UBC Theses and Dissertations

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UBC Theses and Dissertations

Ethnicity, the politics and foreign investment in Malaysia Yap, Kim-hoe


Malaysian economic development policies since independence have been strongly influenced by the relationship between the two major ethnic groups, Malays and Chinese, and by the political complexion of the state which is dominated by the Malays. Ethnic considerations in shaping economic development policies resulted in official preference of foreign investment in financing Malaysia's industrialization and economic growth. The preference was most obvious since the implementation of the New Economic Policy (NEP) in 1971. The NEP, a sweeping affirmative action program, had two official objectives: poverty eradication irrespective of race and the restructuring of society to abolish the identification of race with economic function. Determined to advance Malay economic status in relation to Chinese, the Malaysian government throughout the 1970s employed various policies to redistribute wealth in favour of the Malays. Foreign investment was encouraged to finance the country's industrialization, particularly the development of the manufacturing sector, and to provide new job opportunities and business ventures to the Malays. Restrictions on industrial investment were implemented at the expense of the non-Malays, especially Chinese. The strategy to align with foreign capital remained central to government policies in the 1980s to achieve NIC status thorugh heavy industrialization. The economic recession in 1985-86 forced the government to rely even more on foreign investment to generate growth need for redistribution to take place. The pursuit of this strategy exacerbated ethnic relations under the implementation of the NEP from 1971 to 1990. To remain legitimate in the context of Malaysian politics, the Malay dominated government after 1990 pressed for a strategy of growth with distribution to enhance Malay economic strength vis-a-vis Chinese through the anticipation of continued influx of foreign investment since 1988.

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