Domestic Political Structures and Regional Economic Co-operation 997190280X

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'-~

DOIVIISSTIC

POLITICAL STRUCTURES

REGIONAL ECONOMIC C0-OPERATION A \T`.'\

Harold Crouch

ASEAN Economic Research Unit INSTITUTE OF SOUTHEAST ASIAN STUDIES 1984

Published by Institute of Southeast Asian Studies Hong Mui Keng Terrace

Pasir Padang Singapore 0511

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, Of' transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior consent of the Institute of Southeast Asian Studies. © 1984 Institute of Southeast Asian Studies

ISBN 9971-902-80-X The resporzsib:}'z'1[1) for .facts and opII.*:1'ons expressed in this pub£'icat1'on rests exclusively with the author and his hzterpretations do not necessarily ref leer the views or the policy

of

the Institute or its supporters.

Typeset by Richard Clay (S.E. Asia) Pte Ltd.

Contents

Foreword

vii

'ace

ix

Pre

1. INTRODUCTION

1

2. SINGAPORE

10

3. MALAYSIA

24

4. THE PHILIPPINES

39

S. THAILAND

60

6. INDONESIA

75

7. IMPLICATIONS FOR REGIONAL ECONOMIC

CO-OPERATION

90 I02

About the Author

V

Foreword

In 1981, a research project was launched by a group of political scientists, under the auspices of the Asean Economic Research Unit of the Institute of Southeast Asian Studies, i complement the world of economists in their investigation of the problems and obstacles u m nd in the way of economic co-operation in ASEAN. It has been widely recognized that whilst ASEAN has been established since 1967 and received fresh impetus as a regional organization after 1975, very modest progress has been achieved in the area of economic co-operation, although this is one of the primary objectives laid down in the ASEAN Declaration. A team of economists therefore set the task for themselves to focus on specific aspects of economic

co-operation in ASEAN, such as industry and trade, investments and finance, commodities and food and energy, to investigate in depth the nature of the problems and obstacles, and to discover possible areas of breakthrough in the process of economic co-operation in an effort to understand the dynamics of economic regionalism. It soon became evident that a similar enquiry directed at the political dimensions of regional economic co-operation was necessary to arrive at a

comprehensive understanding of the problem. The Konrad Adenauer Foundation very generously provided the enabling funds for such a study. Thus, nine political scientists came together in two separate workshops in 1981 and 1982 in Singapore to examine the political factors affecting ASEAN economic co-operation. The results of their research efforts are seen in the six monographs in this series entitled ASEAN Political Studies. The monographs examine the institutional factors, both domestic and regional, the bilateral relations, and the decision-making processes which impinge on regional economic co-operation. Hopefully, the monographs listed below will each in their own way throw light on the political dimensions of regional economic co-operation: 1. Domestic Political Structures and

Harold Crouch

Regional Economic Co-operation

vii

2. Impediments to Regionalism in Southeast Asia: Bilateral Constraints among ASEAN Member States 3. The Institutional Structure of ASEAN'

Evolution and Reform 4. Decison-making in an ASEAN Complementation Scheme: The Automotive Industry

Hans H. Indorf Chin Kin Wah

Seth Chee Meow and Estrella Solidum

5. ASEAN Negotiations: Two insights

6. The World of ASEAN Decision-makers' A Study of Bureaucratic Elite Perceptions

Pushpa Thambipillai and J. Saravanamuttu Zakaria Haji Ahmad and Withaya Sucharithianarugse

These studies were completed by June 1983 and do not take into account the entry of Brunei as the sixth member of ASEAN in February 1984.

Chan Hens Chee PrQ;'ecF Co-ordirzator

viii

Preface

This study is concerned with how the domestic political structures of the ASEAN states might affect' regional ec0iiO1Tii'c co-operation. An attempt is made to compare the different political capacities It he ASEAN states to carry out policies opposed by particular vested interests and to examine possible implications for regional economic co-operation. A comparative Ftudy this sort inevitably lacks proper balance because it is in the nature of things that the author cannot have equal knowledge and experience of the states that he is discussing. In this case, the author is resident in Malaysia and had earlier spent several years in Indonesia, but his direct experience of the other three states is more lim During the course of this study he was [ b e to spend a month in Indonesia, three 11 ks in the Philippines and a week in Thailand, while several brief visits were made to Singapore. Much of the discussion; therefore, relies heavily on secondary sources and the Far Eastern Economic Review. The author wishes to express his thanks to the ASEAN Economic

or

u

Research Unit of the Institute of Southeast Asian Studies for the support given to this project.

H.C-

July 1983 Bangi, Malaysia.

ix

1 Introduction

The purpose of this study is to examine how the contrasting domestic political structures of the countries of the Association of Southeast Asian Nations (ASEAN) might affect the prospects of regional economic cooperation and integration. It is often said that certain governments lack the "political will" needed to implement policies designed to enhance regional co-operation and integration. In this study, an attempt will be made to understand why some governments have more political will-power than others. It will be suggested that the political and administrative capacities of the ASEAN governments are very different from one another and that some are much more capable than others of implementing policies intended to bring about far-reaching social and economic change. Governments with a "high" political and administrative capacity could be expected to be more able to pursue programmes in the interests of regional co-operation which involve major social and economic readjustments, while governments with a "low" capacity are less likely to embark on such programmes. The capacity of the government to implement effectively new policies

which tend to disrupt established social and economic arrangements is, of course, only one, and not necessarily the most important, factor which affects regional economic co-operation. It must not be assumed that governments with a "high' political and administrative capacity will necessarily prefer to engage in increased regional co-operation. It is only argued here that they have the capacity to make the adjustments necessary to implement such policies if they so decide, while countries with a "low" capacity are less able to make such adjustments. The actual policies of governments will depend very much on how they perceive their national interests and their assessment of the impact of particular policies on these interests. Many economists in the ASEAN countries seem to believe that regional economic integration is self-evidently desirable and in the interests of all.

They argue that economic integration leads to a more rational and I

2

Domestic Poifricrn' Structures and Regional Economic Co-operation

efficient distribution of economic resources in the region with the result that the economic production of the region must increase and thus bring about a general rise in prosperity. It therefore seems obvious that regional economic co-operation should be encouraged with the ultimate aim of attaining regional integration. But from the perspective of political science, it must be recognized that policies which bring benefits to a region as a whole do not necessarily bring benefits in equal measure to all its components.

