What are the implications of the post-2008 crisis and recession for global privatisation trends and related HRM practices?

 To understand the limitations of the discussion on developing countries and to appreciate their greater complexity

• To engage with the way the state plays a role in relation to multinational corporations in such contexts

• To use Malaysia as an example of proactive labour market strategies and state planning in relation to foreign direct investment and national training

• To outline some of the challenges in terms of employment relations and the way worker representation is developed

Introduction

There is an increasing trend among key texts on international human resource management (IHRM) to question whether developing countries should be dealt with as a national or regional context deserving of special attention. At first glance, this may seem to be slightly problematic as it appears to dismiss the

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realities and challenges of human resource management (HRM) and industrial relations (IR) in developing countries. It appears that when we think about the international dimension of these subjects, we should consider them in terms of transnational corporations and their impact across a range of contexts. However, this new trend is related to the difficulty of defining what a developing country is. In some cases, China is presented in a developing context, which in many respects is not always plausible, given the extent of its social and economic development. On the other hand, there is a concern that the use of binaries such as ‘developing’ and ‘developed’ ignores the more complex realities of the world in terms of the crisis among developed countries and the emergence of powerful developing countries such as India and Brazil. However, the term developing can still be used because of the ongoing nature of income differentials; the dominance of specific types of multinational corporation (MNC) and the nature of their activities in low- income countries; the ongoing ethnic hierarchies between North and South; and the problematic political issues in relation to the nature of trade union and par- ticipatory systems in various developing contexts.

Many discussions in IHRM may, in fact, conceal the specific challenges and dilemmas facing countries and their workforces in terms of the rapid and/or uneven economic and social changes that are taking place. What is more, they may remain silent on political issues and on questions of human rights. This silence may be driven by a particular view of management and economic development dominated by Americanized, neoliberal/market economy or managerialist understandings of organizational change and social context.

This chapter aims to outline some of the debates concerning developing coun- tries in relation to HRM and IR. It will show how such debates have been structured, and how changes since the 1990s, resulting from developments in foreign direct investment (FDI) and the role of MNCs, have introduced a new set of issues and dynamics. The chapter will then focus on a specific national con- text in terms of the impact of FDI and the way this has influenced both manage- ment and labour. The development of new forms of working and new groups of workers in internationalized sectors of the economy will be outlined, describing leading debates in the area. However, the chapter also aims to question the pas- sivity implied in many of the dominant views of regulation, politics and par- ticipation in terms of developing countries by arguing that national actors are highly significant in the development of the local economic context, albeit within a specific, normally marketized, context and framework. It will also show how the impact of developments such as FDI has actually contributed to new sets of debates and issues within such contexts in terms of work and employ- ment, as well as in management. Ethical issues have emerged in terms of work and employment change alongside social issues regarding the composition of the workforce, as well as regulatory dilemmas regarding managing interna- tional elite interests and those of local populations as economies and societies change. Furthermore, new agendas around employment representation and politics have not been far from the surface of these contexts, as Chapter 14 outlines.

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This chapter therefore looks at two very different features of how employment relations systems are affected by internationalization and by state responses to it: in the first instance, the national case focuses on how the state attempts to enhance the skills and ‘pliability’ of its workforce in relation to new forms of external investment and employment; while the second part examines some dilemmas and issues that are emerging in terms of ambivalence towards collec- tive worker representation. The chapter focuses on Malaysia as a national con- text which has been developing rapidly but which exhibits many of the positive and negative features of a country balancing economic and social demands in terms of HRM and labour relations. It uses various aspects of Malaysian HRM and employment relations to present the different views and concerns that exist.

Understanding employment relations and the management of labour in developing countries

The question of development has been less central to the study of HRM and IR than one might imagine. The focus of many discussions has, until the past decade or so, been on so-called developed countries. The argument that developments in countries such as the United States or the United Kingdom need to be privileged rests on a series of assumptions about the dominance of the liberal market econ- omy within management texts (see Chapter 8). First, these are economies that have developed market-oriented social and political structures, and where com- petition has led to a greater investment in management development and strate- gic innovation. Second, if one of the concerns of the study of employment, work and management is to seek best practice, then this is likely to be found within such national contexts. Third, where new forms of organizational innovation and change are seen in other contexts such as Japan (see Chapter 7 for a discussion of these developments linked to Japan), this can be attributed to the application of ‘western’ management thought, albeit within a distinct mediating context. Yet the problem with this approach and set of assumptions is that it supposes that employment practices and management strategies in developing countries can best be improved by mimicking and integrating those of developed countries, and that such practices are potentially transferable. Hence, there is a view of develop- ing countries that stresses their passivity and fundamentally recipient status in terms of organizational development and HRM change. Developing countries are seen as receivers and accommodators of international developments in terms of markets and organizational processes.

