Keywords

1 Introduction

This chapter will shortly summarize Malaysia’s history as well as analyse the strategies and short term tactical moves employed by Malaysia in managing its economic transitions since its independence in 1957. Most Southeast Asian countries, except from Thailand, were colonized by Europeans, such as the English, the French and the Dutch. Malaysia was colonized by the British since 1786, with the first official settlement of Penang by Francis Light. Later on, the British reinforced their colonization of Malaysia via the Treaty of Pangkor 1874, where only the Perak Sultanate received a British “advisor”. The original idea of the British was to exploit the resources of Malaysia starting from spices and later on, tin mining. After rubber was brought in by Sir Henry Wickham with seed from the Brazilian Amazon, the oil palm was brought in from Nigeria. Tin, rubber, and oil palm generated the major income from economic resources for the British home economy, until the Federation of Malaya received their independence from the British in 1957. In 1963, Singapore, North Borneo (now Sabah), and Sarawak joined the Federation of Malaya to make up Malaysia. In 1965, Singapore opted out of Malaysia to form the Republic of Singapore; another separate nation, Malaya inherited the agricultural economy with tin, rubber, and oil palm exports in 1957. The people resided in the rural area with nearly zero industry and very little service. The basic structure of the economy was rural and agricultural with a narrow agriculture export base. The country has three major races, Malay-Bumiputra, Chinese, and Indians with unique and specific economic activity engagements, places of residence, and professional positions. There was an acceptable “Status quo social contract” and Malaysia needed very little economic growth at that time. Growth and modernization were not so important back then. Malaysians were satisfied with the state of affairs until an event suddenly occurred on May 13th 1969 that changed almost everything. What followed in Malaysia, was a change from a multiracial rural-agricultural economy to an export-oriented economy with manufacturing and service orientation through deliberate economic and political policies and strategies. Most of those events led to the sustainable economy of 2014 – with the capability of adjusting and adapting fast to the global economic disturbances in a rapid and flexible manner, especially since 1981. By the time, when the US economy and the world economy were shaken badly by the financial crisis in 2008, Malaysia was perhaps the most robust and resilient economy with external and internal contributors. The main measures that managed these transitions smoothly and safely, were the formulation of the public policies, the design of the 5-year plan, and the tactical annual National Budgets of Malaysia. These three elements were based on the visions of leaders and the synergetic acceptance of those visions by the loyal population and perhaps appropriate policies-institutions setting the right priorities in the infrastructural development such as roads, communication, schools, ports, and airports (see Table 6.1 for guide to changes). More than 20 years went by without any major events since Malaysia’s independence. Then in 1980, things changed rapidly for Malaysia. Thanks to the 35 public policies and many innovations by the country’s leadership, which were not gimmicks or mere slogans, Malaysia and her 29 million people, is considered top 20 country of the world today. The data from the various official sources indicated these points. Before we continue, the following timeline shall highlight what Malaysia went through as a nation:

Table 6.1 Timeline of major socioeconomic events that affects transitions in Malaysia
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2 Determinants of Economic Sustainability in Malaysia

Every country is unique in its ability to survive economic, social, and political crises. Nevertheless, some factors are relevant for every country:

  • The attitude of the citizens and non-governmental organizations (NGO).

  • The vision and sincerity of political leaders in handling the oppositions.

  • The transparency of political and administrative procedures.

  • The integrity of public servants and private sector workers.

  • The efficacy of the law, legislations, and taxation system.

  • The extent of involvement of the “small people” in economics, social, and

  • political matters, and the distribution of assets and wealth.

  • Efficiency of enterprises and agencies administration.

  • Accountability of public servants and institutions.

  • Productivity of public and private investments.

  • Continuity of the nation’s presidents and premiers.

  • The interference of the international organizations, rulers, and the international game playing of the superpowers.

  • The knowledge of all people and their reading culture.

These factors and other considerations depend, to some extent, on the people. Sustainability requires the participation, involvement, protection, and the guarantees of people at large. The government system alone will not make strategies sustainable. Strategies must be conceived, formulated, executed, and evaluated well by the political leaders, who should have the interest of the common people or the majority of the population at heart, when formulating national policies, plans and agendas. Malaysia had good leaders for the last 60 years. We had been able to acquire some of the best advisors as early as in the mid 1960s. The ruling party is a multi-racial coalition of Malays, Chinese, Indians, and minority ethnics. Before 1974, the party was Alliance (Perikatan). Since 1974, the coalition is named National Front (Barisan Nasional), a party that runs the economic and other affairs for the people. The country is a parliamentary democracy and constitutional monarchy. BN is a ruling party that has lasted longer than the Japanese LDP and India’s Congress Party. Malaysia’s ruling party has been in the country’s leadership for more than 58 years. This continuity has given Malaysia more advantages than most other countries. Transitions are better managed by governments with long tenure. Sustainability would be a product of a continuous government. Transition in the ruling party’s leadership is also important. The Malaysian ruling party Barisan Nasional had been led by the Alliance of United Malay National Organization (UMNO). The UMNO President, Vice-president, and deputy president provided stability and changed hands in an orderly manner. Their continuous and orderly changes helped the government to manage the Malaysian economy in terms of sustainability of strategies, even those that went beyond two planning periods. The thoughts and vision had reinforced the ways Malaysia administers and implements project programs. Schematically we see a clear path between the leadership’s vision and the people’s interests (Fig. 6.1).