In the ASEAN region, it is clear that the primary responsibility of the governments is still to their own nations and not to the region as a whole. National leaders are concerned with regional affairs not because of an intrinsic commitment to the region as such but because developments in neighboring states impinge on their own states. The political stability and economic welfare of each state depends in part on continuing stability and welfare in the neighbouring states, while political upheaval and economic decline in one state can threaten the well-being and security of the other states in the region. In general, national considerations remain decisive so that policies intended to promote the interests of the region as a whole will only be supported by individual governments when, on balance, they at least do not harrn the interests of their own particular state. Within an established regional community such as ASEAN there will naturally be more "give-andtake" between its members than would be the case in the absence of such an association. In the context of an ongoing community of nations, governments will be more ready to sacrifice immediate national interests on particular issues in the expectation that such actions will be reciprocated by other members on other issues. But in the final analysis, the balance sheet remains national rather than regional. That the regional interest does not necessarily coincide with the interests of the individual states is clear when we consider the case of regional economic integration and its impact on industrialization. The creation of a regional free-trade area or a customs union might lead to enhanced rationality in the distribution of regional resources through encouraging greater specialization within the region and thus result in faster economic growth in the region as a whole, but inevitably, the distribution of such growth would be uneven. Economic integration would provide a much larger market for those countries with the more advanced industries, while countries with backward industries would shift resources ...from industry to other areas, such as agriculture or mining, where they had a comparative advantage. In the case of ASEAN, economic integration would enable the high-technology industries of Singapore to dominate stly expanded market and thus block the prospects of such industries from developing in the other four memberstates. Economic integration might also provide increased opportunities

l

Introduction

3

for certain industries in the Philippines, Thailand, and Malaysia, although the benefits from gaining access to a wider market for some industries would have to be balanced against the consequences of opening their own domestic markets to penetration by more advanced neighbours in other areas. in the case of Indonesia, which is industrially the nost backward state, however, the opening of it s market to the industries of other ASEAN states would be disastrous for its prospects of industrialization. As long as the ASEAN political leaders regard the individual state rather than the region as the basic political unit, economic integration which stimulates development in some states while obstructing industrial growth in others will not be welcomed by those states which stand to fall further behind, even though it might be shown that the region as a whole would be better off. Not all economic co~operation, however, conflicts with national interests- The individual states of a region might find it to be in the national interests of all to engage in particular forms of limited cooperation. They might, for example, decide to hold joint negotiations on trade issues with countries or associations of countries outside the region. Attempts might be made to co-ordinate foreign investment policies so that multinational corporations are less able to play off one regional state against the others. Agreements might be reached to back each other up in the event of international shortages of basic commodities such as rice or oil. And limited project-by-project agree~ merits can be reached on industrial specialization. In cases of this sort, regional co-operation not only enhances the interests of the region as a whole but can also serve the national interests of each of the component states. Even then, such agreements are reached only after the individual states have carefully weighed the advantages with the disadvantages from the point of view of their separate national interests. The main concern of this study, however, is not with an analysis of competing

national

interests but with contrasting

domestic

political

structures. The states of the region differ markedly in the extent to which government economic policy-makers can asbe decisions in an

environment relatively insul an from immediate political pressures representing special interests. In some countries, political leaders with their technocratic and bureaucratic advisors are able to take a broad and long-term view of the national interest defined according to "rational" economic criteria, whereas in others "irrational" political considerations seen to predominate. The extent to which "irrational" political pressures prevent the pursuit of "rational" economic policies depends on the nature of the political system. All live ASEAN states have adopted political forms in which authoritarian characteristics are to a greater or lesser degree prominent. Four of the five experimented with Western-style liberal democracy in

4

Domesffc Pdificaf .Structures and Regional Economic Co-operation

the years immediately after gaining independence while the fifth also passed through brief democratic interludes. But Western-style democracy did not prove to be an enduring form of government in Southeast Asia. Some abandoned democracy and established frankly authoritarian governments, others preserved the institutional structure of liberal democracy while restricting democratic liberties and managing the political process

so that the remnant opposition could never succeed in defeating the government. The abandonment or restriction of Western-style democracy was justified on various grounds but the most important was that strong. government was needed to preserve political stability and promote economic development. The national leaders in the ASEAN states regarded- un- : restricted Western-style democracy as inappropriate for the circumstances in which they found themselves. Democracy led to divisiveness, corruption, inefficiency and instability. What was needed was a strong government capable of imposing order on society and implementing policies in the interests of economic development. The ASEAN governments thus attempted to legitimize themselves by promising strong, effective government committed to rapid development and modernization. Under relatively authoritarian rule it was hoped that the government could formulate and implement developmental policies free of the self-interested political pressures to which governments had to respond under unrestricted democracy. Backed by a powerful security apparatus capable of protecting the regime from political challenges, the government could then place economic policy-making in the hands of technocrats and administrators whose policies were expected to stimulate rapid economic growth and industrialization. In place of the politicized and patronage-ridden bureaucracy typical of Third World democracies, authoritarian regimes promised efficient, professional and clean administration, Authoritarian regimes thus aimed to legitimize themselves through effective performance. Public acceptance of the loss of democratic freedom could be compensated for by economic growth and clean, efficient administration.

In practice, however, there were big differences between the ASEAN states in the extent to which they conformed to the "modernizing authoritarian" model. The full implementation of the model required that governments to a large extent insulate themselves against political pressures aiming to obtain special benefits for particular groups in society. Such pressures can be examined at two levels - pressure from below and pressure from above. Pressure from Below

No government can insulate itself completely against "irrational" pres-

sures from below and totally ignore middle-level and mass demands. Even the most authoritarian regimes must take into account minimum

Introduction

5

mass interests in order to avoid rioting, revolts, and revolution. But there are considerable differences between governments in the extent to which they are respon inns forward by particular groups or organizations representing' the interests of particular sections of the public. In some political systems there are channels, luck as political parties, interest groups and the press, for the airing of popular demands and grievances, while in other $5 rems opportunities for the expression of public discontent are strictly circumscribed. -.

m

While it is not possible in this study to attempt a complete explana~

son of the differences between the ASEAN countries in the degree of their authoritarianism and the extent to which their governments are responsive to pressure from below, attention will be drawn to several important factors. Firstly, the degree of authoritarianism is influenced by the level of economic development and the consequent class structure. In a society

where the level of economic development is relatively high and the economy growing, the middle class will be relatively large and prosperous, while much of the lower class will also have experienced some advancement. In such a society, the middle class provides a solid base of support for the government which in turn must be at least partly responsive to its demands. At the same time, the capacity of the government t o ensure minim M standards of welfare for much of the lower class reduces dissatisfaction and the 1 of challenge from that quarter, and thus makes authoritarianism less necessary for the government to maintain its grip on power. On the other hand, in societies where the level of economic development is still low, the middle class will remain too small to provide a solid base of support for the regime, while the overwhelming majority of the lower class will get little benefit from economic growth. In these circumstances, the government has little alter» native but to rely on authoritarian means of control, and in a n y case

does not have to worry about middle-class demands for a more liberal system. severely there is the less

