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Ethnic politics and democracy in Taiwan and Malaysia

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Ethnic politics and democracy in Taiwan and Malaysia

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ETHNIC POLITICS AND DEMOCRACY IN
TAIWAN AND MALAYSIA
by
Pai-Ming Chiu
A Dissertation Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(POLITICAL SCIENCE)
August 2001
Copyright 2001 Pai-Ming Chiu
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U M I Number: 3054721
Copyright 2001 by
Chiu, Pai-Ming
All rights reserved.
_ _ _( g )
UMI
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UNIVERSITY OF SOUTHERN CALIFORNIA
The Graduate School
U niversity Park
LOS ANGELES, CALIFORNIA 90089-1695
This dissertation, w ritten b y
P/H-MiNG CHiU
Under the direction o f h.x.$.. D issertation
Committee, and approved b y a ll its members,
has been presented to and accepted b y The
Graduate School, in partial fulfillm ent o f
requirem ents for the degree o f
DOCTOR OF PHILOSOPHY
Dean o f Graduate Studies
Date August 7, 2001________
D1SSER TA H ON COMMITTEE
^ b t jdL-
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TABLE OF CONTENTS
PAGE
LIST OF TABLES vi
ABBREVIATIONS vii
ABSTRACT x
CHAPTER
1 LITERATURE REVIEW AND THEORETICAL
FRAMEWORK 1
Introduction 1
The Dependent Variable 4
The Independent Variable 7
Literature Review 9
Structural Conditions for Democracy 10
Ethnicity and Democracy 17
Theoretical Framework 20
Methodology 28
Levels of Analysis 29
Units of Analysis 31
Sources 32
The Measurement of Independent and Dependent Variables 32
The Outline of Chapters Ahead 34
2 THE HISTORICAL AND INSTITUTIONAL CONTEXT
FOR ETHNIC POLITICS IN TAIWAN 37
The Sketch of the Political History of Taiwan 38
The Ethnic Differences between the Taiwanese
And the Mainlanders 39
The Heritage of Ethnic Politics in Post-1949 Taiwan 42
Japanese Colonial Rule 43
The KMT Takeover Years 45
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iii
Political Institutions Under Authoritarian Rule 49
The Two-tiered Overlapping Jurisdiction Structure 50
Quasi-Leninist Party-State 51
Martial Law Regime 55
Limited Local Democracy 60
Concluding Remarks 61
3 THE RISE OF TAIWANESE ECONOMIC POWER 63
Mainlander Economic Power 64
State-Owned Enterprises 64
Party Enterprises 67
Mainlander Private Sector 68
Taiwanese Economic Power: Initial Stage 71
The Early Years 71
The Land Reform 72
The Emergence of Taiwanese Economic Power 74
The Blessing of the Land Reform 74
The Rise of Taiwanese Capitalists through Four Channels 75
The Rise of Taiwanese Capitalists since Export-
Oriented Industrialization 77
Concluding Remarks S8
4 THE INCREASE IN TAIWANESE POLITICAL POWER
AND ETHNIC COHESION 91
Ethnic Political Power 91
Bureaucratic/Institutional Power 92
Ideological Power 112
Ethnic Cohesion 125
Mainlander Cohesion 125
Concluding Remarks 133
5 SUMMARY AND CONCLUSION 136
6 THE HISTORICAL AND INSTITUTIONAL CONTEXT
OF ETHNIC POLITICS IN MALAYSIA 146
The Formation of the Modem State 146
The Political System: An Overview 148
Ethnic Pluralism in Malaysian Society 153
The Origins of Ethnic Politics in Malaysia 15 5
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iv
Ethnic Division of Labor 156
The Japanese Occupation Period 159
Ethnic Politics in Decolonialization Process 159
Concluding Remarks 170
7 ETHNIC POLITICAL POWER AND ETHNIC
COHESION IN MALAYSIA 171
Politics Since Independence 171
Ethnic Cohesion 176
The Increase in Malay Political Power 191
Ideological Power 192
Bureaucratic/Institutional Power 199
Concluding Remarks 205
8 THE INCREASE IN MALAY ECONOMIC POWER 211
The Period of Rural Development and Economic
Liberalism (1957-69) 212
Industrial Development Strategy 213
Development Programs for the Malays 214
Consequence of the Development Programs 217
New Economic Policy (1971 -1990) 220
Overview: Its Cause, Objectives, and Significance 220
Rural Programs for Poverty Eradication 222
The Programs for Malay Participation in the Modem Sector 223
Chinese Strategy in Response 233
Ethnic Economic Power 239
Concluding Remarks 249
9 SUMMARY AND CONCLUSION 252
Summary 252
Discussion 259
10 CONCLUSIONS: COMPARISON AND DISCUSSION 267
Comparison: Taiwan and Malaysia 267
Beyond the Explanation of Ethnic Politics 276
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V
Ethnicity as a Factor of Explanation 276
Other Structural Explanations 279
Final Remarks 285
REFERENCES 286
APPENDICES 323
1 CHRONOLOGY 324
2 THE LIST OF INTERVIEWEES 328
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vi
L ist o f T ables
TABLE
1.1 Performance, According to Gastil’s/Freedom House Index,
in Taiwan Democratic and Malaysia, Selected Years
4.1 Taiwanese Composition of the KMT Central Committee,
1952-1988
4.2 Taiwanese Composition in the KMT Central Standing Committee,
1952-1988
4.3 Taiwanese Composition of the Ministerial Post in the Executive
Yuan, 1950-1989
4.4 Taiwanese Composition in the Military, 1950-1987
4.5 Popular Votes of the Tangwai/DDP in Elections, 1980-1986
7.1 Peninsular Malaysia: Ethnic Composition of Parliamentary Seats
8.1 Peninsular Malaysia: Ownership of Share Capital of Limited
Companies by Ethnicity and Industry, 1970 (%)
8.2 Peninsular Malaysia: Ethnic Composition of Employment
by Ethnicity and Industry
8.3 Mean Monthly Household Incomes by Ethnic Groups in
Malaysia (1970-1990)
8.4 Malaysia: Enrollment for Degree Course in the Tertiary
Education by Ethnicity, 1970-1988 (%)
8.5 Malaysia: Ownership of Share Capital (at par value) of
Limited Companies by Ethnicity, 1970-1990 (%)
8.6 Estimated Malay Ownership of Share Capital in the
Corporate Sector by Industry, 1983 (%)
PAGE
6
97
98
100
101
112
200
240
241
243
244
246
248
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A b b r e v ia t io n s
ABIM Angkatum B elia Islam M alaysia (Malaysian Islamic Youth
Movement
ACCIM Associated China Chambers of Commerce and Industry Malaysia
AIC Chinese National Association for Industry and Commerce
AID The United States Agency for International Development
ASN Amanah Saham Nasional (National Unit Trust Scheme)
BN Barisan Nasional (National Front)
CSC Central Standing Committee
DAP Democratic Action Party
DDP Democratic Progressive Party
EOI
export-oriented industrialization
FAPA Formosan Association for Public Affairs
FELDA Federal Land Development Authority
Gerakan Gerakan Rakyat M alaysia (Malaysia People's Movement)
ICA Industrial Coordination Act
IMP Independence of Malaya Party
ISA Internal Security Act
ISI import-substituting industrialization
KMT Kuomintang (Nationalists Party)
MARA M ajlis Amanah Rakyat (Council of Trust for Indigenous People)
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MCA Malaysian Chinese Association
MCP Malayan Communist Party
MDS
most-different-system design
MIC Malaysian Indian Congress
MPH Multi-Purpose Holdings
MSS
most-similar-system design
NCA National Commercial Association
NEP New Economic Policy
N1A National Industry Association
PAP People's Action Party
PAS
Parti Islam Se-M alaysia (Pan-Malaysian Islamic Party)
Pemas
Perbadanan Nasional B hd (National Corporation)
PNB Permodalan Nasional B hd (National Equity Corporation)
PVC polyvinyl chloride
RIDA Rural and Industrial Development Authority
SEDC state economic development corporation
SMEs small and medium-sized enterprises
SOEs s ta te - o w n e d e n t e r p r i s e s
TGC Taiwan Garrison Command
TIM Taiwan Independence Movement
TRA Taiwan Relations Act
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TRAPP Tangwai Research Association for Public Policy
UDA Urban Development Authority
UMNO United Malays National Association
UMBC United Malayan Banking Corporation
VACRS Vocational Assistance Commission for Retired Servicemen
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X
ABSTRACT
This study examines ethnic politics as an explanation for the contrast in
democratic performance of Taiwan and Malaysia, two ethnically bipolar states, from
the 1950s to the early 1990s.
During this period, the level of democracy increased in Taiwan but decreased
in Malaysia. Given the similar levels of ethnic conflict, the contrast in democratic
performance between Malaysia and Taiwan is a puzzle for the ethnic conflict
perspective, in which ethnic conflict is disadvantageous to the prospects for
democracy, and the scale of conflict is usually related to the degree of democracy.
To solve this puzzle, I propose power-centered structural approach built on the
institutional perspective on ethnic politics. The institutional perspective holds that
institutional arrangements, as regulation and management of ethnic conflicts, make a
different in democratic performance. However, 1 contend that it is the power
structure behind institutional facades that plays the more significant role in
understanding democratic prospects in ethnically divided countries. The relative
power resources among ethnic groups shape the institutional arrangements that in
turn affect democratic performance. The structure of ethnic power includes ethnic
cohesion, economic power, and political power, which can be subdivided into
external support, ideological power, and bureaucratic/institutional power. Based on
the theoretical framework, the hypothesis is that the more the ethnic power of the
dominant group increases, the more likely the prospects for democracy decrease; the
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more the ethnic power of the subordinate group increases, the more likely the
prospects for democracy increase. The two cases under research generally support
the hypothesis. In the case of Taiwan, where the Mainlanders had controlled
economic and political power, the increase in Taiwanese ethnic power promoted
democracy; in the case of Malaysia, where the Malays took advantage of their
control of the state to expand their political and economic power, the increase in
Malay ethnic power was conducive to the setback of democracy.
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1
CHAPTER I
LITERATURE REVIEW AND THEORETICAL FRAMEWORK
Introduction
This study examines ethnic politics as an explanation for the contrast of
democratic performance from the 1950s to the early 1990s between Taiwan and
Malaysia, two post-colonial ethnically bipolar states with similar levels of ethnic
conflict.
The significance of this research can be viewed from three aspects: topic,
research question, and contribution to knowledge. First, as far as I know, there are no
comparative studies to date on ethnic politics in Taiwan and Malaysia. Although
ethnic politics and democracy have received increasing academic attention due to the
international dimensions of ethnic conflicts worldwide and the global resurgence of
democracy, studies of ethnic politics and democracy in Pacific Asia, especially in
comparative perspective, have captured much less academic attention compared with
those of Eastern Europe and Latin America. There are even fewer cross-regional
studies comparing countries in East Asia with those in Southeast Asia.
Second, the significance of the study lies in the research question: given
similar levels of ethnic conflict, why did the prospects for democracy increase in
Taiwan but decrease in Malaysia? The contrast in democratic experiences between
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the two countries is counterintuitive to conventional wisdom: Taiwan, as a quasi-
Leninist party-state, was expected to be difficult to democratize, while, Malaysia, as
heir of British representative democracy, was expected to be become democratic
more readily. This kind of conventional wisdom was illustrated in a worldwide
survey of democracy conducted in the 1980s, prior to Taiwan’s democratic
breakthrough, (Wesson 1987, 173, 190), which predicted that “democracy on Taiwan
does not have a bright future,” while “dynamic reform efforts make it probable that
democracy in Malaysia will make continued progress.”
The contrast in democratic performance between Malaysia and Taiwan, both
of which have had similar levels of ethnic conflict, is a puzzle from an ethnic conflict
perspective; which holds that ethnic conflict is disadvantageous to the prospect for
democracy, and that the scale of ethnic conflict is inversely related to the degree of
democracy. In the 1980s Malaysia and Taiwan experienced similar levels of
moderate ethnic conflict,1 (Gurr 1993, 14, 122). However, they have taken diverse
directions with respect to democratic development in the 1980s: Taiwan has moved
toward democratization from a quasi-Leninist party-state (Cheng Tun-jen 1989),
while Malaysia has experienced an increase in the practice of authoritarianism
1 In the Minorities at risk project. Ted Robert Gurr and his team developed a profile of each ethnic
group's history of conflict by using a Guttman scale. In the order of increasing intensity, ethnic
conflicts are classified as nonviolent protest, violent protest, and rebellion. Protest typically aims at
persuading or intimidating officials to change their policies toward the group; rebellion aims directly
at more fundamental changes in governments in power relations among groups. When protestors use
violence it usually occurs in sporadic and unplanned ways. The use of violence by rebels takes the
forms of concerted campaigns of armed attacks. Nonviolent protest s refers to conventional political
activity on behalf of group interests.
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3
behind the facade of constitutional parliamentary democracy (Crouch 1992; Koo
1997; Means 1996; Munro-kua 1996; Saravanamuttu 1989; Tan 1990).
More importantly, the significance of my dissertation depends on
contribution to knowledge. To solve the puzzle of the research question, I propose an
alternative perspective, due to the theoretical limits of both the ethnic conflict and
institutional perspectives in the literature on the relationship between ethnicity and
democracy. The alternative is the power structure perspective, which will be
elaborated later. For this purpose, I have integrated power structure concepts from
both the literature of democratization and that of ethnic politics. The resulting
concept of the power structure can be expressed as balance of ethnic power. Ethnic
power consists of ethnic cohesion, economic power, and political power, with the
last subdivided into external support, ideological power, and
bureaucratic/institutional power. The measurement of the concept will be discussed
in the section of methodology. Drawing from the power structure perspective with
new concept of ethnic power, the basic hypothesis is that ethnic power makes a
difference in democratic performance in ethnically divided countries: the more the
ethnic power of the subordinate group declines, the more likely the level of
democracy will decrease; the more the ethnic power of the dominant group declines,
the more likely the level of democracy will increase.
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The Dependent Variable
The dependent variable is the level or degree of democracy. It implies that
the pathway either evolves in a positive direction toward more democratic forms of
governance— political liberalization or democratization, or regresses in a negative
direction toward less democratic forms— democratic erosion or decay. There are
essential distinctions between political liberalization and democratization.
Liberalization may involve measures favorable to democracy such as the reduction
of censorship of the media, the releasing of political prisoners, the return of exiles,
and the tolerance of opposition, although it does not necessary lead to full-scale
democratization. While liberalization may entail expanded civil and political rights
within an authoritarian regime, democratization goes beyond that, and also involves
replacement of government through holding fair, free elections regularly for
selecting top decision makers (Huntington 1991, 9).
The level of democracy, as a dependent variable, can be classified into
political regime types: authoritarian, semi-democratic, and democratic regimes. An
authoritarian regime is defined as a form of government which shows little or no
significant political competition or freedom to the extent that the rulers impose their
values and demands on the ruled (Gasiorowski 1996, 471). In contrast, a democratic
regime is defined as a form of government in which (1) extensive competition exists
among individual and organized groups through fair, free regular elections for its
most powerful collective decision makers; (2) no adult citizen or major social group
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5
is excluded from political participation; (3) a sufficient degree of civil and political
liberty, such as freedom to speak, assembly and organize, exists to ensure the
integrity of political participation (Giarorowski 1996, 471; Huntington 1991, 7).
Midway between authoritarian and democratic regimes is semi-democratic
one, a type that is neither authoritarian nor democratic, but with some of the features
of each. Semi-democracy refers to a style of government in which the effective
power of political party competition, freedom and fairness of election, and other
political rights and civil liberties are so restricted that electoral outcomes may
deviate considerably from the public preference (Case 1993b, 7-8; Gasiorowski
1996, 471).
According to Gasiorowski’s political regime change dataset,2 Taiwan was an
authoritarian regime from October 1949 to October 1986, when it began a period of
democratic transition, and was semi-democratic as of December 1992; Malaysia
enjoyed democracy from August 1957 to May 1969, experienced a short period of
authoritarian rule, and has maintained semi-democracy since February 1971.
According to Gastil’ s/Freedom House Index, the contrast of the two countries
is more noticeable. Taiwan in 1978 was as the same level of democracy as Malaysia
: This dataset contains time series data for the 97 largest Third World countries which had populations
of at least one million in 1980; its coverage begins with the date of independence or the date at which
a modem state was first established and continues through December 1992. To identify regime hange.
it constructs four types of political regime: authoritarian, transitional, semi-democractic and
democratic regimes. Its measure is strongly corrected with several most popular measures, including
the Freedom House Index (Gasiorowski 1996,478).
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6
in 1992, while Taiwan in 1992 was as the same level as Malaysia in 1978. The
turning point of the contrast was around 1987 and 1988 (see Table 1.1).
TABLE 1.1
Democratic Performance, According to Gastil’s/Freedom House Index, in
Taiwan and Malaysia, Selected Years
Years Taiwan Malaysia
1978 9 6
1987 9 8
1988 8 9
1992 6 9
Sources: Adapted from Raymond D. Gastil. “The Comparative Survey of Freedom: Experiences
and Suggestions." in On Measuring Democracy, pp. 39-41: Freedom House Survey Team.
Freedom in the World 1987-88, 1988-89, 1992-93.
Notes: 1) The lower the score is. the higher the level of political democracy is. The democracy is
measured by civil liberties and political rights, each of them being composed of seven-point scale
as a rating system. The total rating simply adds them together in a fourteen-point scale. Thus, for
example, the most democratic countries get one point each for political rights and civil liberties for
a total of two points.
2) Even though Gastil’s index actually is a freedom index, it is used as a real measurement of
democracy since freedom is strongly related to democratic practice (Emmerson 1995). The
indicators of the index, consisting of political rights and civil liberties, correspond with the
definition of liberal democracy (Diamond 1992, 42). Its validity and correlation will be discussed
in the section of methodology.
3) Since Gastil's index covers a range of years, from 1973 annually, it has been commonly used
indicator of democracy for comparison within a country or across countries in books and articles
by many scholars, such as Means (1991). Diamond (1992). Sorensen (1993). Lipset. Seong and
Torres (1993), Leng and Lin (1993). Burkhart and Lewis-Beck (1994). Emmerson (1995). Linz
and Stepan (1996). Casper and Taylor (1996). and Ersson and Lane (1996).
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7
The Independent Variable
I suggest that ethnic politics is an independent variable to be reckoned with in
explaining the contrast of democratic development between Malaysia and Taiwan.
By ethnic politics, I refer to any politics at the level of government that relies on the
relative power of ethnic groups, as Karklins (1944, 4) held. I will discuss the
theoretical foundation of this definition later.
It is important to stress that I have no intention to employ a single variable to
fit in every historical detail in these cases. No single factor is sufficient or necessary
to explain the development of democracy in all countries and thus seeking a single
dominant cause to comprehend historical complexity in different countries is
doomed to be a futile task (Huntington 1991, 38; Pennock 1979, 206-7).
To study ethnic politics, it is necessary to understand ethnicity and ethnic
identity. Ethnicity is broadly defined as a shared origin and culture based on
common subjective identity and objective situation including some mixture of race,
ancestry, language, religion, or shared historical memories (Ragin & Hein 1993,
255). The mobilization (or politicization) of ethnicity involves ethnic identity.
Concerning the origins and strength of the ethnic identity, there are two schools;
primordial and instrumental.
According to primordialists, ethnic identity is inherited or given, and, if not
permanently fixed, at least very difficult to change. It is a subjective sense of shared
identity based on objective cultural attributes. The “primordial bonds” stem from
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8
being bom into a particular religious community, speaking a particular language, or
even a dialect of a language, and following particular social practices (Greetz [1963]
1994, 31). These objective cultural attributes provide a basic subjective aspect of
group attachments developed from childhood and youth (Brass [1979] 1994, 83).
For instrumentalists, ethnic attachment is highly adaptive and responsive to
changing situations. The boundaries of an ethnic identity can expand or contract over
time. In general, ethnicity is a dynamic and flexible element in social and political
relationships. Ethnic identity is a social construction; it is the product of human
action and choice. Among instrumentalists, some analysts further argue that ethnicity
is mainly a practical resource of individuals and groups to promote their security or
economic interests. One type of analyses from this perspective is the rational choice
school which views ethnicity in terms of costs and benefits; a rational choice actor
pursues ethnicity when the return is better than other alternatives (Esman 1994, 11).
Another is the Neo-Marxist approach which holds that ethnicity is a myth or
expression of “false consciousness” that conceals real class interests. Ethnic
mobilization is class struggle in disguise and is the result of economic exploitation of
dominant classes within and among countries (Majstorovic 1995, 37-9).
Both primordial and instrumental perspectives can be used to explain the
origins of ethnic identity. In the case of Malaysia, the Malays as a separate ethnic
group from the Chinese can be seen through the primordial perspective: they are
different race and have different ancestry, customs, language, religion, and culture.
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9
The ethnic boundary between the Malays and the Chinese was difficult to change. In
the case of Taiwan, the Taiwanese are not different from the Mainlanders in the
primordial dimension because they are both Han Chinese with common ancestry,
religion, customs, and written language, which are not easily subject to change.
However, according to the instrumental perspective, the primordial bonds between
the Mainlanders and the Taiwanese were fluid, and the Taiwanese became
distinguished from the Mainlanders due to their different historical experiences or
memories: the Taiwanese were under Japanese rule on the island for an extended
period (1895-1945) and were repressed by the KMT government during the takeover
years (1945-1949), while the Mainlanders fought a brutal war against the Japanese
invasion in the mainland China (1937-1945) and implemented discrimination policy
in favor of the Mainlanders during the KMT takeover years (1945-1949).
Literature Review
The literature review will first examine structural conditions for democracy
and indicate its theoretical limits in understanding the prospects for democracy. Since
I chose the structural research tradition to study democratic performance, which will
be discussed in the section of methodology, the discussion is confined to structural
preconditions. This review will then examine ethnicity as a structural condition for
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10
democracy and shows the theoretical limits of the ethnic conflict and institutional
perspectives in understanding the relations between ethnicity and democracy.
Structural Conditions for Democracy
In the structural perspective, modernization and Marxist theoretical
approaches provide explanations for the preconditions of democratization, including
economic development, class, political culture, and the relations between the state
and society.
In the modernization literature, economic development, as measured by GNP
per capita or GDP per capita, is the orthodox explanation for democracy. As
originally proposed by Lipset (1959), the seminal thesis is that ’’the more well-to-do
nation, the greater the chance that it will sustain democracy.” Although the thesis has
basically survived a wide range of sophisticated statistical methods in many
quantitative studies (Burkhart & Lewis-Beck 1994; Diamond 1992; Londregan &
Poole 1996; Moore 1995), there have been many critiques of the Lipset thesis from
historical and comparative studies. In response to the challenge, Lipset, Seong, and
Torres (1993) stress that the relationship between economic development and
democracy is not linear but is more like and “N-curve.” Diamond (1992) suggests
that the Physical Quality of Life Index or the Human Development Index is the better
indicator than GNP per capita for explaining the correlations between development
and democracy. Based on a dynamic probit model, however, Przeworki and Limongi
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11
(1997) conclude that economic development does not cause democratization, which
can be initiated at any level of development, but, once democracy is established, it
plays a role in the prospects for democratic survival.
Moreover, the main reason economic development is not a determinant factor
for democracy is that its impact on democracy relies on several major intervening
variables in a causal chain— education, the middle class, and political culture. First,
economic development results in higher literacy and more widespread education,
which in turn promote a more democratic political culture conducive to democracy.
Second, economic development alters the social structure from predominately lower
class to largely middle class. With more education, the middle class is more likely to
support democratic values. Third, economic development changes the relations
between the state and society and gives rise to civil society with a large number of
voluntary, intermediate organizations that increase political participation, diversify
political opinions and streamline political skills. As a result, the state can no longer
dominate political resources and hence democracy is promoted (Diamond 1992;
Diamond, Linz & Lipset 199S). Hence, although many scholars recognize economic
development as the single most reliable statistical predicator of democracy, economic
development does not guarantee the prospects for democracy.
Some modernization theorists contend that political culture affects the level
of democracy regardless of socioeconomic structure factors. Inglehart (1990) points
out that civic culture, defined by a composite index of life satisfaction, interpersonal
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12
trust, and lack of support of revolutionary change, affects democratic development.
However, testing with cross-national data, Muller and Seligson (1994) stress that
interpersonal trust appears to be a result of democracy rather than a cause of it.
Generally, their analysis of causal linkages between civic culture and democracy are
not supportive of this modernization thesis.
The relationship between the state and society is also singled out from the
economic development thesis as a structural cause for democracy. Changing relations
between the state and society can be measured by the dynamic of civil society.
According to Diamond (1996, 208), civil society refers to “the realm of social life
that is voluntary, self-governing, self-supporting, autonomous from the state.” A
highly organizational density in civil society can serve democracy because it
establishes a counterweight to state power (Rueschemeyer et al. 1992, 50). At the
same time, the state can shape the development of civil society in many ways, such
as easing or obstructing the organization of different class interests. The complex
interdependence of state and society causes a variety of conditions conducive or
hostile to democracy (Rueschemeyer et al. 1992, 67).
Unlike the modernization approach that stresses social change, the Marxist
approach emphasizes changing class structure as the explanation for democratic
performance. A classic starting point is Barrington Moore (1966); he concludes that
changing relations between peasants, landlords, urban bourgeoisie and the state have
impact on democracy and stresses the critical role of the bourgeoisie in promoting
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13
democracy. If the bourgeoisie is conceptualized as the middle class, both classical
Marxists and orthodox modernization theorists regard the middle class as the main
agent of democracy. However, in the view of both recent modernization theorists and
Neo-Marxists, the emergence of the middle class in fostering democracy is often
ambivalent (Diamond, Linz & Lipset 1995; Rueschmeyer et al. 1992). Moreover,
because of its intermediate position in class structure and internal diversity, the
middle class is diversified in its interests, and in its relations with the dominant class.
There is a need to disaggregate the middle class for the evaluation of its role in
political process; small-scale entrepreneurs and the professional middle class are more
likely to endorse democratization; whereas the owners of capitals are much more
likely to support authoritarian regime (Diamond, Linz & Lipset 1995, 23).
Rueschemeyer et al. (1992) also indicate the changing balance of class power
as an important factor to understand the relations between capitalist development and
democracy. The landlord class have been the most anti-democratic; the peasants have
been disorganized and relatively weak as a force for democratization; the urban
bourgeoisie and the middle class (the salaried and professional) have not been as
anti-democratic as the large landlords, but their attitude toward democracy is
lukewarm or ambivalent; and the urban working class has been a prominent force for
democracy. They also emphasize class alliances for the advance of democracy. Since
the working class alone is generally too weak in the struggle for democracy, it
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14
usually forms alliances with bourgeoisie and/or middle class (Rueschemeyer et al.
1992, 59).
However, according to some theorists, the significance of class as a political
force in the post-industrial era has declined, due to the emergence of new
occupations which complicate class structure, on the one hand, and economic
development, which weakens the class position of the working class on the other
(Marks 1995, 240-1). Post-industrialism creates diverse new groups with various
interests, which loosen class ties and undermine class cleavages. Economic
development also reduces the solidarity of working class. Increased geographic
mobility has eroded the sense of community, and the growth of mass media has
diversified sources of political information. Trade unions have become more
diversified in membership and political interests as the proportion of female,
professional, and organized white-collar employment has increased. In democracies
the effect of class on politics can be seen by the relations between class position and
voting. Since World War II, class voting has declined, for classes must complete with
a variety of single-issue interest groups, such as consumers, feminists,
environmentalists, and human rights groups, which are generally more concerned
with values or lifestyle issues than with class issues, including unemployment and
working conditions (Rempel & Clark 1995, 243).
The theoretical limits of both the modernization and Marxist approaches
indicate that the above structural conditions cannot explain or cannot sufficiently
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15
explain the contrast of democratic performance between Taiwan and Malaysia, which
will be discussed in the final chapter.
Moreover, these approaches underestimate the role of ethnicity in social and
economic development in ethnically divided countries. Both early modernization
theorists and classical Marxists believe that economic development and social change
weaken ethnic identity, although they present different reasons. For the early
modernization approach, economic development gives rise to modem society in
which the various primordial ties of ethnicity would gradually disappear. For
classical Marxists, national and ethnic identities are subject to the economic forces of
social change and are viewed as an intermediate stage along the path from capitalism
to international proletarian solidarity (Majstorovic 1995, 37; Newman 1991, 451-3).
In recent years, both revised theories of modernization and Neo-Marxism
have increased attention to ethnicity by recognizing the existence of ethnic conflict,
but they have not paid adequate attention to it. The revised modernization theories
still treat ethnic conflict as a dependent variable, suggest that economic
modernization, by increasing ethnic interaction, may enhance ethnic cleavages
(Newman 1991), The Neo-Marxist approach basically regards ethnicity as a form of
“false consciousness” and thus ethnic conflict as class struggle in disguise, as
mentioned above.
However, ethnic conflict should not be reduced to class struggle. Although
some ethnic conflicts include elements of class stratification that reinforce ethnicity
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as a source of social cleavages, ethnic identity is often more significant than class
identity. When compared to class, ethnicity appears to be more ascribable to most of
the people due to its cultural depth, affective ties, and the sense of common kinship.
It is difficult to treat social class as a solid foundation for collective identity since
class boundaries are more fluid than ethnic ones. The reason is that classes, as
categories of economic interests, are likely to be subdivided according to differences
in skill and income levels (Smith 1991, 5). While class status is more responsive to
social mobility, ethnic membership is generally given at birth (Horowitz 1985, 90-1).
In a cross-national statistical analysis of 86 countries in 1975, the statistical data
shows that compared with class, ethnicity has much stronger correlation with
political conflict (Majstorovic 1995, 44-8).
In sum, neither the modernization nor Marxist approaches can sufficiently
explain the prospects for democracy in multiethnic countries because they neglect
the possibility of ethnicity as a main political force that can affect democratic
performance. Even Rueschemeyer et al. (1992, 286) hold that ethnicity plays a
stronger role in some cases they do not examine, and they admit that the conclusion
generalized from the selected cases probably underestimate the role of ethnicity in
democratic performance in the modem world as a whole.
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17
Ethnicity and Democracy
The significance of politicized ethnicity for democratic development has been
analyzed through two basic approaches. In the conflict perspective, there has been
profound skepticism about the prospects for democracy in countries suffering ethnic
conflict. As early as the nineteenth century, John Stuart Mill argued that liberal
democracy was nearly impossible in ethnically divided countries because they could
not meet the minimum democratic requirement of social and political integration and
consensus (Lijpart 1977, 18). In the same vein, Dahl (1989, 255) holds that
democracy is impossible when ethnic identities are so strong that ethnic conflicts are
constantly violent and are not subject to negotiation. Many studies seem to confirm
that ethnic conflicts, which revolve around an exclusive conception of legitimacy
and symbols of worth, tend to be zero-sum and more resistant to compromise in
political processes, which eventually leads to the erosion of democracy (Diamond,
Linz & Lipset 1995, 42-3). Moreover, a number of cross-national statistical analyses
have also indicated that ethnic cleavages are negatively related to democracy
(Hadenius 1992, 114). Indeed, contemporary international incidents seem to confirm
that the scale of ethnic conflict is closely related to the degree of democracy. In the
Third World, democratic regimes in Nigeria, Lebanon, and Sri Lanka broke down as
a result of severe ethnic conflict in the form of civil war. In East European countries,
democracy has made more progress in Hungary, Poland, and the Czech Republic,
where ethnic cleavages have been less important; and has made less progress in
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18
Slovakia, Bulgaria, Romania, and former Yugoslavia where ethnic conflicts have
been strong (Horowitz 1994, 36).
In the view of institutional school, however, the same degree of ethnic
conflict may result in different levels of democracy. Institutionalists contend that
institutional arrangements such as regulation and management of ethnic cleavages
may facilitate or obstruct liberal democracy. In other words, institutional engineering
can influence the prospects for democracy in multiethnic countries.
The most prominent institutional design is consociational democracy
(consociationalism or power-sharing democracy), which is inaugurated by Arend
Lijphart’s 1969 article in World politics, “Consociational Democracy.” The
consociationalism, serving as an explanation of the political stability of some smaller
European countries. Austria, Belgium, the Netherlands, and Switzerland, was
characterized by four major aspects (Lijpart 1977, Chap. 2).
(1) joint decision making in the form of inclusive grand coalitions;
(2) a high degree of autonomy for ethnic groups;
(3) minority veto usually restricted to the most vital matters;
(4) proportionality as the basic standard of the allocation in political
representation, civil service, and other public resources among
ethnic groups.
All four features of consociational democracy contrast greatly with that of
majority-rule or majoritarian democracy. The essence of majority-rule is the
concentration of political power in the hands of majority, while consociational model
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“is to share power, to diffuse and decentralize power, to divide power proportionally,
and to limit power” (Lijphart 1995, 857).
While many scholars attempt to apply the consociational model to a variety
of cases in order to refine the concept, some criticize question the empirical validity
of the theory and interpretations of evidence. Some argue that consociational polity
is profoundly undemocratic because it implies elite domination and would
undermine democratic accountability by inflating the power of elites who govern the
state within interethnic ruling coalitions. They are dissatisfied with the power-
sharing democracy that requires a low level of popular participation. Some hold that
consociationalism and democracy are incompatible, since they are skeptical that
ethnic group leaders generally prefer accommodation to aggressiveness. The
contending factions that struggle for power and leadership within an ethnic
community compel their leaders to respond to demands and grievances of their
constituents in competitive elections by espousing more extreme positions. This
blocks interethnic compromises, leading to the loss of the consociational character of
the regime. (Esman 2000, 101-2; Lustick 1997, 113). For example, Brian Barry,
one of the most systematic critiques of the theory, holds that the consociational
model emphasizes formalistic cooperative behavior of political elites at the expense
of manipulative device and power relations as the condition of political stability in
countries (Barry 1975a). He indicates that Switzerland fails to fit the consociational
model at every point because of the mildness of ethnic conflict, the use of
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majoritarian techniques such as binding referenda, and successful challenges to elite
decisions (Barry 1975b, 486).
In contrast to the consociational model, the concept of a control model, first
developed by Lustick (1979), can be viewed as the other end of the spectrum of
institutional design for the management of ethnic conflict. From the institutional
perspective, while the consociational model facilitates democracy, the control model
hinders democracy. Control refers to asymmetrical relations in which the hegemonic
power of an ethnic group resolves ethnic conflict by dominating other ethnic groups.
Hegemonic control is basically coercive rule by either a numerical majority or
minority, making it unworkable for the subordinated ethnic group to impose
challenges (McGarry & O’Leary 1993, 23). Examples include Russians and other
nationalities in the former Soviet Union, Arab and Kurds in Iraq, Tutsi and Hutu in
Burundi, and Mainlanders and the Taiwanese in Taiwan (Lustick 1979, 330). In the
control model, therefore, the reduction of ethnic conflicts through domination leads
to the decrease of democracy.
Theoretical Framework
The analysis of the theoretical relationship between the structure of ethnic
politics and democratic performance will begin with my criticism of the institutional
school. After an examination of the nature of democracy and power, the essence of
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state power, and the power relations between the state and society, it will discuss the
structure o f ethnic politics, focusing on domestic relations between the state and
ethnic groups.
I contend that the discovery of the structural conditions behind institutional
facades plays a very important role in understanding democratic experiences in
multi-ethnic countries. In the control model, domination of an ethnic group over
other ethnic groups reveals the power structure of contending ethnic groups. In
consociationalism, power-sharing agreements that are negotiated among the major
contending ethnic groups involve power politics. Moreover, the success of
consociational arrangements is built upon several favorable conditions, as Lijpart
(1977; 1995) concedes. One of them is a multiple balance of power among ethnic
groups in terms of number and relative size of ethnic groups. A multibalance of
power contains two elements: (1) a balance or an equilibrium among ethnic groups,
(2) the presence of at least three ethnic groups. A multiple balance of power is more
conducive to consociational democracy than a dual balance of power or hegemony
by one of the ethnic groups. This is because in the case of two ethnic groups, a clear
majority may seek to control rather than cooperate with the rival minority, and two
ethnic groups with approximately equal size may attempt to win a majority by
domination instead of cooperation (Lijpart 1977, 55).
I will argue that the balance of ethnic power not only lies in the structure of
ethnicity and demographic terms; it also depends on the power resources of each
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ethnic group, notably political and economic power. Although the ethnic
composition of the total population in a country often affects relative ethnic power, it
does not necessary determine collective ethnic power. It is evident that in some
countries, it is the numerical minority acting as the dominant ethnic group that
wields a much greater share of power resources; some of the examples include the
White minority in the former regime of South Africa and the Sunni Arab minority in
Iraq (Esman 1994). Furthermore, institutional designs are the expression of the
power structure. Based on this premise, the proposition is that the relative power
resources among ethnic groups shapes the institutional arrangements, which in turn
affect democratic performance.
The literatures of democracy, the state, and ethnic politics lend support to the
proposition. The nature of democracy, at root, is a matter of power and access to
power (Bollen 1 991 ; Horowitz 1994; Rueschemeyer et al. 1992). Basically, the
nature of power concerns the ability to control others or achieve one’s aims. Because
such ability is often associated with the possession of certain resources, power is
commonly defined as the possession of resources (Nye 1993, 50). Since power
resources are more or less unequally distributed in all societies, the allocation of
power resources matters for democratic development. In a cross-national statistical
analysis, Vanhanen (1992; 1997) finds that the concentration of power resources is
not conducive to democracy; whereas the dispersed distribution of power resources
makes democracy possible. Accordingly, in ethnically divided countries, the
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concentration of power resources in an ethnic group does not facilitate democracy
and their dispersion favors democracy.
