KMS 3014 Industrial Relations

Learning Unit 2 A General Overview of Malaysia Industrial Relations The development of Malaysia economy. The state, law and industrial relations in Malaysia.

The Development of Malaysia Economy

Malaysia economy has been transformed from low income of raw materials to a middle income emerging multi-sector market driven by manufactures exports. The Malaysia economy was enjoying high growth (average of 8.7%), low inflation (less than 4%) and low unemployment (less than 4%) in early ninths. However, Malaysia economy was severely affected by the financial crisis in year 1997 where it affect most of the economic aspects.
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 Foreign direct investment is dropped almost up to 85 percent. Gross domestic product growth dropped to 0.7 percent from its usual growth between 7 to 9 percent. Many efforts had been made or renationalized to avoid the situation reach chronic level. A vigorous recovery programs mounted has shown positive results in year 1999-2000.
However, our economy is also very much affected due to 2001 global slowdown.

Total Population in Malaysia

Year 1970 1980 1990 2000 2009 No (million) 10,881.8 13,879.2 18,102.4 23,494.9 28,306.7

Total of Manpower Utilization in Malaysia

1982 Labour Force (million) Total Employment (million) Unemployment (000) Unemployment Rate (% of Labour force) Labour Force Participation Rate (%) 5,431.4 5,249 1992 7,319 7,047.8 2002 9,886.2 9,542.6 2009 11,315.3 10,897.3

182.4 3.4

271.2 3.7

343.5 3.5

418 3.7

64.8

65.9

64.4

62.9

Gross Domestic Products

Year 1970 RM million 11,829

Inflation Rate
Year 1980 1990 2000 2008 2009 % 6.7 3.0 1.5 5.4 0.6

1980
1990 2000

53,308
115,828 356,401

2010 2009 674,434

2011*

1.7
3.0

 British never promoted industrialization in colonial Malaya, except for moderate support for rural industries. The First Malaysia Plan (1966-1970) emphasized import substitutes industries (ISI) as the Investment Incentives Act approved in 1968. There are lots of reasons for such moves. The ICA was further amended in year 1971 to allow companies in the electronic industry to secure tax relief for the first 4 years, which could be extended for 5 to 7 years after the production started. Government introduce New Economy Policy (NEP) in 1971, intended to eradict poverty and restructure the society so as to eliminate the identification of race with economies.
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 The strategy also emphasized redistribution via growth in output and employment. Then, Malaysia industrialization policy shifted to export oriented industries (EOI) in 1970s from ISI. During the 3rd Malaysia Plan (1976-1980), 60 percent of total investment was expected from foreign sources. FDI by MNCs was encouraged to act as important catalyst in facilitating industrial growth and development and is credited with significant effects on employment, training, culture and how the organization work. Look East policy was introduced in 1980s to encourage FDIs.
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 Lim and Pang (1991) stated that the government relaxed the equity requirement rules in 1986 in order for 100 percent foreign equity in export-oriented organization. The Investment Act 1986 also provided double taxation deductions for research and training. Manufacturing industry has become one of the major contributor towards Malaysia GDP. During the 1990s, the trust of Malaysias industrialization policy under its Sixths and Seventh Malaysia Plans was aimed at achieving the maximum output growth the economy could generate.
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 The focus was on increasing productivity, efficiency and competitiveness. The local producers and foreign firms are encouraged to produce high quality products, greater variety, with more value added and also through the process of just-in-time. The public sector played the role of facilitator and the private sector take a lead in achieving the stipulated national objectives. With the decline in FDIs, Malaysia is looking for more participant from Domestic Direct Investments(DDIs). Under the Economic Transformation Programme (ETP), the government expected DDIs to outplace FDIs.
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 Government has provided a wide and diverse range of fiscal and non-fiscal incentives to attract DDIs to capital incentive, high technology industries and to the creative and knowledgeable based industries. Malaysia is making major investment in education and training to increase a pool of knowledge workers and improve the quality of our graduates. Some of high impact funding projects halal industry, green energy, biotechnology, aerospace, advance electronics, pharmaceutical and the maintenancerepair-overhaul engineering industry.

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The State, Law and Industrial Relations in Malaysia

In Malaysia, government is the dominant actor in Industrial Relations (IR) system. It acts as Legislator through Parliament, Administrator through Ministry of Human Resources and Participant as the largest employer in Malaysia. The advisory services provided by the state are dispensed by MoHR and its various departments. Its employment section administers a National Employment Services to keep track record of unemployment. Each of the individual states has its own IR department that provides advice and information related to IR matters.
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 The state commitment to industrial conflict resolution and fair play can be seen in the establishment of a federal industrial arbitration system. The IR department at regional and federal levels and the Industrial Court are two important agencies that play a key role in the conflict resolution process, which allows the employer and the employee equal representation in conflict resolutions.
State Intervention in IR Before Independence The explosive growth in trade unions and membership in 1946 led the colonial government to take firmer action against trade union militancy. Trade Union Ordinance amended in year 1948 which give greater administration powers to the Registrar of Trade Union.
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State Intervention in IR Before Independence Emergency Regulations were introduced to control the communist movement, which had quite substantial influence on trade unions.
State Intervention in IR After Independence With the growth of union membership, it is deemed necessary that the state should adopt more permanent and equitable regulatory institutions in Malaysia.

The IR Act 1967 has greater impact on IR matters such as:13

 First, the impact of trade union recognition .

Second, the impact on the scope for collective bargaining should be discussed. Matters related to managerial prerogative are strictly non-negotiable.

Third, industrial action is prohibited by the Act in certain situations. It is allowed only in cases where the party initiating the action is able to prove that the dispute constitutes a trade dispute by law.

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 The government has made extensive use of security legislation and has implemented a succession of anti labour laws. The rationale for the governments anti labour laws is unions are seen as obstacles to the pursuit of a low wage strategy of national capital accumulation and unions have consistently supported opposition parties.

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