The Historical Development of Foreign Investment in the Formation of the Malaysian Economy. Colonial Period-Post Independence

Inhaltsverzeichnis

ABSTRACT

THE HISTORICAL DEVELOPMENT OF FOREIGN INVESTMENT IN MALAYA

BIBLIOGRAPHY

ABSTRACT

The development of the Malaysian economy currently inherited from the previous three levels, beginning with the level of growth and rapid development of the natural resources industry, especially tin and rubber starting from the mid 19th century until the year 1914, followed by a period of volatility or instability of the natural resources industry in the period between the First and Second World War and last but not least the level of consolidation and rationalisation of the natural resources industry together with a diversified economy after 1945.^[1] For the purposes of smoothness and consistency in understanding the history of foreign investment during the British colonial and Malaysian post colonial periods, the history of foreign investment in Malaya^[2] will be analyzed in advance. The background of the study will focus on Malaya since the formation of its economy is the cord to the formation of the Malaysian economy. However, the contribution of Sabah dan Sarawak economic development in the formation of Malaysia's economy could not be denied.

Keywords: British, Malaysia, Foreign Investment, Post-Colonial, Malaya

Iwao Hino Raja Singam. 1927. Straits Settlements Police Journal. no place: no publisher.

Wong Lin Ken. 1965. The Malayan Tin Industry to 1914. Tucson: University of Arizona Press.

THE HISTORICAL DEVELOPMENT OF FOREIGN INVESTMENT IN MALAYA

During the British colonial era in Malaya, foreign investments are focusing in sectors of rubber and tin^[3] with British were the main contributors of capital investment.^[4] Tin industrial enterprise is the oldest and major export material in Malaya. Prior to the year 1820, tin mining was undertaken by the Malays using traditional methods. The inclusion of the Chinese with a better mining methods in surface mining and pump mining has expanding this industry until Malaya became the biggest tin producer and exporter in the world in the early 1900s. British rule which introduced the Residential System and usage of dredge by European operators accelerate the tin industry development. This was further assisted by the construction of the railway and road that facilitated the work of tin transporting to the port for export. In 1885, the first railway was built linking Taiping and Port Weld. This transport development has led to the opening of more new mines and increase the tin production.

The problems of labour shortages are being addressed by British with promoting labour migration policy from China. To launch the mining business, the administration has been updated with the introduction of surveying mining land to determine the border accurately and avoid a fight between miners. The efforts undertaken by British has promotes the development of tin industry in Malaya and increase its mining productivity. The rapid development of tin industry in Malaya was due to high demand in the world market, following the Industrial Revolution occurred in Europe. Tin was required in the food caning enterprise to avoid tin from rusty and ensure food is safe for use.

Changes in Europe’s transport revolution have led to the discovery and creation of motorcar requiring tire rubber as windy for the vehicle.^[5] During the burst of rubber prices in 1909-11,^[6] British investors are interested to invest in the rubber company in British capital market^[7] because the British rubber company gets big profit that allows them to pay dividends as high as 30 to 40 percent.^[8] Rubber price boom in 1909-1911 also prompted Japan to invest capital in the rubber plantation in Malaya.^[9] The importance of Japanese rubber led to the formation of Japanese Planters' Association in Singapore in 1912.^[10]

British trading companies such as Harrison and Crosfield, Bousted Buttery Estate Agency, Guthrie and Company, Barlow and Company, and Sime Darby^[11] was involved in playing an important role in ensuring the British domination over the rubber industry export. These trading companies has involved in Malaya’s export and import trade for decades before the introduction of rubber, with a good reputation in the financial integrity in British and Malaya.^[12] They also has a strong network with the European cultivation community, goverment officers, and experienced in Malaya’s economic sector. These trading companies became the mediator between foreign capital sources, British investors, and users of foreign capital which is the plantation industry in Malaya.^[13] In addition to British investors, investors from Europe also invest when rubber prices soar, including Western industry company's rubber-based although their involvement less significant.^[14] The passion of the United States^[15] and Japan capitals as shown in rubber plantations investment in Malaya has led to enforcement of the Rubber Lands (Restriction) Enactment in 1917.^[16]

In addition to the capital in key sector, British also invest in trade^[17] and transport^[18] to ensure the main goods can be exported, as well as manufacturing goods can be imported from their countries. When the British export activities are increasing, this contributed to the increasing number of British banks and this leads to a pattern of control over trade and investment areas in order to meet the needs of the British, thus the birth of a colonization patterns in terms of foreign investment.^[19] From eleven foreign banks^[20] operating in Malaya at that time,^[21] not less seven of them are British-owned or British controlled banks^[22] such as Chartered Bank of India, Australia and China, Hong Kong and Shanghai Banking Corporation and Mercantile Bank of India.^[23]

Apart from rubber, British also has interests in tobacco, coconut and oil palm plantation.^[24] Perak and Selangor have large foreign ownership estates reserved for oil crops for export activities. Oil palm plantation is grown in large farms owned by British and other European citizens. A British enterprise, Boystead and Company Ltd., has opened a modern rice mill in Tumpat (Kelantan) in 1936. In the foundry industry, two British tin companies namely Straits Trading Company and Eastern Smelting Company have the monopoly right. International Tin Regulatory Scheme is an important British instrument for protecting large investment made in this field. British also has interests in other mineral resources. The most important gold mine in Malaya is owned by Raub Australian Gold Mining Company. Coal mined in Batu Arang, Selangor by Malayan Collieries Company. Tungsten ore were obtained from a single mine in Pulai, Perak. Its full-scale production resulted in the Federated Malay States emerged as the fourth largest producer of tungsten ore in the world.^[25]

Investment participation from foreign countries during the British colonial era were insignificant. The importance of the United States investment are in rubber plantations,^[26] organisations for the purchase and delivery of crude rubber,^[27] tin mining^[28] and distribution of petroleum products.^[29] The Netherlands also invest in a variety of agricultural crops and trade, but do not have investment in rubber.^[30] In terms of investment amount, the Dutch holding may not be much lower than the United States investment. France also has major investments in the industry of tin and rubber.^[31] Report of Malaya by the United States Department of Commerce in 1923 stated there are four French companies in the tin industry.