To understand the power nature of the relationship between ethnic politics
and democracy, the state should be discussed, since the state in the contemporary era
has become the predominant institutional mechanism of power distribution (Esman
1996), and the state plays the central role in democracy. According to Weber (1958,
78), the state refers to “a human community that claims the monopoly of the
legitimate use of physical force within a given territory.” Following the Weberian
approach, the state is more elaborately defined as “a set of organizations invested
with the authority to make binding decisions for people and organizations juridically
located in a particular territory and to implement these decisions using, if necessary,
force” (Rueschemeyer & Evans 1985, 46-7). The more power resources are
concentrated in the state, the more difficult democracy (Lipset 1994, 4). Democracy
is impossible when the state wields complete economic power over production and
distribution (Huntington 1989,18). The state affects the power structure of a country
by various means, such as coercion and cooptation. Among the variety of state
power, coercion is the supreme one which the state monopolizes by means of the
police and the military. If the institutions of coercion and violence are strong in the
state apparatus, there is less chance for democracy (Rueschemeyer et al. 1992, 67).
With respect to state-society relations and class analysis, state power is
related to state autonomy. The basic conception of state autonomy refers to the
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ability of the state to pursue its interests and to resist pressure from private interests
and act independently of social groups (Caporaso & Levine 1992, 182). From the
perspective of modernization theories, the state must not be too autonomous; the
power of the state needs to be counterbalanced by the organizational strength of a
dense civil society, which is rich in social institutions and social interaction, to make
democracy feasible (Diamond, Linz, & Lipset 1995). In addition, the state with too
high autonomy violates the principle of democracy, which involves responsiveness
between the ruler and the ruled (Caporaso & Levine 1992, 191-2). In this sense, the
more autonomous the state is from the forces of society, the less the chances of
democracy. On the other hand, state autonomy, in class analysis, is defined in terms
of the relation of the state to the dominant class; it refers to the ability of the state to
pursue the interests other than those of the dominant class (Hamilton 1982, Chap. 1).
When the state is captured by the dominant class, it is less likely to promote
democracy (Rueschemeyer et al. 1992, 64).
In terms of its relation to ethnic groups, the autonomous state could be
ethnically impartial by such means as depoliticizing ethnicity, or it could employ
ethnicity as a resource for the pursuit of the agenda of the state. In contrast, the non-
autonomous state would act in response to societal ethnic pressures (Brown 1994, 3).
In ethnic politics, the state is regarded as the main arena for ethnic demands and
interests since state policies affect the relative power, status, and material benefits of
ethnic groups. Within the framework of the state, ethnic groups promote their claims
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and interests—better access to political, economic, social, and cultural rights,
resources and opportunities, including citizenship, voting rights, eligibility for public
offices, higher education, land, capital, credit, licenses, employment and business
opportunity, the position of religion, the status of language in education and in
government transactions (Esman 1994, 18-9; 1996, 259). Thus, control of the state is
a central aim of contending ethnic groups.
When an ethnic group gains control of state apparatus, the state lacks
autonomy from the dominant ethnic group. The dominant ethnic group can exercise
political hegemony through the state over the subordinate groups. Ethnic hegemony
can be exercised either by repression or by discriminative policies of exclusion,
subordination and preference (Esman 1994, 221-2). Exclusion policies can deny
citizenship, job recruitment, and political participation to the ethnic minority;
subordination policies endow some rights to ethnic minorities but treat them as
inferior citizens; and preference measures for the dominant ethnic group constitute
reverse discrimination through explicit affirmative action or implicit practice. Most
importantly, when an ethnic group dominates the state, the security forces are tightly
controlled by the dominant ethnic group, and important economic assets are soon
transferred to the members of dominant ethnic group (Esman 1994, 229). All these
policies of ethnic hegemony have negative effects on democracy. In short, when the
ethnic group captures the state which dominates the access and redistribution of
power resources, the prospects for democracy are diminished.
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2 6
To construct the concept of power resources for ethnic groups, I develop the
concept from Michael Mann’s The Sources o f Social Power, in which he holds that
social groups compete for four major types of power resources: political, economic,
military, and ideological (Mann 1993). All these power resources are ideal types;
they often exist in mixed form. To quell internal threat or disorder, political power is
exercised through military or security coercion. To justify the legitimacy of a regime,
sustain power distribution and mobilize mass support, political power is exercised
through ideological institutions, including language, education, and the mass media
(Richmond 1994, 289). Political power and economic power are interactive in causal
relations. While economic resources can affect political outcomes, political power
can often be converted into economic power. Political power is exercised to
intervene in markets and obtain shares or even gain control of economic resources by
legal regulations, direct participation in the form of state enterprises and so on.
Conversely, economic power resources check state power and influence distribution
of political power through bribery, capital flight, lobbies of interest groups, provision
of campaign funds, organizing civil society and the like. In ethnic politics, political
power and economic power are the most influential power resources among
contending ethnic groups.
Thus, ideological power may be regarded as an element of political power.
Political power also involves bureaucratic/institutional power, since institutions are
the expression of power structure, and political power reveals itself in bureaucratic
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27
and electoral institutions. Military power is combined into bureaucratic/institutional
power, for the military is a kind of bureaucratic institution. However, for analytical
purpose, political power is separated from economic power.
In addition to political and economic power, ethnic cohesion is also a critical
factor of power struggle among ethnic groups. Ethnic cohesion can affect the
political and economic power of each ethnic group. Ethnic cohesion refers to the
degree of political divisions, cleavages, and factions based on class, kinship,
occupation, ideology, or competition for leadership within an ethnic group (Esman
1994, 20).
Democratic development in ethnically divided countries may also be affected
by international factors. Domestic ethnic conflict often involves external situations
(Esman 1994; Gurr 1993). There are two factors of the international environment
relevant for ethnic mobilization: the international status of the regime and external
support to contending ethnic groups (Gurr & Harff 1994, 85). Ethnic groups in
rivalry tend to seek moral or material support from foreign entities, including ethnic
kinfolks, friendly governments and international organizations. The types of external
support mainly include verbal advice, financial aid, military aid, provision of
information, and provision of safe havens for exiles (Gurr & Harff 1994, 91). A
second element is the status attributed by international society to the regime. The
global community tends to support a regime with strategic interests or abundant
economic resources (Gurr & Harff 1994, 85-6). The involvement of external actors
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in domestic ethnic politics may have a negative impact on democracy: for example,
if foreign alignment with the ethnic rival leads to civil war, or it may have positive
impact on democracy: for instance, diplomatic pressure as a result of human rights
violations, raising costs of resisting regime change (Rothchild & Groth 1995, 78-9).
Therefore, ethnic politics here is defined as any politics that depends on the
relative power of ethnic groups. In the structural sense, it can be termed “balance of
ethnic power” because balance of power can mean any distribution of power
(Sheehan 1996, 4). Based on the above theoretical framework, the ethnic power of a
given ethnic group consists of the ethnic cohesion, economic power, and political
power, which can be subdivided into external support, ideological power, and
bureaucratic/institutional power.
Based on the literature review and theoretical framework, the hypothesis is
that the more the subordinate group increases its ethnic power, the more likely the
prospects for democracy is increased; the more the dominant group increases its
ethnic power, the more likely the prospect for democracy is diminished.
Methodology
This study uses the comparative method. In terms of broad strategy, the
comparative method can be classified into the case-oriented (qualitative) and the
variable-oriented (quantitative). While the variable-oriented method aims at testing
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hypotheses derived from theory by statistical techniques, the case-oriented method
seeks to be historical interpretive and causal analytic with the aid of theory (Ragin
1987). Obviously, I choose to use the case-oriented method, or comparative
historical method.
In terms of outcome or dependent variable, there are two types of
comparative method—positive and negative. The positive method identifies
independent variables associated with a common outcome, while the negative
method shows independent variables associated with divergent outcomes (Smelser
1973, 52). In this perspective, the negative comparative method is used for this
dissertation.
Additional classifications focus on techniques of comparative analysis. The
designs of comparative method in practice are most-similar-system design (MSS)
and most-different-system design (MDS). MSS involves very similar cases with
different outcomes, whereas MDS concerns very different cases with similar
outcome (Peters 1998, 37-41; Ragin 1987, 45-8). Both Taiwan and Malaysia are
ethnically bipolar countries with similar levels of ethnic conflict. Therefore, the
design of the comparison method in this dissertation is MSS.
Levels of Analysis
Levels of analysis, divided between the micro (or individual) level, and the
macro (or system) level, refer to the degree to which political units are aggregated
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30
for analysis (Landman 2000, 17). In terms of levels of analysis, the literature on
political regime change has been divided into two major camps of research
perspectives: structural and process-driven explanations (Kitschelt 1992). The two
approaches have different merits. The structural-oriented approach is preoccupied
with contextual preconditions of regime change and views democracy as the
outcome of long-term structural impetus. As mentioned previously, economic
development and class are the main elements of structural analysis. In contrast, the
process-oriented analysis focuses on the short-term sequence of political interaction
and bargaining among political agents who make strategic choice in democratic
process. The discussion about the role of leadership in democratic performance is
the prominent example of the process analysis.
The research approach employed to examine the thesis is structural analysis. I
prefer structuralism to process explanation because a process can be understood only
in terms of a structure as whole, and that structure underlies the surface forms of
events (Stromberg 1994, 290). It is also because the general causes can be better
explained by identifying the historical context of the process and by establishing the
sets of constraints that shape political outcome. The structural approach also has
advantage over process explanations in causal analysis that require a fairly long
historical period. For the above reasons, this dissertation focuses on the structural
conditions of democracy, rather than a process analysis of regime change.
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Units of Analysis
Systematic comparison makes use of comparable units of analysis. Units of
analysis are the objects on which researchers collect data, such as individual people,
countries, social movements and so on (Landman 2000, 16). The units of analysis
here are ethnic groups. In Malaysia, I will analyze Malays and Chinese. In terms of
ethnic categories, non-Malays is read as Chinese in Malaysia because Indians share
less than 10% of the total population and have no significant influence in ethnic
politics.
In Taiwan, I will analyze the Mainlanders and native Taiwanese. It is
debatable to regard the Mainlanders and the Taiwanese as two different ethnic
groups. Some people prefer to call this a sub-ethnic division, arguing that the
Taiwanese and the Mainlanders are the same ethnic group— Han Chinese, for they
both shared elements of Han culture such as Confucianism, Buddhism, and standard
written language. However, as mentioned earlier, from an instrumentalist
perspective, ethnic identity, as a product of human action and choice, can be changed
in response to changing situations. The Taiwanese, who were under Japanese rule for
fifty years and were repressed by the KMT government during the takeover years,
have a different historical situation from the Mainlanders, who witnessed the Sino-
Japanese War in Mainland China. Partly because of their different historical
memories, although this does not mean that the Taiwanese are not Han Chinese,
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many Taiwanese distinguish themselves from the Chinese and from an instrumental
perspective can be regarded as the Taiwanese.
Sources
The sources of my research include secondary sources, mainly books and
journals in English and in Chinese. I also conducted interviews with politicians,
bureaucrats, scholars, business people and other groups in Taiwan and Malaysia
(listed in the Appendix). Statistical data are based mainly on secondary materials
drawn from documents and newspapers.
The Measurement of Independent and Dependent Variables
In addition to measuring democracy qualitatively in terms of regime type as
Gasiorowski’s political regime change dataset shows, it is beneficial to measure
democracy quantitatively for more detail. There are two quantitative categories for
measuring democracy (Shin 1994, 146). One involves the subjective perception of
experts, while another relies on objective conditions observable in the political
process, including participation and competition.
Shin (1994, 147) suggests that the subjective measure is more beneficial than
the objective measure. Although the objective measures of democracy are easily
replicated and have more delicate gradations, these rates are not highly reliable,
partly due to manipulation or coercion in the political process, or simply due to
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33
misinterpretation by researchers. High voter turnouts, for example, may reflect vote
buying or legal compulsive obligation for citizens in some countries with low level
of democracy, while low turnouts may indicate either indifference or satisfaction in
the attitudes of the voters in a democratic nation (Bollen 1991, 4). In general, the
subjective rating is preferable among scholars for rating democracy because
researchers can incorporate as many factors as possible when making assessments of
a country, and many features of liberal democracy can only be measured by
subjective ratings (Bollen 1993, 1210). Among several subjective measurements,
Bollen (1993, 1225) recommended Gastil's index due to its highest validity
coefficient in political rights and negligible random error. Thus, I choose Gastil's
index as the measurement of liberal democracy in comparing democratic
performance between Taiwan and Malaysia.
Based on the above theoretical foundation, ethnic power, as a cluster of
independent variables, is classified as ethnic cohesion, ethnic economic power, and
ethnic political power, which is further subdivided into ideological power,
bureaucratic/institutional power, and external support.
Ethnic cohesion is generally examined through the extent of interparty or
intraparty conflicts within each ethnic group. In the case of Taiwan, ethnic cohesion
is examined through the KMT for the Mainlanders, and through KMT local factions
and opposition groups for the Taiwanese because prior to 1986 the establishment of
new parties was banned under martial law. As to ethnic political power,
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bureaucratic/institutional power is examined mainly through ethnic composition of
the military and higher levels of civil services, especially the cabinet. In the case of
Taiwan, bureaucratic/institutional power includes the ruling party, the Kuomintang,
because Taiwan had been a quazi-Lenninist party-state prior to democratic transition.
Ideological power is mainly examined through the policies of culture, language, and
education. External support is based in the support received by ethnic groups, either
the politically dominant ethnic group or the politically subordinate group, from
outside the countries. Due to availability of the data, ethnic economic power is
assessed through data on the changing ethnic composition of business groups and
information on small and medium-sized businesses for Taiwan, and through data on
household income by ethnic groups and on share capital of limited companies
according to ethnic groups for Malaysia.
The Outline of Chapters Ahead
The rest of the dissertation explores the impact of ethnic power or the balance
of ethnic power on democratic performance in Taiwan and Malaysia. The case of
Taiwan is examined in Chapters 2 through 5. Chapter 2 provides an historical
overview of ethnic differences between the Taiwanese and the Mainlanders and the
origins of ethnic identity of the Taiwanese, and then discusses the nature of the
political system before democratic transition. Chapter 3 shows the emergence of
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Taiwanese economic power, with special attention to small and medium-sized
enterprises, in the context of Mainlander economic power. Chapter 4 explores the
increase in Taiwanese political power in terms of ideology and
bureaucratic/institutional power, and also deals with the issues of ethnic cohesion,
with emphasis on the Kuomintang (KMT) local factions and the integration of the
Taiwanese opposition. Chapter 5 reviews the ethnic power of both Mainlanders and
Taiwanese and explores how it affected democratic development in the 1980s.
Chapters 6 through 9 cover the case of Malaysia. Chapter 6 is concerned with
the essential historical and institutional context for ethnic politics in Malaysia since
its independence, including the birth of the modem state of Malaysia, ethnic
diversity, the nature of the political system, and the origins of ethnic politics in the
colonial period. Chapter 7 explores the balance of ethnic political power between the
Malays and the Chinese after independence in terms of ethnic cohesion and ethnic
political power, particularly ideological power and bureaucratic/institutional power.
Chapter 8 examines the distribution of economic power between the Chinese and the
Malays, focusing on how the Malays increased their economic power through the
New Economic Policy. Chapter 9 reviews and discusses ethnic power between the
Chinese and the Malays and its implications for democratic erosion in Malaysia.
The concluding chapter, Chapter 10, compares Taiwan with Malaysia in
terms of the independent variable and discusses the significance of ethnic balance of
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power as an explanation of the different outcomes of political change between the
two countries in comparison with other structural causes of democracy.
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37
CHAPTER 2
THE HISTORICAL AND INSTITUTIONAL CONTEXT
FOR ETHNIC POLITICS IN TAIWAN
This chapter provides the historical context for the following chapters on post
war ethnic politics of Taiwan, with special attention on the period from 1945, when
China, represented by the Kuomintang government, reasserted its sovereignty over
Taiwan, to 1970 when the Taiwanese began to increase their political power. Following
the sketch of history in terms of the changing sovereign state, and a discussion of the
ethnic differences between the Mainlanders and the Taiwanese in terms of language,
residence, and occupation, this chapter emphasizes the causes and the process of the
emergence of ethnic Taiwanese identity under Japanese colonial rule and the five years
of Nationalist Chinese takeover. The last section will discuss the nature of Taiwan
political system before the democratic transition by exploring the unique aspects of
Taiwan's political system, namely the overlapping of jurisdiction between central and
local government as well as the coexistence of a quasi-Leninist party-state under martial
law regime and limited local democracy.
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38
The Sketch of the Political History of Taiwan
The modem history of Taiwan was characterized by ethnic politics, which
originated in the alternate periods of colonial rule and Chinese rule. Before the Han
Chinese came to Taiwan, the island was conquered and ruled by two European colonial
powers, the Dutch ( 1 624-1 661) and the Spanish (1626-1642). Subsequently Taiwan had
more than two hundred years of Chinese rule by first the Cheng regime and then the
Ching Dynasty. Finally, the Japanese colonized it from 1895 to 1945, paving the
cornerstone of post-war ethnic politics in Taiwan.
The Dutch, as the first colonists, began to control southern Taiwan in 1624, and
the Spanish colonized northern Taiwan two years later. The Dutch expelled Spanish
settlements from northern Taiwan in 1642 and then ruled the whole island as a
commercial base for twenty years. After the collapse of the Ming Dynasty in 1644,
Cheng Ch'eng Kung—a Ming loyalist—defeated the Dutch in 1662. The Chengs
governed Taiwan as the political base of Han Chinese military resistance against the
Manchu who ruled Mainland China under the Ching Dynasty. In 1683, the Cheng
regime submitted its sovereignty to Ching Dynasty. Imperial China initially ignored the
political and economic importance of Taiwan and regarded it as a frontier district
inhabited by savages, pirates, and traitors. Hence Taiwan was treated as a prefecture of
Fujian province until it was promoted to provincial status in 1885. Following China's
defeat in the first Sino-Japanese war, China formally ceded Taiwan to Japan in 1895
(Kuo 1973). When the Japanese surrendered in 1945 as a result of their defeat in the
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39
second Sino-Japanese War, the Kuomintang (KMT) government reasserted Chinese
sovereignty over Taiwan, which became one of the provinces of China. Eventually, as a
result of the defeat in the civil war against Chinese Communists in 1949, the KMT
relocated its regime in Taiwan, claiming the legitimacy of the sovereignty over the
China mainland.
The Ethnic Differences between the Taiwanese and the Mainlanders
Ethnic distinctions in Taiwan resulted from two major waves of Chinese
immigration. Chinese immigrants from the coastal provinces of the mainland had been
settling in Taiwan on a regular basis since the fifteenth century, but Taiwan did not
experience the first major influx of Chinese immigrants until the decades of Cheng's
regime on the island and the early Ching Dynasty in the seventeenth century. Those
consisted primarily of the Hoklo from the southern region of Fujian, with a much
smaller number of the Hakka from Guangdong. Despite their slight subethnic
differences, the Hoklo and the Hakka both came to identify themselves as Taiwanese
due to similar historical memories. The second wave, starting with the KMT takeover of
Taiwan in 1945 and peaking during the KMT retreat to Taiwan in 1949, brought around
one and a half million core supporters from various provinces in Mainland China.
About 60% of the Mainlanders have their origins in the five coastal provinces of the
mainland—Fujian, Jiangshu, Zhejiang, Shandong and Guangdong (Jacobs 1993, 26).
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Aside from a very few Malayo-Polynesian aborigines, those who arrived in Taiwan
before 1946 are called the Taiwanese, and the Mainlanders are those who came after
that. Those who are bom in Taiwan inherited their fathers' ethnic status according to the
Chinese custom. Currently, the Taiwanese account for 85% of the total population,
while the Mainlanders comprise around 14%.
Ethnic segmentation in Taiwan was manifested in the language, occupation and
residential segregation of the Mainlanders, especially in early decades. The residential
segregation of the Mainlanders has been very common. While the Taiwanese were more
evenly distributed between cities and rural villages, the overwhelming majority of the
Mainlanders lived in the urban areas. The degree of urbanization for the Mainlanders
was high: the larger the cities, the higher the percentage of the Mainlanders. During the
1 950s and the 1960s, around one-half to two-thirds of the Mainlanders inhabited the five
major cities, especially Taipei (Greenhalgh 1984, 537; Wang 1989, 55-56). Moreover,
many Mainlanders resided in the segregated communities the KMT government
allocated for them; for example, in 1967 over 28% of the Mainlanders resided in such
communities (Kung 1998, 99).
Even though the Taiwanese and the Mainlanders use the same written characters
in Chinese, they use different spoken languages, which are mutually incomprehensible.
The Hoklo speak Taiwanese, a derivative of Min-nan, the southern Fukien dialect. The
Hakka, in addition to Taiwanese, speak their native tongue, the Hakka dialect. Since
Mandarin was established as the national and educational language, Taiwanese has been
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41
disallowed in the military, schools, and most government institutions, and has been
spoken only privately in the family, community, religious and business context (Gates
1981, 264). Although more than 90 percent of the younger Taiwanese can understand
Mandarin (Cheng 1994, 363), some elder Taiwanese cannot speak Mandarin and may
speak Japanese. Mainlanders speak both Mandarin and various dialects of their home
provinces, but virtually none of them, except for the younger generation, can speak
Taiwanese.
Due to ethnic networks and an inability to speak Taiwanese, economic
opportunities for the Mainlanders in the private sector were limited compared to the
Taiwanese who were predominately employed in the agricultural, fishing, industrial and
commercial sectors of the economy (Chang 1994, 97). In contrast, most of the
Mainlanders, with their educational and employment background in Mainland China,
served in the government, official institutions, public schools, public enterprises, and the
armed forces. For example, a survey of 1967 indicated that the Mainlanders, which
were 14% of the total population, held 22% of the jobs in transportation, 34% in public
administration and professional occupations, including doctors, professors, and lawyers,
as well as 82% in military, police, and national security (Wei 1976, 261-2). At the top
of career ladder, the Mainlanders were more likely to be managers, executives, and
professionals, while the Taiwanese tended to be proprietors (Greenhalgh 1984, 540). In
the field of education occupations, university professorships were nearly all held by the
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42
Mainlanders, except for the medical schools; and the principals of secondary schools
and elementary schools were generally the Mainlanders (Meisner 1963, 100).
Ethnic differences between the Mainlanders and the Taiwanese, however, have
been partly mitigated by the common cultural heritage of Han Chinese and the several
decades of KMT rule. The adoption of Mandarin as the national language and the
teaching medium in the school system has greatly facilitated interethnic interactions
between the Mainlanders and the Taiwanese, especially in the educated second
generation. Moreover, over time ethnic boundaries were further blurred through
intermarriage between the two ethnic groups. Thus, although ethnic consciousness
remains influential in the politics, the Taiwanese and the Mainlanders usually can get
along with each other in social life (Hsiao 1998, 329).
The Heritage of Ethnic Politics in Post-1949 Taiwan
Ethnic cleavages and ethnic diversity in terms of language, occupations, and
resident pattern originated from the emergence of Taiwanese identity under Japanese
colonial rule and the takeover policies of the KMT government.
Taiwanese identity developed from the experience of resistance, the sense of
cultural alienation, assimilation policy, and the practices of discrimination against the
Taiwanese during Japanese colonial rule. During the Ching regime, the Han Chinese
immigrants gradually developed a local or provincial identity and regarded themselves
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43
as Taiwanese, but they did not deny their identity as Chinese (Ko 1991, 127-8). In other
words, Taiwanese identity was compatible with Chinese identity at that time. A
Taiwanese identity independent from the Chinese identity did not develop until Japanese
colonial rule.
Japanese Colonial Rule
The Taiwanese identity initially emerged as the result of China’s inability to
support Taiwan against Japanese occupation. When Taiwan was ceded to Japan, the
Taiwanese pleaded in vain with the Ching dynasty not to yield to Japan. Without any
assistance from China in their armed resistance against Japanese occupation for several
years, some Taiwanese were convinced that the motherland had betrayed them. This
historical sense of betrayal gave birth to the Taiwanese identity. Secondly, under
Japanese rule, Taiwan lost contact with and was alienated from Mainland China.
Japanese rule prevented the Taiwanese from participating in the Chinese political and
intellectual developments that nurtured Chinese identity. In addition, the Taiwanese
experienced different historical memories and developed their own new cultural values
and worldviews, conducive to the Taiwanese identity (Meisner 1963, 97).
Furthermore, during the Japanese colonial period, the Japanese imposed class
distinctions between the colonized Han Chinese and the colonizer Japanese. Politically,
the Japanese held the top positions at all three levels of local administration; the
exception was a few Japan-educated Taiwanese appointed as village headmen in the
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44
later colonial period. Economically, while the Japanese dominated modem industries
and commerce, almost 70% of the Taiwanese were employed in agriculture, with a few
working in traditional commerce (Gold 1988a, 103). Socially, very few Taiwanese were
admitted into a university and their academic pursuits were confined to medicine,
agriculture and other applied sciences, with a few studying politics, history, and law
(Kuo 1973, 20). Having been exploited economically, discriminated against socially,
and oppressed politically, the Han Chinese had a keen sense of ethnic identity. Keeping
the above historical memories, they tended to identify themselves strongly as the
Taiwanese. The term "the Taiwanese" has been common since the second decade of
Japanese rule (Tu 1996, 1124).
In the late 1910s, the Japanese began to pursue an assimilation policy in which
education and language played a prominent role. In 1922, the government eliminated
segegration and reduced differences in the education between the Taiwanese and the
Japanese (Ho 1995,49). In 1939 the Japanese administration requested that elementary
education included the reading and speaking of Japanese. In 1941, the primary
education was finally also unified under a single system (Lai et al. 1991, 33-4). When
militarists gained control of the government in Japan during the 1930s, the colonial
administration speeded up the pace of Japanization by imposing Japanese religion,
customs, and language on the Taiwanese, and urging them to adopt Japanese names. In
1941, the Japanese authorities launched the campaign to mold the Taiwanese into
imperial subjects through public services. As a result, in 1944, 71% o f the Taiwanese
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45
were literate in Japanese (Hsiao 1992,84). It is also estimated that 4% of the Taiwanese
were employed in the Japanese bureaucracy, and 10% of the Taiwanese adopted
Japanese names (Lai et al. 1991, 45-6, 172). After Japan's surrender, those who had
accommodated to the Japanization chose Taiwanese identity. This was even evident in a
few Taiwanese' aborted attempt to collaborate with radical Japanese military officers for
the independence of Taiwan following the surrender of the Japanese (Li 1993, 18-19).
On the other hand, the Taiwanese who resisted the policy advocated a home rule
movement that stressed Taiwanese local culture to differentiate it from the Japanese
culture (Yin 1987, 276). In practice, most of the Taiwanese mixed Japanese and local
Taiwanese cultural values in their customs and manners, which were conducive to the
survival of Taiwanese identity. The effect of the assimilation policy under the Japanese
colonial regime reinforced Taiwanese identity after the retrocession to China under the
KMT rule. Although the reactions to the policy among the Taiwanese was different—
some accommodated the policy and many resisted it, the end result with respect to the
KMT regime was the same—strengthening Taiwanese identity.
The KMT Takeover Years
Taiwanese identity was reinforced by the attitude of the KMT government
toward the Taiwanese during the five years of takeover, embodied in the recruitment
and takeover policies of the KMT government as well as the suppression of the
February 28 Uprising in 1947. While the Taiwanese public welcomed the KMT
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46
takeover in 1945, the KMT authorities treated the Taiwanese with suspicion because
some Taiwanese had been conscripted and fought in Japanese armies against the
Chinese or acted as Japanese spies (Jacobs 1990). In 1945, General Chen Yi was
appointed as governor-general of Taiwan Provincial Administration and Commander-in-
chief of Taiwan Garrison. As a governor-general, Chen Yi was empowered to enact
legislation and to supervise the local branches of the federal government, covering the
judiciary, the central bank, and the examination institution for the public services. With
a centralized government, having with both military and civilian authorities at his
disposal, similar to the form of government in the Japanese colonial regime, Chen Yi
was able to exercise much more power than the governors of provinces in Mainland
China (Chen 1994, 287-8). As a consequence, the Taiwanese usually associated that
kind of governorship with the oppression they suffered under the Japanese, and
nourished bitterness and resentment against the KMT rule (Li 1993, 24).
The recruitment policy of the Administration further alienated Taiwanese elites
by virtually excluding the Taiwanese from political power, and thus consolidated their
Taiwanese identity. When the Japanese left, the KMT did not promote lower-ranking
Taiwanese but recruited the Mainlanders to higher posts. In 1946 the Taiwanese held
only 7.6% of the 296 upper and middle level positions in the Administration (Cheng
1995, 72). Only three out of the seventeen county chiefs and city mayors were the
Taiwanese. In the bureaus and institutions directly under the provincial government,
only two of the sixteen directors were the Taiwanese. More importantly, of the top
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47
twenty positions in the administration, consisting of governor-general, secretary-general,
department heads, deputy department heads and chief secretaries, only the Deputy
Department Head of Education was the Taiwanese (Cheng 1992, 257). It is worth noting
that of the above six Taiwanese high-ranking officials, five were the 'Half Mountain'
(the 'mountain' represents mainland China, and thus the terms refers to the quasi-
mainlander), the Taiwanese who had worked with the KMT regime on the mainland and
came back to Taiwan for the takeover (Cheng 1992,256-7; Jacobs 1990). In addition to
nepotism and ethnic discrimination in the recruitment of the bureaucracy, the
administration restricted the promotion of the Taiwanese and paid lower salaries to the
Taiwanese who held the same grade in comparison with the Mainlanders (Li 1993, 31).
Aside from political discrimination, KMT economic policies also led to
Taiwanese resentment on economic grounds and had the effect of reinforcing Taiwanese
identity. The Taiwanese resented the KMT inattention to their economic needs because
the Mainlanders controlled economic assets left by the Japanese and often exploited
them for personal gains, at a time when Taiwan suffered severe unemployment and
hyper-inflation. Through its takeover of all Japanese public and private wealth and
through the establishment o f an all-compassing public sector covering land, trade,
utilities, finance, engineering, agriculture, manufacturing, and transportation, the Chen
Yi government controlled manufacturing and monopolized the external trade and
financial system of Taiwan (Cheng 1994,289-90; Liu 1995, 26-7). In the public sector,
the Trade Bureau and the infamous Monopoly Bureau of Tobacco and Wine became the
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48
major source of corruption, leading to the outbreak of ethnic conflict the next year
(Hsiao 1992, 90). Expecting a share of the Japanese spoils, the Taiwanese concluded
that the KMT government was even worse than the Japanese in its economic
management.
More importantly, the island-wide violence between the Mainlander state and
Taiwanese society following the February 28 Uprising strongly forged the Taiwanese
identity. On the evening of February 27, 1947, four mainlander policemen and two
agents of the Tobacco and Wine Monopoly Bureau beat an illegal tobacco peddler in
Taipei and killed one of the bystanders who defended the vendor. When the
demonstration escalated as a result of police shooting into the crowd, large-scale street
riots rapidly expanded into uprisings in major cities on the island. The Taiwanese
angrily assaulted the Mainlanders, destroyed their properties, and even attacked
government offices, including police stations. Since the provincial government had too
few armies to suppress the massive uprising, the Taiwanese initially controlled most of
the cities. To resolve the February 28 Incident, the Taiwanese demanded political and
economic reforms, including immediate municipal executive elections and equal
representation of the Taiwanese in the provincial government and state-owned
enterprises. The Chen Yi government was conciliatory and promised to consider the
reform proposal and refrained from military coercion. However, the central government
decided to send military reinforcements from the mainland. In March the uprising was
finally crushed. During the week that followed, thousands of Taiwanese were
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49
imprisoned or killed, including most of the Taiwanese elites. Some fled from Taiwan
and became activists of the Taiwan independent movement overseas (Lai et al. 1991).
Although the KMT removed Chen Yi from his post and appointed some
Taiwanese to official positions, the KMT policy with respects to the uprising was to
erase it from public discourse without apology to the Taiwanese. As a result, regarding
the KMT as a foreign overlord whose rule was even more oppressive than that of the
Japanese, some Taiwanese were alienated from and even hostile to the Mainlander
regime. The historical memories of the February 28 Incident became the symbol of the
Taiwanese opposition, which employed the Incident to strengthen the Taiwanese
identity and mobilize mass support in opposition movement (Ko 1991, 129). In 1949,
the KMT regime relocated to Taiwan, bringing from the mainland a full-fledged central
government with armies, legislative bodies, legal and other coercive systems. Since then
the Mainlander have controlled the central government, resulting in the continuation of
ethnic politics in Taiwan.
Political Institutions Under Authoritarian Rule
This section will provide the essential historical political background for
understanding ethnic politics since 1949 in Taiwan. The main concern is to illustrate
Taiwan's dualistic political system characterized by the coexistence of the quasi-Leninist
authoritarian party-state under martial law nationwide with limited electoral democracy
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50
at the local level. The dualistic political system was to resolve the political dilemma
over how to consolidate political power of the immigrant regime and at the same time to
draw support from the Taiwanese. On the one hand, Chiang Kai-sek and the KMT
sought to increase party and presidential power through authoritarian rule under martial
law in order to forestall political crisis resulted from their defeat in the civil war against
communists in Mainland China. On the other hand, as the immigrant regime of minority
rule, the KMT was forced to make certain compromises on local democracy the
Taiwanese desired so as to receive greater Taiwanese support (Jiang Nanyang 1995,73).
The Two-tiered Overlapping Jurisdiction Structure
Before democratization, the political system of Taiwan was unique in two
aspects. One aspect was the two-tiered overlapping jurisdiction structure: the central and
the provincial governments, both had jurisdiction over essentially the same territory.
Since the central government, which proclaimed Taiwan as a province of the whole
China, had relocated from the mainland and had sovereignty only in Taiwan, the
provincial government administered the same territory, including the island of Taiwan
and its offshore islands, as the central government did, except for offshore islands
approximate to mainland China and some islands in the South China sea (Tan, Yu &
Chen 1996, 485).
Under a unitary system, the central government exerted control over the
provincial government and held ultimate authority for formulating and conducting
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51
policies. Under the supervision of the central government, there were two levels beneath
the provincial government—township-level units and village-level units. The central
government ensured the implementation its policies through the provincial government
by exercising legal, financial, and personnel controls (Chang & Lam 1996, 121-2; Chao
1992, 54). Thus, the operation of provincial government was supervised and controlled
by the central government.
The other unique aspect was that Taiwan political system was dualistic; on the
one hand there was quasi-Leninist authoritarian party-state and martial law regime at the
national level and on the other limited home rule and electoral democracy at the local
level (Jiang 1995, 76).
Quasi-Leninist Party-State
Taiwan was an authoritarian party-state. As a ruling party, the KMT was often
inseparable from the state. Virtually all leaders in the state institutions were party
members, whose careers showed substantial crossover between state and party posts;
and state funds were channeled into the support of party-related activities (Sutter 1988,
56). The KMT viewed itself as a missionary revolutionary party with a ultimate goal of
national unification and with the guiding ideology—The Principles of the ThreePeoples,
doctrines written by the party's founding father, Sun Yat-sen. Although the KMT party
was distinct from the typical Leninist party in terms of its ideological orientation, it
modeled itself on a Leninist party in terms of party structure and party-state
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52
relationships (Cheng 1989, 477). The KMT party-state was characterized by
organizational parallel between the state and the party, party leadership over
government agencies, state corporate control over social groups, state capitalism, as well
as a ban against other parties and the restriction of other political and civil rights under
martial law.
As a quasi-Leninist party, the KMT party paralleled the state at all levels. Its
structure was hierarchical, beginning with the local unit at the bottom, subordinated to
subdistrict, district, county, provincial, and finally up to national level. In addition to the
above party hierarchy, there were special party branches for hospitals, state agencies,
public enterprises, the military, veterans, students, teachers, overseas Chinese, and
major vocational groups (Kung 1998, 53). The party structure at each level included
congresses, committees, and administrative machines. Party cells were the basic units
for training, investigation, and service activities (Pang 1992, 43). At the top o f the
party's hierarchy, the Central Standing Committee (CSC), which resembled the
Politburo in the Leninist parties of the former Soviet Union in status and power, served
as a final decision-making body and a real power center. Headed by a party chairman
who had decisive influence in decision-making, the CSC members were represented by
the leaders of a wide range of institutions— the party, the bureaucracy, the military, the
judiciary, the mass media, big business and the electoral bodies (Wu 1989, 397).
As a quasi-Leninist party, the KMT was above all state agencies and electoral
institutions in power and authority. The KMT initiated and finalized important policies,
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53
and the government formulated and implemented them. With the party network linking
the government bureaucracy, the KMT supervised the working of the government and
legislative bodies at all levels (Dickson 1997, 52-3). In general, the KMT established
primacy over the state in most aspects of policy and personnel matters.
The KMT also established control of the military and security agencies. The
KMT required that military officials at all levels and the personnel in charge of the
confidential affairs hold party membership (Kung 1998, 75). To ensure military
commanders' political loyalty to the party, the KMT established in 1950 political
commissars system, assigning political commissars who were responsible for
conducting political education and political surveillance in each military unit at each
level in the military hierarchy (Jiang 1995,92). The KMT party chairman who served as
the President was also the supreme commander of all armed forces, and the President
took his power of command directly through the Chief of the General Staff who led the
military command (Cheng 1990, 52-3). In addition to personal authority of the party
chairman, the participation of military leadership in the decision-making center of the
party also ensured the party leadership of the military. It was manifest in the dominance
of the central government by Chiang Kai-shek and Chen Cheng, who served as
president and prime minister respectively, and in control of Taiwan Province until 1972
by other generals, who served as provincial governors (Cheng 1990, 126-7).
