed  countries,  is  foreign  industries  not  of M a l a y s i a  restricting  manufacturing  does  it  intervened  Chinese  that  i s more  country  cases  of  Chapter  However, t h e c a s e a  significantly is  industry  a  The  by  postulated  industry,  restrictions.  other  of  If  of  Singapore  evaluated  hypothesis  restrictions.  the  f o r e i g n ownership  characteristic  explanatory  officials.  Prime  very a t t r a c t i v e  exert  some  investors,  companies,  discussions Minister  the with  himself.  to f o r e i g n i n v e s t o r s ,  97  it  d i d n o t r e q u i r e many f o r m a l r e s t r i c t i o n s  t h e g o v e r n m e n t c o n s i d e r e d t o be a d e q u a t e As all  shown  seven  Thailand  l  f  the case  control.  of Malaysia  while the cases of  and  five.  Singapore  of  lower  two  each  supported  hypotheses  level  of  i s largely  foreign  On t h e o t h e r hand, S i n g a p o r e ' s  hypothesis  i s mainly  its  country's  overriding  hypotheses  three  countries.  made.  Firstly,  strategy heavy  based  need  economic  restrictions  elites  do  economic  not  follow  restrictions. perceives pressure  foreign  the  from is  i t  is  investment.  a  and  i s less  state  vulnerable  the  to  invoke  governing  in a l l c a n be  economic  likely  to  If a country's interventionist to  impose  governing  group  domestic  nationalist  likely  and  favourable to  likely  whose to  an  i s more  investment.  country  If  follow  intervention  economic more  elites  nationalistic  Secondly,  that  restrictions  a  by t h e e v i d e n c e  n a t i o n a l i s m and  on f o r e i g n  strategy,  o f two  investment  some g e n e r a l i z a t i o n s  whose  economic  impose  to  means o f c o n t r o l .  were s u p p o r t e d  a country  government  relative  refutation  f o r foreign  As a r e s u l t ,  on  e x p l a i n e d by i t s  due t o t h e g o v e r n m e n t ' s p e r c e p t i o n o f  u s e o f i n f o r m a l and i n d i r e c t Three  Thailand's  investment  Malaysia.  the  supported  of the explanatory hypotheses,  refutation much  i n table  t o a c h i e v e what  political  advocates  of  restrictions  on  group  does  not  98  perceive  that  i t i s v u l n e r a b l e to  nationalists,  the  restrictions. ethnic  Thirdly,  group  is  subordinate, perceived domestic also  an  a  less  country  action  imbalances  groups  can  foreign  aimed  the  investment.  economically-dominant action  having  restricting  foreign  investment  i s less  attempt  to  the  an  Malaysia from  1970  study  placed to  has  1980  looked  explanatory that  more  many  hypotheses.  Malaysia differed  three  of  examined,  the  domestic  namely  from  presence  an  The  generalizations  I f a c o u n t r y does  not  explain  Malaysia's  of  Singapore,  evaluated  and  several found  pressure,  related  in  situations  ethnic  higher  this  Singapore  economic  domestic  why  investment  c h a p t e r , i t was  the  of  to occur.  question  or  economically-dominant from  group,  effect  foreign  and  and  strategy,  derived  ethnic  likely  Thailand  political  minority of  Thailand  both  redressing  effect  on  variables  majority  large  central  In t h e t h i r d  economic  the  hypotheses  of  either  at  secondary  restrictions  than at  answer  invoke  economically-  minority  the  the  secondary  government  In  but  economic  to  where  vis-a-vis  have  from  likely  politically-dominant,  economic ethnic  is  in  government  restricting  have  country  pressure  and  minority.  explanatory level  of  restrictiveness. Malaysia's  fairly  unique  ethnic  s i t u a t i o n was  t h e most  99  important foreign  reason  for  investment.  redressing  Malaysia's Malaysian  perceived  effect  and  the  of  but  large  also  indirectly  significant NEP  and  related  vehicles Chinese were  for were  quite  majority  ethnic and  led  much  in  An  of  Malaysia's  political  were In  The  the  main  contrast,  the  in Thailand  and  Chinese  Singapore  most  policies.  rules  Moreover,  secondary  Malay  regulatory and  Malay  and  small minority  to  from  in Thailand  from  economic  for  explanatory with  domestic Malay  a  and  formed were  the both  economic  nationalists  the  a  Malaysia's  high  of  level  Although  to  for This  decision  the  degree  early  foreign  pressure  nationalists.  to a c e r t a i n in  was  variable.  government's  investment.  did react  restrictions  political  the Malaysian  foreign  group  pressure  together  influenced  to control  investment.  in  the  the  e c o n o m i c a l l y dominant.  secondary  restrictions  try  fairly  group  situation,  ownership,  between  foreign  restrictions.  political  significant,  at  aimed  had  investment  a  action  minority  minority  legislation  only  Domestic  pressure  Chinese  assimilated.  politically  ethnic  Chinese  Malaysia's  on  economically-subordinate,  resulted  foreign  restrictions  imbalances  restricting  economically-dominant hegemony  government  economic  politically-dominant, majority  greater  to  governing  to pressure mid-1970s,  100  economic  nationalists  military  coup  foreign  of  lost  1976.  investment  a l l  significance  with  Economic  nationalists  advocating  restrictions  were a l s o  the  insignificant  in  Singapore. Finally, secondary elites  economic  explanatory  followed  nationalism  and  intervention. their  The  dominant pressure a  economic  the  minority  domestic  Malaysia's  interventionist Thus,  covering  than 1970  political  based  on  economic  government  economic  presence and  of  and of  a  more  or  Singapore  because  i t had  domestic  pressure  for restrictions,  the  important.  strategy.  explain Malaysia's  explanatory  economically  Malay  political d i d not d i d not  nationalistic  restrictions  an e c o n o m i c a l l y - d o m i n a n t  differences  two  and  strategy.  setting:  economic  an  control  other  consequently  domestic  interventionist  the  domestic  adoption  placed  1980  leaders to  T h a i l a n d and S i n g a p o r e  Thailand to  Malaysia's  from  setting,  economic  Malaysia  investment  important,  heavy  arose  for restrictions.  parallel  an  d e s i r e by M a l a y s i a ' s  variables,  similar  also  strategy to  economy  ethnic  was  variable.  favourable  country's  explanatory  have  an  strategy  variables,  during a  on  foreign  the  very  period  different  ethnic minority,  and a n a t i o n a l i s t i c Taken  together,  these  greater restrictiveness.  ethnic  factors  were  the  and  Of most  101  SELECTED BIBLIOGRAPHY BOOKS AND ARTICLES A n d e r s o n , Thomas, and J a n R u d e n g r e n . 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