However, unlike natural rubber, trade and banking, foreign ownership in the tin mining industry are shared with the United States, Australia and France,^[32] with the majority ownership is British.^[33] After the mid-19th century, Malaya has become the main source of the world’s tin when canning industry begins during the American Civil War.^[34] The role of the British government has encouraged British investment in the mining industry.^[35] About 70% of the tin production are from foreign ownership mining.^[36] Japanese investment goes into Malaya in the 1930s aimed to exploit the mineral extraction, but it focused on iron mines that are not quite important because Japan gets the main supply from Australia and elsewhere.^[37] Japan has interests in steel investment,^[38] in line with the expansion of Japan’s steel industry where iron from Malaya is the most important source of supply outside the Japanese control territories.^[39]

In the face of Japanese competition in the textile industry,^[40] British introduced the textile quota system in 1934 that revive the Lanchashire goods import to Malaya.^[41] There is also a Japanese competition in the galvanized iron industry.^[42] In 1938 the British position strengthened, when Japan lost the bulk of trade arrangements through Chinese community act that boycott the Japanese goods as a result of the conflict in the Far East.^[43] At the moment, British is a leader among providers of Malaya. In terms of investment, British viewed impose constraints when there is a conflict of interest between them with Japan in the rubber industry, and provide encouragement when no conflict of interest as in the iron mining industry.^[44]

During the Japanese occupation in Malaya, North Borneo and Sarawak, the economic condition of these three prefectures do not grow with all trade and investment activities cease.^[45] After the end of the Second World War, on 1 April 1946 the Straits Settlements was dissolved. Singapore becomes a British Crown Colony with a civil administration headed by a Governor and separated from the Malaya. On January 21, 1948, the Malay rulers and the British representative signed the agreement of the establishment of the Federation of Malaya in preparation towards the establishment of the Federation of Malaya on February 1, 1948. This agreement abolished the Malayan Union and unifies the Malay States in a federation for the first time. Prior to the Federation of Malaya achieved independence in 1957, the pro-business policies and legislation, in the form of five-year development plan^[46] was introduced by the government in 1956. Pioneer Industries Ordinance 1958^[47] stimulated a new wave of foreign investment.^[48] At this time British was the major trading partner. Japan ranks third after Britain and the United States.^[49] British multinational companies investment^[50] in the Federation of Malaya’s manufacturing industry only occurs at the end of the 1950s.^[51] Some A few British multinational companies such as Fraser and Neave, Unilever and Bata started investment in the manufacturing sector as a response to the Federation of Malaya’s import replacement industry program.^[52]

On 16 September 1963, North Borneo, Sarawak and Singapore merged with the Federation of Malaya to form Malaysia, but Singapore later parted ways on 9 August 1965. By the late 1960s when Japanese companies have started to overcome their competitors in the West, the Japanese top management believe that their system is better than the West and they began to produce a form of new management.^[53] The term 'Japanese Incorporated'^[54] was created by the West as a result of anxiety to the attack of the Japanese economy in the world in the late 1960s.^[55] From the early 1960s, Malaysia began to receive automobile activities admission from Japan.^[56] This is challenging the dominance of the automobile market by cars from Britain and United States.^[57] British is the largest and most important investors from all foreign investors in the industrial field in Malaysia in the 1960s.^[58] During the mid-1960s, Japanese investment in export-oriented began pouring into Malaysia.^[59] Japanese investment projects was conducted by major Japanese conglomerates, usually as a joint venture with local owners^[60] than owned them completely. The initial phase of independence until 1968 marked the start of the inflow of foreign investment on a large scale to meet the needs of the market for foreign companies and at the same time, providing much needed capital for Malaysia’s economic development.

After the Government announced policies to encourage investment^[61] in export-oriented industries in 1968, Malaysia received foreign investment from many resources rather than before. In 1971, the Government has implemented the New Economic Policy (NEP)^[62] with the goal to eradicate poverty irrespective of race and restructuring society to eliminate racial identification according to economic activities.^[63] Free Trade Zone Act 1971 was introduced^[64] to encourage the electronic sector for export activities.^[65] Since the 1970s, the Malaysian industrial sector has grown, spurred on by the installation of electronic components from the United States and Japan.^[66]

British dominance as the largest foreign investor in Malaysia's manufacturing sector in 1968 had been taken over by Singapore in 1973.^[67] Singapore, British and the United States^[68] emerged as the three largest investors in Malaysia’s manufacturing sector at the moment.^[69] After the end of the world oil crisis,^[70] the year 1980 ended with Japan replaced the United States as the largest producer of steel and motor vehicles in the world.^[71] Japan also emerged as Malaysia’s key trading partner, with 20% from the total of Malaysia’s external trade^[72] and the largest investor in Malaysia’s manufacturing sector in Malaysia.^[73] In the Malaysian market, Japanese cars dominated more than 70% from total sales, with the remainder shared by Britain, Germany, Italy, Sweden, France and United States.^[74] The exceptional growth in manufacturing and high-technology industries has changed the economic activities of agriculture and mining in the early 1970s to a major producer of semiconductor chips in the 1980s, mainly due to the presence of the United States and Japan multinational companies in Malaysia.^[75] As an effect of the cloudy relationship with the British Government,^[76] by 1981 the Japanese position in Malaysia have been strengthened through the implementation of the Look East Policy under the leadership of Tun Dr. Mahathir Mohamad.^[77]

BIBLIOGRAPHY

Allen, G.C. Donnithorne, A.G. 1962. Western Enterprise in Indonesia and Malaya: a study in economic development. London: Allen and Unwin.

Andaya, Barbara W. Andaya, Leonard Y. 1982. A History of Malaysia. London: The Macmillan Press Ltd.

Baker, J. 1999. Crossroads: A Popular History of Malaysia Singapore. Singapore: Times Books International.

Bauer, P.T. 1948. The Rubber Industry: A Study in Competition and Monopoly. London: Longman.

Birch, E.W. 1898. A Memorandum upon the Subject of Irrigation. Kuala Lumpur: Selangor Government Printing Office.

Brock K.S. 1971. Indigenous Banking in the Early Period of Development: the Straits Settlements 1914-1940. Malayan Economic Review 16 (1): 57-75.

Brown, I. 1994. The British Merchant Community in Singapore and Japanese Commercial Expansion in the 1930s. In Sugiyama, S. Guerrero, M. C. (editors). International Commercial Rivalry in Southeast Asia in the Interwar Period, pp. 111-132. New Haven, CT: Yale Center for International and Area Studies.

