INTRODUCTION
The role of Government agencies in the
economic development of Malaysia can be discussed against the background of the
socio-economic situation in the country.
The most obvious of the colonial
'heritage' of this country besides economic dualism was the phenomenon of
racial identification with economic functions. When the country achieved
independence in 1957, the indigenous communities were engaged in the stagnant
and depressed sectors while the non-indigenous communities were engaged in the
prosperous and thriving plantation/mining sectors as welt as in industry and
commerce. This had a self perpatuating and cumulative effect on the Malays -
savings are low because income is low, income is low because productivity is
low, productivity is low because investment is low and investment is low
because savings are low — the vicious circle of poverty. The vicious circle of
poverty did not allow the Malays to accumulate capital and in turn to invest in
their education or to move to urban areas where the growth industries were
found.
To overcome the vicious circle certain
economic measures have been taken since 1957 to reduce the racial economic
imbalance and also to generate overall economic growth in the country. Public
investment was adopted as one of the key instruments of economic policy in this
direction. The public investment that was undertaken over the years was mainly directed
in developing and improving the rural sector to benefit the Malay peasantry.
Very little public investment was directed into commerce and industry (the
growth sector) which was largely dominated by non-Malays. The objective of
doing this was to narrow the racial economic gap. There was also no public
investment undertaken to bring about Malay participation in commerce and
industry, except marginally through assistance rendered to the rural cottage
industries.
The Government agencies that were established
over the years up to 1969, with the exception of Federal Land Development
Authority (FELDA) and possibly the Council of Trust for Indigenous People
(MARA), did not engage in the direct production of commodities. They were
mainly concerned with the provision of credit, regulation of the market for
rural produce, etc. There was very little Government participation in the
economic activities of the country.
However, after the May 1969 racial riots
the Government laissez faire philosophy changed. Despite the large public
investment in rural development it was strongly felt that there had hardly been
any improvement in the standard of living of the rural people. It was also
obvious that there was very little Malay participation in the modern sectors of
the economy both in terms of employment and ownership. As productivity and
income levels were much higher in the modern sectors as compared to the
traditional sectors, it was felt among government circles that the only way the
living standards of Malays can be increased was by increasing their
participation in the modern plantation and mining industries and also in
commerce and industry.
As a result the Government launchud the
New Economic Policy (NEP) with the twin aims of eradicating poverty and
restructuring society. Public investment continued to take place in peasant
agriculture and, in fact, the number of Government agencies engaged in this
sector has increased significantly in recertt years. At the same time, there
has been a substantial increase in the volume of public investment in commerce
and industry. The number of Government agencies engaged in the production of
industrial commodities, set up specifically to inject Bumiputra participation
into commerce and industry, has increased substantially.
The strategy for achieving the objectives
of the Ni l’ mn lo be realized through rapid expansion of the economy over time
i.e. through expanding the national cake rather than through redistributing the
existing cake. For instance, it is stated in the Second Malaysia Plan that the
target of ownership is to be affected through the active participation of
Malays in the new additions made to the stock of wealth, not through the
disruptive redistribution of existing wealth. For this purpose other Government
agencies have been set up to promote development.
The Government agencies that have been
established can be broadly categorised into 3 main groups:
(1)Those institutions which were set up
primarily to promote land development and settlement with a view to improving
rural farm income. 'The FELDA, the Sarawak Land Development Board and the Sabah
Land Development Board were established to open up new land schemes for the
settlement of the rural poor and the landless, and have formed the backbone of
rural development policy since the Second Malaysia Plan. The Muda Agricultural
Development Authority (MADA) and the Kemumbu Agricultural Development Authority
(KADA) were set up specifically to assist padi farmers in the two largest padi
production areas in Malaysia, while the National Padi and Rice Authority (LPN)
was charged with the responsibility of administering a price support programme
for padi farmers and ensuring an adequate supply of rice for domestic
consumers. The Federal Agricultural Marketing Authority (FAMA) was established
to market selected agricultural produce so as to ensure that farmers receive a
fair and equitable return for their produce.
(2)Those institutions which were set up to
promote greater bumiputra participation in commerce and industry under the NEP.