Fig. 6.1
figure 1

The relationship of leaders visions, planning, economic activities and impact, in Malaysia (Source: Visualised and simplified by Author from briefings of EPU officers)

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3 The Malaysian Economy Way

Over the years of implementing policies to the socioeconomic targets and to ensure sustainability, we anchor our faith on the people. We lacked this previously before the 1969 riots. For the first 5 years of the New Economic Policy (NEP), we were filling gaps and not getting the results towards equity, equality and growth together. The NEP has three main objectives with unlimited strategies:

  • To achieve national unity.

  • To eradicate poverty regardless of race.

  • To restructure society in a way which reflects the Malaysian society, ensuring that no race is associated with the geography of residents, economic activity, profession, or origin.

Malaysia was still thumbing her way out of the memory of the racial tensions of 1969. To encourage the NEP to work, the leaders worked hard to develop the Acts of parliament, to draw the action plan and to set the direction. The idea is to get a real solution working with little disturbance from gossips and speculations of the people and foreign agents. We revived the previous Acts and developed new ones.

Among them, the noted ones are:

  • The Internal Security Act 1948, 1960

  • The Seditious Act.

  • The Official Secret Acts. (to safe guard government strategic and tactical secrets)

To this end, the USA being so engrossed with human rights, freedom, and perhaps democracy and free enterprises, saw no abuse. Since Malaysia is an ex-colony of the British, the basic ideas of these acts, passed by the parliament, are those deployed by the British at their appropriate occasions, not beyond that. We apply them as cautiously as necessary, being fearful of the UN provisions and other interference from Western superpowers. In the 1960s and 1970s, especially before USA lost Vietnam to the Viet Cong in August 1975, whatever we do to protect our democracy would be welcomed by the UK, USA and even endorsed by the UN, in the name of democratic idealism, and to stop the ASIAN domino, resulting from communist insurgents contributed by the Soviet Union (USSR) and the People’s Republic of China (PRC) doctrines and ideals. The period 1957 through 1969 was a period of trials with conventional approaches to development regarding Post-independence economic structure and racial inequalities. In the case of Malaysia, the group that needs uplifts and management in transition periods is the majority Malay-Bumiputra group, making up 68 % of the population. This lack of foresight has led to the May 13, 1969 incidents, i.e. major racial riots because of the failure to address ethnic inequities in the year since 1957.

