Diversity of Southeast Asian Capitalisms: Evolving State-Business Relations in Malaysia

ABSTRACT

Empirical gaps exist in the literature about diverse forms of capitalism. The first is thematic, involving the incomplete institutional and political account of how the state can, through a series of policies, shape the development of domestic enterprises. The second gap is regional in nature: this literature does not deal with the historical development of firms that have played a central role in industrialising Southeast Asia. One reason for this is that since most existing theories are based on Western contexts, they are theoretically ill-equipped to deal with the concepts of power and state-business nexuses when the political system is not democratic in nature. But state-business ties, where politicians in power distribute government-generated rents on a selective basis, have resulted in diverse business systems such as highly diversified conglomerates, state-owned companies and small- and medium-scale enterprises. This article deals with these theoretical and empirical gaps. To better understand the nature and implications of evolving state-business ties in Southeast Asia, this topic is examined through the lens of regulation theory. To appreciate the complexity and implications of state-business configurations on the political system and forms of enterprise development, a case study of Malaysia is provided.

KEYWORDS:

• Varieties of capital
• regulation theory
• enterprise development
• Southeast Asia
• Malaysia

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Emphasising actors, the first of them being the firm, is consistent with a view based on strategy and justified when sometimes employing game theory in the VoC framework.

2. The French intellectual School of Political Economy has been influential over the last 30 years, especially in the US, Latin America, Japan and South Korea (Aglietta 1976; Hollingsworth and Boyer 1997). Its scientific contribution is seen in two key academic journals: L’Année de la Régulation and Régulation Review.

3. NIE refers to social relations as contracts and holds the view that exchange is central and intrinsically superior to all other economic activities, as emphasised by North (Maucourant 2012).

4. In neo-classical theory, this equilibrium exists. It is self-regulating and stable. If an external shock occurs, the quantity of goods and/or price will automatically re-adjust themselves back to the point of this equilibrium. In this model, the concept of power is not relevant as it is assumed that the market functions correctly and co-ordinates exchanges.

5. Bumiputera, or sons of the soil, is an epithet used to refer to the Malays, though it includes indigenous communities, including those in the Borneo states of Sabah and Sarawak.

6. The G20 now comprises 17 firms, following a spate of mergers to create huge enterprises that can compete globally when they invest in foreign countries, a key government agenda.

7. The government classifies a company as small if its sales turnover is between RM250,000 and RM10 million or if it has between five and 50 full-time employees. Companies with a sales turnover of RM10–RM25 million or between 51 and 150 full-time employees are classified as medium-sized.

8. In the mid-2000s, Malaysia’s spending on R&D as a share of GDP was about 0.95%, very much behind Japan (3.4%), Singapore (2.39%) and South Korea (3.23%).

9. When Najib became prime minister in 2009, he pledged to curb money politics and corruption. However, for that to occur, he had to devolve power to oversight institutions to ensure they had the autonomy to act without fear or favour. This was not done.

10. The Bandar Malaysia project entails the construction of a mammoth underground city that will accommodate Mass Rapid Transit lines and a commuter and express rail link. Twelve highways are to converge in Bandar Malaysia which will serve as the gateway for the proposed high-speed rail line between Kuala Lumpur and Singapore.

11. Lim Kang Hoo was ranked by Forbes in 2015 as Malaysia’s 27th richest person with assets of US$650 million (Forbes Asia, February 24, 2016). He has an interest in four publicly-listed companies: Iskandar Waterfront City, Ekovest, Knusford and PLS Plantations. Ekovest’s shareholders include Haris Onn Hussein, the brother of the Minister of Defence, Hishamuddin Hussein. The son of the Sultan of Johor, Tunku Ismail Sultan Ibrahim, is the chairman of Knusford whose Managing Director is Ahmad Zaki Zahid, once closely associated with former Prime Minister Abdullah.

12. Donald Trump, when elected as president in 2016, announced his intention to withdraw America’s involvement in the TPPA. Malaysia, however, hopes the remaining countries involved in discussions will institute this trade agreement (see Bernama, March 11, 2017).