Thus, the higher the level of economic development, the less authoritarian the system of government and the more scope for pressure from below especially from the middle class, while developed the economy, the more authoritarian the regime and

the less scope for pressure from below. Authoritarian control, however, is likely to be more severe when the working class makes up a large part of the lower class, even when the system as a whole is relatively highly developed. All governments, whether closed or relatively open to pressure from below, tend to be unresponsive t o demands from trade unions. In countries with a low level of economic development, the political influence of the trade union movement is negligible not only because of the authoritarian nature of the government but also because of the small size of the working

6

Domestic Polfticaf Structures and Regional Economic Co-operafion

class and the weak bargaining position of unions due to widespread unemployment. In less severely authoritarian political systems with a higher level of economic development and a larger working class, the trade union movement also usually lacks political influence. This is because the government's economic development programme depends on the creation of a favourable environment for investment, much of which is foreign. The government, therefore, must provide a "disciplined and cheap" labour force. Even when a government is relatively relaxed in facing other pressures from below, it usually maintains strict controls over the working class and is unresponsive to trade union demands. Finally, strict authoritarianism requires a ruling élite consisting of a united, closely-knit group with a common ideological outlook. If, however, the government consists of an alliance of groups representing different interests with contrasting ideal ogical outlooks, rigid authoritarianism is not possible because élite factions will always tram to bolster their own positions vis-ci'-vis other élite factions by cultivating support at the mass level. Governments consisting of coalitions between various groups ares, therefore, likely to be relatively responsive to pressure from below, while governments made up of a single group are more able to resist middle-level and mass demands. Thus, while all the ASEAN governments have certain authoritarian features, the extent of their authoritarianism varies. Severe authoritarianism is only possible when the governing élite is united. Authoritarianism, however, is likely to be less severe when the economy is relatively highly developed although authoritarian controls tend to be strict in the case of the trade union movement. On the other hand, governments in economically less developed societies which lack a broad social base of support can usually maintain political stability only through relatively severe authoritarian means, although the degree of severity is reduced when the ruling élite is not united. In general, therefore, the governments

of the ASEAN states tend to be fairly unresponsive to pressure from below and are especially unresponsive to demands from the industrial working class. Pressure from Above

In the ASEAN region, "rational" economic policy-making is, in fact, threatened less by overt pressures from below than by covert pressures from above in the form of links between élite-level vested interests and the power-holders in the regime. While more-or-less authoritarian regimes can usually pursue policies which disregard particular mass interests with a large degree of impunity, they are often Far less able to resist the demands or elite-level interests; particularly those of business groups closely associated with key figures in the regime itself. All governments

lnrroducfion

7

must take account of the interests of the business community as a whole but there are differences between the governments in the way in which they deal with pressures from particular business groups Md requests from particular enterprises. The extent to which a government can determine its economic policies on the basis of rational economic criteria free of such particular pressures is influenced by the nature of the society over which it rules. In general, rational economic policy-making by technocrats is more likely in societies which are relatively highly developed and modernized while governments in less modernized societies seem less independent of outside pressures. Among the specific socio-economic characteristics which affect the political capacity of a regime to resist particular vested~interest pressures, several will be given special attention in this study. Firstly, economic policy-making tends to be more rational when the economy is relatively modern and industrialized. In contrast to a "traditional" economy based on agriculture, mining or entrepOt trade which can function reasonably effectively despite a lack of technocratic manage~ rent, a sophisticated modern economy needs technocrats to administer rational policies on the basis of technical criteria rather than politicalpatronage considerations. Secondly, a substantial middle class generates pressure for efficient, professional, and technocratic administration. In contrast to the peasantry and the working class, members of the middle class tend to have higher expectations of the government, are more critical when its performance does not live up to their expectations, and are more self-confident in opposing its policies. When the urban middle class is relatively large it can provide an important political base of support for the government which is then forced to take account expectations that the administration will be efficie professional clean, whereas the expectations of a numerically insignificant middle ... with impunity.

lass can be ignored

Finally, rational decision-making is more easily achieved when a government is relatively autonomous and separate from particular business interests. In contrast to regimes here the political and economic elites are almost identical and business success depends almost entirely

m

on political infiuWM technocratic policy-making is likely to be more effective when there is a substantial business community which has developed relatively independently of the regime. Although individual businessmen and enterprises will always seek particular favours, an established business community - as a community - tends to demand a more open and regularized style of administration which does not disadvantage enterprises lacking special links with the regime. The extent to which governments can resist élite-level business pressures and thus allow technocrat-administrators to formulate policies on

8

Domestic Pofiricoi Srmclures and Regional Economic Co~operotion

a rational economic basis depends on several factors. In relatively modernized societies where the economy is fairly advanced, the middle class is substantial in size, and the business community is relatively independent of the government, rational policy-making is likely to predominate. On the other hand, in less modernized societies ere industry is less developed, the middle class is small, and the business community is more tied to the regime, rational economic criteria tend to be replaced by political-patronage considerations as Wie EasiS Of' government policies. Domestic Political Structures and Regional Economic Co-operation

The capacity of governments to pursue policies adopted on the basis of rational economic criteria is greatly affected by the extent to which they are able to isolate themselves from the pressures of particular sectional interests. In this regard, there are substantial differences between the ASEAN states- While some governments have the capacity to formulate and implement policies in an environment relatively free of particular

demands from both mass and élite-level vested~interest sources, others are far less autonomous and much more subject to pressures from above and, sometimes, from below. This discussion is relevant to the question of economic co-operation and integration within ASEAN. The prospects of implementing policies of economic co-operation will depend not only on weedier such co-

=

operation furthers what economists and teehnoc! consider Ethe national interest of their respective countries but will also be aft;;t;t;gi by how politically important vested interests within each ASEAN country

assess the effects of particular measures on their own interests. The relative influence of technocrats and bureaucrats on one hand, and particular business interests on the other, as well as certain mass interests in some cases, on government policies varies from country to country. It should not, however, be assumed that "rational" technocrats and bureaucrats insulated from "irrational" political pressures will necessarily favour policies designed to increase regional economic integration. Their attitudes will depend on how they perceive their country's national interest. Nor should it be assumed that vested interests will always oppose regional integration. On the contrary, some business interests would welcome moves towards greater regional integration. However, it is usually the case that the main initiative towards expanding co-operation comes from technocrats arid administrators, while the main resistance comes from groups which have an interest in the maintenance of existing arrangements and may be harmed by the readjustments accompanying steps towards integration.

in particular,

opposition is likely to come

from business interests which would be exposed to increased competition

Irziroducfion

9

as a result of moves towards integration, and labour whose jobs might be threatened. ""; suggested in this study that governments which are relatively insulated from E ss and vested-interest pressures will be better able, if they so decide, h implement policies designed to enhance regional eco» romaic integration than those which are more open to pressure. In the chapters that follow the susceptibility of each ASEAN government to pressures from both below and above will be examined, and their capaci~

;

ties to implement "rational" policies in the face of mass and elite-level vested-interest pressures evalu use. In the conclusion, an attempt will be made to discuss the implications of different political structures for the various types of possible co-operation and integration in ASEAN.