Developing nations are understood in terms of the dominance of industrial sec- tors such as agriculture and the public sector, which are renowned, albeit for quite different reasons, for being hampered by bureaucratic and command-style management processes: in the former through direct forms of supervision or results-related payments, and in the latter through highly immobile bureaucracies

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(Blunt and Jones 1992). Yet Jackson (2004: 229), in a synthesis of the study of devel- oping countries, tried to widen this view and explain a broader range of factors seen by many to constitute the core characteristics of developing countries that inhibit development and change: authoritarian management, which can be explained by the political context of various developing countries; a strong bureaucracy that emerges because of the importance of the state and formal inter- ventions resulting from weak civil societies; a tendency to put the emphasis on inputs and direct control by management, rather than on outputs and quality, because of the limited nature of production processes and markets; the impor- tance of informal and family links because of an absence of principles of equity in the labour market; a lack of worker involvement and a restrictive view of human resources; and a fundamental lack of management skills related to the absence of extensive education, among other factors. Many studies have focused on such features, seeing them as representative of a ‘primitive’ state of affairs within such countries. Moreover, they do so in many cases without explaining the colonial history of such contexts – as in the impact of the British or Belgian empires, say, in sustaining underdevelopment, or the impact of neocolonial actors such as the United States in focusing investment support on limited and primary sectors within such contexts as Costa Rica and Guatemala. There is also the ongoing problem that many developing countries, as in Africa, for example, are studied in relation to the European and North American contexts – as if the developments in the Far East had not taken place and reference points for development were narrower (Kamoche 2002).

In addition, the political context is normally ignored in the study of HRM, and even part of IR, for example, the manner in which contexts of authoritarianism can systematically suppress or inhibit the development of democratic voice mecha- nisms within industrial relations, and therefore traditions of social dialogue. The study of management and work in such contexts is normally skewed, partly because of the need to sanitize and neutralize political discussion in the manage- ment classroom, placing the focus on matters of technique and ‘best practice’.

Some try to remedy this issue by invoking the role of culture and the need to gain a broader understanding of a country’s context and possible influence on HRM developments and IR traditions. Within management and organizational studies, the use of Hofstede’s (2001) work, Culture’s Consequences, continues to be invoked as a means of understanding the differences between cultures and nations in organizational terms: and even in recent contexts, it remains a point of entry (Marchington and Wilkinson 2008) for the comparative study of HRM. Differences are measured in terms of the acceptance of hierarchy, risk aversion, individual and collective identity, and masculine versus feminine approaches. The accepted norm is that developing countries in the main are more hierarchical (or accepting of hierarchy), more masculine and in some cases more collectivist. That these terms are highly problematic is clear; however, the developing context is often seen as being locked into a particular cultural perspective: political and

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regulatory traditions are rarely accounted for in such views (Hofstede 2001). Such explanations can run the risk of making social development seem difficult, or they may make the process of change in qualitative terms appear to be less achievable (for example, the emergence of social and worker rights). Such countries appear to be complex and opaque in such approaches. Harvey (2002) warns us that the organizational and employment complexity of African nations, for example, may have been exacerbated by the impact of colonization and imperial control, which have disrupted ethnic communities and led to uneven urbanization and change. Hence, culturalist analysis might have limitations in explaining such contexts and understanding that cultures emerge from repression, resistance and change and are not static entities deeply embedded in general traits.

Others have tried to move away from characterizing cultural traits or economic customs and practices in a quixotic manner, and studied newly emerging centres of power such as in Latin America or the Middle East with a greater sensitivity to the actual context and the challenges of change (Vassolo et al. 2011). There is an increasingly great sensitivity – relatively speaking – in attempts to understand the role of political elites, economic/political networks, the informal economy, the impact of new forms of multinationals, human resource development gaps, and the impact of growing expectations and rights-related concerns. In addition, inter- and intra-regional collaboration between governments and social actors has emerged as a theme of growing importance. In such approaches, developing countries appear to be more complex spaces, and more dynamic and changeable than traditionalist views would indicate. The way they interact with the global context is therefore deeper and richer than might be imagined from quasi-colonialist/ managerial readings.