With its centralized state power, the KMT established its supremacy over the
society not only by the above party and military/security system, but also by exercising
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54
corporatist controls over the largest and the most resourceful social groups—the
teachers' associations, the farmers' associations, water-irrigation associations, industrial
and commercial associations, and the trade unions (Sutter 1988, 57). The KMT
intervened in the selection of leaders, the activities, and even the budgets of social
groups (Tien 1993, 108). The KMT requested that key official holders must have party
membership. The party's central cadre school held periodic study sessions for the leaders
of these groups. Party cells operated at each level to monitor closely their elections and
activities. The KMT also coordinated and mobilized a variety of social groups to
support the regime.
The KMT regime under state capitalism also wielded extensive controls over the
economy in Taiwan. As a planner, the KMT state regulated and intervened in the
economy through legislative and administrative measures; as a banker and an
entrepreneur, the state engaged directly in a variety of economic activities through the
monopoly of the financial system and important industries, including oil, sugar,
electricity, fertilizer, shipbuilding and transportation.
It is worth noting that the KMT established a one-party authoritarian rule under
the facade of checks-and-balances democratic institutions. Under the 1946 Constitution,
the KMT reestablished the National Assembly and the five-chamber (Yuan) structure of
government, namely the Executive Yuan, the Judicial Yuan, the Examination Yuan, the
Legislative Yuan, and the Control Yuan. The Executive Yuan is the equivalent of a
cabinet of ministers; the Judicial Yuan is the equivalent of a Supreme Court. Following
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55
Chinese political tradition, the Examination Yuan organizes civil-service examinations
and registers public functionaries such as transfers, promotions and commendations,
while the Control Yuan monitors the ethics of government officials and investigates
corruption. Finally, the Legislative Yuan is responsible for the legislative and approving
the government budget. In addition to the legislative Yuan and the Control Yuan, the
National Assembly is also one of the three parliaments at the national level. The
National Assembly acting as an electoral college is empowered to elect the President
and the vice-President, as well as amend the constitution. While the members of the
Control Yuan are required to be indirectly elected through city councils and provincial
assemblies, those of both the National Assembly and the Legislative Yuan are required
to be directly elected by the citizens (Wu 1995, 26). However, under martial law, there
were no elections for the three national parliaments until 1969, which will be elaborated
in the later section.
Martial Law Regime
The Taiwan political system was authoritarian also in the sense of a martial law
regime. Although the ruling regime was structured around the 1947 constitution, in
reality the authoritarian rule of the KMT was based upon the 1949 martial law and the
1948 Temporary Provision (the Provisional Amendment for the Period of Mobilization
of Communist Rebellion). The Temporary Provisions provided the legal basis for
suspending the normal constitutional governing process as well as civil and political
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56
rights. Through several amendments, these extra constitutional arrangements were
steadily expanded during the 1950s and 1960s (Tien & Chu 1994, 10). The effect of
these provisions and amendments was to broaden presidential power. In the final form,
the Temporary Provision allowed the President to serve unlimited terms, to make
changes in the organizations and personnel of the central government, and to employ
emergency powers at the expense of the constitutional authorities of the Legislative
Yuan, the Judicial Yuan and the Executive Yuan (Tien 1992a, 7). Under the revised
Temporary Provisions of 1966, the President was able to decide major national policies
through the newly established National Security Council. For the members of the three
above mentioned national parliaments (the National Assembly, the Legislative Yuan,
and the control Yuan) who had been elected in mainland China, the Temporary
Provisions also exempted them from being subject to reelection and enable them to
extend their tenures until new election can be held in China as a whole (Chiu 1993, 28-
9). Since those delegates were all loyal to the KMT regime, the political stability of the
KMT regime was ensured.
While the Temporary provisions defined the nature of power within the central
government, martial law provided the legal framework for exercising that power at the
society. On the legal basis of the Temporary Provisions, martial law gave the military
extraordinary power over civilian affairs. Although the state of martial law was not
fully implemented and was indeed similar to a state of siege in civil law countries, it
hampered civil and political rights (Chiu 1993, 25). It permitted the suspension of
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57
constitutional rights, leading to censorship, banning new political parties, and
prohibiting political offenses—strikes, petitions, demonstrations, public meetings, and
spreading rumors (Peng 1971,476). It also authorized the military-security agencies to
arrest, imprison, or execute any individual considered to threaten national security or
any individual trying to organize an opposition party, and to exercise control over mass
media to ensure the exclusion of information that threatened public order or challenged
the legitimacy of the regime.
During the period of the martial law regime, freedom of speech and information
was greatly restricted by the media controls and state ownership of media. The regime
intervened media with strict regulations. For the newspaper industry, controls over
entry, price structure, and the number of pages greatly affected the business operation of
private newspapers.3 Moreover, in 1958 the revised Press Law provided for mandatory
corrections in print media and the suppression or seizure of a publication if it committed
sedition or treason (Rampal 1994,639-40). The print media of the opposition has been
subject to censorship, banning, confiscation, and suspension in the order of increasing
severity (Lunce & Rumpf 1985, 16). Restrictions were tighter for the electronic media,
such as radio and television. The party and the state owned most o f the major radio
networks and had a complete monopoly of television broadcasting. It is clear that the
electronic media were used to promote only the views of the KMT regime. Thus, the
3 In 1951, the government began to restrict granting new licenses of the newspapers, with the result that
the number of the newspapers remained the same from 1961 until 1987 when newspaper ban was lifted
(Chan & Clark 1992, 170). The administration also limited the number of pages for each newspaper under
martial law regime (Chen 1998, 17).
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58
news was almost standardized and commentaries were all controlled. Critics against the
government were seldom tolerated, and any perceived damage to the regime's image
was subject to suppression.
Under the martial law regime, security agencies kept a tight rein on political
activities and showed little tolerance for political dissent. The Taiwan Garrison
Command4 and other related institutions arrested, tried, imprisoned or executed
individuals they regarded as a threat to public order and national security. To watch over
the society, security agencies maintained an extensive network of informants. For
example, they installed a security department, disguised as a branch of the personnel
department, in government institutions and public enterprises (Wakabayashi 1994, 118).
Suppression was severest in the reign of the White Terror (1949-1953), during which
the KMT carried out the total destruction of the underground Chinese communists in
Taiwan. Although there were only 900 members of underground Chinese communists,
according to a Mainlander productive scholar of Taiwan History, more than 4,000
people were executed and more than 8,000 were kept in long-term detention on a charge
of sedition and communism (Wang Hsiao-po 1996, 36). Since then, even isolated cases
of individual challenges to the KMT regime were suppressed. One prominent example
of political repression was the 1960 suppression against the establishment of new
4 The Taiwan Garrison Command (TGC) was the foremost military-security institution, exercising
extensive power in security-related civilian affairs. Established in 1950, the TGC was responsible for
border control, coast guard, cracking down the organized crimes, supervision of civilian police forces, exit
and entry visa permission, random screening of mails and telephones, censorship of publications and mass
media, surveillance over political dissents, approval of meetings and rallies, and detention of political
prisoners (Chu Yun-han 1992, 21).
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59
opposition party by Lei Chen, a Mainlander liberal, who was charged with associating
with communist agents and was imprisoned; and another example was 1965
imprisonment of Professor Peng Min-ming, the chairman of the Political Science
Department at Taiwan University, who endorsed Taiwan independence (Tien 1989,94).
Although there were fewer executions in the 1960s than the 1950s, any person charged
with treason could be arbitrarily arrested, tortured, convicted in closed military trails and
sentenced to long terms prison (Klintworth 1995, 87).
Martial law also prohibited new political parties except for two small parties: the
Chinese Youth Party and the Democratic Socialist Party, which were relocated from
mainland China and were actually inactive without impact on party politics due to their
financial dependence on the KMT (Guo, Huang, & Chiang 1998, 185). Without party
organization, the opposition was unable to challenge the legitimacy of the KMT rule.
For instance, supported by a few local Taiwanese politicians, mainlander intellectuals of
the Free China Fortnightly attempted in vain to form the Chinese Democratic Party. As
the foremost organizer, Lei Chen was imprisoned in 1960 on a charge of patronizing
communist agents (Tien 1993, 110).
In short, martial law not only gave the government broad powers to arrest and
imprison dissenters, but also imposed a complete ban on the formation o f new political
parties, effectively preserving the KMT regime as a one-party state. Martial law also
ensured the legitimacy of the KMT government through the control of ideological
institutions, such as the mass media.
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60
Limited Local Democracy
While maintaining martial law regime, the KMT government instituted limited
home rule by holding local elections in order to consolidate its regime through the mass
support of Taiwanese society. The local elections not only provided avenues for
diluting Taiwanese discontent or even hostility toward the mainlander regime mainly
due to the February 28 Incident, they also consolidated KMT rule by providing
networks of patron-client relations which fostered connections between mainlander
elites and local Taiwanese notables (Tien 1996, 8).
In addition to the elected provincial assembly, all the county magistrates, city
mayors, township heads, as well assemblymen in county, city, and township were
elected (Chao 1992, 49). In 1950, direct elections were first instituted at township,
county, and city levels for voting county and municipal councils, as well as the
magistrates of 16 counties and the mayors of five cities. The first provincial assembly
election, in which its members were indirectly elected by city and county councilmen,
was held in 1951; since 1954, the provincial assembly has also been directly elected
(Wu Wen-ch'eng 1996, 85-7).
Although the KMT instituted local elections, the KMT was able to exercise
control over local politics by several means. In addition to those mentioned above, such
as party-state penetration, martial law, and the relations between the central and the
provincial government, the KMT dominated local electoral politics through the
appointment of several most important executive positions and the limitation of the
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61
qualification of elected offices. The central government appointed a provincial governor
beginning in 1950, mayor of Taipei as of 1967, and the mayor of Kaoshiung 1970.
Beginning in 1960, all the elected executives of all levels of local governments, such as
county magistrates and city mayors, could only be reelected once; from 1967, the
qualification of election candidates were restricted to certain level of education and
professional working experiences (Lin 1998, 222). More importantly, the local politics
were subject to the KMT control through local factionalism under several major
strategies, including regionalization, checks-and-balances, and patron-client network,
which will be discussed in later chapters.
Concluding Remarks
The origins of Taiwanese ethnic politics since 1950 can be traced back to the
Japanese colonial period and the KMT early takeover years. The birth of the Taiwanese
consciousness began with the Taiwanese response to the policies of political, economic,
and cultural discrimination, and subsequently the policies of limited assimilation, in the
era of Japanese rule. KMT political and economic domination over Taiwanese society
and its brutal suppression against the Taiwanese following the February 28 Incident
during the takeover years resulted in the reinforcement of the Taiwanese identity. The
Taiwanese identity that the native Taiwanese had conceived and developed in the
Japanese colonial period and the early takeover years of the KMT was repressed under
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62
authoritarian rule during the early decades of the KMT rule, but revitalized dynamically
in the 1980s with the ethnic mobilization of the Taiwanese opposition movement.
Having inherited a history of imperial governance and colonial rule, Taiwan had
enjoyed no democratic experience prior to the Second World War. Subsequently,
Taiwan was governed under a one-party authoritarian state under martial law regime for
nearly four decades, and did not achieve a democratic breakthrough until marital law
was lifted in 1987. The following chapters will provide the explanation by examining
the increase in Taiwanese economic and political power from the perspective of ethnic
politics in Taiwan.
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63
CHAPTER 3
THE RISE OF TAIWANESE ECONOMIC POWER
This chapter focuses on the emergence of Taiwanese economic power in a
context in which the Mainlanders had economic power. The first section deals with
Mainlander economic power in the public sector, KMT enterprises, and the Mainlander
private sector. The second section explores the weak foundation of Taiwanese economic
power in the early years. The following section discusses the growth of the Taiwanese
private sector, with special attention to the rise of small and medium-sized enterprises,
which supported the Taiwanese opposition movement. Finally, in the concluding
remarks, Mainlander and Taiwanese economic power are briefly reviewed and
evaluated.
The chapter shows that the Mainlanders, which inherited state enterprises,
allocated American economic aid, and dominated private enterprises, controlled
economic power during the import substitution industrialization phase in the 1950s. The
Taiwanese, meanwhile, were weak in economic power due to the land reform and their
lack of capital. Despite the growth of state enterprises and party enterprises, however,
the Mainlanders gradually lost dominance over economic power beginning in the 1960s
with the rise of the Taiwanese private sector, especially small and medium sized
enterprises (SME), through export-oriented industrialization.
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64
Mainlander Economic Power
This section shows that Mainlander economic power relied mostly on state
enterprises, both financial and non-financial, especially in the early years. Mainlander
economic power was further strengthened by party enterprises and Mainlander private
firms that received most of the state's favoritism, especially in import substitution
industrialization, through state allocation of resources, including American aid, in the
early years.
State-Owned Enterprises
To control economic power, Mainlanders dominated the state-owned enterprises
(SOEs), occupying the important posts in the SOEs and controlling their management
(Lo 1994,212). When senior military personnel, most of them Mainlanders, retired from
their posts, they usually served on the boards o f the SOEs (Wade 1990, 266). Thus, the
Taiwanese have long held that the SOEs serve the economic interests of the Mainlander
minority, not the Taiwanese majority. The SOEs were perceived by many Taiwanese as
the bastions of Mainlander power (Crane 1989-90, 8).
Since the early 1950s the KMT state has had one of the largest public enterprise
sectors outside the communist bloc and sub-Saharan Africa (Wade 1990, 176). In the
1970s the average SOE share in total investment exceeded 30%, which was among the
highest in the world (Liou 1992,404-5). Adding to the weight of the public enterprises
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65
was the network of party enterprises, which often undertook joint ventures with the
SOEs.
Origins and the diversity of the SOEs. Although the SOEs owned very large-
scale enterprises, they incorporated a broad range of business ventures, including light
and rural industries. The variety of SOEs resulted from their origins, including the vast
colonial heritage, relocation of some enterprises from Mainland China, the creation of
new firms, and takeovers from the private sector (Lee 1995, 46). The largest group of
SOEs was inherited from the colonial Japanese, and ranged from finance, energy,
utilities, mining, metals, cement, printing, machinery, industrial materials,
transportation, and telecommunication to fertilizer, sugar, salt, tobacco, wine, lumbers
(Chang 1992, 310). Some SOEs moved from Mainland China included textile, finance,
fishing, machinery, shipping, and defense industry (Chen et al. 1991, 32). The need for
the industrialization added to the diversity of the SOEs. In the 1970s new SOEs were
formed in steel, energy, fertilizer, aluminum, petrochemical and shipbuilding for heavy-
chemical industrialization (Jeon 1994-95, 576).
As the representative of the military interest, the Vocational Assistance
Commission for Retired Servicemen (VACRS) is significant in the public enterprise
sector. The VACRS, which was established under the Executive Yuan in 1954, was a
huge holding company, under which 99 firms operated in 1970 (Kung 1998, 91). To
provide Mainlander veterans training, medical care, nursing homes, and employment
services, the VACRS has run a very wide range of businesses including gas, farms.
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66
orchards, food processing, land development, construction, steel, cement, mining, paper,
printing, publishing, textile, trade, transportation, telecommunication, chemical,
pharmaceutical, hospitals, and military equipments (Chang 1992, 311). The largest
enterprise was its construction firm, which employed more than thirteen thousand
people and had an annual income of nearly half a billion U.S. dollars (Lee 1986).
Significance. The significance of the non-financial public enterprises can be
illustrated in two aspects: economies of scale and the monopoly of the commanding
heights. In 1952 the public ownership of industry in industrial production was 56.6%
(Lee 1995, 47). The SOEs still controlled almost half of all industrial production until
the early 1960s. Although the proportion of the SOE output in industrial production has
declined rapidly since the 1960s, the strength of public enterprises has remained
considerable, evident not only in economies of scale: in terms of sales the SOEs still
held nine of the top 10 businesses and 16 of top 25 businesses in 1984 (Crane 1989-90,
7), but also in the monopoly of commanding heights, in such areas as water, coal,
electric power, sugar, salt, shipbuilding, railway, transportation, communication, and
petroleum refining, as well as in leading position of oligopolistic upstream industries,
such as steel, other basic metals, heavy machinery, synthetics, petrochemical and
fertilizers (Amsden 1991, 1123; Wade 1990, 179). In addition, the SOEs monopolized
wine and tobacco, and dominated foreign trade and domestic produce trade (Liu 1995,
108). According to the data from the Industrial Development Bureau, in 1982 the SOEs
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still monopolized 11.8% of major industrial products (Lin 1992, 188). Thus, the SOEs
controlled major sector of economy on which many private enterprises depended.
The Financial Sector. The financial sector was also dominated by the
Mainlander state. The financial system mainly consists of the central bank, domestic
commercial banks, foreign banks, the postal saving system, and the credit cooperatives.
Of lesser importance are small and medium sized-enterprise banks, insurance
companies, investment and trust companies, and the credit departments of farmers' and
fishermen's associations. Only the saving and loans companies and credit cooperatives
that had been managed by the Taiwanese during the Japanese colonial period continued
to be private (Chou 1995a, 57). Private banks did not exist until 1959 when one
domestic private bank with considerable state and foreign capital was established in the
form of development and trust company (Liu 1995, 287). The state-owned banks far
outweighed the private banks in importance. Of the total 24 modem banks in 1981, only
three were privately owned (Myers 1990, 35). Even in 1980, the top four banks were
state-owned banks, accounting for nearly 90% of total banking system deposits (Liang
& Skully 1987, 118). In 1983 the state-owned banks accounted for 78 .9% of the total
assets compared with 13.6% held by the private banks (Kuo 1991, 68).
Party Enterprises
The economic power of Mainlander party-state depended not only on state-
owned enterprises and financial institutions, but also on the party enterprises dominated
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by the Mainlanders. The KMT enterprises, often co-invested with the SOEs prior to the
1980s, enjoyed oligopolistic and even monopolistic status, most of them in the finance
and petrochemical sectors (Chen et al. 1991, 70-1, 80-1). Initially, because of their
small number and lack of influence, the party-run enterprises did not capture the public
attention until the 1960s, when the KMT enterprises developed rapidly. The KMT first
aimed at the financial sector and formed enterprises including the Chinese Development
and Trust, the Taiwan Stock Exchange Center, and the Central Industrial Insurance (Xu
1997, 403-4). In the late 1980s, it was estimated that the KMT held 100% share in 12
and over 40% share in 17 enterprises, which were under the management of the KMT
Central Financial Committee, one of the largest holding companies in Taiwan. Under
the KMT Central Cultural Work Committee, famous KMT enterprises included Central
Daily News, Cheng-Chung Publisher, China Broadcasting, China Television, and
Central Movie. In addition, the Youth Corps, as a quasi-party organization, owned many
inns and activity centers in major tourist spots. Besides the enterprises owned by the
Youth Corps, it was estimated that there were over 80 party enterprises as of 1989
(Chen et al. 1991, 70,80-1). At the end of the 1980s, the book value of the assets of the
party enterprises was more than 10% of the total private enterprises (Xu 1997, 400).
Mainlander Private Sector
Furthermore, a few Mainlander businessmen who became big capitalists added
to the weight of Mainlander economic power. Most of the Mainlander entrepreneurs.
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69
coming from the coastal areas, especially the Shanghai region and Shantung province,
had the assets, the skills, and the experience of running businesses, especially in textiles
and food processing. In the 1950s, the KMT government implemented import
substitution industrialization (1S1), aiming at the creation of a local market for protected
industries and the displacement of imported goods. Under ISI, the government located
investment opportunities, devised investment plans, provided technical and financial
supports, and finally selected capitalists to take over enterprises (Pang 1992, 149-50).
During the period of American aid, the KMT state favored Mainlander businessmen
more than the native Taiwanese, most of who had no special social ties and political
connections with the government (Hsu 1991, 87).
With American aid, the regime assisted certain key sectors, such as cotton textile
and flour milling, in which most of the capitalists were Mainlanders. In the textile
sector, for instance, the state supplied raw cotton, paid the workers' wages, and
purchased the yam through an entrustment scheme (Gold 1986, 70). In addition, the
government also financed the imports of the raw material, gave a preferential rate of
exchange, and guaranteed the price of textile products (Baldwin, Chen & Nelson 1995,
3). Of the fifteen textile companies in 1955, the Mainlanders privately owned seven,
and managed another three SOEs (Kuo 1995, 96). Under the promotion and the
protection of the KMT state, they developed rapidly and then expanded into other
industries. For example, Hsu Yu-hsiang, who formed the Far East Textile Company,
diversified his investments into cement and department stores. Another Mainlander,
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Yen Ching-ling, the owner of Tai Yun Textile Company, founded Yue Loong Motor
Company, which monopolized the assembly of automobiles for domestic market until
the late 1960s (Bello & Rosenfeld 1990, 236).
Mainlander economic power was concentrated in the public sector, rather than
the private sector. On the one hand, the Mainlander private sector was much smaller
than the Taiwanese private sector because the population ratio was favorable to the
Taiwanese and large portions of the Mainlanders were employed in the public sector.
On the other hand, the public enterprise sector was large in scale and exerted control
over major sectors of the economy—strategic industries, finance and banking,
transportation and communications, public utilities and commercial trade.
Even though the SOEs expanded with the growth of heavy industries in the
1970s, the SOEs sector, the pillar of Mainlander economic power, has been in relatively
decline in comparison with the rapid growth of the private sector. The decline of the
SOEs was first evident in 1966 when the ratio of SOEs in industrial production dropped
to less than 40%. By the early 1970s, the share of SOEs in industrial production had
further fallen to around 21% (Chan & Clark 1992, 175-6). Consequently, Mainlander
economic power was in wane compared with the rise of Taiwanese economic power
from the 1960s.
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71
Taiwanese Economic Power: Initial Stage
This section explore the weakness of Taiwanese economic power in the early
years after the Second World War, and then discusses how the land reform, which
happened in the early years after the relocation of the KMT regime, affected the
decrease in Taiwanese economic power.
The Early Years
Taiwanese economic power was very weak during the early years. In 1 950, the
vast majority of the Taiwanese were peasants. The Japanese regarded Taiwan as an
agricultural supplier and a market for its industrial products and thus kept economic
power in its own hands and discouraged the emergence of Taiwanese entrepreneurs.
Under Japan's colonial rule, major financial institutions and large-scale industries,
including paper, cement, fertilizers, and sugar refining, had been owned by Japanese
conglomerates (Numazki 1986, 489). In 1929 the Japanese owned 90.7% share of
capital in industry compared with only 8.4% controlled by the Taiwanese (Gold 1988a,
107-8). The colonial government did not sponsor industrialization except sugar refining
until the 1930s, with the onset of the Second Sino-Japanese War. Sugar was still 50%
of the gross value of the private manufacturing sector in the 1930s. The modem
industries, such as metal, pulp, chemical, came only in the years before the end of the
colonial rule, and did not play a significant role in the economy (Ho 1975, 421-2). The
gross value of industry began to surpass agriculture in the early 1940s, but the industry
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72
was always concentrated in food products, which accounted for 61% of industrial
production (Ku 1997, 97-8). Even worse, Taiwanese private industries suffered
setbacks during the war and early postwar years. The United States bombing destroyed
over half of industry capacity. The repatriation of Japanese technicians and
entrepreneurs, separation from Japan market, massive inflation imported from the
mainland, and financing the KMT for the civil war against the Chinese communists in
the Mainland China from 1945 to 1949 also had a negative impact (Chan & Clark 1992,
78; Pang 1992, 112). During the years before the KMT state relocation to Taiwan, as
mentioned previously, the Mainlanders monopolized the economic assets left by the
Japanese and established state enterprises including land, trade, finance, utilities,
agriculture, manufacturing, and transportation. For the above reasons, the majority of
Taiwanese businesses remained very small. Lacking a strong capitalist or financial class,
the Taiwanese exercised no economic power.
The Land Reform
The land reform carried out by the KMT between 1949 and 1953 also reduced
the economic power of Taiwanese landlords. As an effort to promote agricultural
productivity and economic recovery, to secure the political loyalty of the peasants, and
to undermine power base of landlords, the land reform proceeded in three stages. In
1949 the KMT implemented a rent reduction program in which farm rents were reduced
from 50-70% to a maximum ceiling of 37.5% of the anticipated annual yield of main
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73
crops (Lin 1987, 42). In addition, tenant farmers no longer had to pay their rent in
advance; if the crops failed because of natural disasters, they could apply for a further
reduction (Kuo, Ranis & Fei 1981, 50). The second stage began in 1951 when about half
of the public land previously expropriated from Japanese landowners was gradually sold
to the tenant farmers at below market values—land was valued at 2.5 times the yield of
the main crops and could be paid for over a 10-year period (Mcbeath 1998, 28). Finally,
in 1953 the landlords were compelled to sell excessive landholding beyond the
ownership ceiling—2.9 hectares of medium grade paddy land for each farm worker— at
the undervalued price described above. In return, the landlords received bonds and
stocks as payment—70% in commodity bonds and 30% in stock shares of four public
enterprises, namely Taiwan Cement, Taiwan Paper and Pulp, Taiwan Agricultural and
Forestry Development, and Taiwan Industrial and Mining (Ka & Shelden 1986, 1297).
However, mainly because of the lack of experience in business, about 91% of the large
landlords and more than 98% of the small landlords quickly resold their shares at a
considerable loss (Pang 1992, 138; Simon 1988, 147). Most of the landlords resold to
the larger landlords who had entered businesses long before the land reform. Besides
those four enterprises, the government did not intend to further privatize other SOEs.
Thus, most of the former Taiwanese landlords lost their prior economic base and did not
accumulate new economic power during the early years.
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The Emergence of Taiwanese Economic Power
This section examines the increase in Taiwanese economic power through
economic foundation laid by the land reform, the rise of Taiwanese private enterprises,
both business groups as well as small and medium-sized enterprises.
The Blessing of the Land Reform
The land reform was a mixed blessing for Taiwanese economic power. While
land reform reduced the economic power of most Taiwanese landlords in the short run,
it did contribute to Taiwanese economic power by laying the solid economic foundation
in the long run. The prominent effect of the land reform was to improve the living
standard of the former tenants. The land reform brought about a major increment in
peasant income. The net income gain was 18% of their total income in 1949 and rose to
38% in 1953 and 44% in 1959 (Clark 1989, 160-1). In terms of household expenditure,
ten years after the land reform, the farmers spent higher share of their income on health
care, farm building, water, electricity, recreational activities, and educational expense
for the children. It was found that after the reform the tenants' households that sent all
their children to elementary school grew from 63% to 92% (Wei 1973, 461, 463). The
land reform also played an important role in fascinating rural industrialization. In the
early 1970s many rural households established their small firms with saving from
agricultural income. As the result of growing income, the rising consumption of the
rural households also provided the market for the growth of the rural industries such as
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75
building materials (Speare, Liu & Tsay 1988, 88). Moreover, the land reform had a
significant impact on shifting the power base from the Mainlanders to the Taiwanese in
later years, as land values rose very rapidly during speedy industrialization (Mcbeath
1998, 28).
The Rise of Taiwanese Capitalists through Four Channels
The rise of Taiwanese economic power not only depended on the increase in
wealth of the Taiwanese population, but also the emergence of Taiwanese entrepreneurs
in the private sector. Although most of the entrepreneurs who received favoritism under
ISI were the Mainlanders, a first generation of a few Taiwanese capitalists also emerged
under the state intervention through four avenues, each involving close relations
between the state and business.
The first channel was the privatization of the four SOEs in the land reform, as
mentioned previously. The former largest landlord families, the so-called Big Five
Taiwanese Families, accumulated their shares in Taiwan Cement, one of the four former
SOEs. Controlling Taiwan Cement, Koo Chen-fu, one of the biggest landlords, became
the top Taiwanese business leader and served as a member of the Central Standing
Committee of the KMT beginning in 1981 (Gold 1986, 71; Hsu 1991, 115).
A second channel was through special relationships with the KMT; for example,
a group of wealthy families in Tainan who had close ties with the state established
textile mills. In 1953 the Hou and Wu families invited Wu San-lin, who had political
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connections with the regime, to serve as a partner to secure the government approval for
the establishment of spinning mill, which laid the foundation of “ Tainanbang" or
literally Tainan business group (Numazaki 1993, 489-90). Likewise, when the
government allowed the private sector into the insurance business in I960, Wu Huo-shih
invited Hsieh Tun-min, a deputy speaker of Provincial Assembly, to be a partner in
order to obtain approval for running an insurance company, which developed into a
strong business group (Hsi 1991, 66).
A third closely related approach for the emergence of Taiwanese entrepreneurs
was through the patron-client networks of local governments. Taiwanese elites of local
KMT factions received regional economic rents as the reward for their political support
in elections. The economic rents offered by the KMT government included: (I)
regional-based oligopolies such as credit unions, fisherman or farmer cooperatives,
small and medium-sized enterprise banks, bus companies, public utilities, and farm
produce cartels; (2) special loans from provincial banks; (3) public procurement from
local government agencies; (4) favorable zoning regulations or public construction
schemes for land speculation; and (S) protection of such illegal business as casinos and
underground dance clubs (Chu 1992b, 151).
Finally, the rise of the Taiwanese capitalists was through their quick response to
opportunities presented by the state's industrial priority. In 1957 Wang Yun-ching, a
former lumberyard owner, agreed to manufacture polyvinyl chloride (PVC) with
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77
American aid and developed it into a highly successful business group with Taiwan
Plastics as its core (Gold 1988b, 189).
The Rise of Taiwanese capitalists since Export-Oriented Industrialization
While some Taiwanese capitalists developed their businesses through the above
channels, many Taiwanese businessmen increased their economic power without this
kind of government protection beginning in the 1 960s when the KMT regime shifted to
export-oriented industrialization (EOI). By the late 1950s, as a result of trade deficit
and the saturation of domestic market, the dynamics of import substitution began to
recede, leading to a decline in the growth rate and an increase in inflation and
unemployment (Chan & Clark 1992, 82). Under these circumstances, the government
decided to change the development strategy.
The change of the development strategy from the ISI to the EOI resulted in a
shift from the promotion of the SOEs toward support for the private sector in which
local Taiwanese capital was predominant. From that point the private sector has
expanded rapidly, particularly the Taiwanese SMEs. The private sector in the share of
the industrial production rose swiftly from 48.9% in 1955 to 72.3% in 1970 and more
than 80% in 1980s. Between 1963 and 1972 the growth rate of the private sector
averaged 22.8% annually (Liu 1991, 28). By the mid-1960s, about 80% of private
enterprises were in the hands of Taiwanese (Cole 1967, 645). The rapid growth of
Taiwan's industry in the 1960s was mainly caused by the expansion of three
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78
manufacturing sectors—textiles, food processing, and electronics (Wu 1994, 173).
While the Mainlanders dominated textiles, the Taiwanese controlled food
processing and electronics. In the context of rapid growth of the private sector, the
economic power of Taiwanese majority was on the rise.
The Causes. The rise of Taiwanese capital can be partly attributed to the
promotion of private investment by the United States Agency for International
Development (AID), which was influential in stabilizing and facilitating economic
development in Taiwan. The influence of American aid for Taiwan's development was
impressive, contributing half of Taiwan's gross investment in the mid-1950s and was
still 20% of investment in the mid-1960s on the eve of its termination (Chan 1990, 142).
From 1951 to 1965, America gave Taiwan a total of $4.2 billion in economic and
military aid of which 41% was economic aid (Mcbeath 1998, 33). Almost two-third of
the economic aid went to infrastructure and human resources. Approximately 67% of
the aid went to the SOEs, 27% to mixed enterprises and 6% to solely private enterprises
(Simon 1988, 148). Although the figures seemed to be disadvantageous to the private
sector, this aid created a favorable climate for private investment through the
enhancement of infrastructure, and even helped induce a large amount of private
investment through selective promotion (Liu 1990, 274).
In fact, AID had a strong commitment to the development o f the private sector
beginning in 1957 when the United States shifted the focus of aid policy from the
military to economic development (Shiau 1989, 60). Consequently, in 1958 an Office
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79
of Private Enterprises was established within AID (Haggard & Pang 1994, 77). AID
also supported the SMEs through its Small Industry Loan Fund and Model Factory
Program (Gold 1986, 71). AID exerted pressure on the KMT government by
threatening to reduce American aid if the KMT did not adopt the 19-points Program for
the EOI, adding an inducement of US$ 20-30 million in additional aid for prompt
implementation (Schive & Barlow 1990, 92). In 1959, the United States announced that
if Taiwan reduced the control on the domestic market, the United States would support
Taiwan’ s industrial development and export market promotion (Chou 1995, 86). Under
American pressure, various regulations that had hindered the growth of the private
sector were abolished, and the benefits flowing to the private sector were expanded
(Haggard & Pang 1994, 78). Up to 1964, nearly nine hundred firms had received loans
from the Small Industry Loan Fund (Schive & Barlow 1990, 84-5). In the 1950s,
American aid facilitated the participation of the private sector in new industries such as
textiles, glass, chemical, canned food, and synthetic fibers (Liu 1990, 275).
Relations with Japan also contributed to the ascendancy of the Taiwanese
capital. Imported Japanese technology has become essential for the survival of export
industries. It has been estimated that Taiwanese products utilizing Japanese spare parts,
components, raw materials and technology were responsible for more than 60% of total
export (Klintworth 1995, 38). During the early 1960s, a number of Taiwanese
businessmen in such fields as textiles, drugs, food processing, agricultural machinery,
electrical equipment, and telecommunications, entered into technical cooperation
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80
agreements and joint ventures with Japanese firms (Cole 1967, 647). Due to Japanese
ties, most business leaders in electronics industry were the Taiwanese (Kuo 1995, 170).
A notable example was Hung Chien-chuan, who manufactured electronic goods for the
local and foreign markets, building up a prominent business group through the Japanese
connections (Gold 1988b, 189).
The vast open foreign markets were also the external factor beneficial to the
growth o f Taiwanese economic power through export expansion. During the 1960s and
the 1970s, the demand for the manufactured products in the developed countries,
especially Japan and the United States, expanded rapidly. Until the mid-1960s Japan
was the most important foreign market for Taiwan. The United States had surpassed
Japan as Taiwan's leading export market by 1967 (Baldwin, Chen, & Nelson 1995, 6).
In 1975 the United States and Japan accounted for 34% and 13% respectively of the
country’s total exports (Schive 1992, 112).
The international division of labor also played a role in the growth of the
Taiwan's SMEs. In the international division of labor, the SMEs in Taiwan concentrated
only on the stage of manufacturing and entrusted marketing tasks to foreign importers,
multinational trading companies and Japanese general trading companies (Chou 1992,
110). The so-called trading companies in Taiwan did not really practice international
marketing, only offering secretarial services for trade (Chou 1995b, 241).
The emergence of Taiwanese economic power, starting with the SMEs, relied
not only on external factors, but also on several internal institutional elements including
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8!
family support and entrepreneurship. The entrepreneurship of the Taiwanese was
conducive to the boom of the SMEs. Taiwanese entrepreneurs had learned how to do
business either with their small family firms during the Japanese colonial period or
through the state enterprises and big private business during the postwar years
(Amseden 1991, 1127). The survival and the prosperity of the SMEs was dependent on
their entrepreneurship—the fact that they were more adept in responding to their
customers' requirements and to changing commercial conditions, such as quantitative
restrictions on exports, more flexible in rapidly filling small orders, and more attentive
to matters such as quality, design, prompt delivery, attractive packaging, and follow-up
services (Chan & Clark 1992, 147; Lam & Clark 1994, 416).
The unreserved support of the family to business ventures was also important to
the emergence of the SMEs, most of which were family-owned. During the difficult
years, family members worked without compensation to help the business. It was also
the family member that financially supported the small business, which had difficulty
obtaining bank loans, to become established, overcoming financial difficulties (Hwang
1991, 122).
Another reason for the prevalence of the SMEs was government policies. The
Mainlanders minority who controlled the state perceived the increase in the economic
power of Taiwanese majority as a challenge to their political hegemony in Taiwan. To
suppress Taiwanese economic power, the Mainlander-controlled state discouraged the
creation of private big business by keeping entry barriers low and the incentives system
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82
universal across industries (Cheng 1990, 160). Moreover, the government depended on
the SOEs and suppressed private ventures in sectors such as upstream petrochemicals.
The state also prevented Taiwanese business groups from gaining financial power and
discouraged them from business concentration by excluding them from the banking
sector (Cheng 1994a, 59, 77). As a result, the so-called big private business in Taiwan
is not big by international standard, and most of them are downstream industries (Cheng
1990, 170). In short, the discouraging of the big capital led to the proliferation of the
SMEs.
On the other hand, the government's policies were beneficial to the development
of the SMEs through export promotion measures, such as investment incentives, access
to credits and market information, and administrative assistance. It offered investment
incentives such as tax credits and rebate of custom duties for export firms (Cheng
1994b, 156). The government also transformed the multiple exchange rate system into a
single one in 1959, and established the first export processing zones in Kaohsiung in
1966, followed by two more in Nantze and Taichung in 1969 (Lin 1987, 60). In 1965,
the government formed the SMEs Advisory Division to provide administrative
assistance, expanding it three years later. Since the 1970s, the government has paid
close attention to the development of the SMEs. In 1970 the job of assisting SMEs was
transferred to the Industrial Development Bureau under the ministry of economic affairs
(Yu 1991, 352-3). In 1970, the China External Trade Development Council was
established as the trade promotion agency in order to assist export industries for
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83
training, trade show, and market information (Hwang 1991, 94). In 1972, the China
Youth Career Development Association was founded so as to assist young businessmen
to acquire loans, information, and technology for new business ventures (Liu 1990,
276).