Buerah Tunggak Hussin Salamon. 2011. Mengembalikan Kegemilangan Tamadun Melayu-Islam Menerusi Pemupukan Budaya Niaga Berteraskan Akhlak. Sari 29 (2): 123-147.

Caballero, C. L. 2001. The British Presence in the Malay World: A Meeting of Civilizational Traditions. Sari 19: 3-33.

Callis, Helmut G. 1976. Foreign Capital in Southeast Asia. New York: Arno Press Inc.

Carl K., Steaz, John M. 1984. Agricultural Development in the Third World. Baltimore: The Johns Hopkin University Press.

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^[1] P. J. Drake, Currency, Credit and Commerce: Early Growth in Southeast Asia, Hampshire, Ashgate Publishing Limited, 2004, P. 15. See also Kamarudin bin Othman, Rosman bin Mahmood Mohamad Shukri bin Johari, Hubungan Eksport Terhadap Peningkatan Produktiviti Sektor Pembuatan di Malaysia: Satu Kajian Granger Causality, Research Project, February 2006, Dungun, Universiti Teknologi MARA Cawangan Terengganu, 2006, pp. 10-14.

^[2] Malaya at the time refers to the Malay States in Peninsular, Penang and Singapore.

^[3] Shakila Yacob, The United States and the Malaysian Economy, London, Routledge, 2008, p. 1. See also Sumafiiatiee binti Sulong, Kesan dan Peranan Pelaburan Langsung Asing Ke Atas Pertumbuhan Ekonomi Malaysia, Master’s Thesis in Economics, Universiti Utara Malaysia, 2003, p. 10.

^[4] V. Kanapathy, Foreign Investment in Malaysia: Experience and Prospects, Singapore, Nanyang University, 1971, p. 2. See also Helmut G. Callis, Foreign Capital In Southeast Asia, New York, Arno Press Inc, 1976, pp. 52, 55. Although the distribution of capital by foreign nationals cannot be estimated precisely, arguably British investment are exceeding 70 percent from the total of foreign investment in Malaya. See also Sieh Lee Mei Ling, Menangani Cabaran Dunia: Strategi Globalisasi di Malaysia, Kuala Lumpur, Institut Terjemahan Negara Malaysia Berhad, 2007, p. 24. British investment estimated to be worth 33 million pound sterling in 1913 and about 108 million pounds sterling in 1930.

^[5] P. J. Drake, Currency, Credit and Commerce: Early Growth in Southeast Asia, Hampshire, Ashgate Publishing Limited, 2004, pp. 34, 56. See also Lee Sheng-yi, The Monetary and Banking Development of Singapore and Malaysia, Singapore, Singapore University Press, National University of Singapore, 1974, p. 41.

^[6] Yoshimura Mako, Japan’s Economic Policy for Occupied Malaya in Yoji Akashi Yoshimura Mako (editors), New Perspectives on the Japanese Occupation in Malaya and Singapore, 1941-1945, Singapore, NUS Press, 2008, p. 121.

^[7] See P. J. Drake, Currency, Credit and Commerce: Early Growth in Southeast Asia, Hampshire, Ashgate Publishing Limited, 2004, p. 34. Rubber plantations however concentrated in the West-Central and South-West of the Malaya, where there are efficient transportation and communication networks already exist, thus facilitating and reducing the prices of rubber export and supply and labour import. See also Lim Chong Yah, Economic Development of Modern Malaya, Kuala Lumpur, Oxford University Press, 1967, pp. 108-109. He reviewed separately on primary production, population, financial management and infrastructure.

^[8] Poroor Radhakrishnan, The Role of Rubber in The West Malaysian Economy, Ph.D. Thesis, Stanford University, 1974, p. 35. See also D. M. Figart, The Plantation Rubber Industry in the Middle East, Washington, D.C., Government Printing Office, 1925, p. 93.

^[9] Yuen Choy Leng, Japanese Rubber and Iron Investments in Malaya, 1900-1941 in Wolf Mendl (editor), Japan and South East Asia: From the Meiji Restoration to 1945, London, Routledge, 2001, pp. 126, 127, 132. At this time Japan also entered the rubber trade with producing bicycle tires and rubber shoes. See also Mohamad Isa Othman, Pendudukan Jepun di Tanah Melayu 1942-1945 (Tumpuan di Negeri Kedah), Kuala Lumpur, Dewan Bahasa dan Pustaka, 1992, p. 78. See also Khadijah Md. Khalid Lee Poh Ping, Whither The Look East Policy, Bangi, Penerbit Universiti Kebangsaan Malaysia, 2003, p. 45.

^[10] For further information about Japanese Planters’ Association, kindly see R. L. German, Handbook to British Malaya, London, Malay States Information Agency, 1937, p. 100.

^[11] Poroor Radhakrishnan, The Role of Rubber in The West Malaysian Economy, Ph.D. Thesis, Stanford University, California, 1974, p. 35. See also P. J. Drake, Currency, Credit and Commerce: Early Growth in Southeast Asia, Hampshire, Ashgate Publishing Limited, 2004, pp. 56, 57.

^[12] See ibid., pp. 56, 57. These trading companies already have marketing and financing knowledge and a strong network of relationships in British, and have the experience and agency in shipping and insurance. In addition, they are in a few years was involved with the opening of Malaya to large-scale commercial agriculture. What is most important, their good image in London trade network provides a guarantee for the British community to invest in new rubber companies set up with the help of trading companies.

^[13] Ibid., p. 35. See also G.C. Allen, A.G. Donnithorne, Western Enterprise in Indonesia and Malaya: a study in economic development, London, Allen and Unwin, 1962. For more information on the role of the Agency Houses in Malaya, kindly see Lee Sheng-yi, The Monetary and Banking Development of Singapore and Malaysia, Singapore, Singapore University Press, National University of Singapore, 1974, pp. 46-79. See also K.M. Stahl, The Metropolitan Organization of British Colonial Trade: four regional studies, London, Facer Faber, 1951.

^[14] See Voon Phin Keong, Western Rubber Enterprise in Southeast Asia 1876-1921, Kuala Lumpur, University of Malaya Press, 1976, p. 150. From 1,034 rubber company directors in Malaya in 1914-15, a total of 1,025 persons are British citizens, while nine other directors are Belgium and France citizens.