What is also becoming clear is that there is a need to view MNCs as more than just depositors of investment, and developers of technical and organizational knowledge, on the positive side; or, from a more critical perspective, as organiza- tions that seek cost advantages and can do so with very little engagement with local states. The image of MNCs as simply being able to enter and leave such economies at will – exploiting their cost advantages in terms of both physical and human resources – is highly questionable (Lillie and Martínez Lucio 2011). In fact, in some cases, MNCs find themselves being forced to operate at a more ‘sophisti- cated’ political level, given a range of host country challenges: increasing political change in developing countries; greater awareness of qualitative issues at work such as workers’ rights; the problem of local developing professional elites and their positions within new investment and employment networks; and greater governmental collaboration in a variety of regions. The social and learning agenda has shifted from the approach seen in the 1960s–80s, when investment was domi- nated primarily by a set of specific MNCs and national host countries. The politics of investment is more complex. Greater capacity within developing states has meant that the host country interaction with MNCs and international capital is changing.

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Regardless of the positive impact on poverty generated by some aspects of FDI (Dollar and Krayy 2001), issues have emerged as a result of the rapid and uneven nature of change and the social consequences attendant on it. The impact on women and children through their inclusion in the labour market within an unsta- ble pattern of employment has generated increasing interest in health and safety issues, and a broad concern with both human and employment rights. Structural adjustment and privatization in the context of developing countries has had a disproportionate impact of women as they attempt to combine a traditional role within a new employment role, normally within hidden economies (Pyle and Ward 2003). These increasing concerns with rights vary greatly within developing countries, but the shift in concerns has led to a more complex set of debates with international corporate interests.

Much depends on the level of autonomy and power of independent social inter- ests and groups such as trade unions or social movements within a national con- text. There remain enormous disparities in the manner in which organized labour influences social and political policy at work, yet the political and regulatory context can shape policies or create political concerns, as in the case of Saudi Arabia, where the state regulation of employment quotas for nationals and prac- tices of segregation at work are highly significant. Traditions of labour regulation vary greatly in developing contexts, from highly submissive and repressed con- texts where labour organization and labour regulation has been minimal (for example, what was Colonel Gadaffi’s Libya in terms of both; and Saudi Arabia in terms of the former?) through to systems which, while being politically repressive, have had to put in place a semblance of minimal labour regulation to avoid the need for independent unions, as in Chile under the dictator Augusto Pinochet in the 1970s and 1980s. Then there is the case of countries where labour representa- tion and regulation is quite extensive but under the tutelage of a centralized one- party state which dominates labour representation, as in China or Vietnam. Yet there are countries where industrial relations systems and trade union roles have been influenced by a colonial heritage with a particular model of industrial rela- tions, that while being limited in terms of union influence does have a degree of independence and liberty (for example, Malaysia).

And it is not solely in relation to organized labour representation and regulation that we may see considerable variety. Within developing countries, there are also changes in management circles. Increasing management education and rising professional expectations in relation to MNCs have begun to emerge, driven partly by exogenous factors (the increasing transnational orientation of MNCs in terms of policies and staffing) and endogenous ones (the increasing presence of a professional middle class and the impact of new forms of management expecta- tions). Zahra (2011) has argued that, in the Middle East, the growing clash between formal organizational cultures and traditional informal and hierarchical customs – coupled with major political change within both the state and society – means that the process of organizational change, greater external investment and the systematic

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use of local natural resources will reveal a new set of political and academic agen- das, as well as competing management views and values.

Hence, MNCs and investment within developing countries have contradic- tory effects and can lead to greater political learning and organizational tension. The issue of changing expectations and debates is not unilinear, lead- ing to a certain and pre-established outcome, but rather it is disruptive in both positive and negative ways. In terms of HRM and IR, we need to appreciate this dual effect of the impact of disruption and change. It unsettles communi- ties in their rural or local contexts but also creates new communities and new struggles:

The irony here is that at the same time as capital escapes regulatory contexts and national systems in search of increased value and surpluses, it also re-encounters regulatory systems. This creates a constant dilemma for capital in terms of escaping, encountering and rethinking relations within and between contexts. In a sense, however, focusing on the inevitability of re-regulation, and the sometimes high cost to capital of regulatory flux, misses the point.

(Lillie and Martínez Lucio 2012)

Hence, host country states at the local level may accommodate international capi- tal and MNCs, but they can also create a degree of mutual dependency, as in the role of the state in areas such as labour market policy, learning and regulation, which facilitate the work of MNCs. The context of developing countries is some- what passive – coming into itself only when MNCs appear to employ local resources (human, material and market) – yet over time these dynamics can be become more complex and interactive.