The advance of the SMEs can be further attributed to their own informal
financial network and the improvement of the formal limited access to credits. Under
the state-controlled financial system the SMEs were discriminated against.5 Credits
were rationed according to the size and ownership of enterprises— the SOE was the first
priority, followed by big business and finally the SMEs (Cheng 1994a, 79). The share
that large firms borrowed from domestic banks averaged more than three times that of
the SMEs between 1965 and 1972 (Amsden 1991, 1127). In spite of discrimination, the
formal access of credits improved slightly for the SMEs. In 1957, the Bank of Taiwan
began to provide low-cost export loan to the manufacturers who would undertake the
development of markets abroad (Myers 1990, 35-6). In 1974, the Trust Fund for SMEs
was founded (Hwang 1991, 105). The provincial government established an SME bank
in 1976 and reorganized seven private and local mutual loan and saving companies into
regional SME banks from 1977 to 1979. Furthermore, a low-interest development loan
for the SMEs was inaugurated in 1982 for upgrading the SMEs in the strategic sectors
5 State-owned banks in Taiwan discriminate against the small firms in loan preference because they
assume significant responsibility for the loans they make only with limited capacity and information. The
regulation for the business sector is so lax that it is difficult to develop a monitoring capacity. With little
reliable information about a firm's financial condition, it is rational for the state-owned banks to direct
loans according to presumed risk inferred from the ownership and size of enterprises (Cheng Tun-jen
1994a, 79).
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84
(Cheng 1994a, 71, 74). Thus, the SMEs' share of bank loans grew to around 30-35%
during 1980-85 (Chou 1995a, 70).
However, the share of loans was still not sufficient for financing the SMEs. As a
result, the small business relied mainly on families, friends, and other informal markets,
including rotation credit associations, mutual savings and loan societies, postdated
check transactions, underground moneylenders and informal mortgage lenders (Winn
1994). Since the interest rate of underground moneylenders was very high and the SMEs
avoided from borrowing too much from informal moneylenders, the SMEs generally
practiced buying on credits for several months without interest rates in their business
transactions and also depended on social relations, especially families and friends, to
obtain financial resources (Chen Chieh-ying 1995, 268). The size of the informal curb
market was difficult to measure, but it was estimated that 25.1% of financing for
businesses between 1964 and 1988 came from the curb market (Chou 1995a, 64).
The importance of small and medium-sized enterprises. The SMEs, most of
them owned by the Taiwanese, demonstrated the economic power of ethnic Taiwanese.
The importance of the SMEs in Taiwan’s economy was illustrated by the indicators of
industrial concentration. In 1983 the five largest businesses in Taiwan shared only
10.3% of GNP, and the 96 biggest firms held 31.7% of GNP, while the 50 largest
businesses in Korea held 93.3% in the same year (Lam & Clark 1994, 414). Moreover,
the SMEs were not concentrated in sectoral terms, but spread to a very broad spectrum
of industries. According to an official statistics in 1985, the SMEs, in terms of sales
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85
values, predominated in apparel, printing, leather goods, wood and bamboo products,
chemical products, rubber products, basic metal, metal products, and machinery
equipment (Biggs 1991, 170).
The significance of SMEs also lies in their domination over Taiwan's industry in
terms of employment, industrial output, and export sale earnings. In manufacturing,
SME output rose to 47% in 1976 (Chou 1995b, 229). The SMEs also played important
role in export-led economic growth. Between 1975 and 1985 the ratio of the export sale
earnings to the total sale earnings (both export and domestic) in the SMEs averaged
64% (Chou 1995b, 236-7). Specializing in labor-intensive industries, the SMEs
contributed significantly to employment; for instance, in 1976 those employed in the
SMEs reached 61% of the total number of employees (Chou 1992, 108). In addition,
SME output in the commercial sector was three-quarters of total sales in the early 1 980s
(Lam & Clark 1994, 414).
In short, the Taiwanese economic power rose sharply during EOI period when
SMEs became the engine of the export-led economic growth and some SMEs expanded
into larger enterprises or business groups.
Business Groups. Moreover, T ai wanese economic power also revealed itself in
private large businesses which have increasingly been dominated by the Taiwanese.
Despite the restriction of big business through government policy, some Taiwanese
SMEs gradually developed into big businesses, especially in the form of business
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86
groups,6 rather than in the form of a single large company. By the early 1970s, big
capital was readily identifiable (Cheng 1990, 170). While the Mainlander capitalists
tended to be concentrated in banking and textiles, the Taiwanese big businesses
dominated in food processing, business services, electronics, plastics, and metals (Liu
1987, 129). According to a business leaders directory, native Taiwanese were 68% of
the top 500 business leaders in the early 1970s (King 1993, 146). Among capitalists at
the level of the top 100 business groups, the position of the Mainlanders has declined,
especially since 1980s. According to a survey of Taiwan top 100 business groups in
1978, 77% were controlled by the Taiwanese, 17% by the Mainlanders, and 6% by both
the Taiwanese and Mainlanders (Lin & Lin 1993, 115). In terms of the size of the
business groups, the Taiwanese owned the largest and the smallest categories while the
Mainlanders occupied in the middle-to-large size class (Greenhalgh 1984, 540). As to
top 10 business groups, the Taiwanese owned four compared with three for the
Mainlanders in 1975; the Taiwanese held seven whereas the Mainlanders retained three
in both 1981 and 1983; the Taiwanese owned six, including the top four, while the
Mainlanders maintained three in 1985 (Bello & Rosefeld 1990, 239; Field 1995, 70). It
is worthy to note that until now the largest private business group, Formosa Plastic,
remains in the hand of Wang Yun-ching, the foremost Taiwanese business leader.
6 A business group in Taiwan, organized in the basis of a multi-companies group instead of a large multi
divisional company with a lot of subsidiaries, is a cluster of firms owned or operated by a small number of
owner-managers who are interrelated through the kinship, marriage, and other social ties (Numazaki
1993,486).
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87
The power structure of the private enterprises is like a pyramid—many SMEs
are at the bottom; regional oligopolies and larger enterprises in the middle; and a few
core business groups at the top (Hsu 1991, 75). In view of the above account, it is
evident that Taiwanese shared overwhelming majority at the bottom, as well as the
majority in the middle and at the top. In short, the Taiwanese outperformed the
Mainlanders in the private sector.
Class Structure. The increase in Taiwanese economic power was also evident in
class structure. As compared with the Mainlanders, the Taiwanese accounted for 90% of
petty bourgeoisie (non-agricultural self-employed) between 1976 and 1985. Moreover,
the Taiwanese shared 88.3% of capitalists (non-agricultural employers) in 1976 and
90.5% in 1985 (Sheu 1989, 139).
State-business Relations. The increase in Taiwanese economic power was also
evident in state-business relations. The business community was organized into state-
corporatist business associations. While the National Industry Association (NIA) and
the National Commerce Association (NCA) were dominated by the Mainlanders and
were not subject to elections due to martial law until the 1970s, the Chinese National
Association for Industrial and Commerce (AIC), as a formal channel of interest
articulation for Taiwanese business leaders, regularly recruited the Taiwanese in their
governing boards following its establishment in 1952. In 1961 the Mainlander president
of the AIC was replaced by a Taiwanese, Koo Chen-fii (Kuo Cheng-tien 1998, 88). In
the 1970s, the AIC replaced the NIA and the NCA to become the chief private
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88
organization for promoting international economic cooperation. When NIA was
reorganized and was subject to elections in the 1970s, those Taiwanese who were
elected as the president of the NIA served as members of the KMT Central Standing
Committee in later years (Hsu Jui-hsi 1991, 103, 110). Furthermore, large businesses
began to get involved in politics more directly in the early 1980s. The first organized
business involvement happened in 1983 when the 13 legislators with strong business
background established an informal group in the Legislative Yuan. This precedent
paved the way for other business leaders to enter national politics. In the 1983
legislative election, many business leaders or business-supported candidates were
elected (Kuo 1998, 92).
However, Taiwanese economic power was limited in the context of state
corporatism and party-state authoritarianism. Although Taiwanese business leaders
were quite actively involved in economic policy making through the above chambers of
commerce and elected offices, their influence was basically restricted to economic
issues until the 1980s when the SME businessmen supported the political opposition
movement.
Concluding Remarks
After years of economic growth, Mainlander economic power declined relatively
while Taiwanese economic power was on the rise. The Mainlander minority exercised
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89
economic power mainly through the public enterprise sector. The growth of the SOEs
has been less rapid than that of private enterprises since the 1960s. The relative decline
of the SOEs signified the decline in the economic power of the Mainlanders because the
decrease in the economic power of Mainlander SOEs was not offset by the prosperity of
the party enterprises or private Mainlander entrepreneurs. It is worthy to note that
although Mainlander economic power was in relative decline, it was still considerable
up to the 1980s. The reason is that Mainlander elites still controlled the political power
of economic decision-making and the SOEs continued dominating the commanding
heights, such as energy, utilities, raw materials, transportation, telecommunication, and
finance.
The Taiwanese began to increase their average economic power along with the
growth of the private sector from the 1960s. In the beginning, most o f the Taiwanese
had been in the agricultural sector and Taiwanese businessmen had been few in
proportion. In the 1960s, however, the Taiwanese export-oriented SMEs mushrooming
in Taiwan's takeoff economy gave a big boost to the growth of Taiwanese economic
power. In the 1970s, when Taiwanese SMEs continued to multiply and some of the
SMEs developed into business groups and large enterprises, the Taiwanese eventually
surpassed the Mainlanders in economic power.
In sum, although the SOEs still exercised significant economic power through
the control of finance and upstream industries, the Taiwanese owners of the SMEs and
big capitalists exercised their economic power to significantly influence both the
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90
economic and political process. In the next chapter, the Taiwanese SMEs will be
identified as the supporters of the Taiwanese opposition movement.
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CHAPTER 4
THE INCREASE IN TAIWANESE POLITICAL POWER
AND ETHNIC COHESION
This chapter will examine why and how the political power of the Taiwanese
increased in terms of bureaucracy/institutions and ideology, and will be concerned with
the issue of ethnic cohesion, focusing on the KMT local factions and the integration of
the Taiwanese opposition. In terms of political power, the growth of Taiwanese
bureaucratic/institutional power is first explored, including the KMT party, the
government, military, and the opposition movement. The next section deals with the rise
of a Taiwanese ideology, which challenged the declining Mainlander ideology through
the dynamics of dissident journals and mass activities. In the section on ethnic cohesion,
in the context of Mainlander political solidarity, it will deal with the lack of Taiwanese
cohesion and the improvement of cohesion in the Taiwanese opposition. Finally, the
increase in Taiwanese political power is assessed in the concluding remarks.
Ethnic Political Power
The first subsection shows that the increase in Taiwanese political power in three
bureaucratic/institutional aspects—Taiwanization, holding of supplementary national
elections, and political opposition movement—were mainly caused by the increase in
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92
Taiwanese economic power, which was evident in the support of the middle class such
as the Taiwanese owners of SMEs in the Taiwanese opposition movement. It is also
clear that the dynamics of local elections, the Presbyterian Church, as well as external
support through the overseas Taiwan Independence Movement and the United States
Congress, played a role in the Tangwai opposition movement, which was the most
important aspect of the increase in Taiwanese political power for the struggle for
democracy. The decline of Mainlander ideological power and consequently the
legitimacy crisis of the KMT was also related to the increase in Taiwanese political
power in terms of Taiwanization and holding of supplementary national elections; and
the decline in Mainlander ideological power as an explanation of Taiwanese opposition
movement will be discussed in the next subsection of ideological power.
Bureaucratic/Institutional Power
Since the KMT established its regime in Taiwan, the ethnic factor has played a
critical role in the distribution of bureaucratic power in political process. Under the
KMT authoritarian rule, especially in the early period, the Mainlanders monopolized all
significant political positions, tightly controlling the top of the party-govemment-
military power pyramid. Even in the three elective bodies of the central government—
the National Assembly, the Control Yuan, and the Legislative Yuan, the Mainlanders,
not subject to re-election according to the Temporary Provisions (as mentioned in the
previous chapter) constituted the overwhelming majority.
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93
The KMT was in effect the party of the Mainlanders, especially during the first
two decades. Although the Mainlanders were only around 12% of the total population in
Taiwan, between 1952 and 1963 they retained about 70% of KMT party membership.
For the same period, more than 30% of the Mainlander population was the members of
the KMT, while Taiwanese party membership was less than 2% o f the Taiwanese
population. The Taiwanese did not become the majority of party membership until
1975 (Kung 1998, 65-7). More importantly, the Mainlanders dominated the key
positions of the party hierarchy at all levels, even to the lowest district level. At the
district level in 1955, the Mainlanders held over three-quarters of party secretaries, and
above half of both aides and secretaries (Dickson 1996, 54). The Taiwanese generally
served in staff posts in local party committees.
In the 1950s and the 1960s, Taiwanese political power was very weak. After the
February 28 Incident of 1947, nearly 70% of Taiwanese elites absented themselves from
politics (Wang 1994, 183). The Taiwanese who involved themselves in politics virtually
played no important role in the national political process. Even many “Half Mountain”
Taiwanese who worked under the KMT in the mainland during the Japanese colonial
period were purged because of their political responsibility in the February 28 Incident
and their island-wide political networks (Chen 1995, 133-6). Only very few Taiwanese
reached high positions in early years; for example, until the 1 970s, only one ministerial
post, Minister of the Interior, was held by the Taiwanese (Tien 1992b, 40). Some
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94
Taiwanese community leaders without political ambition represented a form of token
political participation, holding ceremonial posts (Lu 1991a, 113-4).
In the meantime, Taiwanese political power was confined to local politics,
especially through local elections. During the first two decades, the Taiwanese
averaged above 90% in both provincial assemblies and city/county councils, and around
90% of county magistrates and city mayors (Lee 1972, 230-2). Despite the high
percentage in elected offices, however, the political power of the Taiwanese in local
politics was generally rather limited. First, the KMT regime restrained Taiwanese KMT
local factions from accumulating power by prohibiting them from building nationwide
political coalitions and by encouraging them to compete against each other for the state
resources distributed in patron-client networks (Chen 1995, 150-3). The KMT also
supported some young party cadres without links to local factions in an attempt to
replace local factions in elective offices in the early 1970s (Chen 1995, 182-9). Second,
Taiwanese dissidents never posed challenges to the Mainlander regime in the local
elections. Individual opposition leaders sometime did win impressively in the local
elections, but they tended to settle for localized activities, and were generally reluctant
to raise legitimacy issues for fear of political reprisal (Tien 1988, 18). Finally, as
mentioned previously, the provincial government was subject to the control of the
central government, which was characterized by quasi-Leninist party-state under
authoritarian martial law. Furthermore, the Taiwanese did not control the provincial
bureaucracy. Until 1969, Taiwanese consistently held 5 or 6 department heads in the
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95
provincial government, but the percentage dropped sharply from 50% (1954-57) to 25%
(1962-69) (Huang 1993, 47). More importantly, the most eminent position in the
provincial government, the Provincial Governor, was occupied by Mainlander officials
from 1949 to 1957, and Mainlander generals from 1957 to 1972 (Jiang 1995, 831).
Taiwanization. The rise of Taiwanese political power can be traced back to the
Taiwanization program, the process of ethnic power sharing through recruitment of
more native Taiwanese into the upper echelons of state apparatus promoted by Chiang
Ching-Kuo beginning in the 1970s (Tien 1992b, 40). Taiwanization resulted from the
legitimacy crisis of the KMT government. Between 1972 and 1978, diplomatic
setbacks—caused by the withdrawal of Taiwan from the membership of the United
Nations and the termination of official diplomatic relations with major powers,
especially the United States and Japan—undermined KMT legitimacy, which will be
further discussed in the section of ideological power. The crisis of legitimacy motivated
Chiang Ching-kuo to launch Taiwanization by coopting Taiwanese, the numerical
majority, which was also becoming stronger economically. Taiwanization was on
attempt to solve the crisis of legitimacy for the Mainlander regime.
The process of Taiwanization was extensive in each state apparatus, including
the party, government and armed forces 7 (Wu 1994, 155-6). The Taiwanese of the
7 Lee Teng-hui and Lin Yang-kang were the illustrative examples of the rise of Taiwanese political power
in bureaucracy. Lin Yang-kang, after serving as Nantou County Magistrate (1967-72), was appointed
Director of the Provincial Government’ s Department of Construction (1972-76), Mayor of Taipei (1976-
78), Provincial Governor (1978-81), Minister of the Interior (1981-84), Vice-Premier (1984-87), and
eventually President of the Judicial Yuan (1987-). More dramatically, Lee Teng-hui first served in the
Joint commission on Rural Reconstruction. Later he was promoted as Minister without Portfolio (1972-
78), Mayor of Taipei (1978-81), Provincial Governor (1981 -84), and finally Vice-President (1984-88).
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96
younger generation who were trusted by the KMT according to their loyalty and ability
were promoted sequentially from the local governments, to the provincial government
and then to the central government. The former city mayors and county magistrates
were selected to serve as the committee members and even department heads in the
provincial council. After several years of experience and training in the provincial
government, some provincial officials were promoted to the Executive Yuan
in the central government (Wu 1996, 63). In short, they were chosen according to their
age, their relations to the KMT, and their performance in local politics. Those promoted
were generally Taiwanese capitalists and intellectuals (Jiang 1995, 196).
The Taiwanization program began with the local and provincial government. In
1972, the first Taiwanese was appointed as a provincial governor, and the Taiwanese for
the first time held majority (60%) of the committee members in provincial council. In
the mid-1980s, the committee members of the provincial council held by Taiwanese
rose to 75%, and the city mayors and county magistrates grew to 100% (Lu 1985b, 16).
Likewise, the KMT party initiated a rapid turnover of county and municipal-
level party executives, and assigned the Taiwanese to chair those local committees. As
a result, the Taiwanese ratio in district cadres rose to 56.6% in 1975 and 73 .3% in 1985.
At the city/county level, the proportion of Taiwanese increased from 34.5% to 53.9%
between 1975 and 1985 (Dickson 1997, 124-5). At the provincial level, however, the
Taiwanese had obtained only 27.9% of all party cadre positions by the mid-1980s, and
had not served as a party secretary-general or a provincial party chair.
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97
Taiwanese share in the directors of central party organ did not change during the
years of Taiwanization. The Taiwanese did not hold the top central party posts in the
Departments of Organization, Overseas Affairs, Cultural and Media, Mainland Affairs,
Women's Work, Finance, or Party History Commission (Dickson 1996, 54, 74).
Nevertheless, the ratio of Taiwanese members in the KMT Central Committee has
grown significantly since 1976. The Taiwanese representation in the Central Committee
rose from 3.1% in 1952 to 14.6% in 1976 and 34.4% in 1988 (see Table 4.1).
TABLE 4.1
Taiwanese Composition of the KMT Central Committee, 1952-1988
Years
Numbers Percentage
1952 l 3.1
1957 3 6.0
1963 4 5.4
1969 6 6.1
1976 19 14.6
1981 29 19.3
1988 62 34.4
Source: Adapted from Teh-fii Huang, "Election and the Evolution of the Kuomintang,"
Electoral Politics and Democratic Transition in Taiwan, ed. Hung-mao Tien, p. 118.
More importantly, the party began selecting some Taiwanese members to its
highest ranks. There was no Taiwanese Central Standing Committee (CSC) member
before 1957 and only two prior to the KMT embarking on the Taiwanization policy. The
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98
number of the Taiwanese in the CSC increased steadily after that, and the proportion
grew significantly after 1976. Forinstance, in 1981, the Taiwanese received nine seats,
or 33% of the total members of the CSC; in 1988, Taiwanese CSC member grew to 16,
or 52% of the total (see Table 4.2).
TABLE 4.2
Taiwanese Composition in the KMT Central Standing Committee, 1952-1988
Year Total number Taiwanese (no.) Taiwanese (%)
1952 10 0 0
1955 10 0 0
1957 15 2 13
1963 15 2 1 3
1969 21
2
10
1973 21 3 14
1976 22 5 23
1981 27 9 33
1984 31 12 39
1986 31 14 45
1988 31 16 52
Source: Hung-mao Tien, "Transformation of an Authoritarian Party State: Taiwan's
Development Experience." In Political Change in Taiwan, eds. Tun-jen Cheng and Stephan
Haggard 1992b p. 4 1 . Teh-fo Huang, "Elections and the Evolution of the Kuomintang," In
Taiwan’ s Electoral Politics and Democratic Transition, ed. Hung-mao Tien. 1996, pp. 119-
120. Tianming Jiang et al. ed. Tangtai Taiwan Tashi Tian [Chronicle of Important Events
in Contemporary Taiwan], 1995, pp. 848-54.
With respect to important government posts, the increase in Taiwanese political
positions was also considerable. In addition to provincial governor, Chiang appointed
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99
the vice-presidents of both the Legislative Yuan and the Judicial Yuan in 1972. The
following year the first Taiwanese was assigned as the vice-president of the Control
Yuan. Since then the provincial governor, the vice-presidents of the Legislative Yuan,
Judicial Yuan, and the Control Yuan have been reserved for the Taiwanese.
Furthermore, in 1987 two Taiwanese were named as the presidents of the Judicial Yuan
and the Control Yuan, respectively (Huang 1 991 , 548-9).
In the cabinet, the percentage of the Taiwanese steadily increased from 11.2%
for the period of 1963-72 to 34.3% for the period of 1984-89 (see Table 4.3). In 1972
Chiang made drastic measures in cabinet reshuffle. Of the 23 members in the new
cabinet, six native Taiwanese were granted cabinet posts, consisting of the vice-
president of the Executive Yuan (vice-premier), the minister of interior, the minister of
transportation, and three ministers without portfolio. Since then the vice-president of the
Executive Yuan as well as ministers of transportation and interior have been reserved
for the Taiwanese (Huang 1991, 548). In 1984 the first Taiwanese was assigned as the
minister of justice8. Nonetheless, as a rule, the Taiwanese were assigned to positions of
lesser importance in the cabinet. The prominent ministerial posts of defense, finance,
education, economic affairs, and foreigner affairs were never held by Taiwanese prior to
1988 (Kau Ying-mao 1996, 295).
8 The assignment was politically significant because judicial administration and security affairs the
ministries of justice held responsible for was so politically sensitive that the ministry had long been
exclusively held by Mainlanders (Shen 1984, 28).
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100
TABLE 4.3
Taiwanese Composition of the Ministerial Posts in the Executive Yuan, 1950-1989
Years Number Percentage
1950-54 1 5
1954-58 1 5.3
1958-63
2 7.7
1963-72 4 11.1
1972-78 8 30.8
1978-84 8 27.6
1984-89 12 34.3
Source: Teh-fii Huang, "Elections and the Evolution of the Kuomintang," Taiwan's Electoral
Politics and Democratic Transition, ed. Hung-mao Tien. 1 996, p. 116.
Moreover, when Chiang Ching-kuo became President in 1978, he designated a
“Half Mountain” Taiwanese, Hsieh Tung-min. to hold the post of vice-president. The
further step toward Taiwanization in 1984 was evident in the selection of Lee Teng-hui,
a native-born Taiwanese who had received Japanese education, to serve as a vice
president, a possible power successor (Yang 1984, 31).
Regarding the military, the ethnic composition also displayed the similar trend of
growing Taiwanization, but the Taiwanese share in top posts was much less (see Table
4.4). Although the percentage of the Taiwanese in all categories of military ranks
increased from 1950 to 1987, the Taiwanese among generals and colonials remained
small, especially in comparison with the lower ranks of soldiers and non-commissioned
officers, of which almost 79% were the Taiwanese. In 1975, a Taiwanese was first
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101
promoted to an important position, the second-rank commanding post in the Defense
Ministry’s General Political Department which was the power base of Chiang Ching-kuo
(Tien 1975, 627). In the 1980s, of the 19 leading posts in the military, only two were
held by Taiwanese (Tien 1992a, 41). Despite Taiwanization, Mainlanders remained in
control of the military.
TABLE 4.4
Taiwanese Composition in the Military, 1950-87 (%)
Years Generals Colonels Lieutenants Soldiers
1950-65 1.3 9.6 13.8 52.8
1965-78
7.4 18.8 34.7 68.4
1978-87 15.8 32.6 48.3 78.7
Source: Adapted from Tien Hung-mao, ’ Transformation of an Authoritarian Party State:
Taiwan’s Development Experience.” In Political change in Taiwan, 1992, p. 42.
Note: Generals includes Generals, Lieutenant Generals and Major Generals; Colonels includes
Colonels, Lieutenant Colonels and Majors; Lieutenants includes Captains, First Lieutenants
and Second Lieutenants; Soldiers includes non-commissioned officers and soldiers.
National Supplementary Elections. The rise of Taiwanese political power was
also evident in the emergence of national supplementary elections from 1969 in which
the great majority of the newly elected were the Taiwanese. These were elections for the
three national parliaments; they were supplementary because only a certain portion of
the parliamentary seats was open for elections. As already mentioned, the Taiwanese
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102
had been largely confined to local politics through local elections because the KMT had
claimed under the Temporary Provisions that Taiwan was only a province of the whole
China, and that national elections for Taiwanese representatives would not be held until
the recovery of the mainland China. However, due to the increase in Taiwanese
economic power and the KMT legitimacy crisis, the first national supplementary
elections were held in 1969. In the 1969 elections, 15 members were elected to the
National Assembly, two members to the Control Yuan, and eleven members to the
Legislative Yuan, comprising less than 1%, 1%, and 3% respectively (Cooper & Chen
1984, 51; Wu 1996,98). The national supplementary elections of 1972 were on a larger
scale, adding 119 new members to the parliaments. However, most of the candidates
were indirectly elected. In addition to the indirectly elected members in both the
National Assembly and the Control Yuan, in the Legislative Yuan about the half were
indirectly elected by professional organizations and overseas Chinese, which were under
the control of the KMT (Cooper & Chen 1984, 51; Wu 1995, 30). With the rise of the
Taiwanese opposition movement, more supplementary national elections were held for
the National Assembly in 1980 and 1986, the Control Yuan in 1973, 1980, and 1987, as
well as the Legislative Yuan in 1975, 1980, 1983, and 1986 (Chao 1987, 307-8). The
1980 elections were the first national elections in which the Taiwanese opposition
actively participated (Lu 1987, 296).
Taiwanese presence in top positions of the party, bureaucracy, and the military
resulting from the Taiwanization program and in the elected offices resulting from
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103
national supplementary elections was far from proportional to their population, which
was 85% of the total. Moreover, except for some elected politicians in the political
opposition, many Taiwanese elites were co-opted by the KMT government. Thus,
although the Taiwanese in the KMT state reflected the increase in Taiwanese political
participation, which were driven by Taiwanese economic power and Taiwanese
opposition political power, it did not threaten Mainlander political power.
The Growth of Taiwanese Political Opposition In contrast, the growth of the
Taiwanese political opposition represented a significant challenge to the political power
of the Mainlander regime from the late 1 970s. At the initial stage, throughout the 1950s
and the 1960s, the Taiwanese opposition lacked a party base and was limited to a few
small groups led by independent local politicians and overseas activitists for Taiwan
independence. However, both the local elections and social-economic development
facilitated the advancement of the Taiwanese political opposition movement, which
aimed at the establishment of a new party. The social transformation brought about by
the rapid industrialization tended to curb the mobilizing capacity of the KMT in local
elections. As the process of urbanization accelerated in the 1970s, the clientele
networks employed by the KMT local factions could not manipulate the electoral results
(Chu 1992a, 29). Consequently, the Taiwanese opposition movement, led by
intellectuals, professionals, and local politicians, obtained increasing support from the
owners of the SME, many of whom were its behind-the-scenes financial sponsors (Chu
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104
1996, 211; Lo 1997, 223-4). By the late 1970s, it was clear that the KMT could no
longer contain the ascendancy of a nationwide coalition of Taiwanese opposition.
Local elections were instrumental for the emergence of political opposition in
two major ways. Since the KMT, as a single-party regime, could exercise control over
the results of local elections, the KMT government was willing to provide some political
space for independent oppositions. The percentage for the opposition to compete ranged
from 16% to 33% of elective offices. The political space for dissension in the local
elections turned out to be a training ground for the opposition, however, offering them a
chance to build a grassroot following and mobilize electoral support (Cheng & Lin
1999, 233). On the other hand, KMT manipulation of nominations in the local elections
caused the defection of some KMT elites to the opposition camp. For example, Yu Teng-
fa, a Kaohsiung County faction leader, led his Black Faction in a mass defection
because of resentment against KMT manipulation of local elections (Rigger 1996,307).
However, the political power of the independent Taiwanese opposition did not
grow until the late 1970s due to lack of organizational unity and mutual cooperation.
Even if an opposition leader won massive support in a certain region for a certain
period, he was not able to maintain his political legacy and influence after his
resignation (Yu 1995, 188).
The power of Taiwanese opposition did not pose challenges to the Mainlander
regime until the 1977 election, which was influential in the formation o f the Taiwanese
nationwide opposition. The opposition experienced its first breakthrough in the local
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105
and provincial elections of 1977. Opposition candidates won 25% of the elections for
magistrates and mayors, obtaining three times as many positions as before, as well as
30% of the seats in the Provincial Assembly, doubling their previous total. (Cheng &
Lin 1999, 235). Following the 1977 election, in the town ofChungli, a mass protest
against alleged irregularities of vote counting initiated a serious clash between the angry
voters and the police, and even a district police station was burned (Tien 1989, 96). In
the incident, which became known as the Chungli Incident, the KMT restrained from the
use of coercive means to the lawbreakers. The KMT restraint helped the opposition to
overcome an important psychological threshold—the image of KMT as invincible
political force (Chu 1992, 38). As a consequence, the incident set off a new drive to
form an island-wide alliance of the opposition candidates. Therefore, the significance of
Chungli Incident was its impact on the integration of Taiwanese opposition.
In 1978 the term “Tangwai” (literally meaning outside the [KMT] party),
representing the opposition, gained popularity when the Taiwanese opposition formed
the “Tangwai Campaign Assistance Corps,” which was subsequently reorganized into
“Tangwai Parliamentary Representatives United Office” when the 1979 elections were
suspended due to the termination of diplomatic relations with the United States at the
end of 1978 (Shih 1988, 52). For the first time in Taiwan's history, the opposition
attempted to coordinate its efforts in organizing campaigns and mobilizing votes for
non-KMT candidates nationwide.
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106
By 1979 the Tangwai had become the most powerful political opposition in
Taiwan. In that year the Tangwai published Formosa in an attempt to represent the
entire opposition by recruiting almost all prominent opposition figures onto its editorial
board (Lu 1992, 125). The Tangwai, under the pretext of establishing 13 “service
offices” for Formosa journal, developed its organization and sought mass support,
holding anti-government rallies in many cities (Wang 1993, 48). The Tangwai decided
to establish unofficial party organization through those service offices (Shih 1988, 53).
Through organizational networks and mass mobilization, Formosa became the central
organization of the Tangwai movement until the Kaohsiung Incident happened in
December 1979.9
The Tangwai opposition resumed its momentum during the 1980s. The KMT
trial against the Tangwai for the Kaohsiung Incident, instead of eradicating it,
unexpectedly strengthened the contending power of the Tangwai because the
suppression exposed the exclusive nature of the regime (Chu 1989, 239). It became
increasingly costly for the KMT regime to employ repressive measures against a
popularly elected opposition. In the meantime, a moderate force led by Kang Ning-
hsiang and his magazine The Eighties continued to serve as a mouthpiece of the
9 On Dcember 10, 1979, a large demonstration sponsored by the Formosa was held in Koashiung, the
second largest cities in Taiwan. To celebrate International Human Rights Day and protest against the
KMT regime abuse of human rights. Violence broke out during the demonstration and 183 policemen,
who were under order to not react with force, injured by the demonstrators. As a result, more than 100
Tangwai leaders were arrested and sentenced from several years to life imprisonment for sedition or
inciting the crowd to riot
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107
opposition movement. When elections were held in 1980, the members of the moderate
opposition and the close relatives of the jailed opposition leaders were able to win seats
in the parliaments (Wu 199S, 36). Encouraged by the unexpected electoral gains, the
Tangwai made more efforts to recruit independent non-KMT political elites (Hu 1993,
ISO). As a consequence, the Tangwai movement recovered quite quickly.
After 1983, the opposition sought to strengthen its political influence, with the
ultimate aim of establishing new opposition party. In 1983, “Tangwai Central Electoral
Assistance Committee” was formed (Chou 1992, 95). Despite the KMT's repeated
warning against the formation of the quasi-party organization, the Tangwai founded in
1984 a “Tangwai Research Association of Public Policy” (TRAPP), which exercised
quasi-party functions in electoral and political activities (Tien 1993, 111). Due to the
undermining of its legitimacy by the political murder of Henry Liu and the financial
scandal of Taipei's Ten Credit Cooperative,1 0 the KMT held two rounds of negotiations
with Tangwai leaders in May 1986 with them in exchange for I their cooperation (You
1993). The negotiations were regarded by the Tangwai politicians as a de facto
recognition of their organized activities. This sense of legitimation prompted the
1 0 In October 1984, the Taiwanese-American author Henry Liu, who had written unauthorized biography
of Chiang Ching-kuo, was murdered in his California home. A half-year later, two agents of Taiwan
intelligence bureau were charged with hiring a Taiwan-based organized crime gang to kill Liu. Human
rights groups in the United States condemned the murder, adding the external pressure for democratic
reform. In addition to the Henry case, an economic scandal exacerbated the difficult political and
economic situation. The Tenth Credit Cooperative, a leading financial institution, was closed by the
government because it was on the verge of bankruptcy. The scandal spread to the political realm when
investors tried to persuade KMT legislators to revise banking law to bail out the cooperative. It
undermined confidence in Taiwan's economic stability and aroused public anger at KMT official's
complicity in corrupt business dealings (Rigger 1999, 124-5).
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108
Tangwai to form the first local branch of the TRAPP in Taipei (You 1993, 105). After
the establishment of several local branches of the TRAPP, the Tangwai defied a long
standing ban on new political parties and inaugurated the Democratic Progressive Party
(DPP) in September, on the eve of the 1986 parliamentary election (Chu 1994, 53).
Once established, the DPP adopted a party constitution and a party platform, and
developed a nationwide organization. In the 1 986 parliament elections the DPP was
firmly validated as the viable opposition party by winning more popular votes than
before.
The increase in Taiwanese political power was not only evident in the growth of
the Tangwai organization, which led to the formation of the new opposition party, but
also in the support from the Presbyterian Church, the overseas Taiwan Independence
Movement, and the United States Congress.
External Support. With the support networks of the Presbyterian Church all over
the world, Taiwan’ s Presbyterian Church, consisting of a majority of Taiwanese
Protestants, was steady supporter of the Taiwanese opposition. Some Presbyterians
played an active role in the opposition movement and even the Taiwan Independence
Movement. Some young ministers in the Presbyterian Church had called for Taiwan
independence since 1971 (Arrigo 1994, 160). In 1973, Taiwanese Presbyterians in the
United States established the Formosan Christians for Self-Determination (Chen 1992,
159-60). In 1977, Taiwan's Presbyterian Church appealed for Taiwanese self-
determination and urged the KMT regime to transform Taiwan to a new and
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109
independent country (Zhang 1998, 53). At the time of the Kaohsiung Incident of 1979,
the general secretary and several other church leaders were arrested for their
involvement (Tyson 1987,167). In 1987, over 100 Presbyterian ministers demonstrated
for the freedom to endorse Taiwan independence (Chou & Nathan 1991, 831). In short,
the support of Taiwan's Presbyterian Church for democracy and Taiwan Independence
was not only moral or ideological but also substantial in terms of direct involvement.
The power of the Taiwanese opposition was further reinforced by the overseas
Taiwan Independence Movement (TIM), which originated in Japan in the 1950s. In
1955 the overseas TIM even established Provisional Government in Tokyo, and in 1960
Taiwanese students organized the Formosan Association (Ong 1963). Since it was
difficult for the Taiwanese to stay in Japan and many Taiwanese students went to the
United States for graduate studies, the leadership of the overseas TIM gradually shifted
to the United States in the late 1960s (Chen 1992, 5). The overseas movement did not
receive strong support among the Taiwanese in Taiwan, but its influence grew rapidly in
the overseas Taiwanese communities, especially in the United States. In 1970, the
Taiwan Independence Movement in Japan, Europe, and the North America merged into
the “World United Formosans for Independence” (WUF1), which advocated terrorism
and violent revolution against the KMT (Martin 1985, 14). In addition to some radicals
who espoused revolution and armed struggle for Taiwan's independence, most of the
overseas Taiwanese organizations formed political lobbies for their cause. Founded in
1982, the “Formosan Association for Public Affairs” (FAPA) became highly effective in
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110
winning several congressional allies including Stephen Solarz and Edward Kennedy
(Chai 1990). On their 1982 trip to the United States, moderate Tangwai leaders, invited
by the United States government to visit the Congress, were introduced to overseas
Taiwanese organizations. That trip transformed the ties between the domestic opposition
and overseas Taiwanese into a political partnership. The FAPA, for example, has set its
agenda in accordance with that of TRAPP and later the DPP (Cheng 1989, 487, 494).