The Council of Trust for Indigenous People (MARA), the Perbadanan Nasional
Berhad (PERNAS) and the Urban Development Authority (UDA) were established to
undertake a wide range of mutually supporting activities with a view to
increasing public investment as well as bumiputra participation and equity
ownership in the commercial and industrial sectors of the economy. The
activities of these institutions include acquisition of ownership in business
and holding shares in trust for bumiputras, the training of bumiputras in
various levels of industrial and commercial employment and the provision of
credit, business premises and advisory services to bumiputra individuals and
establishments. At the State level, the various State Economic Development
Corporations (SEDCs) performed similar roles by engaging in manufacturing,
construction and agricultural activities geared towards providing bumiputras
with greater opportunities to participate in commerce and industry in the State
economies.
(3)The Malaysian Industrial Development
Authority (MlDA) previously known as the Federal Industrial Development
Authority (FIDA), which was set up primarily to promote industrial development
in the country. It serves as the central coordinating agency for processing and
approving applications for the establishment of industrial projects, and for
the granting of investment incentives.
SURVEY OF SOME GOVERNMENT AGENCIES
It is difficult in a book of this nature
to discuss in detail all the institutions under all the categories in great
detail. Hence an attempt is made to discuss some of the more important agencies
or institutions.
LAND AND AGRICULTURAL DEVELOPMENT AGENCIES
(1). Federal Land Development Authority (FELDA). It was established in 1956 to promote land
development and settlement as a means towards economic and social development.
In the earlier stages, FELDA was concerned mainly with the opening of new land
to promote crop diversification; and to improve the income of its settlers, but
its functions were gradually extended to include processing and marketing of
its crops. As the role of FELDA expanded, a number of subsidiaries, either
wholly-owned or on a joint venture basis, were set up in the 1970s.
Since its inception, FELDA has developed
numerous land schemes throughout Peninsular Malaysia, mainly for oil palm and
rubber. Some schemes for cocoa, sugar cane and coffee plantation also have been
opened up. FELDA is today the single largest producer of palm oil in Malaysia.
(2). Muda Agricultural Development Authority (MADA). It plans, coordinates and promotes social and
economic development in the Muda area, which is one of the principal rice
growing regions in Malaysia. Established in 1970, MADA carries out its
functions mainly through its Engineering and Agricultural Divisions. The
Engineering Division is concerned with the operation and maintenance of the
Muda River Irrigation Project. The Agricultural Division concentrates its
efforts on providing advisory and extension services to the farmers and the
implementation of socioeconomic projects in the Muda area. Besides
coordinating the activities of rural-credit institutions, namely the Farmers'
Organisation Authority, the National Padi and Rice Authority, the Agricultural
Bank of Malaysia and the Malaysian Agricultural Research and Development
Institute in the region, the Agriculture Division also effects the
implementation of social and economic projects through a network of farmers'
cooperatives and agro-based cooperative societies. The activities of these
cooperatives are basically geared towards the provision of credit facilities to
the farmers and involvement in agri-business projects and other small projects
aimed at diversifying the incomes of farmers. The Agriculture Division also
conducts socio-economic surveys and research in the region to achieve better
planning for the farmers.
In support of the various agri-business
projects and small projects undertaken by the cooperative societies, which
range from the supply of farm inputs, the sale of agricultural machinery and
the marketing of padi and rice to furniture making, poultry rearing and fresh
water culture, MADA purchases combine harvesters and rents them to farmers'
cooperatives to ease seasonal labour shortages during the harvesting season as
well as to expedite the harvesting process.
(3). National Padi and Rice Authority (LPN). The Lembaga Padi dan Beras Negara was established
in September 1971, as a statutory body under the National Padi and Rice Board
Act, 1971, which is in force in Peninsular Malaysia and Sarawak. Its functions
are:
(i)to ensure a reasonable and stable price
of padi for farmers
(ii)to ensure a reasonable and stable
price of rice for consumers
(iii)to ensure an adequate supply of rice
to meet any emergency
(iv)to make recommendations for the
development of the padi and rice industry and if acceptable, to assist in the
implementation of such recommendations.
To fulfill its objectives LPN is
responsible for implementing a national rice stockpile policy and price support
programme for padi farmers. The LPN is authorised to implement the Guaranteed
Minimum Price for Padi, to control the rice stockpile, to issue licences for
wholesale, retail, rice milling, import and export and to control the movement
of padi from one state to another.
The purpose of the Support Price of Padi
is to prevent a fall in the price of padi to a low level seasonally and also at
all times. The suitable price offered will be an incentive to the farmers to
improve the production of padi, both in quality and quantity. With the
establishment of LPN complexes, the Support Price scheme was implemented. These
complexes buy padi directly from the farmers at the market price. This created
competition between LPN and the private millers and helped to ensure that the
farmers received a fair price for their padi.