It is for this reason that the role of the state and social and economic actors within the national context need to be seen as important to any attempt to under- stand how developing countries engage with international capital, work on the political space of their national context in relation to change and establish a range of practices and institutions. When discussing the state in a developing context, we see these more strategic roles emerge:

Rather than simply retreating to the sidelines to function as the game’s referee, the state must strategically co-ordinate the interaction between key economic actors in a way that will stimulate deep and crosscutting developmental linkages. These linkages are necessary to facilitate information flow, increase vested interests through participation (as opposed to simply consultation), and improve cross-checked monitoring and implementation — all while maintaining appropriate autonomy from distributional interests. But this new role for the state is also dramatically different from the theoretical role of the developmental state. Instead of simply directing investment and ameliorating risk, the state must now encourage, facilitate,

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and co-ordinate the formation of intangible assets, which often requires more private-sector leadership.

(Ritchie, 2002: 32)

The interaction between local institutions and processes of globalization is much more complex in terms of economic and political inputs (local state strate- gies on regional development zones, for example) and social and political out- comes (for example, the impact on local management traditions or emergent politics of social rights and organization by groups such as women, both locally and internationally). A case study from Malaysia (see below) will highlight these complex processes and the tensions that can emerge.

Interpreting national contexts and the politics of industrial relations in the developmental context of Southeast Asia

The role of international economic investment has begun to transform a range of national economies and the regulatory structures within them, and the sheer scale of this investment has been remarkable. The World Investment Report 2013 by the United Nations Conference on Trade and Development (UNCTAD 2013) revealed that developing and transition economies absorbed more than half of global FDI inflows from 2010-2012 against a notable decrease in FDI inflows to developed countries. Total FDI inflows to South-East Asia rose by 104% in 2010, reaching US$97,898 million and this explain a fast recov- ery from the financial crisis of 2007-2008. Association of Southeast Asian Nations (ASEAN) countries saw a significant influx of FDI inflows in 2012, with Singapore being the largest recipient (US$56,651 million), followed by Indonesia (US$19, 853 million), Malaysia (US$10, 074 million), Vietnam (US$8, 368 million), Thailand (US$8, 607 million), the Philippines (US$ 2,797 million) and Cambodia (US$1, 557 million). FDI has been seen as a key driver in pro- moting the economic growth of Asian countries. For example, the introduction of the Investment Incentive Act in 1968, the establishment of free trade zones in the early 1970s and the provision of export incentives in conjunction with the acceleration of open economies in the 1980s have encouraged MNCs to reposition their labour-intensive production in countries such as Malaysia since the late 1980s (Jomo 2007b; Ang 2008, 2009).

The Malaysian population was 27.9 million in 2009, of which 63.3% was urban- based. Being an emerging economy in Asia, Malaysia recorded a total labour force of 12,061,100 in 2009, with 63.1% being economically active in the working age population of 15 to 64 years (Government of Malaysia 2010). Employment in the different industrial sectors increased from 9.275 million in 2000 to 11.621 million in 2009. The average annual employment growth rate for the decade 2000 to 2009

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was 2.8%. The average unemployment rate for the period 2000 to 2009 was 3.4%. Labour shortages have encouraged the influx of low-skilled foreign labour, which between 2000 and 2009 rose to 1.9 million (Government of Malaysia 2010, p. 234). Malaysia has recovered from the Asian economic and financial crisis of 1997 and appears to be heading towards a higher average level of income. Malaysia enjoyed high inflows of FDI in the 1980s and early 1990s compared to other coun- tries in this region, since few countries have such flexible and attractive trade and investment policies as Malaysia. The dramatic economic transformations in South-East Asia have led governments to develop and implement plans to attract high value-added FDI while competing with countries in the immediate region, and in South America and Eastern Europe. The UNCTAD (2013) report makes it clear that the strong FDI inflows into the South-East Asian countries are a result of proactive policy efforts by the various governments to attract FDI inflows. Malaysia has implemented more liberalized economic policies similar to those of other ASEAN countries that facilitated the entry of transnational corporations (TNCs) and FDI inflows (World Bank 2011: 41)Malaysia was ranked 14th in the Institute for Management Development’s World Competitiveness Yearbook 2012/2013. Besides, the country also was ranked 12th in the World Bank’s Ease of Doing Business Report 2013; while AT Kearney’s Foreign Direct Investor Confidence Index 2012 placed Malaysia as the 10th best FDI destination (The Star, 2013). However, the FDI inflows to Malaysia in 2012 fell 17.4% in investments to US$10.1 billion compared to US$12.2 billion in 2011, as a result of global slump in manufacturing sector in which Malaysia depends decidedly for FDI. Indeed, the global economic slowdown, the presence of strict fiscal constraints in Europe, fall in cross-border mergers and acquisitions, rising cautious in investment decisions by TNCs were some common reasons for the decrease in FDI inflows to South-East Asia (UNCTAD , 2013)