The Tangwai opposition also demonstrated Taiwanese political power by
winning support from the United States, which accused the KMT government of
violating human rights. In observance of the human rights provision of the Taiwan
Relations Act (TRA) of 1979, the United States Congress has monitored human rights in
Taiwan since 1980. The U.S. State Department published annually the assessment of
human rights in Taiwan for the Congress (Copper 1992, 120-1). Between 1982 and
1984, American Congress began to exert increased pressures on the KMT regime for the
endorsement of democracy. The Committee on Foreign Affairs of the House of
Representatives held hearings on such issues as martial law and Taiwanization (Lu
1991b, 40). In 1983, the Congress passed a resolution, demanding that the KMT lifted
martial law (Chai 1990, 89). When Solarz visited Taiwan in 1983, he urged the
government to lift martial law and respect human rights, and encouraged the Tangwai to
take risks for democracy. After Henry Liu, the biographer of Chiang Ching-kuo, was
murdered by KMT security agencies in California in 1984, the United States condemned
Taiwan and held the hearings in the House of the Representatives for that case. Some
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ill
members, based on the human rights provisions in the TRA and the Solarz Amendment,
threatened to cut arms sales to Taiwan (Cooper 1992, 123). From 1986 to 1987, the
United States supported publicly the formation of the new party. Before the formation of
the DPP, in May 1986, four congressmen inaugurated in the United States the
“Committee for Democracy on Taiwan,” calling for the release of political prisoners as
well as the revocation of martial law and party ban (Chai 1990, 110). In short, the
United States' support for democracy in Taiwan shifted the focus from the general
concern regarding human rights to specific democratic reforms such as the lifting
martial law and the establishment of new opposition party.
The rise of the Tangwai opposition movement was evident in its electoral
performance after 1980. Despite the party ban and other restrictions under martial law,
the popular votes for the Tangwai/DDP increased steadily in the elections for the
National Assembly and Legislative Yuan (see Table 4.5). Although the Tangwai/DDP
candidates had less than a quarter of the popular votes, the electoral change was
qualitatively significant. It is clear that the Tangwai/DPP, with the considerable voting
support, began to exert increasing pressure on the KMT for more democratic reform.
To resist democratic reform, the KMT regime increasingly paid more cost to suppress
the Tangwai, which secured significant external and domestic support.
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TABLE 4.5
Popular Votes of the Tangwai / DPP in Elections, 1980-1986
Years
Provincial
Assembly*
County
Chiefs+
National
Assembly
Legislative
Yuan
1980
— —
8.6% 13.0%
1981 12.9% 22.8%
—
—
1983
— — . . .
18.9%
1985 15.9% 13.5% - -
1986
— —
19.9% 24.6%
Source: Adapted from Huang Teh-fu, "Cheng-Tang Ching-Cheng Yu Cheng-Chih Min-Chu
Hua: Tai-Wan Ti-Ch’ u Cheng-Tang T'i-Hsi Ti Hsin T’ iao-Chan [Party Competition and
Political Democratization: New Challenges to Taiwan’ s Party System], Suan-Chu Yen-Chiu
[Election Studies] 1(2): 203-5.
Note: The decrease in tangwai popular votes in the elections for county chiefs and city
executives from 1981 to 1985 largely resulted from the increase in the popular votes of non-
KMT local factions.
♦Apart from the election of the Provincial Assembly, the entry includes those of Taipei and
Kuohsiung City Council.
+In addition to the election of county chiefs, the entry includes those of the executives of
other smaller cities.
Ideological Power
This section discusses the tenets of the KMT ideology and how the KMT
established ideological hegemony through education, language, and media. It then
analyzes why and how the ideological supremacy of the Mainlander state went into
decline. Finally it illustrates the tenets of Taiwanese ideology and how it successfully
challenged Mainlander ideology.
Until the late 1970s, the Mainlanders exercised ideological power over the
Taiwanese. The KMT government, influenced by its early experiences of collaborating
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113
with Communists in the mainland, always understood the importance of ideology in the
political process. The KMT ideological hegemony, based on Chinese nationalism and
Sun Yat-sen's the Three Principles of the People, was established through the exclusive
control of education, the domination of mass media, and discriminatory cultural and
language policies in favor of the Mainlanders. Until the rise of the Taiwanese
opposition during the late 1970s, the KMT political ideology not only legitimized the
Mainlander-controlled state structure, but also marginalized the overwhelming majority
of the population, especially the Taiwanese, from the political process.
Ideological Power of the KMT State. The KMT regime employed the one-
China claim to secure its legitimacy. Regarding Chiang Kai-shek as the direct successor
of Sun Yat-sen, founding father of the Republic of China, the KMT considered itself to
be the sole legitimate government of the whole China and the genuine heir of Chinese
traditional culture, and declared that the Communist government on the mainland was a
rebel regime, which did not respect traditional Chinese culture (Chu 1994,47). Thus, the
Mainlander regime defined Taiwan as a province of the whole China and a territorial
base for both revitalization of Chinese culture and recovering Mainland China. The
KMT state also completely denied Taiwan's national identity and viewed the Taiwan
independence movement as treason (Hsiao 1998, 325).
As the KMT official ideology, the Three Principles of the People—the principles
of nationalism, democracy, and people's livelihood—became the main element of
political socialization in Taiwan. In order to reinforce its legitimacy, the KMT regime
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114
also used Sun’s tutelary approach to democracy as an excuse to maintain its
authoritarian rule and limited civil and political rights. According to Sun Yat-sen,
democratic development in China should be gradually implemented throughout three
stages: military rule, democratic tutelage, and constitutional democracy (King 1993,
143). During the period of democratic tutelage, the people would be educated in
preparation for democracy. Thus, the KMT government held that their approach to
democracy was cautious and their ultimate aim was to realize liberal democracy (Hao
1996). Furthermore, the KMT state justified its restriction of democracy as a temporary
measures due to the threat of Communist China, and claimed that as long as the Chinese
Communists refused to renounce the use of military force against Taiwan, the
government could not abolished martial law even though it hindered the progress of
democracy (Lu 1992, 134).
Identified with Chinese nationalism, the teaching of the Three Principles became
the main vehicle for ideological indoctrination through political education. Sun’s Three
Principles were made a mandatory section of the school curriculum at all levels of
education and a prerequisite for university entrance (Hughes 1997, 29-30). During two
to three years of military service, young men were again imbued with the Three
Principles (Wade 1990, 245). The systematic reconstruction of the Three Principles at
all levels of education and in the military service further politicized education from the
point of view of the party-state. Its symbols and interpretations provided the ideological
foundation for legitimization of the KMT government (Walker 1973, 370-1).
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115
The KMT regime was able to establish its ideological supremacy through the
tight control of cultural apparatus, namely education, language, and mass media. First
of all, the education environment was geared to the intensive political socialization,
paying special attention to promoting Chinese nationalism. Under the influence of KMT
educational policy, students in primary and secondary schools were immersed in
Chinese history and geography, so that Mainland China as the motherland was deeply
ingrained in the minds of the students (Tu 1996, 1134). For instance, according to an
academic survey, in addition to foreign countries, China occupied 63% of the content
while Taiwan only 1.5% in the geography textbooks of the junior high school.
Moreover, since 1952 the subjects of Chinese language, history, geography, and
citizenship have been required to reflect basic national values and policies (Lin 1996b,
238).
Furthermore, political education was reinforced through military training at both
high school and college levels. High school students for three years and college
students for the first two years received the military training two hours per week. The
class taught by military instructors covered a broad range of topics similar to those
taught to new soldiers. In addition to formal courses, the military instructors served as
counselors and leaders in many extra-curricular activities. More important responsibility
for the military instructors was to instill patriotism and Chinese nationalism among the
students. The integration of military instruction into education system was thus a further
effort in ideological control over the students (Bullard 1997, 147, 149, 151).
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116
Language policy, as the main tool of cultural and ideology control, displayed the
ideological dominance of the Mainlanders. Mandarin Chinese was adopted as the
national language, but Taiwanese and Hakka were suppressed in all avenues of mass
communication, such as radio, film, television and newspapers. As mentioned
previously, Taiwanese dialects were also disallowed in the military, schools, and most
of the government institutions. In the national language movement, standardized
Mandarin was taught to both school children and adult Taiwanese (Wei 1973, 468).
Since 1956 students have been prohibited to speak dialects in schools (Lin 1996a, 199).
In 1962 when the first television channel began to operate, the government limited non-
Mandarin programs to less than 16% of the total broadcast time. The Radio and
Television Law of 1976 specified that the proportion of Mandarin by radio broadcast
must not be less than 55% and by television must not be less than 70%; the use of
dialects should be decreased year by year (Hsiau 1997,307). As a result, the majority of
the population can speak Mandarin and virtually all of them can understand Mandarin.
In addition to language policy as the instrument of cultural control, Mainlander
government have always tried to promote the image of China through Chinese cultural
symbols, and also to imbue Taiwanese people with national symbols, in particular the
national flag, the national anthem, the national mission, and the national leader. Each
government office and every school exalted the cult of charismatic leaders by hanging
the portraits of Sun Yat-sen and Chiang Kai-shek (Hughes 1997, 29). In the cinemas,
before showing a movie, audience was required to hear the national anthem (Wade
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117
1990, 244). As to cultural symbols, for example, Chiang Kai-shek proposed a revival of
Confucianism, and the KMT launched a large-scale Cultural Renaissance Movement in
1966 in response to the Cultural Revolution in Communist China, which undermined
Chinese traditional culture, especially Confucianism. The Committee of Chinese
Cultural Renaissance Movement was formed in 1967 to launch the movement mainly
through curricula and extra-curricula programs of the elementary and secondary schools.
In society, essay and oratory contests on topics pertaining to Chinese culture were held
regularly, and other cultural activities, such as music, opera, dancing, folk art, painting,
and calligraphy were promoted (Chun 1994, 58). In contrast, local cultural expression
in the form of operas, plays, folk songs, folk-religion customs, and native-land literature
were suppressed.
The Mainlanders also exerted ideological power through the control of the mass
media. The military, the party, and the government owned major newspapers and radio
broadcasting, and monopolized television networks as well. By 1987, the KMT owned
four national daily newspapers: the government owned two, and the military five.
Although the remaining 20 newspapers were privately owned, most of the owners were
closely tied with the KMT; for instance, the owners of the two newspapers with the
highest circulation since the 1970s began to serve as members of the KMT Central
Standing Committee in 1979 (Rawnsley and Rawnsley 1998, 108). Of the 31 radios
broadcasting companies, five were owned by the military, seven by government, and 21
small companies have been private (Rampal 1994,640). With regard to the monopoly of
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118
television stations, the KMT has owned majority shares of “China Television
Company” (68%), the Ministry of Defense has owned “Chinese Television System”
(80%), and the Taiwan Provincial Government “Taiwan Television Enterprise” (49%)
(Wang 1993, 133,137,141).
The increase in Taiwanese ideological Power. Beginning in the 1970s,
however, the ideological supremacy of the KMT regime was challenged due to the new
generation of the well-educated who were not satisfied with the restriction of freedom of
information under martial law, and the legitimacy crisis resulting from the withdrawal
of diplomatic recognition by the great powers and Communist China's unification
proposal.
Along with economic prosperity and more frequent local elections, the
Taiwanese increased the awareness of their political rights. The political awakening
among the increasing number of well-educated and economically secure electorate
steadily generated a rising demand for alternative viewpoints and uncensored news,
which inevitably challenged the dominance of the Mainlander ideology (Chu 1992a,
34).
The diplomatic setbacks in the 1970s undermined the ideological basis of the
Mainlanders regime, which had established its external legitimacy upon the one-China
claim and its domestic legitimacy upon the recovering of the mainland. From the early
1970s Taiwan began to experience challenges to its external legitimacy—sole
representation of the whole China—through increasing diplomatic pressure from the
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119
Communist China. Taiwan's severe diplomatic ordeal began in 1971 when its seat at the
United Nations was withdrawn in favor of a seat for the People's Republic of China
(PRC). Its declining international status was precipitated by the withdrawal of
diplomatic recognition of many developed countries which culminated in 1978 when the
United States terminated the mutual defense treaty and diplomatic relations with
Taiwan. As one of the most isolated countries in the world, Taiwan maintained the
support of only 23 countries; most of them are small and insignificant in the global
community, by 1984 (Chang 1992, 28). On the other hand, the increased international
status of the Beijing government and the curtailment in the tensions of military rivalry
between the Taiwan Straits undermined martial law and the Temporary Provisions that
were built on the one-China claim. The PRC, adopting economic reforms and an
economic opening to the world, has made great progress in economic development since
the late 1970s. With the rise of its power and prestige in the international system.
Communist China has repeatedly made conciliatory gestures to the KMT regime for
unification of China (Wu 1991, 5). The intensified diplomatic frustration and the PRC's
unification proposal made it increasingly unrealistic for the KMT regime to maintain
that Taiwan, the so-called Republic of China, was the legitimate country of the whole
China and would recover the mainland. As the prospects for national recovery became a
political myth, the legitimacy of the Mainlander old guard's domination of the three
national representative bodies became increasingly unacceptable, and the suspension of
national-level elections became even more difficult to justify (Cheng & Lin 1999, 234).
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120
The decline in Mainlander ideological power was evident in the changing
orientation of local party organs and the changing content of the textbooks. According
to a study written by an education scholar, the theme of anti-communism and recovery
of mainland in the textbooks of elementary and high schools decreased from 21.7% in
the 1950s to 3% in the 1980s (Lin 1996b, 238). In the early years, local party cadres
devoted much time and energy to political socialization and ideological promotion; for
example, the local party chairmen supervised political education for their party members
(Winckler 1981, 54). During the later decades, as Taiwan's society became more
pluralistic due to economic development, the local party cadres shifted their
commitments to community services, collecting public opinions, and coordinating
pluralistic local interests in order to win mass support for local elections (Lu 1985a,
163-4).
In society, the decline in Mainlander ideological power was manifest in the
Taiwanese cultural movement, known as the nativist movement. The diplomatic setback
and the increased diplomatic isolation in the 1970s inspired many intellectuals to the
quest for Taiwan identity (Hsiao 1998, 326-7). Several cultural movements were
initiated in the mid-1970s to promote Taiwanese identity, first in literature, and then in
other arts such as music, dance, and film, with attempts to reflect the realities of
Taiwan's society. Social realism about daily life of farmers, workers, and small
businessmen established its legitimate status in the literature circles (Gold 1994, 61).
Receiving new respect and appreciation, Taiwanese popular culture was restored and
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revitalized. The cultural movements served to shape and even to legitimate a growing
Taiwanese consciousness (Hsiao 1998, 327). The stress on Taiwanese localism and the
rejection of Pan-Chinese nationalism in the cultural movements had a great impact on
political ideology of the Taiwanese opposition.
Before 1979, the opposition did not attempt to vigorously challenge KMT
ideological power because it pursued democracy without deconstruction of political
myth based on Chinese nationalism and without assertion of Taiwanese consciousness
(Wang 1996, 156-7). The two famous opposition political journals, Taiwan Political
Review and Formosa, which had particular influence on the development of Taiwanese
ideology, were typical examples. In those journals most of the content involved
criticism of the KMT regime—39% in Taiwan Political Review and 19% in Formosa',
followed by political arrangements—5% in Taiwan Political Review and 13% in
Formosa. Only 4% of the content involved Taiwanese consciousness in both magazines
(Wang 1996, 159). Although the two journals lasted less than one year, they continued
to publish under different journal titles. More significantly, the model they set was
conducive to the development of ideological power of the Taiwanese opposition.
During the 1980s the Tangwai, especially the radical wing, further challenged
the ideological hegemony of the KMT government through criticism of KMT legitimacy
and the construction of Taiwanese nationalism in its political goals and platform (Hu &
Chu 1992, 181). Labeling the KMT an “alien regime” and a Mainlanders' party that
imposed its oppressive rule over native Taiwanese, the Tangwai claimed to represent the
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aspirations of the Taiwanese majority. Criticizing the ideology of the KMT as a mere
excuse to preserve its monopoly of political power, and emphasizing the gap between
KMT ideological rhetoric and reality, the Tangwai insisted that the Temporary
Provisions and martial law should be lifted, and all restrictions on political participation
should be removed. Expressing the political suffering of the Taiwanese under the
Manchu dynasty, Japanese imperialism, and the KMT dictatorship, they vowed to build
a democratic and independent Taiwan based on the principle of self-determination.
Therefore, they explicitly linked the goal of democracy directly to the issue of
Taiwanese identity and the principle of self-determination. While calling for
democratization, through the reform of government institutions, the legalization of
opposition parties and comprehensive popular elections of the three national
representative bodies, they went beyond these political demands and raised questions
regarding Taiwan's sovereignty, arguing for acceptance of de facto separation ofTaiwan
from the mainland (Kau 1996, 298; Lu 1992, 135; Tien 1989, 202). This ideological
discourse was represented by New Tide, the ideologically oriented political journal
published in 1984 by the radical Tangwai, which could be regarded as the origin of the
domestic Taiwan Independence Movement (Wakabayashi 1994, 213).
The Taiwanese Tangwai ideology was spread through the electronic media for
the first time during the military trial, held following the 1979 Kaohsiung Incident. The
KMT government was under both domestic and foreign pressures to hold the military
trials for Tangwai defendants in an open court with unprecedented radio and television
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coverage. The opposition defendants with their defense lawyers freely expressed their
views about democracy and rule of law in their defense speeches (Chiou 1995, 94).
Many Taiwanese responded emotionally to the martyr symbolism around those jailed
opposition leaders, and the Tangwai was regarded as a legitimate democratic force
capable of checking and balancing the authoritarian power of the KMT government. The
Tangwai, thus, achieved a great victory over the KMT regime in the ideological contest.
To promote its ideology, the Tangwai employed several approaches on a regular
basis: (1) slogans and political programs in election campaigns; (2) mass rallies and
activities; (3) political journals. First, the ideology of Taiwanese opposition was spread
to citizens, on a periodic basis, during the election campaigns, in which the opposition
candidates could ignore some of the restrictions of freedom under martial law,
challenging the legitimacy of the regime and criticizing sensitive political issues (Chiou
1995, 80).
Second, the mass activities of the opposition were frequently employed as an
effective way to express its ideology in order to challenge the ideological dominance of
the KMT regime. The mass activities of the Tangwai could be traced to 1979 when at
least 14 mass activities were organized. In January 1979 the Tangwai staged the first
demonstration under martial law (Wang 1996, 152). After the temporary relapse for
several years as a result of the KMT suppression of mass rallies, in 1984 the Tangwai
resumed their campaign for democratic change through mass rallies and street
demonstrations. The number of political protests grew from 4 in 1984 to 106 in 1987
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(Chu 1994b, 100, 103). For example, in 1986, the Tangwai held a series of party
formation rallies, conferences, and seminars to explain why they needed a political party
(Chiou 1995, 100). Those mass activities attracted thousands of audiences and generated
mass support for their ideology.
Finally, another influential instrument for challenging the Mainlander
ideological hegemony was publishing dissident journals. Given the newspaper ban and
the KMT control of electronic media before 1988, journals have been the most critical
instrument to undermine the ideological power of the KMT state. During the first half of
the 1980s the Tangwai published more than 50 political journals under various titles
(Wang 1996, 168). Some of them enjoyed remarkable circulation; for instance, it was
estimated that some magazines sold over 13,000 copies per issue, and even the less
successful journals sold at least 7,000. In 1984 a total of 400,000 copies of dissident
magazines were available in the market (Chen 1998, 23-4). In addition to circulation,
the political journals sent their challenge to the KMT ideological dominance by flexible
publishing. In 1983 the Tangwai began to publish a weekly, which stressed news and
reports and tended to function as newspapers (Jiang 1995,245-6). Avoiding censorship,
they also began publication in the disguised form of monthly or weekly book series
(Chou & Nathan 1991, 824)
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Ethnic Cohesion
This section first examines ethnic cohesion of the Mainlanders and the lack of
ethnic cohesion of the Taiwanese as a result of local factions in the early decades. Then
it illustrates how the Taiwanese increased their cohesion through democratic struggles
within the opposition movement. Under the single-party regime, while the Mainlander
minority was cohesive, the Taiwanese majority was divided among those who supported
the KMT regime in the form of KMT factions and those who were politically neutral or
opposed to the KMT regime in the form of non-KMT factions or non-factions. The
problem of Taiwanese cohesion further embodied in the fragmentation of local KMT
factions, which did not unite as a strong Taiwanese political force within the KMT state.
Mainlander Cohesion
The Mainlanders were strongly cohesive at the level of politics. During its early
years in Taiwan, the Mainlander state overcame the factionalism that had been rampant
in Mainland China. The Mainlander factions,1 1 such as the C. C. group, the Political
Science group, the K’ ung-Sung group, and the Whampao group, lost their influence in
national politics due to purges and power realignments during the reorganization period
of the KMT between 1950 and 1952 (Tai 1970, 429). The remnants of factionalism
1 1 These faction includes: (1) the C. C. group, led by the Chen brothers, which had controlled the
KMT party; (2) the Political Science group which was the liberal wing; the Whampao group, which
consisted of the early graduates of the Whampoa Military Academy; and Kung-Sung group, closely
tied with Shanghai and Shandong capitalists, which had controlled economic affairs.
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126
survived only in the National Assembly, the Control Yuan and the Legislative Yuan,
and remained within the confines allowed by the KMT state (Dickson 1993, 61).
At the same time, Chiang Kai-shek and his son Chiang Ching-kuo took
measures to centralize state power in their hands. The Chiangs reorganized the
factionalized KMT along Leninist lines, as mentioned earlier, leading to party
hegemony over civil administration and the military. In particular, Mainlander cohesion
was strengthened by unifying the security system under the National Security Bureau
which coordinated all security agencies, including related offices in the party, the
military police, local police, Taiwan Garrison Command, the Ministry of Defense, the
Ministry of Interior, the Ministry of Justice, and the Ministry of Foreign Affairs
(Wakabayashi 1994, 99-100). The KMT regime, therefore, was cohesive in terms of
centralization of state power through party hegemony and the integration of military,
security, and administration with the party until democratic transition.
Almost all Mainlanders were loyal to the KMT regime. For example, 93% of
the Mainlanders, whether they embraced democracy as their ideology or not, supported
the KMT in the 1986 Legislative Yuan election (Wu & Lin 1993, 212). The political
loyalty of the Mainlanders was also exemplified by the fact that the KMT could
mobilized Mainlander veterans, military, policemen, civil servants, state enterprises
employers, and even their families to vote for any KMT candidate they were asked to
vote(Ni 1995, 120).
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By contrast, the Taiwanese did not become more cohesive politically until the
beginning of the Tangwai opposition movement. The Taiwanese political elites and
landlords, who had been suppressed in the February 28 Incident and the Land Reform,
lacked a political base for leading and uniting the Taiwanese as an opposition force.
Even most of the “Half Mountain” Taiwanese, who had been trusted to assist the
Mainlander regime for the takeover years, were suppressed and purged by the KMT due
to their formation of island-wide factions and political coalitions (Cheng 1995, 133-6).
Because of the ban against the establishment of the party, Taiwanese oppositions could
not unite and become organized as a political party. Furthermore, even the Taiwanese
who were recruited into the KMT lacked cohesion due to the regional-based KMT
factionalism.
Before the rise of Taiwanese opposition, the main obstacle to Taiwanese
cohesion was factionalism. The local factions came from loose personal networks based
on lineage, marriage, alumni, and territory, already present in pre-1945 colonial Taiwan,
and became an institution under the KMT rule (Bosco 1994, 120). The local factions
filled the political vacuum caused by the elimination of the landlords in the land reform
(Dickson 1997, 45). The local factions are rooted in local elections, and they exist to
select and support candidates for political offices. Each local faction consists of a leader,
a number of cadres, grassroot supporters and reliable voters in given geographic areas or
local organizations, such as teachers, farmers associations, and irrigation associations
(Tien 1989, 170). Faction leaders and the core cadres either hold elective offices as
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mayors, magistrates, and assemblymen, or had held such offices in the past (Wang 1994,
184). Competitions among local factions are fierce.
The lack of ethnic cohesion among the Taiwanese was manifest in electoral
competition between KMT factions and non-KMT factions. Most factions were under
the banner of the KMT, but there were a few non-KMT local factions, such as Yu Teng-
fa of Kaohsiung County and Hsu Hsin-lian of Taoyuan County, which represented
different local interests in competing other KMT local factions (Ting 1991, 81).
The lack of ethnic cohesion among the Taiwanese was further evident in the
competition among the KMT local factions. Based on patron-client networks—an
exchange of political support and cooperation for political and material benefits, the
KMT local faction mobilized support for the KMT regime in order to received material
rewards (Rigger 1994, 136). In the patronage networks, the local factions competed
directly for prestige and resources, leading to passionately rivalries.
In addition, the problem of Taiwanese cohesion was further revealed in the size
and the quantity of factions. During the rule of the KMT, there were about 90 county-
level factions in Taiwan (Cheng 1995, 154). Given the ban against the new political
parties under martial law, the KMT also blocked any attempts of local factions to form
island-wide political alliances. The local factions were prohibited from entering into
alliance with any political force at the central level and were restricted to allies on the
county and township levels (Chen 1995, 150-1). There were at least two factions in
each county; in most cases, there were even three or more factions (Chen 1995,153-4).
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Under the county-level factions, there were township-level factions; which were
generally all permanent alliances of county-level factions (Bosco 1994, 121).
The lack of ethnic cohesion among the Taiwanese has been attributed to the
KMT promotion of local factionalism. As mentioned earlier, the KMT government
contained the local factions within local boundaries and forbade them to enter into both
cross-county alliance and the alliance with the officials in the central government.
Factional leaders promoted to the central government were prohibited to utilize their
positions to distribute patronage to their followers and had to cut off their ties with
them. The factions were also prohibited to build cross-county alliance with other
factions (Chen 1995, 150-1).
With the control of the nomination and resources, the KMT kept the local
factions roughly even in strength in the local elections. The KMT could make or break
the political fortune of a faction by throwing its weight behind rival factions or fostering
new factions in a local area. During the late 1950s, the KMT regime began to employ its
mobilization power and its monopoly of nomination to manipulate local election results
(Wakabayshi 1994, 140). Since the KMT was in a dominant political position, once a
candidate received the KMT nomination, the candidate was almost assured of getting
elected. The ruling party alternated executive nomination between factions, ensuring
that no faction would get the upper hand. In some cases the post would alternate with
every term, in other cases after every two terms. Top posts could be divided among the
factions: if the county magistrate belonged to one faction, the speaker of the county
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130
assembly would belong to other (Dickson 1993, 74). After 1959, moreover, the KMT
regime restricted county magistrates to be re-elected only once (Chen 1995, 153).
Equally important, the party also maneuvered financial and organizational
resources to play local factions against each other (Rigger 1996, 307). The KMT used
its patron-client networks of economic rents to co-opt local elites of the factions that
were elected. When faction members assumed office, they could use their positions and
their relationship with the KMT to acquire economic rents and distributed them to their
clients; for example, an elected office received favorable zoning law or public
construction scheme for land speculation (Chen 1996, 176-7).
During the first two and a half decades, Taiwanese opposition was fragmented
due to the KMT policy of preventing the formation of the nationwide Taiwanese
political force, either in the KMT or in the opposition. It was only over time that the
Taiwanese opposition was able to increase their cohesion. In the late 1970s, as
previously mentioned, the term “Tangwai” referred to a handful of non-KMT candidates
who made attempts to coordinate electoral campaigns. In 1978 they began to form
Tangwai Campaign Corps which organized joint advertisements and campaign meetings
for the candidates (Domes 1993, 123). In 1979, Tangwai formed a liaison unit for the
Tangwai People's Representative Office, which attempted to coordinate Tangwai
activities nationwide (Chao & Myers 1998, 109). In 1981, the Tangwai coordinated
nomination and unified campaign labels and slogans in the local election for the first
time (Wu 1996, 189).
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In mid-1982, however, the Tangwai movement was engulfed in serious
factional conflict between the faction of the moderate Tangwai officeholders, who were
elected as members of national or local representative bodies, and the radical Tangwai
editors and writers faction, which edited opposition journals and operated daily
organizational affairs (Lu 1992, 127). The source of factional conflict could be traced
back to ideological difference concerning how democracy in Taiwan would be achieved
in the beginning of the Tangwai movement. Beginning in 1977, opposition politicians
formed themselves into two ideological lines: the radical, led by Huang Hsin-chien,
sought to reform the system, and the moderate, led by Kang Ning-hsiang, pursued
reform within the system (Wu 1995, 90). In the line of reforming within the system, the
moderates, aware of the danger of repression by the KMT, took a parliamentary line of
peaceful electoral competition, while the radicals, encouraged by the victory in the 1977
election, adopted a street line of mass confrontation for the aim of reforming the system
(Wu 1995,92; Zhang 1997,34). For the term “self-determination,” the two factions had
different interpretations— the moderate demanded greater political power for the
Taiwanese majority; the radicals asserted the possible choice of Taiwan independence
(Sutter 1988, 47).
Although the Tangwai did not reconcile their different positions on the means of
achieving democracy, they gradually achieved cohesivness organizationally because
they were aware of their limited resources and the great political pressure from the KMT
and because they wanted to get better result in elections (Jiang 1995, 251; Wu
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1996,191-2). The Tangwai sought to harmonize policy positions and to formalize its
internal organization to achieve institutional cohesion. In 1983, Tangwai activitists for
the first time adopted a common political platform, such as self-determination, the
lifting of martial law, the revocation of the Temporary Provisions, the prohibition of
political persecution, and the withdrawal of the KMT from the military, the security, and
the judiciary (Wang 1996,203). In the 1983 election, the Tangwai was united under the
Tangwai Central Electoral Assistance Committee, which established for the first time a
formal procedure of endorsement (Hu 1993, 149). In 1984, about 20 elected Tangwai
legislators, provincial assemblymen, and Taipei city councilmen established the
Association of Tangwai Public Officials for Public Policy Studies. Criticized for
excluding the non-elected, it was subsequently renamed the Research Association of
Public Policy (TRAPP) which exercised proto-party functions in electoral and other
political activities. In the meantime, the radical Tangwai formed “Tangwai Editors and
Writers Association” (TEW A), composing of eleven Tangwai political journals and 98
editors and writers (Wu 1996,190). To prepare the 1985 local elections, the TRAPP and
the TEWA cooperated to form the Tangwai Campaign Assistance Association (Ni
1995, 197). In 1986, the TRAPP, under Yu Ching's leadership, began to organize local
branch associations. By June, the Tangwai had instituted thirteen local chapters through
the island (Tien 1989, 1992). As mentioned previously, a new party, the DPP was
finally bom on September 28 at a convention in Taipei.
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133
Concluding Remarks
It is evident that since the 1970s Taiwanese political power has been on the rise,
while Mainlander political power has been declining in relative terms. Although
Taiwanese political power did not match Mainlander political power, the rise of the
Taiwanese Tangwai opposition greatly enhanced Taiwanese political power and was
conducive to democratic transition in the late 1980s.
The increase in Taiwanese political power was less dependent on the Taiwanese
elites who reached top positions in the KMT party, the military, and the government.
As the data shows, the Taiwanese share in top positions was still lower than the
Mainlander counterparts even in the late 1980s, except for the KMT Central Standing
Committee in which the Taiwanese constituted 52% of the total. For instance, the
Taiwanese occupied about 34% of the KMT Central Committee in 1988, 34% of
ministerial posts between 1984 and 1989, and only about 15% of generals from 1978 to
1987. In terms of top positions, it is clear that Mainlanders still held a much larger
share of political power in party, military, police, and government. The position of the
Taiwanese in the government might affect politics to a certain extent through their
increased political power, but it is not clear to what extent they contributed to political
liberalization.
The relation between increased Taiwanese political power and democratic
development hinged more on the rise of the Tangwai opposition movement. On the
surface, Tangwai political power in terms of electoral strength was not remarkable. The
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best record of popular votes for the Tangwai was 24.6% in the 1986 Legislative Yuan
election. The political power of the Tangwai relied more on organizational integration
and ideological strength. In addition, the support of the American Congress, the
Presbyterian Church, and overseas Taiwan Independence Movement fortified Taiwanese
political power. The Taiwanese, in attempting to form a new party and to establish an
ideology based on the link between liberal democracy and Taiwanese identity, posed a
significant threat to Mainlander political power.
Although the Taiwanese majority was much weaker than the Mainlander
minority in ethnic cohesion, the political unity of the Taiwanese opposition under the
common label of the Tangwai increased the suppression cost to the KMT and increased
the oppositions bargaining leverage against the KMT. They overcame their internal
cleavages for democratic struggles against the KMT and continued to develop
nationwide quasi-party organization and finally a genuine new party. That
unprecedented organizational solidarity and mobilization potential based on native
Taiwanese identity demonstrated the Taiwanese share in political power much more
effectively than the statistical data of this chapter.
As a result of the increase in Taiwanese political power, in 1987 the KMT
abolished martial law, and subsequently enacted a set of new laws for freedom of
speech, association and public assembly. After Chiang Ching-kuo's death in January
1988, Lee Teng-hui, the first Taiwanese president as a successor, pledged to continue
the policy of reform and democratization. In 1989 the new rules for the formation of
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135
new political parties were set in the Civil Organization Law (Leng & Lin 1993, 806). In
1991 the Temporary Provisions were revoked which signified the end to the state of
emergency (Tien & Cheng 1997, 3).
To summarize, the increase in Taiwanese political power was manifest in
Taiwanization, the opening of the national supplementary elections, and especially the
growth of the Tangwai opposition movement that had become a powerful
counterbalance to Mainlander political power. The Taiwanese opposition was
particularly important for Taiwanese political power because of the organizational
strength, ideological persuasion, and the solid support it received from the overseas
Taiwan Independence Movement, the internationalized Presbyterian Church and the
United States Congress.
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CHAPTER 5
SUMMARY AND CONCLUSION
This chapter assesses the ethnic power of both Mainlanders and Taiwanese and
explores how collective ethnic power affected democratic development in the 1980s. In
comparing political and economic power between Mainlanders and Taiwanese, this
chapter argues that the increase in economic and political power of the Taiwanese has
been one of the major forces that drove democratic development in Taiwan.
In the beginning, the Mainlanders wielded both political and economic power
while the Taiwanese had virtually no power. When the Mainlander-controlled KMT state
took over Taiwan as a province in 1945, the Mainlanders monopolized political and
economic power through the establishment of military government and of state
capitalism. The Taiwanese failed to get fair share of political and economic power
through their violence or negotiation in the February 28 Incident of 1947. After the
relocation of the KMT regime from the mainland China in 1949 as a result of the KMT
defeat in the civil war against the Chinese Communists, Mainlander political and
economic power was rooted in the influx of immigrant businessmen, professionals,
bureaucrats, military and security forces loyal to the KMT regime, and reinforced by
American support in military and economic aid as well as diplomatic recognition and a
mutual defense treaty against the Chinese Communists.
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With a strong, cohesive, centralized quasi-Leninist party-state under martial law
and the Temporary Provisions, the Mainlanders exercised political power and
consolidated political hegemony over the Taiwanese. The Mainlanders established
political legitimacy based on an ideology of China nationalism, which was indoctrinated
through education, language, mass media, and cultural activities in the military, schools,
communities, and public enterprises. At the same time, the Mainlanders achieved
political cohesion by purging Mainlander factional leaders within the KMT government
and by revitalizing the KMT party along the Leninist lines, subjecting bureaucracy,
military, and security under party leadership.
The Mainlanders also held extensive economic power. They inherited enormous
public enterprise sector from colonial Japanese rule as well as considerable state and
private capital brought from mainland China, the Mainlanders controlled all sectors of
economy, including energy, trade, finance, manufacturing, transportation, and
communications. Until the mid-1 960s, Mainlander economic power was reinforced by the
American economic aid, most of which went to state enterprises. Mainlander economic
power was also strengthened by the fact that the Mainlander political elites who managed
Taiwan's economy showed favoritism in terms of credit allocation and other protection
measures to Mainlander-controlled state enterprises and Mainlander businessmen.
In contrast, Taiwanese economic and political power at this stage was very
feeble. The power base of Taiwanese elites, such as intellectuals and landlords, had been
greatly weakened by the brutal February 28 Incident and the compulsory land reform.
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Even most of the “Half Mountain” Taiwanese who had worked under the KMT in
Mainland China were purged due to their islandwide political networking. Only a few
“Half Mountain” Taiwanese who were trusted by the Chiangs reached high positions at
the central government. In the dualistic political system, which was characterized by
authoritarian party-state under martial law regime and local electoral democracy,
Taiwanese political power was confined to the local level, where it was tightly controlled
by the strong central government through legal, financial, and personnel mechanisms.
Although the Taiwanese share in local elective offices was very high, the weak
cohesion of the Taiwanese political community, exemplified by the proliferation of local
factionalism, further weakened Taiwanese political power. In particular, local non-KMT
Taiwanese politicians, without a nationwide coalition and a party base, lacked mutual
cooperation and organizational unity for the formation of an opposition movement. In
addition, under the repressive measures of martial law, the support for the overseas
Taiwan Independent Movement was reduced to underground activities and did not
attract a mass following in Taiwan.
Taiwanese economic power was as weak as their political power. In the
beginning, most of the Taiwanese were peasants. Despite the improvement of their living
standards after land reform, the income of Taiwanese peasants remained low compared
with other occupations. As for the landlords, with rent reduction and mandatory land
sale at less than market values as a result of the land reform, the landlords as a class was
no longer a pillar of Taiwanese economic power. Although a few landlords eventually
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139
prospered as industrialists based on the industrial stocks of the four privatized SOEs they
received in compensation for giving up their land, many sold the stocks and became small
family farmers. In the meantime, due to the economic legacy of colonial Japanese rule,
the Taiwanese did not have a strong capitalist class; most of the Taiwanese businessmen
ran small family enterprises. Although American aid fostered private businesses, only a
few Taiwanese business leaders who were trusted or had close connections with the state
benefited from the aid because it was allocated through the state apparatus which
generally showed favoritism to Mainlander private business.