2 Singapore

"Rational" policy~making predominates in Singapore. The government is firmly in power and relatively insulated from political pressures whether from mass interests or élite-level vested interests. Although the Singapore constitution is democratic in form and provides for regular elections which are contested by opposition parties as well as the government party, the ruling party's grip on the government is in fact unchallenged. Made up largely of leaders with technocratic expertise and often bureaucratic backgrounds, the government can afford to take its decisions in an atmosphere relatively free of direct political pressures. Political activity is more or less tolerated but it appears to have little effect on policy outcomes. The key policy debates seem to take place within the regime itself on the basis of the rational consideration of alternatives rather than in response to direct political pressure. This does not mean, however, that particular sectional interests are not taken into account by the government. On the contrary, many government policies must be seen as attempts to meet the needs of particular interests. The governments huge housing, education, and social welfare projects have clearly been implemented with the needs of the masses in mind. Similarly, economic policy must be formulated in such a way as to meet the needs of foreign investors on whom the Singapore economy so heavily relies. But important government policies are not determined in response to particular demands by particular organizations or individuals representing particular interests. A particular housing project, for example, is carried out not because the residents of a certain area demand it (indeed they have often opposed such projects) but because the government decides that housing projects are necessary. The government's wage policy is not determined by pressure from trade unions or employers but by what the government believes is appropriate in the context of overall economic policy. And policies in regard to foreign investment are not government responses to the approaches of particular investors - and certainly not the covert approaches of par-

-

10

Singapore

1/

-

ticular investors to particular political leaders or officials but are made on the basis of general assessments of what is needed for the

economy as a whole. Thus, Singapore has been called an "administrative state" where policies do not emerge as the result of the resolution conflicting pressures from various interests but are made administratively by a government which assumes that it knows what is best for the people?

The insulation of the Singapore administrative state from "irrational" political pressures can be studied at two levels. Firstly, we can analyse the growing authoritarianism in the context of economic growth which has enabled the government to deal with pressures from below. And secondly, we can examine the technocratic quality of the regime which has allowed it to resist vested-interest pressures from above. But before that, it. is necessary to place the political system in its economic and social setting. Economic Development and Social Structure

Singapore is by far the most economically advanced member of ASEAN. With a per capita GNP (gross national product) of USS-4,430 in 1980 -more than two and a half times that of Malaysia and more Singapore's than six times those of the other three ASEAN states" economy and society had characteristics very different from the rest. The modern sector of its economy was much larger than those of its neighbours, the middle class made up a much larger proportion of the population, and the lower class enjoyed a far higher standard of living. Since its separation from Malaysia in 1965, Singapore has achieved the highest rate of economic growth in Southeast Asia and has succeeded in transforming its economy from one based on entrepét trade to one in which modern industry plays Q, major role. During the early 1960s, import-substitution industrialization beginning from a small base, produced a rate of growth in GDP (gross domestic product) of 7.2 per cent in the period 1960-64 but this rose to more than 12 per cent in 1965-69 and 14 per cent in 1970-74,3 although the increasingly unstable world economic conditions in the late 1970s brought the average rate for the decade of the 1970s down to 10.2 per cent." The average rate of growth in manufacturing between 1960 and 1980 was 11.3 per cent,5 and employment in that sector rose from 33,000 to 287,000 or 27 per cent of the work-force during that period.'5 In contrast to the threat of growing unemployment in the mid-1960s, Singapore in the mid-1970s was importing unskilled labour from neighbouring countries to fill the jobs regarded as unattractive by fully employed Singaporeans. Singapore's "open~door" policy towards foreign investment undoubtedly brought great benefits to the foreign companies which dominated

--

12

Domestic' Political Structures and Regional Economic Co-opemfion

the growing industrial, as well as the financial and business services sectors. Rapid economic growth also provided more opportunities to Singapore's established business community either as partners in joint ventures or in traditional areas of trade and commerce not attractive to foreign investors. But of greatest significance from the point of view of the political system was the growing size of the middle class and the increasing prosperity of the working class. In Singapore, a city-state, the middle class forms a much larger section of the population than is the case in the other ASEAN states. In 1980, some 13.6 per cent of the work-force was employed in the professional, technical, administrative and managerial categories, with another 27.8 per cent in the clerical and sales categories, making a total of 41.4 per cent in white-collar "middle-class-types* occupations.1 Another indicator of the proportio i of the population living in a middle-class style is ownership of durable consumer goods such as motor-cars and television sets. In Singapore in 1980, the proportion of motor-cars to households was 29.9 per cent and that of TV sets was 66 per cent** There is thus a substantial proportion of the population that has attained a middle-class style of life and thus acquired a stake in the preservation of the existing social order. The working class (that is, the production and related workers cater gory), which made up 40.4 per cent of the work-force, and workers in the service occupations, which made up 10.4 per cent of the work-force, have also benefited during the period of rule under the People's Action Party (PAP).9 Although wages were held low during the first phase of industrial development, measures were taken to provide some compensation in other fields. A huge urban renewal and public housing programme was launched which saw the elimination of many slum areas and the gradual transfer by the early 19805 of about 70 per cent of Singapore's population to subsidized government-built flats. The government also carried out a large-scale expansion of education and health facilities. Then, in the late 1970s the government decided to launch its "second industrial revolution". During a three-year programme beginning in 1979 wages were raised by about 20 per cent annually, well above the average increase in the consumer price index of 7 per cent during those years.'° In 1981, the average weekly earnings of workers in the production, transport and manual category was $l29.13, not far below the $143.98 received by clerical, sales and service workers, with the result that many rnenibers of the working class were able to attain a style of life not very different from those at the lower end of the middle-class category." Income distribution in Singapore is undoubtedly very unequal and those the bottom have many grounds for grievance. But it seems equally undeniable that a substantial majority of the people have benefited materially since the mid-l960s.'2 Economic growth has

Singapore

13

therefore provided a foundation for political stability. A large and

prosperous middle class forms a solid base of support for the political system while much of the lower class has also experienced economic advancement. Although dissatisfaction is present, as is indicated by the

opposition vote in elections, it remains limited partly because as the economic improvements experienced by M majority during the period of PAP rule. The government, therefore, does not face widespread and intensive demands from below, which can only be controlled by severely repressive means, while the presence of a large, well-educated middle class provides a further brake on authoritarian rule. The Singapore political system is nevertheless more authoritarian than others with substantial middle classes, such as Malaysia. One reason for this is the large size of the urban working class which, in the context of considerable inequality, represents a more threatening potential base of opposition than a large but politically unsophisticated peasantry. Furthermore, strict authoritarian control of the working class has been necessary because of the crucial importance of wage policy in the government's industrialization strategy which forms the basis for Singapore's growing prosperity. The weight of authoritarian rule is, therefore, felt much more heavily by the working class than the middle class. Pressure from Below The "administrative State" in Singapore has succeeded in insulating itself from mass demands. Headed by a united and closely-knit leadership, the government became increasingly authoritarian during the 1960s and has thus been able to eliminate or control potential sources of opposition. In any case, support for the opposition has been undermined by the government's success in promoting rapid economic development which has enabled it to build up a substantial base of support among citizens who have experienced economic advancement. When Singapore was granted self-rule by the British in 1959, a more-orless democratic political system was established in which the government was responsible to a parliament elected on the basis of universal suffrage.