It has been alleged that the increasing quantity of FDI and number of MNCs in developing countries has led to the emergence of western HRM policies and practices that could strengthen people management, transferring from ‘personnel manage- ment’ to ‘HRM’ in affiliated local firms (Budhwar and Debrah 2001; Budhwar 2004; Rowley and Warner 2004). Since developing countries uphold unique national man- power development policies and are at different stages of HRM practices, we main- tain that local firms could emulate the best practices of western HRM that suit the local working culture, and the social, political and economic values of the country.

The case study focuses on Malaysia. The study will outline some of the ways in which the state and the industrial relations system engage with internationaliza- tion but also with related indigenous development. We look here at some of the formal strategies and rhetoric of developmental states. It will, however, be fol- lowed by an alternative reading of the way that state and industrial relations strategies are developed in ways to contain workers’ opinions and more positive possibilities of participation. There are various readings of how employment and HRM systems have developed. Readers need to be alert to the different narratives and interpretations that may exist.

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Case study: The state and industrial relations in Malaysia – Creating a context supportive of investment and support

Governments in Malaysia have argued since the early 2000s that knowledge, skills, abilities and other relevant competencies among the workforce are the key to succeeding in a competitive world. The wave of inward investment and the increasing internationalization of the economy have meant that the public authorities foster strategic reform initiatives on human capital and programmes aimed at accelerating the quality and performance of Malaysian workforce.

The government has therefore begun to devote more resources to science and technology (S&T) and research and development (R&D), which are vital for human resource development (HRD). In fact, the importance of HRD has been recognized and was given significant emphasis in Malaysia’s earlier development plans (Malaysia Government 1991, 2001), though innovation capacity and patent production are still small (Wong 2011). Besides, poor performance culture and low productivity levels remain a focus of national political discourse (The Star 2013). Much is said formally about the priority given to education and training, which provides opportunities for academic pursuits and the advancement of knowledge, skills, abilities and other competencies as a way of boosting intellectual capital among the workforce and making Malaysia more competitive globally. Therefore, to assume a passive state role that only responds to and works around MNCs is ill-advised. The evolution of the country’s development policies can be classified into the following major phases: the New Economic Policy (NEP), 1970–90; the National Development Policy (NDP), 1991–2000; and the National Vision Policy (NVP), 2001–10. The Third Outline Perspective Plan (OPP3), 2001–10, which was launched with a focus on building a resilient and competitive nation and embodying the NVP to be implemented over a decade, marks the third phase of development. The Economic Transformation Programme (ETP) was launched in 2010 to build on the policy directions, strategies and programmes of the 10th Malaysia Plan, 2010–15. It also complements existing agendas, such as the Government Transformation Programme (GTP). The programmes under the ETP such as the National Talent Enhancement Programme, MSC Malaysia MyProCert programme (professional certification in ICT industry) and TalentCorp’s (established on 1 January 2011 under the Prime Minister’s Department) Returning Experts Programme are deemed central to crafting a high-performance Malaysian workforce. Malaysia’s global competitiveness depends heavily on new initiatives driven by ETP and indeed efficient development of human capital will be able to attract unremitting inflows of FDI. Hence, planning remains a central part of this logic of regulation.

The government also facilitated efforts in benchmarking and the adoption of best practices on human capital development from other countries as well as from international commitments and conventions. There has been much rhetoric and policy related to ensuring continuous employment and a smooth transition to an advanced level and quality of work among the workforce, and the