^[15] See Shakila Yacob, The United States and the Malaysian Economy, London, Routledge, 2008, p. 31. The Malayan rubber industry attracted a number of the United States rubber companies to invest. In 1905, Malacca Rubber Company was founded, and by 1911 it became one of the largest manufacturers in Malaya. For further information about Malacca Rubber Company, kindly see P. Sodhy, The US-Malaysian Nexus: Themes in Superpower-Small State Relations, Kuala Lumpur, ISIS, 1991, p. 12. Two more the United States rubber companies, Pahang Rubber Company Ltd in Pahang and Tanjong Olak Rubber Plantation Company in Johor were established in 1906 and 1907.

^[16] See J. H. Drable, Rubber in Malaya, 1876 - 1922: The Genesis of the Industry, Kuala Lumpur, Oxford University Press, 1973, pp. 187-188. This enactment determines all land exceeding 50 acres to be planted rubber only given titles to British citizens, citizens of the Malay rulers, the company registered in the British Empire or residents who have been staying in Malaya at least seven years. See also Yuen Choy Leng, Japanese Rubber and Iron Investments in Malaya, 1900-1941 in Wolf Mendl (editor), Japan And South East Asia: From the Meiji Restoration to 1945, London, Routledge, 2001, pp. 126, 128. Enactment No. 1 in 1917 for the Federated Malay States was the enactment imposing restrictions on the granting of title and land arrangements in areas with large rubber. See also file of British Colonial Office No. CO273/464, Memorandum, R. G. A. To Sec. State for Colonies, 3 January 1917. See also Mohamad Isa Othman, Pendudukan Jepun di Tanah Melayu 1942-1945 (Tumpuan di Negeri Kedah), Kuala Lumpur, Dewan Bahasa dan Pustaka, 1992, p. 78. See also Yoji Akashi, The Nanyo Kyokai and British Malaya and Singapore, 1915-45 in Yoji Akashi Mako Yoshimura (editors), New Perspectives on the Japanese Occupation in Malaya and Singapore, 1941-1945, Singapore, NUS Press, 2008, p. 26.

^[17] Sieh Lee Mei Ling, Menangani Cabaran Dunia: Strategi Globalisasi di Malaysia, Kuala Lumpur, Institut Terjemahan Negara Malaysia Berhad, 2007, p. 24.

^[18] P. J. Drake, Currency, Credit and Commerce: Early Growth in Southeast Asia, Hampshire, Ashgate Publishing Limited, 2004, p. 41.

^[19] V. Kanapathy, Foreign Investment in Malaysia: Experience and Prospects, Singapore, Nanyang University, 1971, p. 3. For more information about the difference of international foreign investment in 19th and 20th centuries, kindly see R. Nurkse, The Problem of International Investment Today in the Light of Nineteenth Century Experience in Economic Jurnal 64, 1954, pp. 744-758. See also Helmut G. Callis, Foreign Capital In Southeast Asia, New York, Arno Press Inc, 1976, p. 51.

^[20] See Lee Sheng-yi, The Monetary and Banking Development of Singapore and Malaysia, Singapore, Singapore University Press, National University of Singapore, 1974, p. 39. Foreign banks were set up for the purpose of financing and promoting trade between Western countries and Malaya, by encouraging the capital flows from Western countries to Malaya. See also V. Kanapathy, Foreign Investment in Malaysia: Experience and Prospects, Singapore, Institute of Business Studies, College of Graduate Studies, Nanyang University, 1971, p. 6. The main purpose of foreign banks establishment is for their national industry service, and participate in the profit of the banking deposit and international banking business.

^[21] See also P. J. Drake, Currency, Credit and Commerce: Early Growth in Southeast Asia, Hampshire, Ashgate Publishing Limited, 2004, p. Notes. During this time Malaya including Singapore using Dollar ($) currency.

^[22] See Rubi Ahmad Sieh Lee Mei Ling, Sektor Kewangan in Sieh Lee Mei Ling (editor). Menangani Cabaran Dunia: Strategi Globalisasi di Malaysia, Kuala Lumpur, Institut Terjemahan Negara Malaysia Berhad, 2007, p. 328. Historically, the need to be in the same place with their customers is the reason that led financial companies to Malaya in the late 19th century. Their role is to provide foreign exchange service to foreign traders, often those who come from the same country.

^[23] Helmut G. Callis, Foreign Capital in Southeast Asia, New York, Arno Press Inc, 1976, p. 52. See also Lee Sheng-yi, The Monetary and Banking Development of Singapore and Malaysia, Singapore, Singapore University Press, National University of Singapore, 1974, p. 47. With the rapid development of rubber and tin industries, foreign banks had set up branches and agencies in most cities and towns in Malaya. See also ibid., p. 41. There is also the Netherlands and the United States banks such as Nederlandsche Handel-Maatschappij N.V. and First National City Bank of New York. See also ibid., p. 48. Two other British banks are P. O. Banking Corporation and Eastern Bank. See also ibid., p. 49. Two Japanese banks that active in Malaya before the Second World War are the Bank of Taiwan and Yokohama Specie Bank. Both closed towards the end of the Second World War. For more information, kindly see Iwao Hino Raja Singam, Straits Settlements Police Journal, 1927, no place, no publisher, p. 180. See also The Sarawak Gazette L (795), 16 June 1920, p. 140.

^[24] Helmut G. Callis, Foreign Capital in Southeast Asia, New York, Arno Press Inc, 1976, p. 52. See also Muhamad Ridzuan Amin, Perkembangan Ekonomi di Malaysia, Subang Jaya, Mika Cemerlang Sdn. Bhd., 2009, p. 14. Generally, oil palm cultivation in Malaya was started as an ornamental in 1875 to 1917. In 1917 to 1957, oil palm have been planted commercially by a French farmer, M. Henri Fouconnier in Selangor.

^[25] Helmut G. Callis, Foreign Capital in Southeast Asia, New York, Arno Press Inc, 1976, pp. 53-54.

^[26] See Shakila Yacob, Model of Welfare Capitalism? United States Rubber Company in Southeast Asia, 1910-1942 in Enterprise Society 8 (1), 2007, pp. 136-174. See also Shakila Yacob, The United States and the Malaysian Economy, London, Routledge, 2008, p. 15.