Political parties, organizations representing various interests, and the press operated with considerable freedom, although the Communist Party was banned and responsibility for internal security was not exclusively in the hands of the Singapore Government but shared with Britain and . Nevertheless, in the first election held under the new constitution, an opposition party, Ethe People's Action Party (PAP), led by Lee Kuan Yew, won an overwhelming victory with 43 out of 51 seats, and 54 per cent of the votes. The PAP had come to power following a period of political turmoil

14

Domestic Political Structures and Regional Economic Co-opemrion

in which leftist. trade unions and student organizations had instigated a series of strikes, demonstrations and riots which increasingly threatened the government. The PAP itself was divided between a moderate faction which controlled the government and a leftist faction with its base in the trade unions and Chinese-medium schools. The failure of the new government, which lacked full control over internal security, to arrange the release of all detained leftist leaders, aggravated friction within the PAP which came to a head in 1961 when the leftist faction, which in fact controlled much of the party organization, broke away and formed a new party, the Barisan Sosialis (BS). It was in response to this party split that the PAP government turned increasingly to authoritarian means to retain its power. Sweeping arrests of political opponents took place in 1963 before Singapore joined the new Federation of Malaysia, and the authoritarian trend accelerated after Singapore's exit from Malaysia in 1965.13 A major weapon in the government's hands was the Internal Security Department (successor of the police Special Branch during the British period) which, under the Internal Security Act (which replaced the Preservation of Public Order OrdinanCe i n 1963), had virtually unlimited -

power to detain anyone considered a threat to security. The ordinance had been used againI left-wing trade unionists, school-teachers and students before 1959, and again against orients of the merger with Malaysia in 1963 when over a hundred people were arrested, many of them remaining in detention well into the 19705, and in the case of a few, until the l980s. The Internal Security Act has also been used against suspected communists, radical trade unionists, "extremist" advocates of Chinese language and culture, student activists, and also some Malay dissidents. In 1980, however, it was announced that the total number of

detainees had fallen to 34 and it was believed that this had been reduced further to about 20 in 1981.144 Although the number detained under the Internal Security Act was small, its existence was a powerful disincentive

to oppositionist activity. With the threat of the Internal Security Act hanging over its head, the BS declined as a force in Singapore politicl. When the party was formed in 1961, thirteen of the PAP's assembly members crossed to new party but many of them, together with other party leaders, were arrested in 1963 and afterwards. Having lost faith in the fairness of the parliamentary system, the remaining BS members of the assembly resigned in 1966 and decided to boycott further elections." Although the BS and several other opposition parties continued to exist, the PAP won all the seats, in many cases unopposed, in later elections until a by-election in 1981 when a Workers' Party candidate broke the PAP's

l

monopoly. Despite the difficulties that the opposition parties faced in

Singapore

publicizing their policies and criticisms of the government, the opposite vote in elections has nevertheless been relatively high, especially bearing in mind that many seats were uncontested, at 31 per cent in 1972, 28 per cent in 1976 and 24 per cent in 1980, indicating a substantial degree of alienation among those who have benefited least from the government's policies. The government's success ir; destroying the opposition parties as effective political forces has been due in large part to its control over the trade unions. The BS had its base in the Chinese-speaking working class which enabled its leaders to dominate the Singapore Trade Union Congress at the beginning of the 1960s. The government, however, used

its powers under the Trade Union Act to deregister BS-supporting unions, and detained many of the leaders. in 1961, PAP unionists established the National Trade Union Congress (NTUC) which became the dominant. trade union organization, although a few unions remained

outside it. The independence of the trade union movement was further undermined in 1968 through legislation which severely restricted the right to strike. From a peak of 189,000 members (43 per cent of the work-force) in 122 unions in 1962, the strength of the trade union movement declined steadily to 85,000 in 197035 and the NTUC, having abandoned the strike weapon, became increasingly involved in various social welfare program res financed in part by its commercial activities in such fields as insurance, supermarkets, taxis and minibuses, and its travel agency. In 1979 a young PAP Member of Parliament with a civil-service rather than a trade-union background, was appointed as Secretary-General of the NTUC and then as Minister-without-Portfolio in the government." In 1983, he was replaced by another minister without a trade-union background. Although the NTUC's membership rose again to about 240,000, or almost a quarter of the work-force, in

the quite different circumstances of the 1980s, the NTUC was in no position to behave independently of the government, and strikes were

virtually unheard of. Opposition was also checked by the government's policy towards the press. Although formally independent, newspapers take a line very sympathetic to the government. The liberal press received a blow in 1971 when two English-language newspapers were closed by the government. One of them, the Singapore Herald, had adopted a critical stance on a number of important issues, including national service, labour laws and the Internal Security Act. At the same time, a series of measures was taken against sections of the Chinese press accused of playing on Chinese racial sentiments, including the arrest of senior executives." In 1982, the two major Chinese-language newspaper groups merged under a government-sponsored "rationalization" plan, while the closeness of

16

Domestic' Po1:'f.Fca! Structures and Regional Economic Co-operanfon

the relationship between the government and the major English daily, the Straits Times, was symbolized by the appointment of a retired senior civil servant as the executive chairman f the newspaper group." While successfully undermining the potential countervailing power of opposition parties, trade unions and the press, the government also fostered the development of alternative bodies designed to bring local needs and expectations to the attention of the authorities as well as to keep the people informed about government policies." Since 1965, Citizens' Consultative Committees (CCCs) have been established in every electoral constituency, with the local Member of Parliament as advisor (except in the case of the lone opposition Member of Parliament since 1981), and a network of local management committees of community centres has also been established within each constituency. Through these bodies, the government has been able to keep in touch with popular feeling and respond to those expectations considered appropriate. In addition, although elections have offered no challenge to the PAP's control of the government, they have nevertheless served as a barometer of public feeling which the PAP takes into account when formulating its policies. The trend to authoritarianism in Singapore has been possible because of the unity of the political leadership. The victory of Lee Kuan Yew's "moderate" faction in the struggles between 1959 and 1963 laid the basis for what followed. Under Lee Kuan Yew's undisputed leadership the PAP has remained united and disciplined. Although the party's platform has been transformed from one of oppositionist socialism to the unashamed advocacy of capitalism, its top leaders have shown virtually no signs of ideological or personal differences and there have been few indications of disaffection among the rank and file. The leadership's complete control over the party and the government has provided it with a firm base from which to extend authoritarian controls over the system

as a whole. The Singapore Government has thus created a situation where its survival does not depend on its ability to meet particular mass demands. It has combined limited but effective repression with indirect control of some potential opposition forces and the undermining and intimidation of others. At the same time, its successful programme of economic development has allowed it to give attention to meeting popular expectations. Measures have been taken to ensure that the masses receive a share, although very unequal, in the fruits of development while political machinery has been established to allow the government to respond selectively to public, especially middle-class, grievances. The weight of authoritarian rule has been felt most heavily by the working

class whose low wages form the basis of the government's developmental strategy. The overall result is that Singapore's authoritarianism is strict