Given political and economic hegemony of the Mainlanders who controlled the
state, how did Taiwanese increase their collective power and achieve democratic
transition? This hegemony was initially challenged by the growth of Taiwanese
economic power, especially the growth of SMEs, which were financially independent
from the government and later supported the Tangwai opposition movement.
The increase in Taiwanese economic power dependent on the emergence of
Taiwanese entrepreneurs occurred through several channels, in which the government
offered patronage such as the protection of domestic market. First, a few big landlords
became successful businessmen after they had received stocks from the privatized SOEs
as a payment from the government in the land reform. Second, using their political
connections with the Mainlander-controlled state, a few Taiwanese who were trusted by
the KMT government received favoritism and protection to establish and expand their
business in domestic markets. Third, some Taiwanese, as members of KMT local
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140
factions, were rewarded economic rents through patron-client networks. Finally, an even
smaller number of the Taiwanese, like Wang Yun-ching, were able to develop their
businesses through an agile response to the opportunity the government opened to all
businessmen due to American aid and the state priority of industrial development.
While some Taiwanese received more or less government favoritism, most
Taiwanese businessmen, without direct state assistance, prospered as the owners of the
SMEs after the government had shifted to export-oriented industrialization in the late
1950s. The rise of Taiwanese SMEs could be attributed to their entrepreneurship,
unreserved family support, informal financial network, the vase international market,
government policies of export promotion, the promotion of the private sector by the
American AID, and joint ventures and technology transfer from Japan.
Beginning in the 1960s the economic power of native Taiwanese rose rapidly,
while Mainlander economic power in both public enterprises and the private sector has
been in relative decline. The SOEs have declined in the proportion of industrial
production, falling to less than 20% of industrial production in the early 1970s. The
Mainlander private sector also lost its leading position; for example, by the 1970s there
were fewer Mainlander business groups relative to the Taiwanese in the top 10 and the
top 100 businesses. On the other hand, the SMEs, mostly owned by Taiwanese, were
relatively independent financially, and were dominated Taiwan's industry in terms of
export, employment, and industrial output. Although Mainlanders still controlled the
commanding heights in such sectors as banking, energy, utilities, raw materials, and
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141
transportation through the SOEs, it is clear that the Mainlanders had begun to lose their
economic dominance; on the contrary, the Taiwanese began to exercise increasing
economic influence on the Mainlander regime.
Furthermore, the Mainlander political hegemony was menaced by the decline of
their ideological power in the 1970s when the withdrawal of international recognition and
the unification proposal from the Communist China undermined the legitimacy of the
KMT based on one-China principle and the recovery of Mainland China. In particular,
the withdrawal of the recognition by the great powers, especially the United States,
triggered the legitimacy crisis of the KMT regime. The one-China claim and the recovery
of Mainland China that had served as the basis of the KMT legitimacy became a political
myth to the Taiwanese who were largely exclusive to the national-level politics. The
weakening of the KMT ideology made room for the rise of Taiwanese ideology, which
opposed KMT monopoly of political power in favor of Mainlanders and even linked
democracy to Taiwanese identity.
In order to establish a new basis for legitimacy and forestall the growth of
opposition supported by Taiwanese capital, the KMT launched political reform in two
aspects: Taiwanization program and holding national supplementary elections. The
Taiwanization program incorporated the Taiwanese into the upper ranks of the
government and the KMT. By opening a certain portion of parliamentary seats for
elections, national supplementary elections allowed the Taiwanese who were previously
confined to local electoral politics to enter into national electoral politics.
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The limited and incremental approach of the Taiwanization program and national
supplementary elections did not satisfy the political expectations of some Taiwanese. The
second result of the weakening of KMT legitimacy was the rise of the Taiwanese
Tangwai opposition. In terms of electoral strength, the Tangwai movement was not
outstanding, but the popular votes of the Tangwai in elections steadily increased on the
average. Reinforced by ideological dynamics, organization integration, and the strong
external support networks, the Tangwai multiplied its political power out of proportion
to its electoral strength. First of all, the Tangwai opposition challenged the Mainlander
regime not only because it was financially supported by the owners of the SMEs who
contributed greatly to the export-led economic growth in Taiwan, but also because it was
led by intellectuals and professionals who could undermine the KMT ideological power
through publications and mass rallies. The Tangwai launched successful ideological
attacks against the Mainlanders who gradually lost their ideological hegemony in the
1970s and faced a severe challenge from the Taiwanese ideology in the 1980s. Moreover,
the Taiwanese opposition also demonstrated organizational dynamics and integration.
The Tangwai leaders set aside their ideological differences and formed a nationwide
electoral coalition aimed at the establishment of a new party.
The political power of the Tangwai not only rested on domestic factors such as
their organizational unity and their support from the SMEs and the Presbyterian Church,
but also on the external factors such as legitimacy crisis of the Mainlander state resulting
from the withdrawal of international recognition and the unification proposal of
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Communist China and their external support from the United States Congress. In
particular, the support of the United States Congress was very important to the Tangwai
because Taiwan was heavily dependent on the United States in the economy and the
security, and the Congress linked Taiwan's democratic development to the Taiwan
Relations Acts, which was vital to the security of Taiwan.
Therefore, the shifting in the balance of ethnic power from the Mainlanders in
favor of the Taiwanese was conducive to the growth of democracy in Taiwan. In the
beginning the Mainlanders who dominated the state monopolized both political and
economic power, establishing authoritarian rule in Taiwan. By obtaining increasing
economic power since the 1960s and political power, especially in terms of Tangwai
opposition movement which gained ideological power and external support, since the
1970s, the Taiwanese were possible to promote democratization, and achieve a
democratic breakthrough in the late 1980s.
It may be argued that economic development, the KMT legitimacy crisis, the
dynamic of local and national elections, the United States' promotion export and the
private sector in aid policy and the United States' support of democracy in human rights
policy, rather than balance of ethnic power, played the dominant role in democratic
development in Taiwan.
It may be argue that the leadership of President Chiang Ching-kuo played a more
critical role in Taiwan’s democratic transition. It cannot be denied that President Chiang
contributed significantly in the decision about political liberalization. Beginning in 1972,
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when Chiang became Premier, he took the initiative in increase the appointment of the
Taiwanese to positions in the party, the ministries, and the provincial government. During
1986 Chiang again played a leading role in reform initiatives. He approved a dialogue
between the KMT officials and the leaders of Taiwanese opposition, and appointed a
twelve-man committee to study political reform measures, including suspension of
martial law and the legalization of the political opposition. When the Tangwai formed the
DDP, it was only Chiang, who was the most powerful strongman in the KMT regime,
could hold the KMT-hardliners in check, overruling the suppression advocated by the
KMT elites (Chou & Nathan 1987,284-7; Tien 1993, 105-6). That is the reason why the
KMT credits democratic transition to the leadership of Chiang Ching-Kuo. By contrast,
some argue that the strategy and the leadership of the opposition leaders deserve the
credit in the democratic breakthrough. During the process of dialogue with the KMT, the
leaders of the opposition reduced the risk of suppression by not criticizing Chiang Ching-
Kuo (You 1993, 30). The opposition leaders chose the eve of an election as the timing
for the establishment of the DDP in order to gain mass sympathy and support for
democracy if they should be suppressed and put into jail. This meant that the KMT
would pay a higher cost to suppress them (Yu 1999).
The problem of the above arguments is that they underestimate the impact of
structural constraints, particularly the balance of ethnic power and legitimacy crisis
resulting from the withdrawal of international diplomatic recognition and the threat of
unification with Communist China. In addition, the year of 1986 was also full of political
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145
ordeals for the KMT regime, which was plagued by corruption scandals and party
involvement in the political murder of Henry Liu, a journalist who had written a
biography critical of Chiang Ching-kuo. This series of unexpected events might have
affected the strategic choice of Chiang for political reform.
As mentioned previously, I agree that there is no single dominant factor in
explaining democratic development; instead, the historical complexity of democratization
is explained by a combination of factors. Thus, while not denying the importance of the
above-mentioned factors, I maintained that ethnic balance of power is also an important
factor in democratic development in Taiwan. Democratic development in Taiwan
resulted in part from the increase in Taiwanese economic and political power as well as
the decline in Mainlander political power mainly in terms of ideology. In turn, the
increase in Taiwanese economic power was mainly caused by economic growth and the
shift in development strategy from ISI to EOl. The increase in Taiwanese political power
largely in terms of the Tangwai democratic movement was greatly strengthened by the
KMT legitimacy crisis which was triggered by the withdrawal of international support for
Taiwan as the only legitimate government of the whole China, the dynamics of elections
which trained Taiwanese opposition in political skills, and the support of the United
States Congress which promoted democracy in international human rights policy.
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146
CHAPTER 6
THE HISTORICAL AND INSTITUTIONAL CONTEXT
OF ETHNIC POLITICS IN MALAYSIA
This chapter deals with the basic historical and institutional context for ethnic
politics in Malaysia since its independence. The first section concerns the birth of the
modem state of Malaysia, and the next section discusses its nature of political system
and fundamental political institutions. The third section illustrates the situation of ethnic
diversity in Malaysia. The last section traces the origins of ethnic politics in Malaysia
back to British and Japanese colonial era, with special attention on decolonialization
period.
The Formation of the Modern State
The modem state of Malaysia has its origins in the age of British colonial rule.
In 1786, the British, who had been preceded by the Portuguese and the Dutch, acquired
their first territory on the island of Penang in the Malay Peninsula (or Peninsula
Malaya). In 1826, Penang, Singapore, and Malacca (now known as Melaka), located on
the west coast of the peninsula, were formed into the Strait Settlements and became the
beachhead for the British expansion into the interior of the peninsula. In 1874, Perak
became the first Malay state under the British colonial rule. In 1896, the British
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147
established the Federated Malay States with the capital at Kuala Lumpur. In 1909, the
British expanded its control to incorporate other states—Kedah, Kelantan, Perlis and
Terengganu—into the Unfederate Malay States. By 1914 the British had ruled the
entire peninsula through three distinct institutional arrangements: the Strait Settlements,
the Federated Malay States and the Unfederated Malay States (Andaya & Andaya
1982).
Except for the Strait Settlements, which were ruled directly as a Crown Colony,
the colonial rule of the Malay states was indirect colonial rule through the residential
system, based on the treaties signed between 1874 and 1914. The status and security of
sultans, the traditional Malay rulers (or known as the Rulers), were confirmed and
reinforced by British protection and subsidies. In return, British Residents formally
acted as advisers. In reality, the political power ultimately resided with the Residents
who gained control of military, diplomatic, educational, financial and economic affairs;
only the issues of traditional customs and Islam were left to the sultans (Spruit 199S,
121).
After a short period of Japanese occupation during the Second World War, the
British united Sabah, Sarawak and Brunei, the Protectorates since 1888, into a Crown
Colony in 1946 and incorporated the Peninsula Malaya (except Singapore) into the
Federation of Malaya in 1948. Finally, Malaya achieved independence from the British
in 1957.
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The Federation of Malaysia was later inaugurated in 1963 by the union of
Peninsula Malaya (West Malaysia), the Borneo states of Sabah and Sarawak (East
Malaysia), and Singapore (which seceded from Malaysia in 1965). West Malaysia
consists of 11 states: Johor, Kedah, Kelantan, Melaka, Negeri Sembilan, Pahang,
Penang, Perak, Perlis, Selangor, and Terengganu.
The Political System: an Overview
The nature of political system in Malaysia combines both democratic and
authoritarian traits. That is the reason why some scholars label it as quasi-democracy
(Zakaria Haji Ahmad 1989), semi-democracy (Case 1993a; 1993b), or statist democracy
(Jesudason 1995).
The authoritarian orientation is evident in the federal-state relationship.
Constitutionally, Malaysia is under federalism; actually, it is in general under unitary
system because o f its high level of centralization. Each state has its own constitution,
head of state, and elected assembly, led by a chief minister and cabinet. However, an
increasingly strong central government dominates the states which received only limited
autonomy, and the allocation of power overwhelming favors the federal government
which reserves for itself most important power. Even if there is any inconsistency
between state and federal laws, federal law prevails. While the states have original
powers over land and natural resources such as mining, forestry, and agriculture, the
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149
states governments are bound to accept advice from the federal government, and,
furthermore, are heavily dependent on the federal government for almost all of their
funds (Milne & Mauzy 1986, 108-10; Zainah Anwar 1988, 106).
On the other hand, the institutions of the Federation of Malaya (or later known
as Federation of Malaysia) follow parliamentary democracy based on the British
Westminster model. The central government is headed by one of the sultans as a
constitutional monarch, who is elected for a five-year term on the basis of seniority by
the sultans of the states at a meeting of the Conference of Malay Rulers. As the head of
state, the king is largely symbolic in his role and normally acts on the advice of the
cabinet or a minister. The Parliament consists of two chambers: the elected House of
Representatives and largely appointed Senate (Ahmad Abraham & Jain 1992). In
contrast to the House of Representatives, the power of the Senate is mostly limited to
the delay of legislation. The elections for parliamentary (the federal) and for the state
governments are held at least every five years, and the party or coalition of parties
whose members are able to command a majority in the House of Representatives forms
the ruling government. The leader of the majority party or coalition of parties becomes
the prime minister who acts as the head of government. The prime minister in turn
appoints his cabinet ministers, consisting of members of the both houses of the
legislature.
With formal democratic institutions, the Malaysian political system
distinguishes itself from outright authoritarian regimes. Its democratic institutions are
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shown by the fact that the chief political leaders formally receive legitimacy through
regular elections, universal suffrage is available for citizens of all ethnic groups, secret
balloting and vote counting are conducted fairly on elections, and opposition parties can
participate legally in elections and in the elected legislature (Case 1993b, 77; Jesudason
1995, 337).
On the other hand, the traits of authoritarian rule can also be found in the
dominant party system. The party system can be divided into three blocs—the ruling
coalition, Malay opposition, non-Malay opposition. The ruling coalition in Malaysia, in
fact, is a coalition of component parties, known as Alliance before 1974 and Barison
National (BN or National Front) since then. The main members of political parties in
the ruling coalition are United Malay National Organization (UMNO), the Malaysian
Chinese Association (MCA), the Malayan Indian Congress, and the Gerakan. The main
opposition parties are Democratic Action Party and Pan-Malaysian Islamic Party. The
ruling coalition of parties has won all federal elections and thus consistently maintained
control over the government since independence. Except for 1969, a two-third majority
was secured in the parliament and this majority enables the ruling coalition to amend the
constitution at will (Gomez 1998, 262). The ruling regime amended the Constitution
average once a year until 1987, with the pace rapidly intensifying since then (Means
1991, 294). Consequently, authoritarian controls have generally been strengthened
through frequent constitutional amendments. The most far-reaching authoritarian
controls are provided in Article 150 of the Constitution which deals with the declaration
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of a state of emergency and Article 149 of the Constitution which enacted the Internal
Security Acts (ISA) of 1960. In practice, the Constitution has become an instrument of
rule rather than the check on the government power (Jesudason 1995, 338).
Since the prime minister is also the president of UMNO, the ruling coalition of
parties is led by UMNO (Gomez 1998, 228). As the dominant party in the coalition,
thus, UMNO decides seat distribution and approves the nomination of all candidates.
The seat allocation is to prevent the candidates of component parties within the coalition
to compete against each other and to send the most promising candidates for suitable
constituencies. In the constituencies where the Malays are majority, the candidates
would be from UMNO; in constituencies where the Chinese is majority, the candidates
would be from the Gerakan or the MCA. All parties in the coalition attempt to hold
more seats, which is one of the ways to strengthen their position (Lee & Ong 1987,
129). To acquire more Malays majority seats, the ruling coalition redraw constituencies
through constitution amendments always in favor of Malays, which will be explored in
the next chapter.
Since Alliance or subsequent National Front is a coalition party, votes are
exchanged among component parties. In Malay majority constituencies, the supporters
of a Chinese party votes for Malay candidates of the friendly party in the coalition; and
vice versa in Chinese majority constituencies. Under the system of inter-ethnic vote
exchange, Chinese candidates received more Malay votes from UMNO supporters than
UMNO supporters received from Chinese supporters (Horowitz 1989, 26, 28).
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The ruling coalition in Malaysia is one of the characteristics of
consociationalism or consociational democracy, as mentioned in the early chapter,
which is also featured by proportionality, mutual veto, and ethnic autonomy (Lijphart
1977). However, the Lijphart model of consociationalism did not totally fit into the
Malaysian politics. Lijphart (1977, 153) holds that Malaysia was consociational
democracy before 1969 and doubts that “Malaysia after 1971 can be regarded as either
fully democratic or fully consociational,1 ’ even if parliamentary democracy was restored
in 1971 after the short authoritarian interim between 1969 and 1971. While Lijphart
viewed Malaysia as consociational democracy for the period between 1959 and 1969,
some scholars even refute the existence of ideal-type consociationalism in Malaysia
after independence. According to Milne and Mauzy (1999, 17-8), proportionality was
never a feature of consociationalism in Malaysia because of special rights and political
supremacy of the Malays. The Malays insisted on the official position of Islam, Malay
as the national language, and special treatments in favor of the Malays in scholarship,
economic aid, and bureaucratic recruitment. The most significant breach of
proportionality concerned the highest level of government: the prime minister and
deputy prime minister must be the Malays. Moreover, Chee (1991a, 64-66) indicated
that the principle mutual veto has not been put into practice and the autonomy of the
non-Malay has not been materialized. Thus, it is debatable whether consociationalism
has been existed in Malaysia, especially for the period after 1969.
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Ethnic Pluralism in Malaysian Society
Since the nineteenth century, the influx of Chinese and Indian immigrants has
resulted in a typical multiethnic society, which manifested itself in divisions in
languages, religions, and institutions. The important ethnic groups are the Malays, the
Chinese, and the Indians (including people from Pakistan, Bangladesh and Sri Lanka).
In addition, Ibans in Sarawak and Kadazans in Sabah are also significant ethnic groups
in East Malaysia (Abdulah Taib & YusofF Ismail 1982). The Malays constitute the
largest ethnic group, but they have not formed a distinct majority of the population; the
non-Malays, consisting of the Chinese and the Indian, make up nearly half of the
population, and are predominately the Chinese. In 1957, for instance, the Malays, the
Chinese, and the Indians constituted 49.8%, 37.2% and 11.1% respectively of total
population of West Malaysia. In 1980, the Malay increased their share of population to
55.3%, while the Chinese decreased to 33.8% and the Indian to 10.2% (Leete 1996, 18).
Ethnic pluralism is also evident in the realms of religions and, to lesser extent,
languages. The national language is Malay, which is the medium o f instruction in
education; however, English could be used as an alternative official language until 1967,
and it is now widely used and taught as a second language and as a common language of
elites. Although nearly all younger generations of ethnic groups speak Malay, the non-
Malays speak their mother tongues as well. Among the Indians, Tamil is the most
common (Andaya & Andaya 1982, 4). The Chinese can generally speak Mandarin (the
standard language of the Chinese) and several South China dialects, of which most
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154
common are the Hokkien; and the Chinese-educated Chinese can communicate one
another through common written Chinese language.
The Malays are virtually all Muslims, who regard Islam as the core element of
Malay culture and identity. In contrast, non-Malay identity is not defined in terms of
religion (Majstorovic 1993, 165). Most of the Indians are Hindus; some of them are
Sikhs, Muslims, Buddhists and Christians. With a small portion of Christian, the
Chinese are mainly Buddhists and Chinese folk-religionists, following some mixture of
ancestors worship, Taoism, and Buddhism. Finally, the other indigenous peoples are
mainly Animists, with some Christians and Muslims.
In addition, ethnic diversity is manifest in residential pattern and institutions.
Each ethnic group established its own cultural associations. The Chinese, for example,
reproduced their Chinese cultures and set up temples, private schools, trade guilds,
secret societies, clan organizations, native associations, and dialect associations. There
are also separate labor unions and chambers of commerce for each ethnic group (Milne
1981,42).
The majority of the Malays are located in rural areas. On the whole the Malays
populate the rice areas of the East and the North regions, and in Johore and Negri
Sembilan (Nash 1989, 29). The Chinese, primarily living on the west coast of the
peninsula, are the majority in some cities, such as Kuala Lumpur, Ipoh, Taiping,
Seremban and Penang (Bedlington 1987, 36). On the east coast of the peninsula and the
Borneo states, the Chinese are also more concentrated in the urban areas. In the towns,
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the Chinese usually live in distinct residential districts. As for the Indians, they
generally reside in cities and on plantations in West Malaysia. Between 1970 and 1980
the proportion of Malays in urban areas increased from 15% to 25% while the
proportion of urban Chinese rose from 48% to 56% (Hirschman 1984, 88).
The Origins of Ethnic Politics in Malaysia
Ethnic politics in Malaysia was shaped by the colonial policies of the British and
the Japanese rule. The ethnic divisions of labor, the main colonial policy of the British
colonial era, favored the ethnic pluralism and segregation as well as the structure of
power among ethnic groups. The Japanese occupation government nurtured Malay
nationalism, cooperated with the Malays and treated the Chinese with hostility, leading
to the deterioration of ethnic relations between the Malays and the Chinese. In the
decolonialization period under British rule, the British wanted to reward the Chinese for
fighting against the Japanese by offering them equal political status in the Malay Union
of 1946. Due to a Malay mass movement against the Malayan Union, however, the
ethnic balance of power shifted from the Chinese in favor of the Malays in the
Federation of Malaya, which institutionalized Malay political dominance.
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Ethnic Division of Labor
As noted above, ethnic politics of Malaysia finds its origins in the British
colonial era. Under the resident system, British protected the special position of Malays,
not interfering with their traditional social structure and way of life. Malay rulers were
in agreement with the British authorities between 1913 and 1941 that the Malay
peasantry was protected from economic competition through the measures in the Malay
Land Reservation, designating large areas of land as Malay reservation where only
Malays could own or lease land, and rice growing being set aside exclusively for the
Malays (Means 1986, 97). Malay peasants were discouraging from growing rubber on
their farm or from entering capitalist economy. To develop economic resources such as
tin and rubber, the British demanded labors to which the Malays did not response. Given
the labor shortage, the British encouraged Chinese and Indian to immigrate as the
laborers. As a result, each ethnic group generally engaged in different economic
activities, developing an ethnic division of labor.
Furthermore, since the Malay rulers wanted to maintain the feudal Malay
society, the colonial government provided only modest education opportunity of the
Malays whose rural schooling were limited to the primary level (Hirschman 1984, 92-
3). In the colonial period the education attainment of the Malays was lower than that of
non-Malays. While the Malays, mostly resided in the rural area, generally received
education at the primary level, the non-Malays, with their relatively higher urban
population, could access to English-Language secondary education that only existed in
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157
the urban area (Hirschman 1984, 121). Thus, the economic position of the Malays as a
whole was inferior to the non-Malays.
Most of the poorly educated Malays remained in the agricultural sector, where
they were largely engaged in small-scale rice growing. With regard to the urban Malays
who were illiterate, they held unskilled and low paid job in the police department,
military service and in factories (Abdulah Taib & YusofFIsmail 1982, 107).
As to the non-Malays, many Indians became shopkeepers, businessmen, civil
servants or professionals, and many also worked in railway and rubber plantation
(Abdulah Taib & YusofF Ismail 1982). The Chinese engaged mainly in the modern
sector of economy, and acted as middleman between large-scale European companies
and Malay peasant society. In the beginning, most of the Chinese worked in tin mining
as contracted labors. Then many Chinese made their way up the ladder of economic
mobility without the opposition of the British, who realized that Chinese roles in
shopkeepers, merchants, and artisans were beneficial to the economic development of
the peninsula (Lim 1984, 52). Some of the Chinese served as skilled labors, clerks and
managers in technical and professional jobs, and many of them worked as coolies,
miners and servants, while some Chinese developed their businesses from tin mining,
foundries, sawmills, brick works and commercial agriculture and spread into
construction, money lending, retail and wholesale trade, and small-scale manufacturing
(Esman 1987, 402; Lim 1984, 51).
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Despite their inferior economic role, the Malays achieved a distinct political
status, characterized by the concentration of a small number of Malay elites in higher
posts in civil services. From the beginning the British regarded the Malays as the
indigenous people of the peninsula and the legitimate owners of the country, while the
non-Malays were viewed as temporary guests (Nash 1989, 24). On the other hand, the
British concerned themselves about the effectiveness of colonial rule and the political
tactic of divide and rule, and also responded the concern of the Malay rulers about the
loss of power under residential system. Thus, the British who filled the Malay Civil
Service started to nurture English-educated civil servants from the Malay aristocracy to
be their junior partners in the colonial administration by establishing a Malay College in
1905 and a separate Malay Administrative Service (MAS) in 1910 as a junior service to
MCS. While the British monopolized the top levels and the Malays the middle levels of
political sensitive posts, the non-Malays were prohibited from serving in MAS and
recruited for technical and professional services (Means 1986, 97). While the Chinese
were prevented from entering MAS in Federated Malay States, they could only join the
civil service in the Strait Settlements (Case 1995, 87). Moreover, English-educated
Malays were also recruited to the officer corps of the police and the armed forces, and
dominated top positions. Therefore, it was Malays who received enough training in the
civil service, the police, and the armed forces to be able to take over control of the state
apparatus when independence was gained in 1957.
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159
In sum, under the British rule, the non-Malays, especially the Chinese,
dominated local economy, while the Malays control politics. The Chinese and, to a
lesser extent, the Indians tended to dominate commercial and professional activities and
urban labor; the Malays tended to control small-scale agriculture and higher
administrative posts in civil services. By 1957, for instance, 97.5% of rice farmers were
Malays; 66% of those in commerce and 72% of those in mining and manufacturing were
Chinese (Brown 1994, 218).
The Japanese Occupation Period
The Japanese occupied the peninsula between 1941 and 1945 (known as the
Occupation). The main effect of the Occupation was the deterioration of the ethnic
relations between the Malays and the Chinese largely due to their differential treatment
by the Japanese. Treated with hostility and brutality, thousands of Chinese were
conscripted for labor, and about five thousand Chinese were tortured and executed by
the Japanese (Esman 1994,51-2). In response, the Chinese became the dominant source
of resistance to the Occupation by supporting the underground Malayan Communist
Party (MCP), which organized the Malayan Peoples' Anti-Japanese Army (MPAJA).
The MPAJA was led and supported by almost entirely leftist-oriented Chinese who
received weapons, military training and financial assistance from the British (Lee 1981,
225).
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In contrast, the Japanese attitude toward the Malays was lenient, for they mostly
cooperated with the Japanese. For the cooperation, the Japanese entrusted the former
Malay bureaucrats with taking over the administrative responsibilities previously held
by the British (Lee 1981, 225-6). On the other hand, the Japanese nurtured Malay
nationalism as a means of rallying the support of the mass for the Occupation; for
examples, they encouraged certain nationalist organizations, notably the Young Malay
Union, and fostered political awareness and involvement by mass demonstrations,
slogan competitions and lecturing contests (Bowie 1991,47).
The different treatment of the Chinese and the Malays by the Japanese led to the
bitterness of the Chinese against the Malays who received far better treatment. Tension
between the Malays and the Chinese reached the climax in the interim between the
surrender of the Japanese and the reoccupation of the British. At that time, the MPAJA
took reprisals against those they termed collaborators, especially Malay policemen.
Those reprisals erupted into violence as a sequence of counter reprisals occurred in
several states (Bedlington 1978, 65).
That ethnic conflict underlined the long-term deterioration of relations between
the Malays and the Chinese dating from the late 1920s, when the Chinese had begun to
identify openly with nationalism in China. During the Second World War, external
factors exacerbated the ethnic conflict. The Sino-Chinese war in China united Chinese
supporters of both the Kuomintang and the Chinese Communist party in Malaya through
Chinese nationalism. In addition, Pan-Malay nationalism with the Islamic influence
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from Indonesia was also conducive to the ethnic conflict between the Malays and the
Chinese (Andaya 1991, 629).
Ethnic Politics in Decolonialization Process
The British initially favored equal power distribution among ethnic groups in the
constitutional proposal, known as the Malayan Union of 1946. Due to a Malay protest
movement and Malay nationalism, the British made concessions to the Malays in a
constitutional revision, known as the Federation of Malaya of 1948. The strongest
Chinese reaction against the Federation of Malaya was the insurrection of Malay
Communist Party, known as Emergency, which began in 1948 and formally ended
in 1960. In the meantime, Chinese negotiated with the Malays in the Communities
Liaison Committee and formed an electoral alliance with Malays, leading to an ethnic
compromise, known as the Bargain of 1955, which was incorporated in the Constitution
of 1956. The Constitution institutionalized Malay political dominance, with concessions
in non-Malay citizenship and freedom of economic activities.
The Malayan Union. After the War, the British in 1 946 proposed to introduce a
new structure of government, known as the Malayan Union, which would incorporate
the Federate Malay States, the Unfederated Malay States, the Strait Settlements
(excluding Singapore) as a centralized colonial regime. The new arrangement was
associated with constitutional changes viewed by the British as an essential step toward
the granting of independence to a united Malaya. Owing to Chinese wartime resistance
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against the Japanese and Malay wartime collaboration with the Japanese, this proposal
ended the official favoritism given to Malays and put the Chinese on equal political
status (Case 1996b, 118). The most important provisions included (1) the abolition of
the sultan system—the sultans would retain their position, but sovereignty would be
transferred to the British Crown, and (2) the special position of the Malays would be
cancelled—the liberalized citizenship extended to the non-Malays, thus giving them
equal access to political rights; for example, equal admission to the administrative civil
service (Andaya & Andaya 1982, 255).
The Malayan Union provided the impetus for Malay nationalism and provoked
massive movement from the Malays. The movement against the Union brought together
the Malays of all states and social classes under the leadership of English-educated
aristocratic elites, who believed that the Malays must be politically united and organized
in order to safeguard their legitimate ethnic interests against the challenges by the non-
Malays. Out of the movement the United Malay National Organization (UMNO) was
formed with Dato Onn bin Jaafar as the leader to oppose the Union (Ongkili 1985,67).
Their fear was that the immigrant non-Malays, equal in population but more advanced
economically, would soon dominate politically as well (Esman 1994, 53). UMNO
therefore objected to the surrender of sovereignty, the demolition of the sultans, the
removal of the real legislative power from the states, and the equal status of the Malays
with non-Malay immigrants. Basically, they made two demands that the sultan system
be retained under a constitutional monarchy and that there be specific reference to
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163
special position of the Malay in the constitution. In the face of continued unanimous
Malay opposition, increasing ethnic violence, non-Malay communist-led labor union
strife, and majority of non-Malay indifference for the Union, the British yielded their
position and changed their policy. The Malay Union was revoked and the constitution
was renegotiated between the British and the Malays without the representation of the
non-Malays (Milne & Mauzy 1986, 23). The decisive victory of UMNO transformed it
into Malaya's largest political party and secured the political dominance of the Malays
after independence.
The Federation of Malava. In 1948, the Federation of Malaya came into
existence. It was a federation of the same states as those in the Union, but many
functions of the sultans were restored and some autonomy for the states were retained.
More importantly, the Malay special position was ensured—the adoption of Malay as
the national language, and the preferential treatment of Malays in recruitment for public
services, in reservation of land, and in granting educational scholarship and commercial
licenses (Ongkili 1985, 68). Furthermore, citizenship was made more restrictive—
requiring residence of at least fifteen years and a certain competence in Malay or
English (Kaur 1993,11). As a result of the restricted citizenship, compared with
76.33% of the Malays, there were only 15.26% of the Chinese in the total number of
Federation citizens in 1950 (Comber 1983, 34). The significance of the new
constitutional arrangement is that it became the basis for Malayan independence in 1957
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and prevailed until 1963 when Malaysia was established (Jomo 1989a, 215). In addition,
it incited discontent Chinese who felt betrayed by the British to turn to the MCP.
The Emergency. Almost immediately after the inauguration of the Federation,
there was an armed insurrection, known as the “Emergency,” which reached its peak in
1950 and remained a serious security threat to the colonial regime until the middle of
1950s (the formal state of emergency was not ended until 1960). In response to the
Federation of Malaya and encouraged by the impending victory of communist
revolution in China, the MCP resorted to armed insurrection in 1948. To most Malays,
the outbreak of insurgent communism was seen not only as an assault on British
colonialism, but also as an attack on the homeland of the Malays and an attempt to
transform Malaya into the province of China (Bedlington 1978, 76). During the first two
years, it was estimated that the number of the guerillas increased from 3,000 to over
8,000, while the police force, mostly recruited from the Malays, grew from more than
10,000 to 30,000 (Stubb 1997, 56. 58).
After lack of success in military approach, the British decided to stress the
political approach for the Emergency (Stubbs 1997). Under the Briggs plan, the British
responded with a policy, which proved highly successful. About half a million squatters
(85% of whom were Chinese) were resettled into camps closed off from the surrounding
area without free movement, isolating the MCP from its civilian support. On the other
hand, seeking to address the grievances of the Chinese and assisting the task of alluring
them away from communism, the British promoted the establishment of Malayan
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165
Chinese Association (later known as Malaysian Chinese Association, MCA) in 1949 as
a social welfare agency for the Chinese community (Kaur 1993, 93). The MCA soon
accepted the role of representing Chinese interests to the colonial administration, and
had become a political party by 1952. The MCP, consequently, lost appeal among many
Chinese and its threat was dissipated when the British announced plan to grant
independence to the peninsula (Andaya 1991, 630).
Although the Emergency delayed Malayan independence, once the insurgents
were mostly contained in the mid-1950s, British blueprint for granting independence
was accelerated. Despite the British intention to grant eventual independence, the
British policy was to adequately protect all ethnic groups and to encourage them to
cooperate politically and live in racial harmony, for the British believed that an
exclusively Malay government probably could not guarantee political stability in the
future (Crouch 1996a, 17).
Communities Liaison Committee. In response to the deteriorating Sino-Malay
relations, as early as January 1949, a Communities Liaison Committee (CLC) had been
established, consisting of the leaders of the ethnic groups and a British official (Bowie
1991, 57). Operating until 1951, the CLC became a closed-door forum of ethnic groups
for unofficial discussion of sensitive ethnic issues. The recommendation of the CLC
represented inter-ethnic political compromise and most were incorporated into
legislative proposals (Chee 1991a, 57). Certainly, the CLC set a precedent for multi
ethnic negotiation which later influenced the inauguration of the Alliance. Moreover, the
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166
CLC took an initiative in urging the British to introduced party politics in the peninsula
(Ongkili 1985, 84).
The Alliance. In the Kuala Lumpur municipal elections of 1952, the Selanger
branches of UMNO and the MCA contested the elections as an ad hoc alliance against a
Malay-led multiethnic party, Independence of Malaya Party (IMP). The UMNO
instructed its followers to vote for MCA candidates, while the MCA financed UMNO
campaign. As a team they achieved a conclusive electoral victory against the IMP by
winning nine of the 12 seats (Comber 1983, 45). In the subsequent municipal elections,
the national leaders of the UMNO and the MCA had a similar temporary alliance, and
the arrangement proved equally successful. In the course of 1952 and 1953, the Alliance
won 94 out of 124 seats in municipal elections (Ongkili 1985, 94). Their electoral
success encouraged the UMNO and the MCA to establish permanent national alliance.
One year later, the Malayan Indian Congress (MIC) was incorporated into the Alliance.
Consequently, the Alliance consisted of three parties that represented the interests of
major ethnic groups in Malaya.
Although the three parties still remained independent of each other
organizationally, UMNO was the leading partner in the Alliance since it carried more
electoral weight than that of the non-Malay parties. The MIC was the weakest of the
three parties in the Alliance, because it received little support from it own Indian
community, which had a very small electorate (Andaya & Andaya 1982,268). In 1955,
due to restricted citizenship, the ethnic composition of registered voters had been
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167
estimated as 84% Malays, 11% Chinese, and 5% Indians (Comber 1983, 46). The
Alliance participated in the first nationwide legislative council election in 19SS, and
they won 51 of 52 seats contested (Zakaria Haji Ahmad 1989, 354). The federation
election demonstrated the political strength of the Alliance with UMNO supremacy in
the peninsula. The British finally recognized that it represented the best form of ethnic
cooperation available, and began to transfer power to the Alliance in preparation for
granting independence.
The Bargain and the Constitution. To prepare for independence, the Alliance
leaders in 1955 met to discuss in private and work out a memorandum known as the
“Bargain” (Milne & Mauzy, 1986). In essence, the Bargain provided for Malay political
domination in return for a free market system, which would allow the maintenance of
Chinese economic power. Briefly, it also included expanded citizenship for non-
Malays, Malay as the country's official language, Islam as the official religion as well as
special privileges to Malays in land acquisition, educational assistance, and civil service
employment.
Most of the proposals in the Bargain were incorporated into the M erdeka
(literally, freedom) Constitution, which was drafted after prolonged negotiation in 1956.
The Constitution was viewed as a social contract between ethnic groups. In essence,
non-Malay immigrants were made citizens by the new constitution, but in turn they
accepted Malay dominance with special rights and positions, which were written into
the Constitution. Overall, the Constitution favored the Malays. This was because the
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168
Malays united under the banner of nationalism and because the British were aware of
their obligation to protect the interests of the Malays that considered themselves as
indigenous community. More importantly, the Malays had proved more politically
reliable than the Chinese during the communist insurrection.
