Malaysia, the bumiputra policy, and foreign investors: An evaluation

The influence of foreign investment on Malaysian Bumiputera technology firms: 1957-2016

“…Implications of foreign investment activities through the economic engagement of MNCs in a country have shown mixed outcomes, where the inflow of foreign firms in a country yields positive and negative results for developing countries (Shiong, 1997). One of the comprehensive seminal studies by Stoever (1985) on the evaluation of Malaysian Bumiputera policy and foreign investment contends that foreign companies have played a significant role in Malaysia’s industrial development, alongside other local companies in both primary sectors and manufacturing-based sectors (Ang, 2007; Min, 2003). The existence of MNCs in Malaysia is considered an important source of economic growth as well as providing the impetus for advanced foreign technology and knowledge to domestic firms (Khalifah and Adam, 2009).…”

“…The British-owned mines and estates used few Bumiputera Malays, contracting instead Chinese and Indian labour (Husin Ali, 2008). While agriculture and farming remained the focus for ethnic Malays, commercial and trading interests were predominantly Chinese (Husin Ali, 2008; Jomo, 2007; Stoever, 1985). This imbalance led to an enduring link between ethnicity and economic activity, which eventually led to the formation of the United Malays National Organisation (UMNO) in March 1946.…”

“…Amongst key elements of this initiative was the “30-40-30 rule” which the government used to reduce foreign ownership by 30 per cent of equity shares (Stoever, 1985). The remaining 70 per cent was meant for Malaysian citizens – with the aim of 30 per cent Bumiputera ownership.…”

“…This requirement also applied to existing foreign companies wanting to expand their business or develop new markets within the Malaysian economy. Other factors were taken into consideration by the government such as location, level of technology, use of local resources and most importantly, foreign companies’ contribution to the Malaysian economy to determine exact foreign share percentage (Stoever, 1985).…”

“…The Industries Minister possessed the power to override and determine corporate decisions in certain areas such as directorship, equity ownership and distribution. As a consequence, the number of approved foreign investment projects fell between 1974 and 1977 from 525 approved projects to 400 projects (Stoever, 1985). The Third Malaysian Plan (1976-1980) provided exception under the ICA and eased the terms it demanded from foreign oil companies to foster more petroleum exploration and production.…”