^[27] Shakila Yakob doing many studies on the United States investment history in Malaysia from the colonial to post-colonial era. See Shakila Yacob, Economic and Trade Relations in The Malaysian-American Partnership, Kuala Lumpur, Malaysian Strategic Research Center and AMCHAM, 2011, pp. 32-44. See also Shakila Yacob, Beyond Borders: Ford in Malaya, 1926-1957 in Business and Economic History On-Line 1, 2003, pp. 1-26. See also Shakila Yacob, Model of Welfare Capitalism? United States Rubber Company in Southeast Asia, 1910-1942 in Enterprise and Society 8 (1), 2007, pp. 136-174.

^[28] Shakila Yacob, The United States and the Malaysian Economy, London, Routledge, 2008, p. 15.

^[29] U.S. Department of Commerce, American Direct Investments in Foreign Countries, no place, no publisher, 1929, p. 27.

^[30] Helmut G. Callis, Foreign Capital In Southeast Asia, New York, Arno Press Inc, 1976, p. 55.

^[31] Shakila Yacob, The United States and the Malaysian Economy, London, Routledge, 2008, p. 45.

^[32] V. Kanapathy, Foreign Investment in Malaysia: Experience and Prospects, Singapore, Nanyang University, 1971, p. 3.

^[33] Helmut G. Callis, Foreign Capital In Southeast Asia, New York, Arno Press Inc, 1976, pp. 52, 53. . In Selangor, Negeri Sembilan, Perak and Pahang, there are 40 British companies with a capital between 8 to 9 million pound sterling involved in tin mining activities. Pahang Consolidated Company Ltd is one of the largest tin mining company in the world.

^[34] K. S. Jomo, Warisan Ekonomi Mahathir, Kuala Lumpur, Utusan Publications Distributors Sdn Bhd, 2010, p. 184.

^[35] Jomo, Pembangunan Ekonomi Dan Kelas Sosial Di Semenanjung Malaysia, Kuala Lumpur, Dewan Bahasa Dan Pustaka, 1988, p. 198. The factors that allow Western companies take over control of this enterprise from Chinese miners not only consists of economic factor, but also politic. In addition to the advantages of having the larger amount of capital and mining method that more efficient than the Chinese miners, Western companies also have advantages in terms of support from the British administration in Malaya, which is their official policy of course the priority of British interests. The British administration has imposed several enactments to reinforce official control against tin mining at all levels and nobody is allowed to open mines without government permission. When the license authorization given to miners, the total capital of a mining firm is the most important factor affecting the result. So when the guideline was introduced, Western companies with large fixed capital investment of course have the advantage from small Chinese miners. See also Yip Yat Hoong, The Development of the Tin Mining Industry of Malaya, Kuala Lumpur, University of Malaya Press, 1969, pp. 20-21.

^[36] Paul H. Kratoska, The Japanese Occupation of Malaya: a Social and Economic History, 1941-45, London, C. Hurst and Co. (Publishers) Ltd, 1998, p. 20.

^[37] V. Kanapathy, Foreign Investment in Malaysia: Experience and Prospects, Singapore, Nanyang University, 1971, p. 3.

^[38] See Yuen Choy Leng, Japanese Rubber and Iron Investments in Malaya, 1900-1941 in Wolf Mendl (editor), Japan And South East Asia: From the Meiji Restoration to 1945, London, Routledge, 2001, p. 133. Iron investment are more important than rubber cultivation as it played a major role in the development of the mining industry in Malaya and the Japanese steel industry. See also Khadijah Md. Khalid Lee Poh Ping, Whither The Look East Policy, Bangi, Penerbit Universiti Kebangsaan Malaysia, 2003, p. 45.

^[39] K. S. Jomo (pnyt.), Japan and Malaysian Development: In the Shadow of the Rising Sun, London, Routledge, 1994, p. 1.

^[40] See Khadijah Md. Khalid Lee Poh Ping, Whither The Look East Policy, Bangi, Penerbit Universiti Kebangsaan Malaysia, 2003, p. 45. Japanese cheap cotton products are very popular among the locals than produced by British during this period. See also Shakila Yacob, The United States and the Malaysian Economy, London, Routledge, 2008, p. 36. See also V. Thompson, Japan Frozen Out of British Malaya in Far Eastern Survey 10 (20), 1941, pp. 238, 239. See also Koh Denis Soo Jin Tanaka Kyoko, Japanese competition in the trade of Malaya in the 1930s in Southeast Asian Studies 21 (4), 1984, p. 375.

^[41] Helmut G. Callis, Foreign Capital In Southeast Asia, New York, Arno Press Inc, 1976, p. 54. See also V. Thompson, Japan Frozen Out of British Malaya in Far Eastern Survey 10 (20), 1941, p. 239. See also Mehmet Sami Denker, Internationalization of the Malaysian Economy: Role of Japan, Ph.D. Thesis, Universiti Malaya, 1990, pp. 73, 87. See also Junko Tomaru, The Postwar Rapprochement of Malaya and Japan, 1945-61: The Roles of Britain and Japan in South-East Asia, London, Macmillan Press Ltd, 2000, pp. 21-22.

^[42] See file of British Adviser’s Office Kelantan No. KELANTAN. 580/1934, Japanese Competition in Galvanised iron sheets in Malaya-Forwards copies of S. of S. Malay States dispatch NO: 104 of 22.3.34 a draft reply in respect of F.M.S., for consideration:-, 25 Jun 1934. In this file there is a table entitled Imports of Iron Galvanized (corrugated and sheet) into the Federated Malay States between 1929-1934 (1st quarter).