Under the Constitution, the Malays agreed to made some concession to the non-
Malays in return for the maintenance of Malay privileges and political supremacy.
Non-Malay cultures would be respected and their mother tongues could be used in
private, while the symbols of Malay culture, namely language and religion, would be
exalted. As the national language, the Malay language must be used for official
purposes, but it would not become the sole official language until 1967, because English
would also be used as an official language in parliament, the state legislatures and courts
of law for a period of at least 10 years (Majstorovic 1993, 167). Islam would become the
state religion, although the people were allowed the right to practice their own religion.
More importantly, provisions concerning citizenship and the special treatment
of the Malays were the pillars of ethnic accommodation. There would be a single
nationality in which all people in the peninsula could qualify as equal citizens either by
birth or by fulfilling certain requirements, such as language, loyalty and residence. The
non-Malay citizenship would be granted automatically for those bom after 19S7, the
year of independence, but the requirement of five-year continuous residential status and
language proficiency in elementary Malay for those adults bom before 1957 (Tan 1987,
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169
249-50). The special rights for the Malays were covered under Articles 153 in four
aspects (Comber 1983, 48):
> the reservation of land,
> the quotas for business permits or licenses,
> preference in scholarship or educational grants,
> a four-to-one ratio of the Malays to the non-Malays in the civil service.
To ensure the amendment of the Constitution would not erode or cancel Malay
special position, the Malays were given a unique constitutional status. Any amendment
of Article 153 requires the approval of the Conference of Rulers. As a result, Malay
special rights as defined in Article 1S3 are more difficult to amend than the Constitution
itself (Means 1986, 102).
However, some part of the Bargain were only generally understood and not
explicitly stated in the Constitution. There were several ambiguous examples: the
dominance of non-Malay business, the duration of the Malay special rights, and
language as medium of instruction in schools (Milne 1981, 46).
In sum, the power struggle between the Malays and the non-Malays took the
forms of constitutional changes, insurrection, negotiation, and electoral competition.
Except for insurrection, these forms of power struggle became the pattern of ethnic
politics after independence in Malaysia.
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Concluding Remarks
The changing balance of ethnic power between the Malays and the Chinese after
independence originated from the colonial structure of ethnic collective power, which
embodied both the ethnic divisions of labor and the constitutional framework of the
Federation of Malays. In the period of the Japanese occupation, the political power of
the Malays was reinforced in terms of bureaucracy and ideology because the Japanese
authorities cooperated with the Malays by nurturing Malay bureaucracy and Malay
nationalism. The Chinese failed to challenge the Malay political position that supported
by the British through the communist insurgency in the period of Emergency. As a
result, the structure of ethnic power favoring the Malays in the politics and the Chinese
in the economy until independence foreshadowed the dynamics of ethnic politics during
the several decades of Malay rule.
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171
CHAPTER 7
ETHNIC POLITICAL POWER AND ETHNIC COHESION IN MALAYSIA
This chapter first introduces the context of ethnic political power through
historic milestones of domestic politics. Then it explores the ethnic cohesion of both
Malays and Chinese in terms of interparty and intraparty divisions. The third section
examines the balance of ethnic political power between the Malays and the Chinese in
terms of ideological and bureaucratic/institutional power after independence. Finally,
ethnic political power will be assessed in the conclusion.
Politics Since Independence
At the year of independence in 1957, Tunku Abdul Rahman, as the party
chairman of the ruling coalition—the Alliance, became the first Prime Minister (1957-
1971). He won the confidence and cooperation of the non-Malays because he
understood and was sensitive to the non-Malay interests (Esman 1972,36). Inter-ethnic
compromise and cooperation was characterized by striking a balance between the
protection of Malay special rights and the improvement of Malay economic prospects
on the one hand and the provision of non-Malay citizenship and the protection of non-
Malay economic position on the other (Jomo et al. 1996, 69). Malay and non-Malay
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party leaders cooperated closely in the Alliance government, and facilitated their
political settlements through compromise.
The merger of Singapore into the federation o f Malaysia in 1963 had a
significant impact on the delicate ethnic balance. After merging with Singapore, the
Chinese became the largest single ethnic group, although it was partly balanced by the
inclusion of the indigenous people from Sabah and Sarawak (Crouch 1996a, 22). The
Chinese, led by the People Action's Party (PAP) of Singapore, challenged the political
supremacy of Malays and threatened inter-ethnic political cooperation.
To prevent ethnic balance from shifting to the Chinese, the federal government
sought to confine Singapore's political influence to the local level. Singapore, however,
attempted to expand its influence nationwide and to compete aggressively in federal
politics. As a consequence, when the PAP participated in the 1964 federal elections,
relations between Kuala Lumpur and Singapore began to deteriorate. The PAP tried to
demonstrate the inefficiency and corruption of the Malaysian Chinese Association
(MCA) in order to replace the MCA in the Alliance. The aspiration of the PAP failed
when UMNO supported the MCA ‘s continued participation in the Alliance (Milne &
Mauzy 1980, 69).
In spite of this failure, the forceful, articulate, and well-organized PAP had a
strong impact on Malaysian ethnic politics. The PAP and its party leader Lee Kuan Yew
incited ethnic sentiment by taking controversial issues directly to the public in a
confrontational style. Furthermore, the PAP inaugurated a new coalition of opposition
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173
parties and called for “a Malaysian Malaysia," which espoused a principle of ethnic
equality and refuted Malay special claim to political predominance (Case 1996a, 104).
From the viewpoint of the Malays, the principle threatened the terms of the Bargain. In
consequence, the PAP's action further polarized ethnic divisions between the Malays
and the Chinese. Prime Minister Tunku Rahman became convinced that Singapore had
to be expelled from the federation in order to avoid widespread ethnic conflicts and
escalating political challenge from the Chinese. After the regime announced the
separation of Singapore from Malaysia in 196S, the dynamic of the Chinese political
threats soon faded (Milne & Mauzy 1986, 38). The separation was therefore viewed as
a strategy to restore ethnic balance in favor of Malays.
The most significant political milestone was the 1969 ethnic riot and the
suspension of democracy from 1969 to 1971. After Singapore's expulsion from the
federation in 1965, ethnic tensions between the Chinese and the Malays escalated
because the Chinese who were frustrated by the separation of Singapore demonstrated
their ethnic sentiment and political expectation against the Malay-controlled
government. In this atmosphere of ethnic tensions, the 1969 elections were closely
contested. Although the Alliance continued to be the ruling party by winning a narrow
majority, the Chinese opposition party—Democratic Action Party (DAP) viewed its
relative gain as an electoral victory and held an emotional parade in Kuala Lumpur. The
outcome was ethnic riots between the Malays and the Chinese, leading to hundreds of
deaths and thousands of injuries (Mauzy 1993, 109-10). In response to the riots the
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174
government immediately declared a national state of emergency, disbanded democratic
institutions, and established authoritarian rule. Under emergency provisions, the
government suspended the parliament. Effective power was transferred from Prime
Minister Tunku Rahman to Deputy Minister Tun Razak who led the National
Operations Council, the highest governing agency to exercise the extraordinary power
(Crouch 1996a, 24). In 1970 Prime Minister Tunku Rahman who had lost political
power in 1969 formally resigned and was succeed by Tun Razak. The Malay-controlled
government received major concessions from the non-Malays in return for restoring
parliamentary rule. Ethnic groups reached agreements on the principles of New
Economic Policy, which will be examined in the next chapter, and on the amendments
to the Constitution. By the time that the normalcy returned in 1971 when the Parliament
was reconvened, the state apparatus increased its power by constitutional changes and
new institutional arrangements, which further shifted political balance in favor of the
Malays.
The consolidation of Malay political dominance was achieved mainly through
the enlargement of the ruling coalition and constitutional amendments in 1971 that
severely restricted the freedom of political debate. These amendments prohibited any
act, speech, or publication on the issues that would incite ethnic animosity, including
Malay special rights, non-Malay citizenship rights, the position of Islam as the religion
of the state, and the status of Malay as the sole national language (Lee & Heng 2000,
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175
208). This was the main example of how Malay political power affects democratic
setback beginning in the 1970s.
In 1974 the ruling coalition, renamed it the Barisan N asional (BN, National
Front), was enlarged from three to 14 by co-opting the former opposition parties,
namely the Gerakan, the People's Progressive Party, the Sarawak United People's Party,
and the Partai Islam se-Malaysia (PAS). Although UMNO-controlled government still
adopted a grand coalition strategy, there were substantial differences between the
Alliance and the BN. The most important difference was that by co-opting most of the
opposition parties to form the coalition, UMNO established political hegemony at the
expense of the increasing marginalization of the MCA (Gomez 1994, 34).
In 1976 Tun Razak died unexpectedly and was succeeded by Datuk Hussien
Onn. In 1981 Hussein Onn resigned because of his health, and Dr. Mahathir Mohamad
succeeded him. Since Mathathir became prime minister, he has strengthened the power
of the executive, especially the Office of the Prime Minister (Ho 1992, 227). Compared
with Tun Razar and Hussein Onn who exercised political power less forcefully, Prime
Minister Mahathir, who was also the Minister of Justice and the Minister of Home
Affairs, has repressed political dissent through the amendments of the Constitution, the
control of media, and the curtailment of judicial independence (Hari Singh 1995, 197-8;
Zakaria Haji Ahmad 1994, 154). The Mahathir regime, with a two-thirds majority in
parliament, has the unimpeded power to amend the Constitution, which was amended on
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average once a year until 1987, with the pace rapidly intensifying since then (Means
1991,294).
An example of constitutional amendments was the Printing Press and
Publications Acts. The Act was amended in 1987 that the minister of home affairs had
absolute discretion, which could not be challenged in court, to ban or restrict
publications prejudicial to security, morality, public opinion, and public interests
(Crouch 1996a, 85). One example of political repression under the Mahathir regime
was the event “Operation Lalang” in October 1987, almost comparable to ethnic riot in
May 1969. In that event, Mahathir ordered the arrest of over 100 people under the
Internal Security Act. Justified as a pre-emptive measure to forestall inter-ethnic
violence, the police arrested leading opposition politicians, MCA and Gerakan
politicians, Chinese educators, and social activists. Mahathir attributed major ethnic
tensions to the leading opposition party, the DAP. Following the crackdown, the
coercive laws were tightened, public rallies and three newspapers were banned, and the
Lord President of Supreme Court and six other judges were suspended (Jomo 1988,57).
Ethnic Cohesion
This section will examine the reasons the Chinese were less ethnically cohesive
than the Malays. The first part will explore how the sub-ethnic groups of Chinese and,
more importantly, language and education affected the Chinese political cohesion in
terms of both interparty and intraparty conflicts. The second part will explain why
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UMNO gained support from the majority of Malays and then examine how and why
intraparty rivalries occurred within UMNO after 1970.
Compared with the Malays, the Chinese were more politically fragmented,
especially before 1970. There were more political parties among the Chinese than in the
Malay community, and the Chinese opposition to the ruling coalition was stronger than
the Malay counterpart. While the lack of cohesion within Malays was evident mainly in
the internal power struggle of UMNO, especially in the late 1980s, the fragmentation of
the Chinese was manifest in both the interparty and intraparty rivalries. With three
contending Chinese parties, the electoral support of the Chinese was more fragmentary
than that of the Malays, who generally supported UMNO.
Ethnic Chinese divisions were partly related to the issue of language and
education. Despite understanding the common written Chinese language, the Chinese in
Malaysia speak several mutually incomprehensible dialects, which were conducive to
weak cohesion until the early independent years. The Chinese, most of them
immigrating from two coastal provinces of South China—Fujian and Guangdong, can
be divided into several main sub-ethnic dialect groups. As the largest dialect group, the
Hokkiens share about one-third of the Chinese population in Malaysia; followed by the
Hakkas, Cantonese, Teochew, Hainanese, and other minorities (Tan 1982,39-40). Each
sub-ethnic group, in turn, can be divided into several clan groups; the Hokkiens consist
of seven subgroups, the Cantonese claim six, and the Hakkas three (Siow 1983, 171).
They tended to show loyalty to the leaders of their dialect subgroups, rather than to
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178
coalesce into the coherent ethnic group represented by the MCA nationally (Golay 1967,
347). To some extent, the political identity of one sub-ethnic group differed from that of
another. The most important supporters of the MCA were the Hokkians, and Hakka
tended to support the Chinese opposition parties like the DAP before 1970 (Siow 1983,
173). A political scientist Thoch Kiah Wah (1999) indicated that the political identity of
sub-ethnic groups was no longer a significant factor in the ethnic division of the
Chinese. Thus, Chinese political disunity resulted from different dialect groups seemed
to occur from the 1950s to the 1970s, since Siow's article was published in 1983.
However, the main problem of ethnic cohesion was caused by different views
about government policies of education and language, held by the Chinese with different
education backgrounds. Tang Chee Bang (1988) distinguished three groups of Chinese:
the English-educated (Group C) and the Chinese-educated that can be subdivided into
two groups (labeled as Group A and Group B). Those groups shared the view of
preserving the components of Chinese culture and education, especially Chinese-
medium primary schools. What made them different were their attitudes toward the
government. Group A Chinese were totally concerned with Chinese interests and made
little attempt to become involved with the political reality of Malaysia. They generally
distrusted government policies, especially language policy, and insisted that Mandarin
Chinese should be made an official language in addition to Malay and English. Most
Chinese, labelled as group B, were realistic about ethnic politics in Malaysia and
accepted the necessity for political compromise with the Malays (Tan 1988, 151-2).
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179
For the English educated, labeled as the group C, although they might want to
preserve Chinese-medium primary schools, they were more willing to make settlements
to the extent that the subjects taught in Chinese could be reduced. Some of them even
consented to abandon Chinese-language primary schools in exchange for the existence
of the Chinese as a subject in schools and the equal rights and opportunities in society
(Tan 1988, 152).
As a result, the Chinese in Malaysia were not united behind the MCA but
divided in their support for the MCA and several other parties, of which the DAP and
the Gerakan were the most prominent. Chinese segmentation was also channeled
through other smaller parties: the Labor party. People Progressive Party, and the United
Democratic Party (Crouch 1996a, 70).
The MCA, until the 1960s, was the sole representative of the Chinese
community in the coalition government. In that period it was led by English-educated
businessmen and professionals who dominated the traditional networks of voluntary
associations, chambers of commerce, dialect/clan associations, and occupation guilds.
Its guideline has always been the maintenance of ethnic harmony through
accommodation and its goal is to maximize freedom of enterprise, preserve Chinese
culture, and achieve citizenship on an equal basis for all Chinese (Esman 1994, 60).
The increasingly difficulties of the MCA in retaining the support of the Chinese
communities was not surprising. The reliance of the MCA on UMNO for the allocation
of votes and seats, as already mentioned, was seen by the Chinese community as the
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180
major cause of its ineffectiveness in advancing Chinese interests. It is clear that the
MCA, as UMNO's junior partner in the coalition government, could not disassociate
itself from policies unfavorable to the Chinese. Even when it was successful in receiving
concessions from UMNO in closed-door negotiations, the MCA generally understated
its achievements in order to avoid provoking the Malays into negative reaction (Crouch
1996a, 45).
Another problem for the MCA in winning Chinese support was related to
electoral geography. While the MCA was easily able to draw support from the rural
areas, it was more difficult to gain support from the urban areas, where the majority of
the Chinese lived. The MCA enjoyed considerable support from rural residents, such as
small farmers, mine workers, who needed a party in the government for gaining access
to social amenities, land tenure, and prospects for economic development. The Chinese
in the urban areas, on the other hand, were not so dependent on these amenities and
economic infrastructure; and issues such as education and employment, which
opposition parties raised to get their support, were more important (Lee & Ong 1987,
138).
Two issue areas—constituency boundary and language and education, also
caused the problem of electoral support for the MCA. UMNO drew constituent
boundaries in favor of Malay, to be discussed later, resulting in a reduced number of
seats for the Chinese in the parliament. In 1959, the inability of the MCA to win
concessions on this issue split its ranks (Esman 1994, 66). The beginning of the decline
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181
in the party support became evident in the 19S8 by-election and the 19S9 elections (Lee
& Ong 1987, 137).
More importantly, when the MCA sought to expand its political constituents in
the 1960s, the Chinese-educated began to play a more active role in MCA party politics.
The Chinese-educated local businessmen, who were also the patrons of the Chinese-
language schools and the leaders of local chambers of commerce, dominated at the
grass-roots level. They distrusted government language and education policy, which will
be discussed in the later section. Due to resentment around this issue, some local
businessmen and education activists gradually withdrew their support from the MCA
(Loh 1982, 2). As a result, even at the apex of its electoral performance in 1964, the
MCA won less than half of the non-Malay votes (Lim 1988, 23).
In the late 1960s, the MCA's diminishing electoral strength was evident in
increasing Chinese support for new opposition parties, notably Democratic Action Party
(DAP) and the Gerakan. The DAP owed its existence to the entry of People Action
Party (PAP) of Singapore into Malaysian electoral politics when Singapore was merged
into the Federation of Malaysia in 1963. Established in 1966, after Singapore left the
Federation, the DAP endorsed the PAP's Malaysian Malaysia' concept—providing for
equal political, economic and educational opportunities to all ethnic groups without any
preferential treatment. Some Malays may have suspected that the DAP had secret
relations with Singapore, but others believes the DAP did not receive financial and
moral support from the PAP of Singapore (Hussain Mohamed 1999). Evidence suggests
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182
that Singapore had no incentive to offend Malaysia due to their heavy dependence on
primary resources of Malaysia. Domestically, however, the DAP generally received
support of the younger generation of the Chinese in urban areas (Lee 1987,73, 77). As a
result, the DAP has posed the greatest threat to the MCA since the expulsion of
Singapore from the Federation in 1965.
Founded in 1968 in Penang, the most populous Chinese urban concentration, the
Gerakan became the second important Chinese party in the National Front since 1974.
Its leaders were politicians, intellectuals, and trade union activists, with the former
members of United Democratic Party as its core (Crouch 1996a, 48). In its first election
in 1969, the Gerakan, as the opposition party, earned its reputation by winning eight
seats in the federal parliament and secured control of the Penang state government.
Despite this victory, the Gerakan entered into the government coalition—the National
Front in 1974. The main purpose for the Gerakan to join the coalition was to get
sufficient finances for the development of Penang (Thock 1999). In the early years, it
adopted a socialist-oriented program, and aimed at reaching out to the union movement.
Calling on the Chinese to avoid identifying themselves as a separate political
community and to make effort toward a fuller integration into Malaysia, the Gerakan
originally stressed its multi-ethnic approach in recruitment and organization (Lee 1987,
73, 79). Gradually, the party identified increasingly with the Chinese community, and it
became the shelter of MCA dissidents, whose participation reinforced its Chinese
character (Crouch 1996a, 48).
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The lack of Chinese ethnic cohesion was manifest in the failure of Chinese Unity
Movement of the early 1970s, which was prompted by the 1969 ethnic riots. The
objective of the movement was to broaden the social support to encompass all Chinese
political parties and social organizations. In the beginning, the movement gathered some
momentum, for it mobilized considerable mass support. However, it soon became
obvious that it challenged the existing political leadership of Chinese parties,
particularly the MCA. After support was withdrawn from the MCA, the movement was
unable to achieve ethnic solidarity within the Chinese community (Means 1991, 58).
The problem of Chinese solidarity was further illustrated by the failure of an
attempted party merger and by the interparty competition between the MCA and the
Gerakan. Since the Gerakan was the shelter of MCA defectors, the leaders of the two
parties had struggled for power within the MCA politics in the late 1950s and the early
1970s. The rivalry between them tended to be more intensive, particularly in Penang,
the power base of the Gerakan, which was in the hands of the MCA before 1969 (Chew
1985, 134). They also were rivals in other urban areas of Chinese concentration, such as
Ipoh, Melaka, and Kuala Lumpur (Means 1991, 179). For these reasons, there always
existed a difficult relationship between them. After the entry of the Gerakan into the
enlarged National Front coalition in 1972, their relationship was even more strained.
The Gerakan attempted to take a pro-Malay stance in order to replace the MCA as the
senior Chinese party in the coalition. At the time of the nomination for elections, the
Gerakan challenged the MCA in seat allocation (Lee 1987, 88). The rivalry between
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184
them precluded a merger to maximize ethnic Chinese political interests. In 1985 the
MCA held talks with the Gerakan for a merger, but the attempt failed (Mauzy 1983,79).
The competition between the two parties greatly affected the political leverage of the
Chinese as a whole.
The rivalries of the MCA and the Gerakan with the DAP, which was manifested
in ethnic voting pattern among the Chinese, was an greater obstacle to Chinese ethnic
cohesion. It is estimated that since 1970 the share of Chinese who voted for the DAP,
on average, reached at least 50% (Crouch 1996a, 71). The MCA and the Gerakan in the
National Front coalition confessed that they usually expected to win 35-40% of the
Chinese votes (Crouch 1996b, 129). The party leaders of the Gerakan and the MCA
faced a political dilemma. As member parties in the UMNO-dominated coalition, they
wanted to maintain good relations with the UMNO through their moderate views on
sensitive ethnic issues; as leaders of the Chinese community, they attempted to acquire a
reputation for themselves as champions for the rights of their own ethnic group (Crouch
1996b, 134). In response to that political dilemma, the Chinese always divided over
strategies for political participation. They faced the issue of whether their interests
would be better protected through the support for the government or for the opposition.
This may explain why many Chinese supporting the MCA in one election and then the
DAP in the following. The alternate pattern of Chinese support between the MCA and
the DAP in elections only served to weaken Chinese's bargaining power within the
coalition government (Yeoh 1988, 22-3).
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185
The disunity of the Chinese was further revealed in factionalism within each
Chinese party. As long as the MCA and the Gerakan stayed with National Front, the two
parties leaders had to compromise on certain issues with UMNO, which led to disputes
within their own parties. As a result, new factions within the parties regularly challenged
the leaders of the parties.
Intraparty conflicts within the MCA were always intense and fierce. Sharp
divisions resulted from internal contests for power, disagreement over how to respond to
the coalition and to new factions attracting mass support by appealing to ethnic
frustration. The leaders as old guards, preoccupied with business and assisted by
UMNO, were able to defeat new factions only at the cost of erosion of mass support
(Case 1996a, 47). The internal conflicts in 1972 between a new faction and the old
guards escalated, and the new faction was in open revolt in 1973. The new faction,
which demanded more assertiveness on behalf of Chinese interests, was quickly
defeated and most of them defected to the Gerakan (Mauzy 1983, 79). In 1983-84, a
deep factional conflict again split into two camps between those who owed their
allegiance to the leadership and those who did not. By 198S, the schism had grown into
a three-faction contest (Milne & Mauzy 1986, 45, 57). All these factional struggles
discouraged the cohesion of the Chinese.
The fragmentation of Chinese politics was also exemplified by the intraparty
divisions within the DAP, which also constantly suffered from severe factional
cleavages. The Social Democratic Party and Workers' Party was the product of the
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186
recession due to the internal rivalries of the party. Some DAP leaders and common
members defected to the MCA or the Gerakan in the climax of internal conflicts
(Barraclough 1985, 313).
The lack of ethnic cohesion in the Chinese community can also be found in the
remote relations between the capitalists and party politicians since the 1970s. The
Chinese tycoons such as Robert Kuok, Lim Goh Tong, and Koo Kay Peng preferred to
distance themselves from the Chinese parties and were inclined to identify with the
needs and interests of Malay capitalists and the demands of the Malay dominant state.
Consequently, the Chinese parties found it difficult to exert political influence through
Chinese capitalists (Heng 1992, 142).
In contrast, the Malays suffered less ethnic fragmentation, especially before the
1970s. While the Malays, having close ethnic ties with the indigenous peoples in
Indonesia, the Philippines, and the southern tip of Thailand, were diversified by such
subgroups as Achinese, Boyanese, Bugis, and Javanese (Tan 1982), according to
Malaysian Constitution, Malays are people who practice Malay customs, habitually
speak the language of Malay, and follow the religion of Islam (Hirshman 1987, 555).
Unlike the Chinese, in particular, they were more united by religion. Islam provides the
institution for socialization and generates a sense of solidarity among Malays in general
(Hussin Mutalib 1990, 32). In addition to the Malays, there is a politically created
category, the Bum iputra (literally, son of the soil), which places together in the single
category both the Malays and the other indigenous people (such as Orang Asli, Iban,
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187
and Kadazan) in both West and East Malaysia. The other indigenous people are
generally treated almost as same as the Malays and thus can be read as the Malays in
terms of ethnic politics at the federal level (Tan 1982, 48).
Ethnic solidarity was expressed in both the internal cohesion of UMNO and its
support by the majority of Malays. The first generation of UMNO leaders, who shared
similar values and perspectives, had common class, family and educational
backgrounds. Many of them were drawn from a small English-educated middle and
upper class, from aristocratic or semi-aristocratic families, employed in the bureaucracy,
the judiciary, the armed forces, and the police (Crouch 1996a, 19). Grass root leaders
were usually local officials, teachers in Malay schools and rural landowners (Crouch
1996a, 37).
UMNO gained support from the majority of Malays for several reasons. Malay
cultural attitudes toward authority tended to be deferential toward their community
leaders. As authority was transferred from the rulers and aristocratic civil servants in
the colonial period to top UMNO politician after independence, the Malays shifted their
support to UMNO (Case 1995, 84). In addition to exploiting the traditional value of
loyalty to patrons, UMNO also harnessed the religious authority of the sultans and
controlled patronage networks in order to undermine Islamic opposition parties (Hari
Singh 1995, 191-2). Moreover, purged from UMNO and subsequently repressed by the
colonial regime, the Malay leftists were unable to compete with UMNO in mobilizing
the Malays (Jomo 1982, 469). Finally, in the west-coast states and the south where the
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188
Malays resided with large population of the non-Malays, the Malays were usually more
united behind UMNO to defend their interests against the non-Malays (Crouch 1996a,
16).
Although the majority of them were loyal to UMNO, some Malays supported
other political parties. Among the Malay opposition, the Pan-Malaysian Islamic Party
(PMEP or PAS) was most challenging, especially in their northern strongholds of
Kelantan and Terengganu. Founded in 1951, the PAS originated in the religious wing of
UMNO (Case 1996a, 65). The leadership was chiefly provided by Islamic-educated
intellectuals and educators as well as middle and lower ranking civil servants. Its grass-
root activists were teachers of Muslim schools and Malay primary schools who
disseminated the party's ideology to the villagers (Brown 1994, 223). The main
constituency of the PAS was farmers, fishermen, and artisans of northeast peninsula
(Nash 1989,44). Its strength rested with its appeal to Islam as the principle of a Malay-
dominated country and its desire for the protection of Malay special rights (Andaya &
Andaya 1982, 267). As an opposition party, the PAS claimed that UMNO, through its
close cooperation with the non-Malays, had betrayed Malay interests (Husin Ali 1981 ,
32).
Electoral competition between UMNO and the PAS demonstrated Malay
cohesion in politics. During the 1970s, Malaysia experienced an Islamic revival, which
provided an opportunity for the PAS to win supporters from UMNO. The growing threat
from the PAS was first contained when UMNO incorporated the PAS into the ruling
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189
coalition in 1973. After the PAS left the coalition in 1977 due to UMNO's
encroachment into Kelentan, the PAS usually won about half of the Malay votes in
Kelantan, nearly half in Kedah, and at least 40% in Perlis and Terenganu. In the other
states, however, the PAS often received less than one-fifth of Malay votes (Crouch
1996a, 65). In general, the PAS has attracted about one-third of Malay votes in the
peninsula since 1978 (Crouch 1994, 16).
During the late 1970s and the 1980s, UMNO party politics became increasingly
factionalized. After the introduction of the New Economic Policy, the concentration of
power in the hand of UMNO did not hinder factionalism within the party itself. The
significant causes for intraparty rivalry included the absence of definite successor to Tun
Razak, the lack of threatening opposition parties, and the decline in traditional Malay
deference to constituted authority. Further, the power struggle between Tun Razak and
Tunku Rahman reinforced the factionalization. Tun Razak wrestled power from Tunku
Rahman after the 1969 riots and removed Tunku's allies when he served as Prime
Minister (Means 1991, 54). The more important reason was that the distribution of the
rapidly increased economic patronage under the New Economic Policy reinforced the
power struggle of the Malay elites in UMNO, which was the center of patronage
networks (Funston 1980, 240; Horowitz 1989, 274).
When Tun Razak succeeded to power, the UMNO were divided into three
distinct factions. The first consisted of Tunku Rahman and those associated with him,
known as old guard. The second was led by Dato' Harun, whose constituency was the
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190
UMNO youth wing. The third can be labeled as the new order, including Mahathir,
Musa Hitam, and Tenku Razaleigh Hamzah, who challenged Tunku Rahman's ethnic
accommodation. The second and the third groups endorsed Tun Razak's policy. From
1971 to 1973, there were sharp conflicts between the old guard and the new order. After
1973, Tunku Rahman and his supporters could not maintain significant positions within
the party, and faded from political influence (Horri 1997, 223). After Tun Razak
consolidated his power in the party, rivalries developed between the second and the
third factions in the period of between 1975 and 1978 mainly because of power
struggles (Case 1995, 98).
In the early 1980s factional cleavages within UMNO began to influence the
party's cohesion. UMNO became the battleground for the new Malay business class who
received patronage from the party through political connections. In 1981 and again in
1984 the party was split by intense contests between Education Minister Musa Hitam
and Financial Minister Razaleigh Hamzah for the deputy presidency of the party
(Crouch 1994, 32). In the late 1980s, the competition between Prime Minister Mahathir
and Razaleigh, Minsiter for Trade and Industry, exposed deep factional divisions within
UMNO. Razaleigh enjoyed traditional supporters among rural Malays in his native state
of Kelantan, and he was also identified by the nascent Malay business class. During the
economic downturn and relaxation of the NEP guideline in 1987, he also drew support
from Malay small and medium-sized businesses (Case 1991, 466). In 1987, Razaleigh
launched an unsuccessful challenge to Mahathir for the presidency through the party
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191
elections. Mahathir retained office by a narrow margin of 43 votes. The struggle for
power within UMNO reached an apex when the party split and Razakeigh registered
Semangat 46 (the spirit of 1946) as a new party in 1988.
Despite these intraparty conflicts, ethnic cohesion among the Malays was greater
than that of the Chinese in terms of inter-party divisions. The lack of Chinese cohesion
was evident in the divided electoral support for the MCA, the Gerakan, the DDP or
other smaller Chinese-based parties. By contrast, UMNO won support from the
majority of Malays, except for radical Muslims represented by the PAS. Prior to 1970,
while the Chinese experienced factional struggle within parties, the Malays' parties had
internal solidarity. After 1970, while Malay ethnic cohesion declined mainly due to the
factional rivalries within UMNO, the Chinese failed to increase ethnic solidarity through
party mergers or the Chinese Unity Movement, and remained disunited as usual. Thus,
although the ethnic cohesion of the Malays in terms of intraparty divisions was as
serious as that of the Chinese, the Chinese were unable to take advantage of the decline
in Malay cohesion to challenge Malay political dominance.
The Increase in Malay Political Power
The Malays, as the politically dominant group, controlled the Malaysian state
after independence and beginning in the 1970s increased their political power and
achieved political hegemony, which the Chinese were unable to challenge. The increase
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192
in Malay political power can be seen in their ideological power and increased control of
bureaucracy or institutions.
Ideological Power
This section will explore how the Malays dominated and increased their
ideological power in terms of language, culture, and religion, and then will examine
why and how the Chinese failed to challenge Malay ideological power while retaining
limited ideological power in culture and education.
The Malays have controlled ideological power through domination of the
structure and symbols of politics—a Malay sultan as the king, Islam as the state religion,
Malay as the national language. With control of the state apparatus, after 1970 Malays
increasingly dominated ideology: Malay culture was exalted, the Islamic religion given
greater prominence, and the Malay language adopted as sole national language and
medium of instruction.
Malay ideological power originated from their claim of legitimacy of Malay
dominance on the basis of their indigenousness, as noted in the Constitution. Their
claim to indigenousness was based on being descendants of the subjects of Malay
sultanates who ruled the Malay feudal states before Western colonialism (Gomes 1999,
89). Regarding themselves as the owners of the Malay land, Malays succeed in
legitimizing the symbols of Malay dominance (Crouch 1993, 151). Under the unique
constitutional status, Malays are entitled to political supremacy, a Malay-style political
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193
system, and special rights. To further secure the constitutional guarantee, as mentioned
in the previous chapter, the doctrine required the approval of the Conference of Malay
Rulers for amendments.
In response to the principle of Malay dominance, the non-Malays countered with
an alternative ideology, with the slogan of “Malaysian Malaysia,” calling for an equal
treatment and opportunities in all sphere of activities between the Malays and the non-
Malays, and requiring the state character to be less Malay and more representative of
other ethnic groups. The “Malaysian Malaysia” ideology expressed the aspirations of
the non-Malays in language, culture, education, and government employment (Lee
1997, 89). This ideological concept was so appealing that the non-Malay opposition
made significant gains against the coalition government in the 1969 election.
However, the non-Malay challenge to Malay ideological power failed. After the
ethnic riot o f 1969, the government suspended democracy for over a year. By the time
Malaysia returned to democracy, political balance shifted further in favor of the Malays,
whose political dominance was now more firmly established. As a consequence, the
Malay character of the state was further strengthened, which will be discussed later.
Furthermore, the ideology of Malay dominance could no longer be challenged; the
Sedition Act of 1970 declared seditious and punishable any public discussion of Islam,
citizenship, Malay rulers, Malay language, and Malay special rights (Shamsul 1998,
146).
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194
The issues of national language and education featured prominently in the
Constitution. Constitutionally, Malay was adopted as the national language, with the
provision that English could be used for official purpose for a period of 10 years. As the
national language, Malay has been taught as a compulsory subject in all schools since
independence. To promote the development of the national language, the Language
Council, a government-sponsored bureau, was established (Hirschman 1984, 109). A
major step in developing the national language was the removal of English from the
status of official language, particularly from the medium of instruction in all levels of
schools. However, since Malays needed the Chinese support for state building, they
could not press for a complete Malay language and education system and thus
introduced a gradual approach for the removal of English and the establishment of
Malay as sole official language beginning in 1967 (Lim 1985, 258). Under these
circumstances, an increasing number of Chinese were literate in Malay. According to a
survey by 1980, 41% of the Chinese, twice as those of 1970, were literate in Malay
(Hirschman 1984, 110).
The educational system was open to each ethnic group in the British colonial
period. In addition to the English-language schools, Chinese and Tamil-language
schools coexisted with Malay-language schools. Since independence, the educational
system has become increasingly Malayan-oriented. In an attempt to foster national
unity, Malayanization of textbooks as a common curriculum was designed in the
education system (Orleans & Orleans 1978, 47, 50). A new Education Act, passed in
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195
1961, required all secondary schools within the national system to use either English or
Malay, two official languages of the country, as the medium of instruction (Tan 1988,
61). The existing Chinese secondary schools were forced to choose conversion either
to Malay or English, which would make them eligible for government assistance, or to
remain Chinese, and thus remain ineligible for governmental finance (Loh 1984, 105).
The majority of the Chinese secondary schools chose to convert into English-language
schools for state financing, resulting in the reduction of Chinese secondary schools from
132 in 1961 to 40 in 1971 (Ting 1976, 33). Therefore, within the national education
system the English-language schools were the most popular. 71% of high school
students attended English school in 1969, compared with 29% attending Malay schools
(Crouch 1996a, 160). Following the ethnic riots in 1969, a new education policy was
introduced. English-language schools were converted to Malay year by year, beginning
in the first year of primary school in 1970 and ending with the last year of secondary
schools in 1982. In addition, the National University of Malaysia was established in
1970 with Malay as the sole medium of instruction, and in 1983 all universities were
required to provide instruction in Malay (Crouch 1996a, 160).
During the 1970s, Chinese-language schools continued to receive government
support at the primary level and could continue without government financing at the
secondary level (Esman 1994, 69). Although the government financially supported
Chinese-language primary schools in the national education system, it discriminated
against the Chinese primary schools in the allocation of funds. In 1984 the Chinese
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196
primary schools, which had 27.3% of the total primary school enrollment, received only
3.4% of the total funding provided for primary schools (Chua 1988, 60).
The limit of Chinese influence in education is also exemplified by the issue of a
Chinese-language university. The Chinese made efforts to establish an independently
financed Chinese-language university, which was first presented to the public in 1967.
The government compromised by allowing the MCA to establish an English-language
private college, known as Tunku Abdul Rahman College. Due to the ethnic riot in 1969,
the Chinese deferred the implementation of the project of building the proposed
university. In 1971, the University and College Acts were passed, requiring the king's
approval for the establishment of any university (Tan 1982, 45). The Chinese-language
university issue reemerged in 1978 with greater support from Chinese community due to
the reduction of Chinese quota of university admission under the New Economic Policy.
This effort was eventually defeated when the government ruled against the
establishment of a Chinese-language university in 1981 (Loh 1984, 97-102).
In the process of nation building, the Malays also promoted the concept of
national culture based on Malay culture. Before 1971 there had been no official policy
on national culture; after that the government adopted a national culture policy in a
conference on national culture held by the Ministry of Culture, Youth, and Sports. The
conference advocated a national cultural policy with three principles. (1) the national
culture must be based on the indigenous culture of the region; (2) suitable elements from
other cultures can be accepted as part of national culture; (3) Islam is an important
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197
component in the development of the national culture (Zainul Ariff Hussain 1998, 32).