The period 1970–1990 was the period of New Economic Policy, when the three objectives of NEP were embedded in all efforts of the government to eradicate poverty, to increase household incomes that effected all spin-offs (those of the 1980s, the 1990s and those beyond the year 2000 AD), to improve the distribution of wealth/asset ownership, to educate the Malays, and to assist problematic races like the Indians and the aboriginal people (without religion preference). The 1970–1990 formula was good but did not reach many targets, especially (not) the 30 % equity ownership in the publicly listed companies and national wealth and the 30 % targets in all professional fields like accountants, engineers, architects, medical doctors, dentists etc. The NEP of 1970–1990 was extended to 2020 under the National Vision Policy 2020. Under the NEP, there was neither enough time to accomplish too many things nor to create the optimum condition for equitable distribution of wealth, income, housing-construction, educational accessibility, and the income power to buy shares of public listed companies. This led to various efforts in the gigantic steps of the Amanah Saham strategies, the creation of government-linked companies (GLC), forwarded budgets, and the “money from the little men”. This money was gradually liberated to all Malaysians by Mahathir Mohammad from 1998 to 2003. He created a number of “strategic minutemen” from all races, which we cannot name as they are not public knowledge. The idea was that these “Minutemen” will lead a group directly and assist the weak ones or “weaklings” in subsequent stages and “not just another crony” as alleged by the West. Regardless of any inquiries, there are things that work out, whereas others fell apart in a transition society unlike Malaysia. This phenomenon is also true in US, Japan as well as in the UK and other European countries. This is the usual nature of human character rather than political patronage or intelligence. The period of Prime Minister Najib Tun Razak added even more dimensions to sustainability and transitions since April 4th 2009. The sixth Prime Minister was trying to create a new image, reconciliation and to enhance Malaysian economic frontiers via the ONE MALAYSIA concept. He cared for the poor, the small and medium firms (SME), the lone income, and the Middle income groups, while enhancing the big corporations. Then came the “lost” MH 370 affairs, distracting Malaysia’s will to sustain and tame the various transitions on the domestic fronts as well as the global transitions coming from ASEAN, APEC, China, India, Europe North America and the Arab States. We do not have the complete knowledge yet on strategies to sustain our economy in transition scenarios. Nobody has the answers, except perhaps China. Malaysia had managed well with 34 good policies, infrastructures, continuity of government (Alliance and the BN), citizens of reasonably good character, reasonably honest and ethical leaders, stable currency, peaceful situations, and a good set of climate and natural resources. We were able to mobilise the “small men money”, to involve them in big projects and corporations and cared for the poor and the handicapped in our own little way. Time and the sequencing of strategies and projects brought us successes through what Samuelson called the multiplier-accelerator effects. Our institutions, set of Ministers, and people had created various synergies domestically. We would not have done well if our people had decided to sabotage themselves and their own people with endless demonstrations, street clashes, and perhaps civil wars. Such situations will not enhance anybody nor develop mankind at large. A warring entity will waste time and properties, with enormous loss of future and potentials. To sustain we need our own people. Japan and South Korea are good examples. China is another example with 1.3 billion people. Like everyone else, Malaysia learns from everywhere to get their sustainable strategies in enhancing their economy in transition periods. The answers to those who want to grow, develop, and prosper is free. They are everywhere: Harness them, understand them, and use them for free. Do not take everything Adjust to the need of your people and your country. If you feel bad, apply the virtues of your religions and avoid the vices of men. You will get the answer, though some of them need time of reconciliation. Start small. Get rid of poverty.

Mobilise “small men money” via trusted or created trusts or mutual funds. Get your construction via roads, houses, and buildings going! Make sure democracy exists in house ownership and access to education. Get some monitoring going and use some controls. Free markets can hurt people if some unethical items are developed. Play on plan and the annual national budgets to adjust and to review. We can surely say that economic sustainability in a transition economy can be done by willing societies.

4 Towards a Sustainable Economy for All. Some Preliminary Strategies

  • Get rid of poverty.

  • Do not allow the Gini Coefficient to deteriorate.

  • Get more people involved in the economy and make sure that only few people rely on income support, subsidies, and the food stamp sector.

  • Do not see the rich get richer and the poor get poorer as a pro sustainability.

  • Get more people in point 3 above to save in their personally preferred, modest way. Match these funds with government sponsored soft loans to small and medium firms.

  • Make sure SME are supported.

  • Make sure cooperatives are independent and operational.

  • Mobilize small people fund in unit trusts and assured or secured funds.

  • Do not be one of those Foreign Direct Investment(FD) grantees for outflow of funds, only allow this when absolutely necessary.

  • Mobilize small scale talents. Help them to use their assets well. Do not allow idle assets or assets to be taken away by big corporations. The Nation must support all people and not just corporate leaders.

  • Recognize small people’s contributions in free elections. Help them prosper and spend on consumer goods, while saving small funds in unit trusts.

  • Secure their homes and family; let them feel good about the economy. Do not let them be exploited unattended by the democratic government they elected.

  • Make sure all families have at least one member graduated from a university and/or have an executive job as laid down in the Tun Razak Doctrine in 1957 (Baharuddin 2002).

  • Make sure home, cars and costs of living are affordable. Control demand and supply situations; at least get to know them.

  • Minimum wage may not be necessary. Prices for food and basics must be kept low. House prices must reflect the actual value and Malaysian affordability. Working must make sense.

5 Conclusion

In conclusion, it is obvious that the continuity of a government is very important for the sustainability of the economic enterprises. Visions of a leader and the length of his tenure matters a lot (22 years for Mahathir Mohammad and only 5 years for the third Prime Minister Tun Hussein Onn). Malaysia enjoys these three factors. The will to try an agenda, the planning process and the skill of articulating an agenda to the people also played a significant role. The mobilisation of domestic “small savings” had proven successful for Malaysia. Generally, Malaysia had the “chemistry” for a success in sustaining the economy even throughout all transitions within the 58 years period since its independence in 1957. The New Economic Model for Malaysia 2010 (National Economic Advisory Council 2009) initiated by Premier Najib Tun Razak was a manifestation of this valid experience as it targeted high income, inclusiveness, and sustainability. The Malaysian model would be useful for many developing countries, especially those with the British colonial background and natural resources.