^[43] See Mohamad Isa Othman, Pendudukan Jepun di Tanah Melayu 1942-1945 (Tumpuan di Negeri Kedah), Kuala Lumpur, Dewan Bahasa dan Pustaka, 1992, p. 79. The boycott of Japanese goods by Chinese people occurred after the Tsinan incident (1928) and Mukden incident (1931). See also Yoji Akashi, The Nanyo Kyokai and British Malaya and Singapore, 1915-45 in Yoji Akashi Mako Yoshimura (editors), New Perspectives on the Japanese Occupation in Malaya and Singapore, 1941-1945, Singapore, NUS Press, 2008, pp. 22, 29. See also Nanyo Kyokai, Nanyo Keizai Kondakai, Tokyo, Nanyo Kyokai, 1940, pp. 46-50. See also V. Thompson, Japan Frozen Out of British Malaya in Far Eastern Survey 10 (20), 1941, p. 239. See also Yoji Akashi, The Nanyang Chinese anti-Japanese Boycott Movement, 1908-1928: A Study of Nanyang Chinese Nationalism in Journal of the South Seas Society 23 (1/2), 1968, pp. 69-96. See also S. Leong, The Malayan Overseas Chinese and the Sino-Japanese War, 1937-1941 in Journal of Southeast Asian Studies 10 (2), 1979, pp. 293-320. See also Ching Hwang Yen, The Overseas Chinese and the Second Sino-Japanese War, 1937-1945 in Journal of the South Seas Society 52, 1998, pp. 150-159. See also Shiho Kato, Syarikat Perlombongan Jepun di Malaya Sebelum Perang Dunia Kedua, Master of Arts Thesis, Department of Southeast Asian Studies, Faculty of Arts and Social Sciences, Universiti Malaya, 1992, pp. 195-233. See also Mehmet Sami Denker, Internationalization of the Malaysian Economy: Role of Japan, Ph.D. Thesis, Universiti Malaya, 1990, pp. 73-76, 87. See also Yutaka Shimomoto K. Ravi Mandalam (editors), Japanese Immigrants and Investments in North Borneo, Kota Kinabalu, The Sabah Society, 2010, pp. 170-171.

^[44] Yuen Choy Leng, Japanese Rubber and Iron Investments in Malaya, 1900-1941 in Wolf Mendl (editor), Japan and South East Asia: From the Meiji Restoration to 1945, London, Routledge, 2001, pp. 134, 141. The location of iron deposits in Johor, Terengganu, Kelantan and Pahang proved to be in favour of the Japanese iron miners. Since all states less developed on the ground, the British administration welcomes any form of economic exploitation which will further enhance their savings. Japan can enjoy these privileges than in rubber cultivation industry. In addition, there is no right or interest from British or other European powers in steel. They are more interested in mining other minerals such as tin and gold. This encourages the involvement of Japanese miners as they worked without overshadowed economic competition. See also Chee Peng Lim Lee Poh Ping, Japanese Direct Investment in Malaysia, with Special Reference to Japanese Joint Ventures in Sueo Sekiguchi (editor), ASEAN-Japan Relations Investment, Singapore, Institute of Southeast Asian Studies, 1983, p. 62.

^[45] Ibid., pp. 54,59-144.

^[46] P. G. Beaumont, The Role of Foreign Investment in Malaysia in Jurnal Ekonomi Malaysia, 21 22, 1990, p. 76.

^[47] This Ordinance is intended to encourage the formation of as much as possible of the foreign companies in the manufacturing industry. Incentives that are offered in this Ordinance had attracted international firms where British at this point continue to be the main investor. Countries such as Singapore, Japan and Hong Kong are beginning to show interest in investing. The importance to enhance the inflow of foreign investment increased when the Federation of Malaya had lost benefits compared to traditional activities in the mining sector and agriculture. Unlike the 1950s and the early 1960s, the Federation of Malaya is no longer the major producers of natural rubber and tin. Thus, the entry of foreign investment is vital to reduce the dependence on the primary sector and diversify the economy. See also Kamarudin bin Othman, Rosman bin Mahmood Mohamad Shukri bin Johari, Hubungan Eksport Terhadap Peningkatan Produktiviti Sektor Pembuatan di Malaysia: Satu Kajian Granger Causality, Research Project, February 2006, Dungun, Universiti Teknologi MARA Cawangan Terengganu, 2006, p. 10. However, this Ordinance is seen less effective in the provision of employment opportunities.

^[48] Shakila Yacob, Open Terrain: The Impact of the New Economic Policy on U.S. Foreign Direct Investment in Malaysia in IEHC 2006 XIV International Economic History Congress, Session 94: Foreign Companies and Economic Nationalism in the Developing World after World War II, Organized by International Economic History Congress, Helsinki, Finland, 21-25 August 2006, p. 10.

^[49] Khong Kim Hoong, Malaysia-Japan Relations in the 1980s in Wolf Mendl (editor), Japan and South East Asia Volume II: The Cold War Era 1947-1989 and Issues at the End of the Twentieth Century, London, Routledge, 2001, p. 334.

^[50] See Sumafiiatiee binti Sulong, Kesan dan Peranan Pelaburan Langsung Asing Ke Atas Pertumbuhan Ekonomi Malaysia, Master’s Thesis in Economics, Universiti Utara Malaysia, 2003, p. 2. Multinational company or simply better known as MNC, is one of the most important factor that promotes global production to various locations. It also contributed to the onset of the formation of production centers or manufacturing in a country.

^[51] Chan-Onn Fong, Foreign Direct Investment in Malaysia: Technology Transfer and Linkages by Japan and Asian NIEs in Shojiro Tokunaga (editor), Japan’s Foreign Investment and Asian Economic Interdependence: Production, Trade, and Financial Systems, Tokyo, University of Tokyo Press, 1992, p. 194. See also Shakila Yacob, The United States and the Malaysian Economy, London, Routledge, 2008, p. 36. The small market of the Federation of Malaya provides some incentives to the manufacturing industry, especially before the 1930s. See also J. V. Jesudason, Ethnicity and the Economy: The State, Chinese Business and Multinationals in Malaysia, Singapore, Oxford University Press, 1989, p. 32. See also R. Emerson, Malaysia: A Study in Direct and Indirect Rule, Kuala Lumpur, University of Malaya Press, 1964, p. 42. See also P. P. Courtenay, Geography of Trade and Development in Malaya, London, G. Bell Sons, 1972, p. 109. See also J. H. Drabble P. J. Drake, The British Agency Houses in Malaysia: Survival in a Changing World in Journal of South East Asian Studies 12 (2), 1981, p. 311. See also W. G. Huff, Monetization and financial development in South East Asia before the Second World War in Economic History Review 56 (2), 2003, p. 328. See also G. Jones, Merchants to Multinationals: British Trading Companies in the Nineteenth and Twentieth Centuries, Oxford, Oxford University Press, 2000, p. 293.

