Professor Nicholas J. White, School of Humanities and Social Science, Liverpool John Moores University, United Kingdom
Economic nationalism, Malaysian style
Slow progress by Malay investors led to the much-celebrated ‘Dawn Raid’ on Guthrie shares on the London Stock Exchange. On the morning of 7 September 1981, PNB acquired majority control of the premiere plantation group, partly because it desperately needed assets for redistribution to low-income Bumiputera investors in its highly popular unit trust scheme, launched in April 1981 (Shakila Yacob and White, 2010, pp. 946–8; White, 2018, pp. 175–97).
Such dramatic pro-Malay gestures were also crucial for the political ambitions of economic nationalists like Razaleigh to boost their grassroots popularity. This was a tendency spurred on by factionalism within the ruling United Malays National Organisation and by competition for the Malay vote from the Pan-Malayan Islamic Party. As Prime Minister Hussein Onn confessed in January 1979:
If there is silence for a time, [the Malay majority in the rural areas] become suspicious, nervous that nothing is being done. They begin to think the NEP is a fiasco (FEER, 1979).
Nevertheless, Malaysia’s economic nationalism was simultaneously underpinned by wider macroeconomic considerations going back to James Puthucheary’s seminal publication Ownership and Control in the Malayan Economy (Puthucheary, 1960). He argued that Malaya’s independence was a sham because the commanding heights of the economy remained dominated by foreign, principally British, investors. London-centred agency houses like H&C certainly made huge profits through controlling not only production but also shipping and marketing of Malaysian commodities (Koike, 2017). Local ownership, therefore, offered Malaysia both greater leverage of its primary commodity exports in the global economy and earning potential. Hence a botched attempt in the early 1980s to break the alleged marketing ‘cartel’ operated by the London Metal Exchange as Malaysian tin production was consolidated into the world’s largest tin-mining company, the Malaysia Mining Corporation (Jomo, 1990, p. 73; Mahathir Mohamad, 2012).
In emphasizing PNB’s majority control of Harrisons Malaysian Plantations (HMP) after 1983, the new chairman, Ismail Ali, stated that ‘as a company owned and controlled by Malaysians, [HMP] should be much more responsive to the social and economic situation in the country’. The Malayanization of management and the board accelerated, and preferential opportunities for Bumiputera businesses were introduced in HMP’s vendor policy. There was also to be a new marketing effort in the high-growth economies of Northeast Asia, encouraged by Prime Minister Mahathir’s ‘Look East’ policy (see below). Changes in marketing policy reaped massive direct savings on selling commissions paid ahead, amounting to over RM1 million yearly, while HMP now favoured Malaysian-registered shipping and insurance in transporting its products, thus meeting government policy efforts to stem the drain of ‘invisible’ earnings overseas.3 Tan Tat Wai, who worked with Ismail Ali at Bank Negara and served as a director of PNB-controlled companies, recalled that
Tun [Ismail] was keen to expand Guthrie and Harrison’s palm oil refining operations downstream which, at the time, was still dominated by European interests. He wanted to enhance value adding in the supply chain and to have more direct access to the end consumer markets.4
Anglo–Malaysian relations on the rocks
The takeovers also need to be seen in the context of strained Anglo–Malaysian relations. The rot set in, ironically, during the Anglophile administration of Tunku Abdul Rahman, Malaya's/Malaysia's first Prime Minister. In 1966, the UK’s refusal of additional defence and development aid to Malaysia led to the end of Commonwealth preferences for British imports. In November 1967, the 14 per cent devaluation of the pound sterling against the US dollar hit Malaysia especially hard, given the country’s concentration of currency reserves in sterling. There followed in January 1968 Britain’s decision to accelerate its military withdrawal from ‘East of Suez’ at a time when Malaysia was still reliant on the UK for external defence (White, 2003, pp. 229–31). Britain’s abandonment of its Commonwealth ally appeared confirmed in July 1972 with the sterling float,—denounced by Finance Minister Tan Siew Sin as ‘de facto devaluation’ (Bank of England Archive, 1972; White, 2017, p. 222). Then came Britain’s entry into the European Economic Community in 1973 and a de-emphasis on Asian interests. UK Foreign Secretary David Owen admitted to Hussein Onn in 1977 that British governments
...had been obsessed over the past 15 years or so ...with entering the European Community ...[Owen] regretted the tendency, which had developed over the last few years, to neglect our former links with countries like Malaysia.5
Business strategy and reaction
Conclusion