KMS 3014 - Industrial Relations Learning Unit 2

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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.

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The Development of Malaysia Economy

Malaysia economy has been transformed from low incomeof raw materials to a middle income emerging multi-sector

market driven by manufactures exports.

The Malaysia economy was enjoying high growth (averageof 8.7%), low inflation (less than 4%) and low

unemployment (less than 4%) in early ninths.

However, Malaysia economy was severely affected by thefinancial 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 year1999-2000.

However, our economy is also very much affected due to

2001 global slowdown.

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Total Populationin Malaysia

Year No (million)1970 10,881.8

1980 13,879.2

1990 18,102.4

2000 23,494.92009 28,306.7

Total of Manpower Utilization

in Malaysia

1982 1992 2002 2009

Labour

Force (million)

5,431.4 7,319 9,886.2 11,315.3

Total

Employment

(million)

5,249 7,047.8 9,542.6 10,897.3

Unemployment

(000)

182.4 271.2 343.5 418

Unemployment

Rate (% of

Labour force)

3.4 3.7 3.5 3.7

Labour Force

Participation

Rate (%)

64.8 65.9 64.4 62.9

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Gross Domestic ProductsYear RM million

1970 11,829

1980 53,308

1990 115,828

2000 356,401

2009 674,434

Inflation Rate

5

Year %

1980 6.71990 3.0

2000 1.5

2008 5.4

2009 0.6

2010 1.7

2011* 3.0


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British never promoted industrialization in colonialMalaya, except for moderate support for ruralindustries.

The First Malaysia Plan (1966-1970) emphasized importsubstitutes industries (ISI) as the InvestmentIncentives Act approved in 1968.

There are lots of reasons for such moves.

The ICA was further amended in year 1971 to allowcompanies in the electronic industry to secure taxrelief 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 thesociety so as to eliminate the identification of race

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The strategy also emphasized redistribution via

growth in output and employment.

Then, Malaysia industrialization policy shifted toexport 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 theorganization 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-orientedorganization.

The Investment Act 1986 also provided double taxation

deductions for research and training.

Manufacturing industry has become one of the majorcontributor towards Malaysia GDP.

During the 1990s, the trust of Malaysias

industrialization policy under its Sixths and SeventhMalaysia 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 encouragedto 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 theprivate sector take a lead in achieving the stipulated

national objectives.

With the decline in FDIs, Malaysia is looking for moreparticipant 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 thecreative 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 maintenance-

repair-overhaul engineering industry.

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The State, Law and Industrial

Relations in Malaysia

In Malaysia, government is the dominant actor in IndustrialRelations (IR) system.

It acts as Legislator through Parliament, Administratorthrough Ministry of Human Resources and Participant asthe largest employer in Malaysia.

The advisory services provided by the state are dispensedby MoHR and its various departments.

Its employment section administers a National

Employment Services to keep track record ofunemployment.

Each of the individual states has its own IR departmentthat provides advice and information related to IR matters.

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The state commitment to industrial conflict resolution andfair play can be seen in the establishment of a federalindustrial arbitration system.

The IR department at regional and federal levels and theIndustrial Court are two important agencies that play a keyrole in the conflict resolution process, which allows theemployer 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 actionagainst trade union militancy.

Trade Union Ordinance amended in year 1948 which givegreater administration powers to the Registrar of TradeUnion.

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State Intervention in IR Before Independence

Emergency Regulations were introduced to control the

communist movement, which had quite substantialinfluence on trade unions.

State Intervention in IR After Independence

With the growth of union membership, it is deemednecessary that the state should adopt more permanentand equitable regulatory institutions in Malaysia.

The IR Act 1967 has greater impact on IR matters suchas:-

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First, the impact of trade union recognition .

Second, the impact on the scope for collective bargainingshould be discussed. Matters related to managerialprerogativeare strictly non-negotiable.

Third, industrial action is prohibited by the Act in certain

situations. It is allowed only in cases where the partyinitiating the action is able to prove that the disputeconstitutes a tradedisputeby law.

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The government has made extensive use of securitylegislation and has implemented a succession of antilabour laws.

The rationale for the governments anti labour laws isunions are seen as obstacles to the pursuit of a low wage

strategy of national capital accumulation and unions haveconsistently supported opposition parties.

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KMS 3014 - Industrial Relations Learning Unit 2