LPN is responsible for ensuring that there
is a sufficient supply of rice in the country and that it is readily available
during any emergency. The purpose of the Rice Stockpile scheme is also to
implement the Guaranteed Minimum Price (GMP), rice is purchased from millers at
a price based on the GMP, provided the millers buy the padi at the GMP. The LPN
Stockpile also stabilises the market price of rice to consumers through the
sale of rice from the stockpile.
Rice for the stockpile is bought by LPN
from local millers and also imported. The rice is stored and issued in
continous rotation: the stored rice is sold after 6—9 months. Since the Price
Control rules were implemented in 1974, LPN is the sole importer of rice to
meet the shortages in the country.
(4)Federal Agricultural Marketing Authority (FAMA). FAMA established in 1965 to market selected
agricultural produce in the country and to provide alternative market outlets
to enable a fair and equitable return for the produce of farmers. The functions
of FAMA were extended to:
(i)promote and develop efficient and
effective management of agricultural enterprises dealing in or processing
agricultural produce,
(ii)provide and supervise credit
facilities for agricultural marketing and to ensure that those facilities are
put to maximum use; and
(iii)engage in agricultural enterprises
dealing in or processing agricultural produce. The FAMA Act enables the
Authority to participate in direct trading of agricultural commodities without
first having to prescribe marketing schemes or establishing marketing boards,
as was required previously.
Agricultural produce, as spelt out in the
FAMA Act, includes all agricultural produce except rubber, pineapple, padi and
rice, tobacco, fish, and livestock.
To promote the marketing of the various
agricultural produce, the Authority participates in local and overseas
exhibitions, as well as trade missions abroad. As part of its information
dissemination programme, FAMA engages in the collection, compilation, analysis
and dissemination of market information to farmers, market intermediaries and
the general public.
RESTRUCTURING AND INDUSTRIAL AND GENERAL DEVELOPMENT
AGENCIES
(1)The Council of Trust for Indigenous People (Majlis
Amanah Rakyat — MARA).
The objective of MARA is to motivate, train and assist the Malays'and other
Bumiputras, especially those in the rural areas, to participate progressively
in commercial and industrial activities.
The objectives include the following:
(i)developing manpower resources to
fulfill national requirements,
(ii)providing the Malays and other
Bumiputras with managerial and technical consultancy services,
(iii)providing the Malays and other
indigenous people with credit facilities for them to engage in commercial or
industrial enterprise or in both,
(iv)establishing commercial, industrial,
transportation and other projects which will expedite the participation of the
Malays and other indigenous people in these fields;
(v)providing other facilities, services
and the like, which are of particular or general interest to the Malays and
other indigenous people in the field of commerce and industry.
In pursuance in the field of promoting
greater Bumiputra participation in the economy, MARA continues to provide
financial assistance to Bumiputra entrepreneurs, advisory and extension
services as well as education and vocational training to Bumiputra establishments
and individuals. In addition, MARA has established wholly-owned subsidiaries
and participated in joint-venture projects in commerce and industry with
Bumiputra investors.
2.Perbadanan Nasional Berhad (PERNAS). PERNAS was incorporated as a public limited company
in 1969 to promote greater direct Bumiputra participation in commerce and
industry through the establishment of wholly-owned and joint-venture companies
that would provide opportunities for equity participation by Bumiputras and for
raising their entrepreneurial skills.
Registered under the Companies Act of
1965, its capital is subscribed by a number of Government agencies, including
the Federal Government and Bank Negara Malaysia.
PERNAS is Government sponsored and as such
is entrusted with the implementation of the New Economic Policy. However, as a
public limited company, its operations are geared towards profit making because
profits provide the means by which the objective of PERNAS can be achieved. The
Corporation is creating a crop of skilled local personnel comprising Malay and
non-Malay managers, engineers and technicians.
By the end of 1978, PERNAS had established
8 major wholly-owned subsidiaries engaged in a wide range of economic
activities, which included general trading, manufacturing, mining, insurance,
construction, property development, engineering, securities and investment.
PERNAS believes that both the needs of
Malaysians as well as foreign investors can be met by the formation of joint
ventures where the rights of both parties are respected. PERNAS has succeeded
in forming viable joint ventures in various fields.
3.Urban Development Authority (UDA). UDA was established in 1971 to accelerate Bumiputra
participation in commerce and industry in the urban areas and new growth
centres. It has been entrusted with various functions, some of which are:
(i)to provide and implement projects in
urban areas for development, redevelopment, settlement, resettlement and
public housing, and improvement in environment, services, amenities, traffic
circulation, vehicle parking, recreation facilities and other improvements for
the promotion of national unity, health, safety, convenience and welfare.
