Globalization and Autonomy: The Malaysian Experience as a Test Case

Last year, Malaysia National University's Institute of Malaysian and International Studies (IKMAS) undertook a project that examined the effects of globalization on Malaysian "policy space," or the state's autonomy to develop and implement national policies. The study will soon be published as a book by the Institute of Southeast Asian Studies in Singapore. On February 27, the Asia Program (with co-sponsorship from STAGE) hosted a forum in which two of the project's contributors highlighted its findings and conclusions.

Why does Malaysia provide a useful test case for globalization and state autonomy? Joan M. Nelson, one of the IKMAS project contributors, offered several reasons: the country has rapidly and extensively integrated into the world economy (according to one index, Malaysia has ranked 3rd out of 72 countries in trade integration); the same political coalition has ruled since independence in 1957, ensuring decades of relative political stability and policy continuity; and the Malaysian government has simultaneously pursued growth and national social policies.

Nelson reviewed the IKMAS project's general conclusions. One is that while international economic integration has undoubtedly "imposed restraints," it has nonetheless generally served as an "enabling" force on Malaysia's economic situation—globalization has generated "growth, revenues, and opportunities" for Malaysians. She attributed this "favorable economic outcome" in part to some "fortuitous circumstances" in recent decades: the discovery of oil in Malaysia, which generated economic surpluses; and major increases in labor costs in Japan, which compelled the Japanese to look to Malaysia for low-cost labor.

Nelson also described globalization's impact on Malaysia's national education policies. On the one hand, Malaysia's integration into the world economy has been accompanied by steady increases in both national educational enrollment and participation rates, and by rising federal government expenditures on education. Therefore, globalization has helped spark the growth of Malaysia's educational system. Yet on the other hand, educational policy has in some ways failed to meet globalization's demands. One of the country's educational goals is to promote national unification. Accordingly, in the late 1990s, more schools began teaching in one language—Bahasa. Yet a core language of globalization is English. At a time when English speakers are highly sought after, Malaysia has struggled more and more to produce English-speaking graduates.

Jacob Meerman, the second IKMAS project contributor, focused on Malaysia's National Economic Policy (NEP) and globalization. One of the NEP's signature—and most controversial—features, implemented in the 1970s, is its stipulation that 35 percent of Malaysian firms and enterprises be run by the country's ethnic Malays, or bumiputera. This drastic change in economic ownership regulations initially alienated Malaysia's ethnic Chinese, many of whom emigrated out of Malaysia, taking their skills and capital with them. Later on, the NEP, like Malaysia's educational policies, would suffer from globalization's effects: Meerman noted that the Asian financial crisis caused new bumiputera-managed banks to go bankrupt.

However, according to Meerman, the NEP has largely been a success story: Malaysia's economy has grown tremendously and narrowed the once-yawning income gap between the country's bumiputera and Chinese. And, as was the case with educational policy, this success was fueled by the enabling influence of globalization. Essentially, Meerman explained, Malaysia used a "Washington consensus" macroeconomic model 20 years before its official emergence. Free-market policies were strictly observed; rule of law was rigorously upheld to support public enterprise; and, crucially, Kuala Lumpur assembled a strong set of institutions to encourage foreign direct investment (FDI). The government obtained the necessary FDI "to put people to work" and to stimulate exports. Consequently, GDP and exports took off.

In her commentary, Pek Koon Heng stepped back to consider the broader effect of globalization on Malaysian society. Islamic finance and banking in Malaysia, she argued, can benefit from high world oil prices and the resulting "petrodollars." Additionally, Malaysia's growing trade relationship with China could have an interesting impact on the Chinese living in Malaysia. Meanwhile, Malaysia is not immune to globalization's ugly effects—particularly the marginalization of ethnic communities. In this vein, Heng cited the recent protests of Malaysia's ethnic Indian minority (the second-largest and arguably the most underprivileged in Malaysia), which believes it is discriminated against by the Malay Muslim-dominated government. Yet Heng argued that it is not just non-Malays who are responding to increasingly unpopular government policies; she described a broad movement of youth—Malay and non-Malay—that is presently advocating for major change.

Drafted by Michael Kugelman, Asia Program Associate
Robert M. Hathaway, Director, Asia Program, Ph: (202) 691-4020