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Ministry of Human Resources (MOHR) officially released the National Action Plan for Employment (NAPE), 2008–10 on 20 November 2008. The measures highlighted in NAPE have been outlined under ten main guidelines: (1) active and preventive measures for the unemployed and the inactive; (2) promoting job creation and entrepreneurship; (3) promoting adaptability and mobility in the labour market; (4) promoting development of human capital and lifelong learning; (5) promoting active employment of older workers and the ageing; (6) strengthening gender equality in employment; (7) promoting the integration of special groups into the labour market; (8) ensuring decent wages; (9) transforming informal work into regular employment; and (10) overcoming regional and sectoral employment disparities (Ministry of Human Resources Malaysia, 2009). In essence, NAPE is a national agenda that aims to provide direction and outline priorities for employment. Workers’ rights in employment are seen as key priorities and given adequate emphasis to ensure that workers are not deprived of legal rights and benefits, though, as we shall see, the reality is more complicated. For example, the Human Resources Development Act of 1992, which came into force in January 1993, led to the establishment of the Human Resources Development Fund (HRDF), thus officially ending the training tax incentive scheme that had been in operation since 1987. The HRDF was administered by a Human Resources Development Council (HRDC) including representatives from the private sector and various government agencies, though the role of worker representatives was limited. The Human Resources Development Levy is a mandatory payment imposed by the government on specific groups of employers for the purpose of employee training and skills advancement. Eligible employers are required to contribute 1% of the monthly wages of each employee to the HRDF. The Minister of Human Resources is empowered to reduce or increase the specified levy rate from time to time, and to grant employers full or partial exemption from levy payments.

While evidence from surveys examined by the World Bank suggests that despite being efficient in reimbursing claims and making application procedures easy for employers to comply with, the training impact of the scheme appears to be modest (Tan 2001). Similar concerns surrounded the mandatory National Service Training Programme, or Program Latihan Khidmat Negara (PLKN), as provided for in the National Service Training Act, 2003. Young people aged 16 to 35 years are selected randomly from different ethnic groups and required to attend PLKN for three months to undertake four modules: (1) the physical module; (2) nation building; (3) character building; and (4) community service. Hence, the technical is combined with the cultural in such forms of state intervention, though the Auditor-General’s report of December 2007 pointed out that many of the programme instructors were not well trained, the locations of the camps were unsuitable, the facilities were inadequate and rigid contracts caused government losses of up to RM110.1 million between 2004 and 2007 (The Star 2008). In addition, since 2004, sporadic serious incidents and accidents, including deaths of trainees (total fatalities at National Service camps since the programme’s inception stand at 18 up to the time of writing), were highlighted by the local press (The Sun 2012).

The ‘decent work’ agenda has also been an increasing point of reference for the MOHR under its list of ‘deliverables’ within national developmental policies, and it links to the statements of the International Labour Organization (ILO) in terms of working conditions. The MOHR’s ‘decent work’ agenda is as follows (MOHR 2009):

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1. To develop a workforce that is productive, informative, disciplined, caring and responsive to the changing labour environment towards increasing economic growth and hence creating more job opportunities.

2. To encourage and maintain conducive and harmonious industrial relations between employ- ers, employees and trade unions for the nation’s economic development and well-being of the people.

3. To uphold social justice and ensure harmonious industrial relations by solving industrial disputes between employers and employees.

4. To ensure that trade unions practice democracy, are orderly and responsible for helping to achieve the objective of industrial harmony.

5. To be the leader in the development of the nation’s human resources. 6. To ensure the health and safety of the workforce. 7. To develop a skilled, knowledgeable and competitive workforce in an environment of harmonious

industrial relations with social justice. (Italics added by the authors)

The development of a ‘decent work’ agenda has attempted to create a progressive counter-space within the state running alongside a narrative led by the Ministry of Higher Education. This emphasizes that technical and soft skills in particular are to be included in education and training programmes, and should be consistent with contemporary industry’s needs; so as to increase the marketability of Malaysian graduates, higher learning institutions incorporate the following soft skills: communication skills; critical thinking and problem solving skills; life-long learning and information management; team work; entrepreneurship; professional ethics and moral; and leadership skills in their education and training programmes. The decent work agenda thus appears, however, to be linked to a more functional agenda of worker flexibility based on cultural and social pliability in the face of new employer needs and forms of inward investment fitting the more job-loading dimensions of lean production. Much of the agenda is tied to a specific hierarchical and controlled view of work. In addition, there are also concerns about access and equality issues across the different constituent populations of Malaysia as it is a country with strongly embedded and large minority ethnic groups in the form of Indian and Chinese communities.

Questions 1. What are the main features of government policy in Malaysia with regard to creating a sup-

portive environment for overseas investment in the country? 2. Why is the quality of working life an emergent issue in such contexts? 3. What might be the challenges in terms of such forms of state policy, and developments in

terms of costs and expectations? How realistic might such initiatives be in the light of the pressures to contain labour costs as a result of the importance of FDI?

4. What are the particular views of employment and industrial relations that are embedded in this policy approach (e.g., the use of the terms harmony and orderly)?