Singapore

17

but relatively limited in its repressive impact. It does not, however, give much scope for the successful application of pressure from below.

Pressure from Above The Singapore Government has . o succeeded in insulating itself from pressure 'from above in the form of demands by particular business groups for special consideration. Both the political leadership and the bureaucracy in Singapore have a high reputation for honesty and efficiency. A major factor determining the nature of the Singapore Government has been its political leadership. After the introduction of popular elections in 1955, the government, especially that of the Singapore People's Alliance, began to acquire a reputation for corruption. The PAP, however, consisted of young intellectuals and professionals who were socialist and reformist in orientation, rather than wheeler-dealer politicians and businessmen primarily interested in obtaining benefits for themselves and their supporters. After gaining control of the Singapore City Council in 1957 and the government in 1959, the PAP took firm measures against corruption, and the party acquired an image of being corruption-free. In the only case of a minister being charged with corruption, the Minister ate for the Environment was sentenced in 1975 to and aiiaif years' gaol for an offence which would be considered as normal practice in most ASEAN countries." The integrity of the political leadership extended into the bureaucracy where the government's readiness to take action against offenders was supported by high salaries and colonial tradition. The PAP leaders n only free of corruption but were also technocratic in orientation. While the early generation of PAP leaders had risen through the trade unions and the party, later recruits to the leadership tended to have civil~service and professional backgrounds. As the system became more authoritarian, the government was able to rely more on leaders whose main qualities were their technocratic skills rather than their capacity to mobilize popular support. The leadership's style, therefore, became more "administrative than "political"' in that their approach to decision-making was essentially rational and detached, shown* up relative lack of concern Mamas: the balancing of particular demand! and interests. The predominance rational, technocratic and detached policymaking in the SingapOre Government has been facilitated by the environmenim which it is situated. Firstly, it is suggested that rational, technocratic and expert administration becomes increasingly necessary as an economy modernizes and industrializes. As long as the Singapore economy was based on entrepdt . . . m _

I

Jr

.-.

_

M

..-..

18

Domestic Pohlfif.'a! Srrucfures and Regfonaf Economic Co-operation

trade, the need for technocratic administration was relatively weak. But once the PAP government had set of its programme to transform the economy to one based on modern, complex a11111 sophisticated industry and commerce, technocratic administration became increasingly essential. The need for efficient administration was particularly strong in Singapore in view of its lack of alternative resources and the requirement that its exports remain competitive internationally. By 1980, the modern sector of the economy had become predominant, with the manufacturing sector contributing 24 per cent of GDP, transport, communications and utilities, 24 per cent, and financial and business services, 17 per cent; while a substantial part of trade's share of 26 per cent could also be considered as belonging to the modern sector." Secondly, it appears that administration tends to be more efficient and "clean" in societies where the middle class is large because it is the educated middle class that can become most alienated by inefficiency, corruption and unfairness on the part of politicians and bureaucrats. The middle class in Singapore lacks mass organizations to protest against maladministration but alienation can be expressed through elections and the local community network. Although the government tends to be unresponsive to particular demands, the very size of the middle class, which makes up more than 40 per cent of the work-force, compels the government t o take into account its expectations. Finally, it is argued government economic policy-making will tend to be more rational and technocratic when there is a clear separation between government and private business interests. As noted above, the PAP leaders did not have business backgrounds and, at least initially, the party had an anti-business ethos. Further, it can be argued that the separation of government from business interests is more likely H W maintained when there is a substantial business community which has developed not as a result of government favor 11 and patronage but

from its own efforts. In Singapore, the local Chinese business community

has its roots in the entrepOt trade of the colonial period and is in no sense a creation of the PAP government. But by far the largest part of the Singapore business community is the foreign sector which plays the dominant role in the modern economy, accounting for about 90 per cent of net inyestrnent commitments in manufacturing in the late 1970s. Even more than local businessmen, multinational foreign investors are not particularly beholden to the PAP government. The large size and relative independence of the business community, both local and foreign, from the government tends to encourage rational nd technocratic administration. The government's heavy dependence on a large number of foreign investors means that needs maintain a "favourable investment climate" which can endangered . E corruption and favouritism towards certain companies at the expense of others. -»-=-=

Singapore

19

The Singapore Government has thus been relatively insulated against pressures from vested business interests. The complexity of the economy required technocratic administration which was supported in general by the large and independent business c o m m u n i t y - - w i M substantial middle class. While the government - , . undoubtedly sensitive to the needs and expectations of the business community Ju..-BrutUs foreign and domestic - it continued to treat businessmen as a community and did not respond to requests from particular companies for special favours. By insulating itself from such pressures the government may have alienated some particular interests but it tends to satisfy the expectations of the business community and the middle class as a whole. Government Performance

More or less insulated against pressures from both below and above, the Singapore Government has been able to pursue policies in accordance with its own view of what is best for the country. While certain policies have undoubtedly hurt particular interests, the government has usually paid little heed to protests and has just gone ahead with its programme. The government's industrialization programme provides an excellent example of its capacity to carry through a major economic and social transformation despite its immediately harmful consequences for particular interests. During the colonial period, the Singapore economy was base W entrepOt trade and there was very little industry. At the beginning. of. the_19605, he PAP government attempted to stimulate industrialization through import-substitution policies. The limitations of .. .. . . . . . . .

the tiny domestic mar-ket were temporarily breached when Singapore joined the new Federation of Malaysia, but had to be faced again after Singapore's withdrawal from it in 1965. Singapore's economic crisis was compounded by the 1967 decision of Britain to withdraw its military forces from countries east. of Suez. British military expenditure in

Singapore amounted

[ O 11 per cent of the Singapore GNP in 1967 and provided direct and indirect employment for about 20 per cent of the work-florce.23 Lacking industry, about to lose a major employer, and with E111 unemployment rate of 12.3 per cent in 1965, newly independent Singapore's prospects for the future looked bleak.