(ii)to promote and carry out projects in
urban development areas so that opportunities in the field of commerce and
industry, housing and other activities can be shared by all races, and
(iii)to translate into programmes the
Government policy of restructuring society through development.
By engaging in various development
programmes of property development, urban renewal, provision of premises and
emplacement of various business opportunities in strategic areas more
opportunities have been created for Bumiputras to own property and participate
in the urban centres. UDA also has pursued its strategy of direct participation
in business in the form of joint ventures with Bumiputras and non- Bumiputras
with a view to developing and expanding these ventures.
4.State Economic Development Corporations (SEDCs). Every state has set up its own SEDC to develop and
bring about progress for the state in particular and the country in general.
The 13 SEDCs in the country continue to promote social and economic development
at the state level. These corporations, either on their own or in joint-
venture with private companies and public agencies have been successful in
bringing about more balanced regional development at the state level and in
assisting the Bumiputra community to engage in industrial and commercial
activities. The SEDCs also participate in and promote labour intensive and
domestic resource based manufacturing, mining, building and building and
construction and agricultural activities.
In order to ensure more balanced regional
development, the SEDCs have undertaken the construction of industrial sites in
less developed areas to promote the growth of new industires.
The major sources of finance for the SEDCs
were primarily from the Federal Government, which were channelled through the
respective State Governments. Other sources of finance were from the
Agricultural Bank of Malaysia, the commercial banks and finance companies.
5. Malaysian Industrial Development Authority (Ml DA). Ml DA previously known as the Federal Industrial
Development Authority (FIDA) which is a statutory body established by Act of
Parliament, became operational in April 1967. Its main functions are to promote
and coordinate industrial development in Malaysia and to advice the Minister of
Trade and Industry on the formulation of policies relating to industrial
development. The other functions of the Authority are:
(i)to undertake or cause to be undertaken
economic feasibility studies of industrial possibilities
(ii)to undertake industrial promotion work
in Malaysia or abroad,
(iii)to facilitate exchange of information
and coordination among institutions engaged in or connected with industrial
development,
(iv)to recommend policy on industrial site
development, and where it deems fit, to undertake the development of such
sites,
(v)to evaluate applications for pioneer
status
(vi)to report annually to the Minister on
the progress and problems of industrialisation in Malaysia and make
recommendations on the manner in which such problems may be dealt with.
(vii)to advice the Federal Government on
measures for the protection and promotion of industries including the
imposition and alteration of, and exemption from, customs and other duties and
import and export licensing.
MIDA's functions are related directly to
the speedy establishment of new industries, expansion of existing industries
and the solution of problems relating to industrial development in accordance
with Government policy.
MIDA has been actively engaged in the
deliberations of Government departments and international organisations such as
UNIDO and ESCAP pertaining to development issues which are related to the
policies and objectives of industrialisation. MIDA has also played an important
role in activities concerning ASEAN cooperation.
6. Malaysian Industrial Development Finance Berhad
(MIDF). The MIDF, originally a private finance
institution, was reorganised in 1963 with the participation of the Malaysian
Government and the World Bank. The shareholders include the Malaysian
Government, commercial banks, insurance companies and industrialists.
MIDF's principal objective is to promote
rapid industrialisation by assisting local and foreign investors to establish
sound industrial enterprises in the country.
To this end, MIDF provides medium and long
term loans to assist entrepreneurs in the purchase of fixed assets, such as
land, buildings and plant and equipment for their factories normally up to 50%
of the total fixed asset cost of the new or existing project. A fixed rate of
interest is charged for all loans. Apart from financial assistance, MIDF is
also prepared to advise entrepreneurs on capital needs and all matters
pertaining to an industrial project.
MIDF undertakes to assist industries in
capital flotation and offers direct equity participation. It can also act as
issuing house for companies seeking to raise capital on the Malaysian Stock
Market, underwrite both share and debenture issues and serve as Registrar for
Companies.
In addition, MIDF through its subsidiary,
Malaysian Industrial Estates Sendirian Berhad (MIEL) builds general purpose
standard factories in suitable industrial estates. These are offered for sale
to small and medium entrepreneurs but MIEL can offer long term loans to
Malaysian-controlled companies for the purchase of these factories. MIDF has
established a wholly owned subsidiary, MIDF Industrial Consultants Sendirian
Berhad which provides comprehensive consultancy services.
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