^[52] See Nik Hashim Mustapha Zulkifly Osman (editors), Dasar Ekonomi Malaysia, Bangi, Penerbit Universiti Kebangsaan Malaysia, 1989, p. 27. Originally the growth of the industrial sector in the Federation of Malaya is closely linked to the economic diversification policy. It started with the support of the light industry based on rubber and tin, such as making soaps, drinks, shoes and other items made of rubber. Later, arising from the need to improve the balance of payments and the adequacy of the self in the production of local goods then import replacement policy have become the foundation of the Federation of Malaya’s industrial policy. See also ibid., p. 28. The import substitution industry basically has managed to reduce the imports of consumption goods, but it has not managed to reduce imports of investment and intermediate goods that each respectively increased from 17% to 32% and 8% to 48% between the years 1961-82. See also K. S. Jomo, Warisan Ekonomi Mahathir, Kuala Lumpur, Utusan Publications Distributors Sdn Bhd, 2010, pp. 22, 184, 185. See also Sieh Lee Mei Ling, Menangani Cabaran Dunia: Strategi Globalisasi di Malaysia, Kuala Lumpur, Institut Terjemahan Negara Malaysia Berhad, 2007, p. 33. In the 1960s, the development of import replacement saw changes in the structure of imports. Imports of consumer goods declined, while imports of intermediate goods increased. See also ibid., p. 77. Import replacement policy are justified on a number of economic benefits, including savings in foreign exchange, increase domestic value added, employment creation, learning from foreign enterprises and the impact of positive economic and earnings growth.

^[53] Ezra F. Vogel, Japan as Number One: Lessons for America, Cambridge, Massachusetts, University Press, 1979, p. 134. For more information about the human resource management system in Japanese company, kindly see Gregory T. S. Thong, Asas Amalan Pengurusan Sumber Manusia dalam Syarikat Jepun di Malaysia in Shoichi Yamashita (editor), Pemindahan Teknologi Dan Pengurusan Jepun Ke Negara-Negara ASEAN, Kuala Lumpur, Dewan Bahasa Dan Pustaka, 1993, pp. 152-168. See also Wendy A. Smith, A Japanese Factory in Malaysia: Ethnicity as a Management Ideology in K. S. Jomo (editor), Japan and Malaysian Development: In The Shadow of the Rising Sun, London, Routledge, 1994, pp. 155-158.

^[54] H. Kahn, The Emerging Japanese Superstate Challenge and Response, Englewood Cliffs, New Jersey, Prentice-Hall, Inc., 1970, p. 201. Japan Incorporated more into a conglomerate, a Zaibatsu of the Zaibatsu. Japanese bank is the finance center, and with the help of bank each fast-growing industry can bear higher debt than if they operate alone. The loan powers of overall portfolio are given to each industry. With the economy as a new fund enterprise, this allows product price controlled to low levels, every industry can compete in the world market and earn big money. See also James C. Abegglen, The Economic Growth of Japan in Scientific American 22 (3), 1970, pp. 31-37.

^[55] K. S. Jomo, Warisan Ekonomi Mahathir, Kuala Lumpur, Utusan Publications Distributors Sdn Bhd, 2010, p. 20. See also Jomo (editor), Mahathir’s Economic Policies, Kuala Lumpur, INSAN, 1988, p. vii.

^[56] J. Tann Kok Aun, I Go East: Learning From the Japanese Experience, Kuala Lumpur, Milimex Corpn. Publishers, 1982, p. 30. See also Sieh Lee Mei Ling, Menangani Cabaran Dunia: Strategi Globalisasi di Malaysia, Kuala Lumpur, Institut Terjemahan Negara Malaysia Berhad, 2007, p. 230.

^[57] For more information about the history of the involvement of the United States of America and British in the automobile sector in Malaysia, kindly see Shakila Yacob, Anglo-American Cooperation in the Malayan Automobile Market Before the Pacific War in JEBAT: Malaysian Journal of History, Politics Strategic Studies 38 (2), 2011, pp. 61-82.

^[58] Junid Saham, British Industrial Investment in Malaysia 1963-1971, Kuala Lumpur, Oxford University Press, 1980, p. 12. See also Ismail Md Salleh, Foreign Direct Investment and Technology Transfer in the Malaysian Electronics Industry in Nomura Research Institute Institute of Southeast Asian Studies (editors), The new wave of Foreign Direct Investment in Asia, Singapore, Institute of Southeast Asian Studies, 1995, p. 140. Electronic industry dominate the manufacturing sector in Malaysia. It contributed the largest benefits in terms of macroeconomic output, exports, income, and employment. The industry is making rapid progress during the period of 1986-92 because of an effective promotion encouragement, a conducive investment climate, productive and easily trained labour, and well established infrastructure facilities. See also Sieh Lee Mei Ling, Menangani Cabaran Dunia: Strategi Globalisasi di Malaysia, Kuala Lumpur, Institut Terjemahan Negara Malaysia Berhad, 2007, p. 25.

^[59] See G. C. Allen, Ekonomi Negara Jepun, Kuala Lumpur, Yayasan Penataran Ilmu, 1989, p. 28. During the period after the Second World War, Japan invested a large part of the country's income, and in this way the country shifted from labour-intensive trades to industrial countries that are capital-intensive and high-tech. Most of the Japanese investment is channeled to the plant and equipment used in manufacturing, namely to capital types that give return in market value.

^[60] Chee Peng Lim Lee Poh Ping, The Role of Japanese Direct Investment in Malaysia, Occasional Paper No. 60, Singapore, Institute of Southeast Asian Studies, 1979, p. 75.

^[61] See ibid., p. 77. Investment Incentives Act 1968 introduced the first law passed in order to attract foreign investors to use Malaysia as the location of their production for the international market. This Act was introduced when it is the transition from the policy emphasis in replacement of import to the export orientation industry. More fiscal concessions given, especially to new industries and creating employment opportunities. Malaysia promoted as a low-cost manufacturing centre with uninterruptible power supply cheap workers that are many and can be trained. Some tax relief is also given to companies located in specific areas in Malaysia as a way to expand the development. Among them are giving tax holidays, investment credit tax, reinvestment allowances, export allowances and many more. This period saw the rapid expansion of the free trade zone, licensed production warehouse and other bound facilities. This is to allow import input and export output moving freely without constraints, while local workers from around the set zone can be used.

^[62] New Economic Policy (NEP) is a socio-economic programme in Malaysia which was introduced in 1971 by Tun Abdul Razak. It is a socio-economic programme to achieve national unity and national integration. Through NEP, entry of foreign investors is required. NEP execution can help by changing the Bumiputera become a blue collar worker on par with other races in Malaysia. It also speeds up the process of restructuring Malaysian society to correct economic imbalances so as to reduce and eventually eliminate the identification of race according to the economy function.