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Inward investment and economic development are engineered as much through local state policies as they are through external global economic trends and pro- cesses. Malaysia is an example of a nation that has begun to create a framework of skills development and ‘national progress’, which has helped to create a politi- cal and regulatory context that parallels and interacts with capital flows and changes. As MNCs seek environments with cost benefits in terms of labour, for example, or access points to new markets, they also draw a response from the institutions of the host country context in which they are investing. In many cases, these are framed in a negative way, in that they create a context where MNCs may not be challenged by workers and their representatives, or where development zones are constructed in which worker rights are limited or suspended for finan- cial reasons or health and safety related issues. Hence, in the case of Malaysia, there are other narratives that are more critical of the extent of state support.

Case study: The politics of industrial relations and worker rights in Malaysia – The reality of rights in Malaysia

While facing the Asian economic and financial crisis in 1997, Malaysia worked assertively towards a ‘knowledge-based’ economy with the aim of achieving the status of a newly industrialized country, which necessitates sound industrial harmony via a tripartite labour system. The Employment Act, 1955 (EA), Trade Unions Act, 1959 (TUA) and the Industrial Relations Act, 1967 (IRA) collectively form the basis of the industrial relations (IR) system in Malaysia. However, the Malaysian government receives constant criticism of its long-standing IR and labour laws, which, at the time of writing, have not been revised to accommodate current economic and workplace demands by employers (Arudsothy 1990; Arudsothy and Littler 1993; Jomo and Todd 1994; Rasiah 1995; Kuruvilla 1996; Sharma 1996; Anantaraman 1997; Ariffin 1997; Bhopal and Todd 2000; Ramasamy 2000; Todd and Peetz 2001; Ayadurai et al. 2002; Bhopal and Rowley 2002; Suhanah 2002; Mellahi and Wood 2004; Parasuraman 2004; Todd et al. 2004; Wu 2006; Aminuddin 2007). The Malaysian IR system has become increasingly more restrictive than pluralistic (Kuruvilla and Arudsothy 1995), based on a system of state–employer domination (Kuruvilla and Venkataratnam 1996), and repressive confrontation rather than being accommodating and cooperative (Sharma 1996). Todd and Peetz (2001) maintain it is a ‘controlled’ rather than a ‘commitment-based’ structure delineated by the early British colonial government and maintained by Malaysia since independence. Deficiencies in the democratization of labour legislation have apparently worked against the achievement of collaborative workplace relations. Anantaraman (1997) and Suhanah (2002) argue that Malaysian labour policies since 1958–70, when the emphasis was on import substitution industrialization (ISI), encapsulated in relevant laws, threaten cooperative IR as the government attempts to turn Malaysia into a fully

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industrialized country by 2020. The government viewed the growth of manufacturing for export purposes as a central feature of economic development, allowing for strong competition among the Asian newly industrializing economies (NICs). Thus, the nature of IR policies appeared to be a form of ‘controlled pluralism’ based on significant state control aimed at avoiding industrial conflict in the interests of accelerating the industrialization process (Jomo 2007a, 2007b; Kuruvilla and Arudsothy 1995).

The Department of Trade Union Affairs (DTU) governs trade unions and deals with issues such as registration, internal organization, the election of officers, union finances and, in particular, specifies unions’ rights, powers, duties and responsibilities. However, certain acts strictly forbid unions from representing workers from different establishments, trades, occupations or industries.

The Department of Industrial Relations regulates relations between employers, workers and their trade unions, and aims at the prevention and settlement of any trade disputes and related matters. Workers have the right to form or join trade unions, with the exception of members of the police, the prison service, the armed forces and public sector employees employed in a confidential or security capacity. The IRA grants the director general absolute authority to determine the classifications of employees, and prohibits the formation of unions in ‘pioneer industries’. Indeed, the focal point of criticism in labour studies is that the director general (previously the Registrar of Trade Unions) allowed in-house unions (enterprise unions) to represent workers in the electronics sector after unremitting pressure from international bodies, but exercised arbitrary power to prevent the formation of a national trade union in the electronics sector (unlike their counterparts in the electrical industries) since it comes under the ‘pioneer status’ consistent with the government’s pursuit of a low-cost export-oriented strategy (Jomo 2007a; Jomo and Todd 1994; Kuruvilla and Arudsothy 1995). Furthermore, workers in ‘pioneer status’ industries were prohibited from having their terms determined by bargaining beyond the minimum standards stipulated in the Employment Act, 1955: this undermines the efforts of unionization in such companies (Peetz and Todd 2001). For some employees, the provisions of the Employment Act, 1955 guarantee their minimum employment protection and benefits, so the attractiveness of trade union membership is questionable. However, while the IRA consents to collective bargaining, its scope is limited to the provision of training, the annual review of wages and the development of performance-based remuneration systems. The Malaysian labour laws seem to some extent to be more favourable to employers than to unions or employees, and discourage genuine employee participation in workplace decision making at the in-house or enterprise level (Anantaraman 1997; Ariffin 1997; Suhanah 2002; Parasuraman 2004; Todd et al. 2004). Wad (2001: 4) views in-house unions as ‘weak, management-controlled lapdogs, more or less unable to defend and improve employees’ rights and interests, and that they do not provide for concomitant wage and productivity increases’.