In the afterrnath of separation from Malaysia, the Singapore Govern-

ment reversed its industrialization policy from one based on importsubstitution to export-promotion. The government opened its doors wide to foreign capital and actively encouraged investment in industry. The government's decision to opt f`or export-oriented industrialization based Interests §W'ii1 haiti on foreig n investment conflicted with the ilnuII1Iulldi ' sections of the local business community and labour. Local industry, which had just begun to grow under the protection of import-substitution

m

20

Domesffc Poiitfcal' Structures and Regional Economic Co-operarion

policies, was suddenly faced with the competition of an open economy in which the emphasis was on exports rather than production for the domestic market. On the other hand, the new policy required that tight controls be imposed on trade unions in old& F" maintain labour discipline, and low wages SO that foreign investor! would "EE attracted. Despite muted protests from both quarters, the government's policies were implemented. Then, at the end of the 1970s, the government reassessed its strategy. The success of its export-oriented industrialization programme had not only reduced unemployment but also created a growing labour shortage which could only be overcome by importing unskilled labour from neighbouring countries. Moreover, Singapore's labour-intensive industries were facing increased competition from poorer Third World countries where wages were even lower- tt.. these circumstances, the government decided to launch its "second industrial revolution". The low-wage policy was abandoned and a wage-correction policy" introduced in 1979 which increased wages by about 20 per cent annually for three years. The goal was to force employers to move to a higher technological level by making labour-intensive technology too expensive. Thus, it was expected that Singapore would be able to maintain its level of exports by specializing in higher-technology products while at the same time overcoming labour shortages and its growing dependence on imported labour. In this context, it was also decided to phase out certain industries considered inefficient, such as motor-car assembling on which import duties were imposed. The decision to launch the "second industrial revolution" was taken by the government on the basis of what it believed was necessary for Singapore's future economic development. Although the policy obviously benefited workers, it was quite clear that it was not adopted in response to trade union pressure. On the other hand, the policy had painful consequences for those employers who could not adjust to higher wages and new technology, but their protests were to no avail. capacity of the government to implement program res which it regarded as essential regardless of public reaction is also shown in the case of population policy." As long as Singapore saw its future as being part of Malaysia little attention was given to the question of population growth but after 1965 this issue was suddenly seen as crucial. With two million people on a small island and increasing at a rate 0`il§.§ per cent annually during the 1960s, the prospect of overpopulation seemed to threaten whatever gains were expected fro economic development. Despite religious objections and cultural preferences, "W government . ... .. . .

launched a vigorous programme

curb population growth. Abortion

and sterilization were not only legalized but encouraged, preference was given in school enrolments to children from small families, and income

Singapore

21

tax incentives were provided. The result was a steady decline in the birth rate from 29.5 per cent in 1966 to 17.3 per cent in 1979, while the rate of population growth fell to 1.2 per cent in the late 1970s. As in the '"'""""'* of industrialization, 1 the government's population policy was not adopted as result Mmemands from particular interests and in fact caused dissatisfaction in some circlet But the government had decided that population growth had to be stopped and took lira measures to achieve that goal. Another example df- governmental effectiveness despite the opposition of pantie interests : up urban renewal and housing programme. The PAP government's housing scheme did not initially involve mass evictions of established residents, by 1962 the expanding programme began to require the acquisition of large tracts of land which were often already occupied. Although the plans included compensation and resettlement, they were usually strongly resented by residents threatened with eviction, who were supported by opposition politicians. After the repressive measures taken against the BS in 1963, however, the reclamation of land for urban renewal proceeded much more smoothly. Although evicted residents were usually unhappy, there was no-one to L...

_

mm

.,

whom they could turn for protection, so they had little choice but to accept resettlement." Urban renewal nevertheless continued to meet with sporadic resistance, as was shown in 1978 when the planned demolition of an old Chinese temple to make way for a swimming-pool complex in a public housing estate aroused fierce opposition from temple devotees. But in the end the temple, like the central Sikh temple the previous year, was demolished." Having decided that urban renewal was in the people's interests, the government simply carried out its programme with few concessions to the interests and feelings of those directly affected. Conclusion

The Singapore Government has to a large extent freed itself from the need to respond t o day-to-day political pressures from the middle and lower classes on one hand and élite-level vested interests on the other. A united, closely-knit ruling elite extends authoritarian controls over all potential sources of rival leadership and thus limits the channels through

which pressures from below can be expressed. At the same time rapid economic development and the government's welfare programmes, while not eliminating dissatisfaction, have brought substantial benefits not important sections of the only to the large middle class but . . working class. In this context, particular demands are not likely to get "n

'1

widespread

active supbort

beyond

those directly involved and can

therefore be largely ignored by the government, especially bearing in mind that they cannot be backed by strong political parties, independent

22

Dovnesrfc Poiizicaf Structures and Regional Economic Co-operation

trade unions or the press. Meanwhile, the separation of the government

from the business community and the need to meet the general expectations of the large middle class create an environment which allows the government to resist particular vested-interest demands. Government policies are therefore formulated in a relatively insulated atmosphere in which the government has considerable scope to decide what it believes to be most appropriate. The latitude that the Singapore Government enjoys in deciding its policies has implications an its attitude towards economic co-operation and integration in ASEAN. Because : m a i v e y free from direct pressures, the government has been able to pursue policies based on its own assessment of changing circumstances without being overly forced to take into account particular domestic interests. Thus, for example, in 1976 and 1977 Singapore was strongly advocating the establishment of a free trade zone in ASEAN which would have provided Singapore's industry with a wider market. But when the free trade proposal was rejected by some of the other ASEAN states, the Singapore Government faced few domestic obstacles in reassessing and abandoning its former policy. Instead of being the strongest advocate of regional integration, Singapore has now presented its "four-plus~one" proposal, implying that Singapore, as the "one", will not stand in the way of any agreement between the other four but may remain outside it. The Singapore Government's flexibility and the ease with which it can reverse an earlier policy is due in part to its ability to disregard particular domestic interests which may have had a stake in the continuance of particular policies.

NOTES L Chan Hens Chee, "Politics in an Administrative State: Where has the Politics Gone?" in Trends in Singapore, edited by Seah Chee Meow (Singapore: Singapore University Press for the Institute of Southeast Asian Studies, 1975). 2. World Bank, World Development Report 1982 (London: Oxford University

Press, 1982), Table 1.

3. Chan Hong Chee,

of

Dynamics of One Parry Dominance: The PAP

.as the

Grass-roofs (Singapore: Singapore University Press, 1976), p.2»4.

4. Ministry of Trade and Industry, Economic Survey of Singapore $98/, p.viii. World Bank, op.cit.,l (Fable 2, however, gives a lower estimate of 8.5 per cent. 5. World Bank, op.cit., Table 2. 6. Ministry of Trade and Industry, op.cit., p.9.