^[63] Jamaie bin Haji Hamil, Politik dan Perniagaan: Responsif Awal UMNO Terhadap Rekonstruksi Sosio-Ekonomi Melayu dan Kepentingan Parti in Jebat 29, 2002, p. 54.

^[64] Kamarudin bin Othman, Rosman bin Mahmood Mohamad Shukri bin Johari, Hubungan Eksport Terhadap Peningkatan Produktiviti Sektor Pembuatan di Malaysia: Satu Kajian Granger Causality, Research Project, February 2006, Dungun, Universiti Teknologi MARA Cawangan Terengganu, 2006, p. 10. See also S. Thomsen, Southeast Asia: The Role of Foreign Direct Investment Policies in Development in Working Papers on International Investment, Paris, Organisation for Economic Co-operation and Development (OECD), 1999, p. 22.

^[65] Shakila Yacob, Open Terrain: The Impact of the New Economic Policy on U.S. Foreign Direct Investment in Malaysia in IEHC 2006 XIV International Economic History Congress, Session 94: Foreign Companies and Economic Nationalism in the Developing World after World War II, Organized by International Economic History Congress, Helsinki, Finland, 21-25 August 2006, p. 10.

^[66] For more information about the development of Malaysia’s electronic sector, kindly see Mehmet Sami Denker, Internationalization of the Malaysian Economy: Role of Japan, Ph.D. Thesis, Universiti Malaya, 1990, pp. 503-544.

^[67] Sieh Lee Mei Ling, Menangani Cabaran Dunia: Strategi Globalisasi di Malaysia, Kuala Lumpur, Institut Terjemahan Negara Malaysia Berhad, 2007, p. 26.

^[68] See Shakila Yacob, Open Terrain: The Impact of the New Economic Policy on U.S. Foreign Direct Investment in Malaysia in IEHC 2006 XIV International Economic History Congress, Session 94: Foreign Companies and Economic Nationalism in the Developing World after World War II, Organized by International Economic History Congress, Helsinki, Finland, 21-25 August 2006, p. 10. The United States multinational company involved in the electronic sector are National Semiconductor, Hewlett-Packard, Intel, Litronix (now known as Litronix Siemens), Monsanto Electronics, Motorola, Texas Instruments and Western Digital.

^[69] Ibid., p. 10.

^[70] See Takafusa Nakamura Bernard R. G. Grace, Pembangunan Ekonomi Negeri Jepun Moden, Translated by Prof Madya Dr. M. Rajendran, Jepun, Kementerian Hal Ehwal Luar Negeri, 1985, p. 13. The world oil crisis first occurred in 1973 when the countries of the Organization of the Petroleum Exporting Countries (OPEC) from West Asia stopped oil export to the United States, Europe and Japan because of their support to Israel in the Yom Kippur War of 1973.

^[71] J. Tann Kok Aun, I Go East: Learning From The Japanese Experience, Kuala Lumpur, Milimex Corpn. Publishers, 1982, p. 229. See also Sueo Sekiguchi, Japanese Direct Foreign Investment and ASEAN-Japan Relations: A Synthesis in Sueo Sekiguchi (editor), ASEAN-Japan Relations Investment, Singapore, Institute of Southeast Asian Studies, 1983, p. 5. Japanese investment grew during the 1970s to make Japan the largest investor in Malaysia with 25% from the total foreign investment in Malaysia at the end of 1978. See also Eberhard Boenke, Japan’s Foreign Trade in 1980 in Manfred Pohl (editor), Japan 1980/81: Politics and Economy, Issued under the auspices of the Institute of Asian Affairs and Institute of Southeast Asian Studies, Singapore, Maruzen Asia, 1981, p. 148.

^[72] J. Tann Kok Aun, I Go East: Learning From The Japanese Experience, Kuala Lumpur, Milimex Corpn. Publishers, 1982, p. 12.

^[73] Ibid., p. 36. See also Somsak Tambunlertchai Umphon Panachet, Foreign Direct Investment in ASEAN in Soon Lee Ying (editor), Foreign Direct Investment in ASEAN, Kuala Lumpur, Malaysian Economic Association, 1990, p. 78. Japanese investments in the manufacturing sector are concentrated in food processing, textiles, chemical products, non-metallic mineral products, metal products and electrical and electronic products. Although Japanese company also invests in commercial, construction, financial and other services sectors, but most of the investment was in the manufacturing sector. See also Berita Arab-Malaysian 4, July 1983, p. 1.

^[74] For more information on Japanese car sales compared with the Western countries, kindly see J. Tann Kok Aun, I Go East: Learning From The Japanese Experience, Kuala Lumpur, Milimex Corpn. Publishers, 1982, pp. 32-35. Because of the dominance of Japanese technology in car industry, in December 1982 the Heavy Industries Corporation of Malaysia (HICOM) has signed an agreement with Mitsubishi to produce the first national car. The production is scheduled to start in 1986 with a capacity of 80,000 units a year. See also K. S. Jomo (editor), Japan and Malaysian Development: In The Shadow of the Rising Sun, London, Routledge, 1994, p. 10.

^[75] Shakila Yacob, Open Terrain: The Impact of the New Economic Policy on U.S. Foreign Direct Investment in Malaysia in IEHC 2006. XIV International Economic History Congress, Session 94: Foreign Companies and Economic Nationalism in the Developing World after World War II, Organized by International Economic History Congress, Helsinki, Finland, 21-25 August 2006, p. 10. See also Nooriah Yusof, Pelaburan Langsung Asing dan Pembangunan Industri Barangan Elektrik dan Elektronik di Negeri Pulau Pinang, 1970-2007 in Kemanusiaan 18 (2), 2011, p. 51.

^[76] K. S. Jomo (editor), Japan and Malaysian Development: In The Shadow of the Rising Sun, London, Routledge, 1994, p. 1.

^[77] Nobuo Kawabe, Masalah dan Perspektif Pengurusan Jepun di Malaysia in Shoichi Yamashita (editor), Pemindahan Teknologi Dan Pengurusan Jepun Ke Negara-Negara ASEAN, Translated by Nazlifa Md. Ali, Kuala Lumpur, Dewan Bahasa Dan Pustaka, 1993, p. 276.