Hence, the way that the industrial relations environment has been constructed, and the way unions have been constrained, means that the positive features of dialogue, mutual gains and more inclusive HR strategies may not easily be developed. The development of a fair and inclusive workplace may be hampered by the failure of union renewal and the lack of external support for it.

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Conclusion

The case of Malaysia therefore raises curious issues and concerns about the role of the state and the nature of industrial relations within such contexts. In a lead- ing intervention, Bhopal and Rowley argue that the national state is a key medi- ating factor that is central to the narrative of investment, human resource management and labour related issues:

The oppression of labour is not simply something desired per se by dependent states in all circumstances. The State has other considerations, which can give rise to concessions to labour. Yet, the degree of dependence on capital may determine the ability of the State to pursue a policy designed to meet its internal needs. If dependent states are less able to determine their labour policies owing to MNCs, the implication for those advocating trade/aid and labour rights links is that they need to address the fact that labour suppression may be the result of the actions of MNCs and inactions of states. The complicity of capital and its home state needs to be at the centre of any discussion on human rights and trade. A failure to do this not only leaves dependent developing countries caught between a ‘rock and a hard place’ (economic sanctions and failure to attract FDI), but fails to identify the role of home and dependent host states in the inherent contradictions between capital and labour.

(Bhopal and Rowley 2002: 1181–1182)

The importance of the way the state therefore acts as a dimension of the globaliza- tion of capital is key. The question of globalization is not purely an economic or cultural phenomenon but is a process of interactions (albeit increasingly accelerated ones) between local organizations, regulatory bodies and transnational corporations and networks. What is more, the manner in which the local context responds in terms of HR and IR policies constitutes a complex set of political factors.

The state also has to deal with contradictory outcomes and the manner in which expectations and the understanding of rights change as a result of globalization. Even if only rhetorically, the state and the political elites have to balance a range

Questions 1. What role does the historical colonial legacy play in limiting the role of trade unions and

worker participation? 2. In the case of Malaysia, how has the state attempted to shape industrial relations? 3. What impact might this have on the character of industrial relations and trust within the work-

place? 4. What does this reading tell us about the outline of learning and development strategies in the first

boxed text? How do they differ, and why?

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of competing interests and social developments as investment regimes impact and change the way that people work and live. The Malaysian state is caught between developing supporting mechanisms in terms of training and investment strategies while also creating some semblance of order and supposed equity in what it does. It is likely that in a developmental context, there exists a tension between the softer human development aspects and the harder positions on worker rights and forms of representation, and the contradictions between these may play them- selves out and create a new set of issues and political dynamics.

Reflective questions

1. What opportunities may MNCs bring to a context of economic development? 2. How can governments and social actors ensure that these benefits are built

upon and consolidated in relation to work and employment? 3. What are the main problems that MNCs may bring in terms of dependency

or the nature of work they develop? 4. What are the issues that may emerge in terms of worker rights and repre-

sentation?

Recommended reading

• Harvey, M. (2002) ‘Human resource management in Africa: Alice’s adven- tures in wonderland’. The International Journal of Human Resource Management 13(7): 121–34.

• Kuruvilla, S. and Venkataratnam, C. S. (1996) ‘Economic development and industrial relations: The case of South and Southeast Asia’. Industrial Relations Journal 27(1): 9–23.

• Kumar, N., Martínez Lucio, M. and Che Rose, R. (2013) ‘Workplace industrial relations in a developing environment: Barriers to renewal within unions in Malaysia’. Asia Pacific Journal of Human Resources, 51(1): 22–44.

• Rasiah, R. (1995) ‘Labour and industrialization in Malaysia’. Journal of Contemporary Asia 25(1): 73–92.

• Rowley, C. and Warner, M. (2004) ‘Big business in Asia’. Asia Pacific Business Review 10(4): 485–496.

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