Singapore

23

7. See Department of Statistics, Singapore, Census of Populazio/1 1980, Singapore. Release No. 4: Economic Characteristics, Table 34. 8. Calculated from Far Eastern Economic Review (hereafter cited as FEER), Asia Yearbook 1982, pp. 8-9. The actual proportion of households with cars and television sets may be less because some households have more than one

of each. 9. See note 7 above. IO. Ministry of Trade and industry, op.Cit., pp. 5, 59. I t . bid., p. 52. 12. See v. V. Bhanaji Rao and M. Ramakrishnan, Income Inequality in Singapore (Singapore: Singapore University Press, 1980).

mu

. gilding of New States (Ithaca: Cornell University Press, 1978), pt. am.. 14. New Straits Times (Kuala Lump , 8 August 1981. ... 15. See Chan, op.cit., pp. 194-201. 16. H. V. Luther, "Strikes and the Institutionalization of Labour Protest: The

13. See S. Bedlington, .Welaysia and Singapore:

Case of Singapore", Journal of Contemporary Asia 8, no. 2 (1978) : 226. 17. See Patrick Smith, "The Union Engineers", FEER, 25 June 1982, pp. 5?-63. 18. See Chan, op.cit., pp. 205-6. i9. Patrick Smith, "Pressed iiil(J Wedlock", PEER, 23 April 1982, pp. 102-3. 20. Chan, op.cit., chap. 6. 21. FEER, Asia Yearbook 1976, p. 271. 22. Calculated from table in Ministry of Trade and Industry, op.cit., p. 15. 23. Kunio Yoshihara, FOreign Investment and Domestic Response: A Case Study of Sirzgaporcfs In dusf riafizotio n (Singapore: University of Singapore Press,

1976), p. 6. 24. Sec Saw Swee-Hook "Too Little Land, Too Many People" in Saw Swee-Heck and R. S. Bathal, .Singapore Towards the Year 2000 (Singapore: Singapore University Press, 1981). 25. See Chan, op.cit., pp. 165-80. 26. FEER, A s a Yearbook I979, p. 289.

Malaysia

Compared l o Singapore, the government in Malaysia is more open to political pressures from both below and above. But at the same time, the government has succeeded in maintaining a considerable degree of autonomy from such pressures. In Malaysia, like Singapore, a relatively democratic political system in the early 1960s increasingly acquired authoritarian characteristics with the result that the scope for opposition political activity narrowed and the government became less subject to pressure from below. But in Malaysia, this process was far less advanced than in Singapore so that the government still had to take account of the specific interests of particular sections of the community even if these interests were less forcefully supported than in the past. Similarly, the Malaysian Government was less insulated against pressures from above than was the Singapore Government although, as we shall see later, it was much more able to resist elite-level vested~interest pressure than were the governments of the Philippines, Thailand and Indonesia.

Economic Bcvelopmenl and the Social Structure The relatively open nature of Malaysia's political system is partly due t o

the level o f economic prosperity which has blunted mass dissatisfactions and thus made severe alltlroritarlanism less necessary for the governmem. l\flalaysia's h1211 rate of economic growth during the 1970s brought El steady increase in the size o f the middle class in all communities, while the incidence of extreme poverty seems to have been reduced. Staring the British period, the Malayan economy had eon lbrmcd t o the classic colonial model as an exporter o f raw materials and an importer of rnanulaetures. "jin and rubber made up a large part of' exports while local rnanullactorirlg_ was lrlsigrllficalrt. After independence,

an industrialization strategy based on import-substltulion was launched, but in the late 19605 the emphasis changed to export promotion. During the 1970s the Malaysian economy grew rapidly at an average real rate 24

~J'\

§\.)

Malaysia

of 7.8 per cent. The fastest growing sector was manufacturing which expanded at a rate of 12.5 per cent, and by 1980 was contributing 20,5 per cent of the gross domestic product (GDP), an increase in its share of nearly 50 per cent, compared with 1971.I In 1980, Malaysia's per capita G N P (gross national product) was US$1,620.2 The rapid economic growth of the 1970s was accompanied by a farreaching programme of social reform designed to reduce the economic imbalance between the communities which was seen as the root cause of the 1969 racial rioting. During the colonial period, In immigrant cornmunities had mainly entered t.he modern sectors of mining, plaN-taiionS, and commerce whit# the Malays had remained in their traditional fields of agriculture, Fish administration. This imbalance had not greatly changed by 1969. In the aftermath f the riots, the government introduced the New Economic Policy with two major goals the reduction of poverty, and the restructuring of society to eliminate the identification of economic function with race. The emphasis in practice was on the upliftment of the Malays among whom the incidence of poverty was highest and who were least represented in modern occupationsEconomic growth in the 19705 brought about a gradual increase in the size and prosperity of the middle class. In terms of occupational categories, those in professional, technical, administrative, and managerial occupations in 1980 made up 7 per cent of the peninsular work-force, while another 17 per cent were in clerical and sales occupations, making a total of 24 per cent in the upper, middle, and lower-middle class occupations, compared with 20 pet" cent in 1970. Of particular importance was the communal make-up of these occupations- While the proportion of the non-Malay work-force in these categories rose slightly during the decade from 27 to 30 per cent, the proportion of Malays in such occupations rose sharply from 13 to 18 per cent although non-Malays continued

mu

-

to outnumber Malays by a ratio of 61:39.3 The rise i n middle a n d lower-

middle class prosperity was shown in the huge expansion of housing estates in most Malaysian towns and the increase in ownership of durable consumer goods. In 1980, 19 per cent of peninsular households had cars, and 53 per cent had television sets.* The proportion of private cars to households in peninsular Malaysia, however, rose from 14 per cent in 1970 to 33 per cent in 1980, indicating that many middle-class families had more than one car, while the proportion of" television sets to households rose from 12 to 67 per cent? The growing size and prosperity of the middle and lower-middle classes provided the government with a substantial base of political support. The new Malay recruits to urban, middle-class life, whose rise up the social ladder had been due largely to government policies after 1969, had many reasons to feel grateful to the government, and in general supported it strongly. On the other hand, the increasing prosperity of the non-Malay

26

Dorweshfc Po fif iccfl Srrucfurés and R£'giona:' Economic C`o-uperuiion

middle class made it easier for them to accept the discrimination that the government practised against them. The rapid economic growth of the 1970s "trickled down" to some extent to the lower classes who, In the peninsula, were more or less equally divided between _predominantly Malay agricultural workers (35 per cent) nmumlm *'vvoriu class" of production, transport and oth er workers (33 per cent). .Emg whom non-\'Ialays outnumbered the Malays. In the mis. agricultural sector, the government's land development programme (FELDA) continued to e'