Although the policy did not explicitly declare what indigenous cultural elements shaped
the basis of the national culture, the implication of the third principle and the
implementation of the culture policy indicated that the indigenous culture refers to
Malay culture. Also beginning in the 1970s several government-sponsored organizations
were formed to promote and manage Malay cultural development. In the meantime, the
government disregarded and downgraded aspects of non-Malay culture. While the
government viewed anything associated with Chinese culture and history as
insignificant, considerable effort was made to promote Malay culture and history. To
establish the claim for Malay cultural supremacy over other ethnic groups in Malaysia,
Malays evoked the glory of the Melaka Sultanate, pre-colonial Malay feudalistic rule in
the peninsula, and the Islamic period of Malaysian history, while intentionally
neglecting the pre-Islamic era of Hindu influence as well as modem colonial and
immigrant history (Gomes 1999, 89). The bias toward Malay culture was evident in
many aspects. The federal flag pictures the Islamic crescent; the national anthem is a
traditional Malay song; and mosque construction rapidly expanded throughout the
country (Cham 1977, 208).
It is necessary to mention religious policy since Islam is an important element of
Malay culture. The Constitution prevents non-Muslims from proselytizing their
religions among Muslims, while allowing Muslims to seek non-Muslim converts,
although guaranteeing the freedom of non-Muslims to propagate their religions among
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198
non-Muslims. In addition, Islam, as a state religion, received special treatment. For
example, Islamic programs were transmitted daily by government-owned radios and
television stations while other religions could be broadcast only during major festivals
(Crouch 1996a, 169).
In the 1970s, in response to the Islamic religious revival and increasing influence
of the Islamic political movements, the government introduced the Islamization policy.
Islamic studies were increased from 30 to ISO minutes per week in national primary
schools (Milne & Mauzy 1986, 94). Islamic education also expanded at the tertiary
level, with Islamic studies programs at both the University of Malaysia and the National
University of Malaysia. At the both universities, a broad range of courses in Arabic as
well as Muslim law, history, and theology was provided to Muslim students. In 1983,
the government formed International Islamic University in which Islam permeates all
subjects (Von der Mohden 1987, 191). Moreover, the government launched a campaign
to instill Islamic values in public administration (Tan 1983, 146).
In sum, the Malays exercised ideological control in language, education, and
culture based on the claim of indigenousness since independence. Malays increased
their ideological control beginning in the 1970s by forbidding English as official
language, promoting Malay as sole official language and medium of instruction,
confining Chinese-language education to the primary level within the national education
system, prohibiting challenges to the ideology of Malay political dominance,
downgrading non-Malay culture, and launching Islamization programs. In contrast, the
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199
Chinese failed to challenge Malay ideological power. After the 1969 ethnic riot, under
the amendment of the Sedition Act of 1970, the Chinese were forbidden to challenge
Malay ideology based on the claim of indigenousness through the ideology of
'Malaysian Malaysia' and only exercised their ideological power in Chinese education at
the primary level, enabling them to sustain their limited cultural autonomy.
Bureaucratic/Institutional Power
Under electoral democracy, Malay political dominance through elections was
based on the changing population and delineation of constituency boundaries. In 1957
the Malay and non-Malay population of the peninsula were more or less evenly divided,
the Malays had slightly less than 50%. The 1963 entry of Sabah and Sarawak into the
federation, combined with the 1965 exit of Singapore, shifted the ethnic balance of
population in favor of indigenous people represented by Malays. By 1985, the Malay
proportion of total population had increased to 56.6%. When indigenous people from
Saban and Sarawak were taken into account, the Malay population expanded to 60%
(Crouch 1996a, 57).
More importantly, Malay dominance in the electorate was increased through the
delineation of constituency boundaries. Gerrymandering in favor of rural Malays
increased Malay political power because the majority of Malays resided in rural
constituencies while the urban areas were predominantly non-Malays. Although rural
weighting is viewed as an accepted practice in many countries, in Malaysia the disparity
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200
in the number of electors in constituencies has been excessive. The Constitution had
established the principle of weighting for rural area, but had set a limit on rural over-
representation of 15% (Means 1991, 135). A constitutional amendment in 1962,
however, permitted rural constituencies to have as few as half the voters of urban
constituencies; and in 1973 the restriction on the weighing was removed altogether
(Crouch 1996a, 58). In 1978, for instance, the size of a constituency in the peninsula
varied from 90,611 in urban Petaling, a Chinese area, to 20,991 in rural Grik, a Malay
area (Lee and Ong 1987, 122). As a result, the number of Malay majority constituencies
has been on the increase. In 1964, the number o f Malay majority seats almost reflected
the number of Malays in the total population— 57% of the seats compared to 55% of
total population. By 1986, the Malay weighing bias was extremely large—70% of the
seats compared to 56.6% of total population. In contrast, in 1986 the Chinese, with 32%
of total population, only had 20% of majority seats (see Table 7 .1).
TABLE 7.1
Peninsular Malaysia: Ethnic Composition of Parliamentary Seats
Malay
Majority
Chinese
M ajority M ixed Total
1964 66 33 5 104
1974 79 22 13 114
1986 92 26 14 132
Source: Yeoh Oon Kheng, "The Chinese Political Dilemma." In The Future o f Malaysian
Chinese, 1988, p. 28.
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201
At independence, the country inherited a well trained bureaucracy with the
higher levels filled by English civil servants. Over the years, through the nationalization
policy in which Malays were given recruitment and promotion preference, most of the
top posts were occupied by Malays and the whole government became a bastion of
Malay power (Means 1991, 297). In the higher civil services, while the non-Malays
were concentrated in the professional and technical services, the Malays were largely in
the administrative and semi-professional posts. Although the higher civil services were
not totally dominated by the Malays mainly due to the non-Malay control of the
technical and professional jobs, Malay political power was strongly manifested in top
decision-making positions in bureaucracy, namely the cabinet and the MCS.
The share of the Malays in the top political position of the bureaucracy was
higher than non-Malay because Malay share was ensured by the quota system. The
Malays were not only promoted at a rapid rate regardless o f objective performance
standard (Means 1972,47), the Malay political leaders also followed the colonial policy
of a four-to-one recruitment ratio in favor of Malays for the MCS, and a three-to-one
ratio for the External Affairs Service, the Judicial and Legal Service, and Customs
Service (Gibbons & Zakaria Haji Ahmad 1971, 334). In other words, the recruitment
quota for Malays was 80% or 75%, compared 20% or 25% for non-Malays. In practice,
the recruitment quota of four Malays for one non-Malays exceeded for the MCS. In
1962-63, the Malays had 86.2% of the total in the MCS while the British accounted for
3 .1% and other non-Malays 10.7% (Puthucheary 1987, 96-7). In 1968, 85.1% of the
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202
senior positions in the MCS were Malays, and 7.4% were Chinese (Chee 1991b, 7;
Means 1986, 105). In the late 1980s the Chinese held only about 6% of the senior
positions in the MCS (Lim 1988, 51).
More importantly, by virtue of the quota system, the Malays predominated in top
policymaking positions in the cabinet. The Malays not only have always occupied the
majority of key ministers such as defense, education and home affairs, but also
increased their bureaucratic power when they began to capture the Ministry of
Commerce and Industry in 1969 and the Ministry of Finance in 1974. In other words,
the Chinese, excepted for the Ministry of Finance (to 1974) and the Ministry of
Commerce and Industry (to 1969), served minor ministries (Enloe 1980, 75; Mauzy
1993, 111). Between 1962 and 1969, Chinese ministers decreased from 29% to 20%,
where their Malay counterparts increased from 64% to 70% (Yeon 1982, 67).
Subsequently, despite the increase in the absolute number of Chinese ministers
(including deputy ministers), due to the expansion in cabinet posts, the proportion of
Chinese ministers has decreased. In addition, the Malays serving as secretary-generals
of ministries increased from 81.8% in 1980 to 86.4% in 1988, while the Chinese
declined from 13.6% to 9% (Lim 1982, 26; Yeoh 1988, 30).
In the 1980s the MCA, the senior Chinese party in the coalition, except for
1964 and 1969-73, constantly held four ministries—the Ministry of Transport, the
Ministry of Labor and Manpower, the Ministry of Health, and the Ministry of Housing
and Local Government (http://www.mca.org.my/mca/html), but MCA share of
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203
ministerial posts decreased relatively. The MCA did not get an increase in control of
ministerial posts in 1982, even though the MCA grew its parliamentary seats from 17 to
24 in the 1982 election (Mauzy & Milne 1983-4, 620). As a result, the role of Chinese
in decision-making was on the wane.
Malay political predominance was further strengthened by increasing military
power. Due to recruitment and promotion policies of the armed forces, the composition
of the military was predominately Malay. After the British headed the army until 1961
as well as navy and air force until 1967, the positions of the chief of the armed forces,
chief of the army, and command of the air force were all held by Malays. In the case of
the navy, except for the first command, all his successors were Malays (Crouch 1996a,
134-5). The percentage of the Malays was highest in the army; the navy was slightly
more multiethnic; and the air force had the greatest proportion of non-Malays (Means
1991, 299-300).
The Malays predominated in both the rank and file and the top echelon of
office corps in the military. After the 1969 riot, to prevent further ethnic conflict, the
government expanded the army very rapidly, especially the Malay Regiment, which
recruited entirely Malays. In 1969-70, in the armed force 75% were Malays compared
with 25% of non-Malays; in 1980 Malays grew to 90% while non-Malays only shared
10% (Tai 1984, 48). From 1970 to 1980 the Malay Regiment, which formed the
backbone of the army, increased from 10 to 16 battalions (Crouch 1996a, 134-5).
According to Defense Ministry Spokesman in 1981, Malay officers reached 74.6% and
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204
other ranks 84.8% in the armed force; in contrast, the Chinese accounted for 16.2% of
the officer corps and only 6.1% of other ranks (Crouch 1991, 128). Indicated by the
statistics for total recruitment to the armed forces, this pattern was likely to continue.
The Malays held 92% of rank-and-file recruits in 1979 and 93% in 1981, and they
constituted 86% of officer recruits in 1979 and 91% in 1981 (Crouch 1991, 128). The
weakness of the non-Malays in the military was also evident in the fact that while the
non-Malays were concentrated in technical and professional positions particularly in
the navy and the air force, the Malays dominated in combat sections (Mauzy 1992, 234-
5).
Like the military, the top positions of the police were also monopolized by the
Malays. In addition, the police as a whole was increasingly dominated by the majority
of the Malays. In 1969-70 the Malays had 65% of the total compared with 35% for the
non-Malays; in 1980 the Malays held 80% and the non-Malays only 20% (Tai 1984,
48).
In conclusion, the Malays maintained and increased their dominance of top
political and military posts in the government. While the Chinese still held significant
professional post in the 1980s, they remained weak in the top bureaucratic and military
positions.
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205
Concluding Remarks
After independence, the Malays exercised political power over the Chinese, who
were dominant economically. Particularly after 1969, the Malays increased their
political power and established firm political hegemony over the Chinese.
The Malay dominance of political power rested not only on a bare majority in
population, but also on ethnic accommodation institutionalized in the Constitution, in
which the non-Malays were offered citizenship and economic freedom, and, in return,
the Malays controlled political power. To guarantee their political supremacy, the
Malay- dominated government increased Malay control over the bureaucracy and the
parliament and reinforced ideological hegemony. The highest bureaucratic positions,
such as prime minister and deputy prime minister, were monopolized by the Malays,
and a recruitment ratio of four to one in favor of Malays was institutionalized in the
MCS, the elite civil services. Equally significantly, Malays wielded military power; the
top military officers and most of the military personnel, except a certain portion of non
combat professional positions, were occupied by the Malays. Furthermore, the
delineation of constituency boundaries favored the Malays and thus allocated a
disproportionate number of parliamentary seats to the Malay population. With a two-
thirds majority of the seats in the parliament, the Malays always could amend the
Constitution to their advantage, and consequently further accumulate their political
power. While restricting space for cultural pluralism, the Malay also controlled ideology
of legitimacy through the claim of indigenousness and maintained leading position in
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206
culture and language. Finally, ethnic cohesion was quite strong in Malay community
because most of the Malays supported for the ruling party, UMNO, which seldom
experienced severe internal cleavages prior to the 1970s.
In comparison with Malays, the Chinese were weaker in political power. To gain
citizenship and retain economic power, Chinese elites, represented by the MCA,
accepted a politically subordinated position in the Bargain from the period of the
decolonialization. The Chinese communists subsequently attempted to challenge the
unequal ethnic pact through military power in the communist insurgency, which was
defeated by the Anglo-Malay force in the late 1950s. When Singapore merged into the
federation and participated in federal politics, the Chinese again threatened Malay
political power through the PAP in the ethnic politics. However, the Chinese political
challenge failed again when Singapore was forced to separate from the federation. In
the Alliance, the MCA acted as important but cooperative partner and could not
challenge the political supremacy of Malays because of both the ethnic pact and the
reliance on electoral support from Malays to get elected. Furthermore, the Chinese were
well known for their lack of ethnic cohesion, embodied in diffusion of electoral power
in several contending Chinese parties that suffered frequent intraparty cleavages. All of
these elements contributed the weak political power of the Chinese.
After 1970, the Malays further increased their political power at the expense of
the Chinese. Initially, the Chinese had held some decision-making power in politics; the
MCA was able to exercise economic policy decision-making through the Ministry of
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207
Trade and Industry and the Ministry of Finance. In 1969, the first omen of dwindling
Chinese political power was the loss of the Ministry of Trade and Industry. In 1974, the
Chinese also lost the Ministry of Finance. Since then the Chinese have never held
important cabinet posts, and the proportion of the Chinese in the cabinet posts also
decreased.
The political fragmentation of the Chinese, combined with their minority status
in the population, led to the decline in their political power. In the period of the
Alliance government, the Chinese were less cohesive than the Malays because Chinese
electoral support was diffused among the MCA, the DAP and other several small
parties, and because the main Chinese party, the MCA, suffered from intraparty
divisions. By contrast, except for some radical Malay Muslims, most Malays supported
UMNO, which had internal cohesion.
Compared with the period of the Alliance government, the ethnic cohesion of
the Chinese in the National Front government since 1974 was further diluted by the
entry of the second Chinese party, the Gerakan, which competed with the MCA for
political influence. The alternate support between the Chinese ruling parties in National
Front and the Chinese opposition party—DAP also further weaken Chinese cohesion. In
comparison, although the ethnic cohesion of the Malays has been weakened since the
1970s because of intraparty rivalries within UMNO, the ethnic cohesion of the Malays
was greater than that of the Chinese. While Chinese failed to improve their ethnic unity
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208
and also lacked intraparty cohesion, Malays were less intei party divisions and less
diffused electoral support.
Ideologically, Chinese opposition called for equal treatment among ethnic
groups with the slogan of “Malaysian Malaysia” and received massive Chinese support.
After 1970, however, the Chinese were unable to extend their ideological influence over
the Malays mainly because the ideology of Malay dominance, as a result of the
amendment of the Constitution, could not be challenged by public discussion. Further,
Chinese culture, especially language and education, was persistently suppressed while
Malay culture, viewed as the national culture, was promoted, particularly in the spheres
of religion, education, and language. In short, through hegemony in politics, the Malays
gradually increased their ideological power through constitutional amendments.
To sum up, in the 1960s the Chinese failed to challenge Malay political
dominance through the merging of Singapore into the federation. The Malays expanded
their political power mainly through further control of top decision>making posts,
constitutional amendments, and delineation of constituency boundaries. Although Malay
political cohesion was weakened after 1970, the Chinese were still politically divided
and unable to challenge Malay dominance through party and electoral politics.
Some may argue that the leadership of Prime Minister Mahathir is responsible
for the erosion of democracy. The problem is that authoritarian trend had already started
from the 1970s after suspension of democracy in 1969, and Mahathir could not increase
authoritarian practices, such as frequent constitutional amendments and the
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209
centralization of the executive power into the prime minister office, without the
foundation of Malay political supremacy reinforced by Malay economic power in the
1970s.
To some radical Malays, Mahathir seemed to withhold Malay power for the
benefit of non-Malays. Actually, Mahathir never did anything to undermine Malay
political dominance. On the contrary, Mahathir strengthened state power in the hands of
Malays, as mentioned above. Nevertheless, for regime stability, he withheld radical
Malays from extreme actions through controls and repression.
In the late 1970s radical Malays who supported Islamic resurgence began to
undermine the government’s base of support in the Malay community. The Islamic
resurgence was particularly attractive to the youth and the students. An alliance between
the Malaysian Islamic Youth Movement (Angkatum Relia Islam Malaysia or ABIM)
and the PAS, the main Islamic opposition party, gave the resurgence a political
momentum. Their ultimate goal was Islamic society achievable only by Islamic state
with Islamic law (Mauzy & Milne 1983-84,634). By contrast, Mahathir reacted against
the concept of an Islamic state, which he considered inappropriate for a multiethnic
country. Since Mahathir served as the Prime Minister in 1981, the government has
responded to the resurgence with several strategies: accommodation, co-option, control,
and confrontation (Camroux 1996; Hussin Mutalib 1990). While accommodating the
Islamic movement by implementing Islamization policies in education and culture and
co-opting ABIM leaders into the government, the Mahathir regime controlled the
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210
resurgence with new legislation, and used coercion as a last resort. In 1981, for
instance, the government amended the regulation on association to curb the ABIM
activities (Camroux 1996, 859). In 1985, the government sent troops to suppress a small
group of militant Muslim (Hussin Mutaib 1990). However, the Mahathir administration
response to Islamic movement was generally peaceful and seldom used coercive force
until 1994 (Camroux 1996, 863). It also worth noting that Mahathir’s coercive measures
targeted non-Malays, especially radical Chinese, far more than radical Malays. For
example, there was ethnic imbalance in the people who were arrested in Operation
Lanlang; nearly all of them arrested were Chinese opposition.
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CHAPTER 8
THE INCREASE IN MALAY ECONOMIC POWER
This chapter deals with the distribution of economic power between Malays and
ethnic Chinese, with special attention to how the Malays increased their economic
power. The first section introduces the essential economic background for understanding
the distribution of economic power among ethnic groups. The next section presents the
changing pattern of ethnic economic power between 1970 and 1990. The concluding
section underlines the key points concerning how and to what extent the Malays
enhanced their economic power. The result of the changing pattern of ethnic economic
power, and the increase in Malay economic power, was that both the Malays and the
Chinese held significant economic power by the 1990s.
After independence, Malaysian economic development until 1990 can be divided
into two stages: the market-oriented period (1957-69) and New Economic Policy period
(1971-90). In the first period, due to the relatively liberal economic development
strategies, the benefits of economic development favored the foreigners who dominated
the economy and, to lesser extent, the Chinese who were active in the modem economic
sector. Despite the implementation of rural programs, which improved rural
infrastructure, most of the rural Malays remained in poverty. In the second period, the
Malays increased their economic power significantly at the expense of the foreigners
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and the Chinese through affirmative action in such areas as education, employment, and
corporate shares.
The Period of Rural Development and Economic Liberalism (1957-69)
This section deals with how the development strategy of free enterprise in the
urban sector and state intervention in the rural sector failed to increase Malay economic
power. First, the overall economic situation of the first dozen years after independence
is outlined, with special attention to the distribution of ethnic economic power at
independence. After examining the characteristics of the industrial development strategy
and its effects, the specific programs for economic assistance to Malays both in the rural
and urban sector will be presented. Finally, the consequence of the programs will be
discussed.
During the 1960s, the Malaysian economy grew rapidly. The annual growth rate
of real GDP averaged 6.5%; and nearly 40% of this growth was attributed to the
industrial sector (including mining, construction, utilities, transportation, and
manufacturing) and 17% to the manufacturing sector alone (Osman-Rani 1996, 13). In
manufacturing, the annual growth rate averaged 10 .2%; and the share of manufacturing
in GDP rose from 8.5% in 1960 to 13% in 1970 (Bowie 1991, 80). Despite rapid
economic growth, the agricultural sector provided the backbone of Malaysian exports
and economy during the 1960s.
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During the first decade after independence, the economy was essentially an
extractive one, based on tin and rubber; and the economy was characterized by a high
degree of foreign ownership and control, with a considerable level of Chinese capital.
In the 1950s, European firms dominated 65 to 75% of the export trade and 60 to 70% of
import trade. European companies also controlled 60% of tin output, whereas Chinese
firms had the remaining 40%; Europeans owned 83% of the plantation acreage, while
Chinese held 14% (Gomez & Jomo 1999, 13-14). The foreigners predominated over
banking system in which foreign banks accounted for 99 of a total of 111 branches in
1959 (Lin 1993, 218). In contrast, the Malays were poorly represented in most sectors
of the modem economy. For instance, 3% of registered Malay firms were partnerships;
95% were sole-proprietorship. At the same time, only 12% of total sole-proprietorships
were owned and managed by Malays, while 4.5% of partnerships were Malays (Mohd.
Fauzi Haji Yaacob 1988, 132, 138).
Industrial Development Strategy
The primary industrial development strategy of this period was the laissez-faire
approach, which, as previously mentioned, was one of the centerpieces of the
independence compromise reached among the British, ethnic Chinese, and the Malays.
During the decade, the government neither attempted to reduce foreign domination of
the economy nor to intervene in Chinese businesses (Crouch 1996a, 199-200). The
government mainly relied on the initiatives of the private sector to generate investments
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and on the mechanism of market to allocate economic resources. While the government
provided basic infrastructure, developed new industrial sites, offered general financial
incentives, and to a limited extent protected existing industries from foreign
competition, these measures aimed at preserving the predominantly free enterprise
character of the economy (Bowie 1991, 69).
Under the market-oriented economy, the government protection policy allowed
limited import-substituting industrialization. Through the Pioneer Industries Ordinance
introduced in 1958, the government offered tax relief on profits for new manufacturing
firms. Since the technological base among domestic Chinese firms was modest, foreign
companies, particularly large, capital-intensive industries seeking to secure or increase
their domestic market, benefited most from the ISI (Gomez 1999, 34). Ethnic Chinese
enterprises in food, plastic, and wood-based industry benefited to a limited extent
(Gomez & Jomo 1999, 16-7).
Development Programs for the Malays
While leaving industrial development largely to the private sector, the
government made efforts to intervene on behalf of Malays through public agencies,
especially in the rural sector. Rural development was planned to provide basic
infrastructure to rural residents, most of which were the Malays, and to raise their
income, productivity, and living standards. It consisted essentially of extensive state
programs which mainly aimed at increasing agricultural output, providing facilities for
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215
the settlement and development of new land, offering aids and subsidies for replanting
rubber, as well as improving living conditions in villages and towns through the
construction of infrastructure such as roads and bridges (Husin Ali 1981, 108). The
public agencies were for most part engaged only indirectly in regulatory and facilitative
activities such as providing credits and coordinating projects without being directly
involving in business enterprises (Sieh 1992, 106-7).
Many agencies were established, especially for the rural programs. The Ministry
of National and Rural Development, headed by Tun Razak, was established in 19S9.
Under the ministry, the two most important agencies responsible for the programs were
the Federal Land Development Authority (FELDA) and the Rural and Industry
Development Authority (RIDA) (Puthucheary 1990, 277). FELDA had been created
before independence in 19S6 to be responsible for the planning and supervision of the
entire spectrum of land development and settlement activities, which shared the largest
expenditure in rural development, in order to develop forested land into plantations and
to settle landless peasants (Lim 1985a, 262; Perumal 1991, 204-5).
In this period, there were some programs, including credits, quotas, training, and
corporate ownership, oriented to the Malay business sector. Established in 1950 and
converted to a public corporation in 1954, the RIDA was reorganized and renamed in
1965, becoming the greatly expanded Majlis Amanah Rakyat (Council of Trust for
Indigenous People, MARA). As the major source of credit before 1965, the RIDA
focused on providing small loans to the rural sector for agricultural enterprises. In the
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216
1960s the agency shifted to urban-based programs, which functioned mainly to provide
loans to Malay contractors and taxi-drivers and to conduct training courses (Jesudason
1989,65). During 1966-70, the MARA made preferential loans of $31 million to Malay
businessmen for the establishment of a number of small enterprises (Comber 1983, 54).
Apart from MARA, in 1966 the first Malay bank, Bank Bumiputra, was formed to
provide finance assistance for Malay businesses. Some non-Malay regarded the
inauguration of Bank Bumiputra as an attempt to break Chinese and foreign domination
of the banking industry (Gomez 1999, 35).
The major agencies formed for training Malays were the National Productivity
Center (NPC) and the RIDA Training Center, which became MARA Institute of
Technology in 1967. RIDA/MARA focused on the formal training of professionals
whereas the NPC concentrated on short-term training courses for small businessmen
(Lim 1985a, 257, 260).
License quotas were first applied to transport and construction, both of which
were dominated by the Chinese. In 1958 the government required that all new transport
licenses be issued to the Malays until their share in the industry corresponded with their
share of total population in each state. Between 1958 and 1968, 52% of all new taxi
licenses were issued to the Malays (Lim 1985a, 258-9). Despite the increase in the
number of Malay construction firms due to the license quota, since Malays firms lacked
skills and technology, it was difficult for them to compete with Chinese companies in
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217
the big construction projects. In 1970, only 2.5% of the construction work over
RMS 100,000 in output value went to Malay enterprises (Jesudason 1989, 63).
Of all policies, the acquisition of shares in corporations remained the weakest. In
1961 the government took the first measures to acquire Malay ownership of large firms
with the establishment of the National Investment Corporation, which was charged with
investing in major businesses and industrial enterprises (Golay 1969, 382). The
Ministry of Commerce and Industry in 1965 required new manufacturing companies,
which were approved as pioneer industries, to reserve at least 10% of their shares for the
Malays in order to get licenses for operation. The Corporation would buy the shares and
resell them to Malay individuals (Lim 1985a, 260). Between 1961 and 1967, however,
the Corporation was only allocated $8.1 million worth of shares and had disposed $3.5
million in shares to the Malays (Lim 1985b, 43).
Consequence of the Development Programs
Benefiting from the above programs, the Malays received more opportunities to
participate in business in this early post-independence period than in colonial era. A
nascent Malay business class generally emerged as rentier capitalists who depended
heavily on Chinese partners to operate the actual tasks of fulfilling contracts and other
business obligations (Heng & Sieh 2000, 132).
Despite the entry of a few Malays into modem economic activities, the Malays
generally made little advancement in the modem sector, remaining predominantly in
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218
agriculture and public services. Up to the end of the 1960s Malay manufacturing was
still concentrated in small-scale cottages industries, such as batik cloth-making,
brassware, rattan products, and handicrafts (Mohd. Frauzi Haji Yaaccob 1988, 138).
Even the leading Malay enterprises for most part engaged in mining, transportation, and
timber industry (Jesudason 1989, 66).
Economic development in this period brought greater benefits to the foreign
sector and the domestic Chinese than to the Malays. A small number of foreign firms
still controlled mining, plantation, and manufacturing (Heng 1997, 267). Chinese
businesses continued to make impressive gains and dominate the lower and middle
levels of the economy in this period. A few Chinese firms became large business
groups, engaging in a variety of businesses. The path of economic success for a big
Chinese business typically started with retailing, followed by wholesaling and
international trading, then shifting to resource-based business and eventually financing
and/or manufacturing (Tan 1982, 24). The Chinese businesses were significant in rubber
dealing, small-scale tin mining, shipping, banking, retailing, construction, and import-
export trade (Bowie 1991, 68). Typical examples of tycoons in that period were Eu
Tong Sen in tin and Tan Cheng Lock, the first president of the MCA, in rubber (Sieh
1992, 105). However, the more visible roles of Chinese businesses were served as
middlemen, wholesalers, and shopkeepers, who were at intermediary levels between the
producers and exporters for primary commodities and between the importers and
consumers for manufacturing goods. Even in manufacturing, the Chinese firms were
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mostly small labor-intensive industries such as clothing, paper, printing, and plastic
products. In the early 1970s, 77% of the Chinese companies in manufacturing were
small family-owned sole proprietorships or partnerships (Heng 1997, 271).
The Malay development programs were generally unsuccessful due to two major
factors. First, since the Malays lacked experience and business networks, the Malays
who were granted licenses found it easier to sublease their licenses to the Chinese for a
fee or lend their names to enterprises which were actually operated by Chinese
businessmen (Lim 1985a, 259). Furthermore, most of the development programs were
infrastructural in nature and involved large amount of construction, an industry
dominated by the Chinese (Shambul 1997, 248). Second, the prevalence of Chinese
business networks continued to discourage the Malays from entering businesses already
dominated by the Chinese. Due to ethnic trust and the institution of Chinese family
businesses, it was very difficult for the Malays to find employment or obtain business
partnerships in Chinese business circle (Jesudason 1997, 123).
The failure of the programs resulted in severe criticism from economic
nationalists such as Dr. Mathatir Mohamad in UMNO and strong protests by Malay
businessmen, many of them were party officials and top civil servants, articulated in two
major conferences—the First and the Second Bumiputra Economic Congress in 1965
and 1968. The criticism and the protest signified the Malay businessmen and politicians
demand for more radical programs to promote their economic interests with greater
speed (Heng & Sieh 2000, 133; Lim 1985b, 43-4).
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New Economic Policy (1971-1990)
This section demonstrates how Malays increased their economic power through
the New Economic Policy: why the policy was launched, its objectives and significance,
its specific programs, and the Chinese response.
Overview: Its Cause, Objectives, and Significance
The 1969 ethnic violence following the election was partly attributed to the
discontent of Malay businessmen over their lack of economic progress previously
expressed in the two economic conferences. Considering ethnic violence to be the result
of ethnic economic disparity, the government yielded to the demands of Malay
businessmen and decided to intensify its efforts to expand the role of the Malays in the
modem economy and to advance their social and economic position in the society. In
1971 the regime launched a centerpiece program of positive discrimination in favor of
Malays, known as the New Economic Policy (NEP), which was incorporated into a
series of five-year plans.
The NEP was committed to achieve two objectives. The first sought to redress
economic imbalance among ethnic groups so as to reduce the identification of ethnicity
with economic functions. In practice, the government sought to raise Malay equity
shares from 1.9% to 30% by 1990. The Chinese share would be allowed to increase
from 22.5% to 40%, and the foreign share would be reduced from 60.7% to 30%. It also
entailed restructuring education and employment pattern and creating a Malay
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221
commercial and industrial community (Horii 1997, 212). The second aimed to eradicate
poverty, especially rural poverty associated with Malay population, by improving the
access to land, physical capital, and infrastructure, and by increasing employment
opportunities and income levels (Cleary & Shaw 1994, 86). Over the years the first
objective of restructuring took precedence over the poverty reduction objective, and
became the major agenda of the NEP (Jomo 1990-1, 414).
In essence, the NEP goal was to raise Malay ethnic economic power through
poverty reduction policies in the rural sector, through the expansion of employment
opportunities in the urban sector, and particularly through the accumulation of Malay
corporate assets. While the primary focus of most programs in the pre-NEP period was
on rural and infrastructural development, programs in the NEP aimed at the activities of
modem sector such as finance, commerce and industry (Gomez & Jomo 1999, 31).
The significance of the NEP can be understood in terms of the increasing role of
the government, especially in redistribution. By influencing the control of resources,
capital assets, and access to business opportunities, the regime restricted market
mechanisms in favor of the Malays with the goal of developing a Malay capitalist class
and redistributing wealth and economic activities from foreigners and non-Malays to
Malays. The government used such policy instruments as quotas, preferences,
regulations and state-owned enterprises to make the shares of foreigners and non-
Malays available to Malays at discounted price and to train Malays for business
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222
management (Esman 1994, 72). In short, the NEP was primarily redistributive in
nature.
During the NEP period, the goals of the ethnic redistribution were facilitated by
economic growth and structural transformation. The growth of the GDP in the 1970s
averaged 7.5% annually and in the 1980s 5.9%. Agriculture declined from 29% of the
GDP in 1970 (adjusted to 1978 price) to 18.7% in 1990, whereas manufacturing
increased from 13 .9% of GDP to 27% (Chee & Lee 1994, 164-7).
Rural Programs for Poverty Eradication
The secondary objective under the NEP was the poverty eradication programs,
which involved efforts to accelerate rural development through raising productivity,
land development, and modernization of rural infrastructure. Since poverty was the
highest among the rural Malays, poverty eradication programs mainly involved Malay
peasants, especially those groups such as fishermen, rice farmers, and rubber
smallholders. The non-Malay rural and urban poor were virtually neglected (Jomo 1990-
91, 480).
One of the most prominent programs introduced to eradicate rural poverty was
the government's massive land development scheme implemented by FELDA, which
was expanded notably after 1970. FELDA specialized in the development of large land
schemes, in which large new rural communities were established with infrastructural
facilities. Under the FELDA programs, land was developed for rubber, palm oil and
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223
other corps, and allocated to individual settlers, who were provided with a house, garden
plot, and a small holding of rubber, oil palms, or other crops (Wyzan 1990, 623). In
1970 some 20,700 families were settled on 90 schemes, and by 1990 the number of
households had increased to 116,293, involving about half a million people on 315
schemes (Crouch 1996a, 122).
The Programs for Malay Participation in the Modern Sector
The primary objective of the NEP was to increase Malay participation in the
modem sector. Since it was expected that the objective could not achieved by private
Malay capitalists acting alone, the government established many new public enterprises
to mobilize resources and accumulate capital on their behalf. In addition, the other
major role of public enterprises included taking control of strategic sectors, fostering
Malay entrepreneurship, and facilitating joint ventures with both foreigners and non-
Malays (Searle 1999, 60).
The Growth of the Public Enterprises. The public enterprises expanded very
rapidly. Initially, there were only 10 public enterprises at the year of independence but
the total number of major enterprises owned by federal, state and regional authorities
rose to 841 in 1986 (Gomez 1996, 136). In 1974 the Ministry of Public Enterprises was
created to coordinate their activities (Chan & Horii 1986, 37). Development funds for
public enterprises between 1971 and 1975 grew from U % oftheG N Pto25.6% in 1985
(Jesudason 1989, 80). Several factors were responsible for the expansion of public
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224
enterprises. Basically, the government increased state funding for public enterprises, and
gradually shifted to deficit financing. The acquisition drive was also facilitated by the
availability of oil from east coast of the peninsula from the mid-1970, the appreciation
of international oil price in the 1970s, and Industrial Coordination Act of 1975
(mentioned below) which required each company to ensure allocation of a minimum
30% of its equity to Malay agencies or individuals (Gomez 1999, 37-8).
The public enterprises could be classified under two major categories: trust
agencies and non-financial public enterprises. The trust agencies are statutory
institutions, which hold corporate shares for the government on behalf of the Malays
(Ho 1999, 64). The major trust agency was Permodaran Nasional Berhad (PNB,
National Equity Corporation). The most prominent non-financial public enterprises
consisted of Perbadcman Nasional (National Corporation, Pemas), the Urban
Development Authority (UDA), and, at the state level, State Economic Development
Corporations (SEDCs).
The 13 SEDCs were formed in the early 1970s and were responsible for a wide
range of activities based on needs, resources, and the initiative of each state's Chief
Minister. Their engagement in various projects included resource-based labor-intensive
manufacturing, the provision of industrial estates, business premises and housing, and
participation in transport, tourism, and wholesale and retail trading (Milne 1976, 246).
Since the SEDCs received generous funds from the central government, they expanded
rapidly. However, due to their heavy losses, in 1982 the government restricted them
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225
from operating in certain fields, and even closed down some inefficient ventures (Milne
1986, 120).
The UDA, inaugurated in 1971, aimed to assist Malay businessmen in the
retailing, services and small manufacturing, originally in Kuala Lumpur and later also in
other Chinese dominated urban commercial areas (Gale 1981, 139). To be specific,
UDA's programs provided capital, management skills, and supervisors to small
businesses; business premises through rent or sale below market rates; the development
of strategic locations in urban areas; and redevelopment of older sections of Kuala
Lumpur. It also constructed large commercial complexes through joint ventures (Milne
1976, 245). Its role was one of the most ethnically sensitive, resulting from the direct
competition in predominantly Chinese commercial areas between the Chinese and the
Malay business, especially in construction and property development dominated by the
Chinese (Wyzan 1990, 66).
Founded in 1969 by the Ministry of Finance, the Pemas functioned mainly as a
holding company, acquiring some of major companies, particular those under foreign
control. Starting with insurance and construction, it rapidly expanded into mining,
engineering, securities, and real estate, and by the late 1970s it had grown into a large
conglomerate of 67 enterprises (Searle 1999, 62). Furthermore, the Pemas dominated
strategic trading, resource-based industries, export-oriented manufacturing businesses,
and some high-technology investment (Gomez & Jomo 1999, 32). Among its
noteworthy ventures in the 1970s were the acquisition of the monopoly of trading rights
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226
with China which was originally dominated by Malaysian Chinese capitalists, and the
purchase of the largest single bloc of shares in plantation-based conglomerates such as
Sime Darby and leading mining businesses like the former London Tin corporation
(Lim & Canak 1981, 218). The Pemas also played a major part in the control of the
banking sector; for example, in 1986 the Pemas became the owner of the United
Malayan Banking Corporation (UMBC), the country’s third largest bank (Gomez &
Jomo 1997, 33; Jesudason 1989,93). By 1988, with UMBC as the core, the Pemas had
grown into huge conglomerate of 96 enterprises (Horii 1991, 295).
Despite the accelerated transfer of corporate assets to Malays, the individual
Malay share of total Malay equity decreased sharply from 60% in 1970 to 34% in 1980
because the Malays, those in the middle income group, sold their shares, mainly to the
Chinese. The government offered preferential treatment for the Malays to buy special
issues of shares at discounted prices. However, virtually all the Malay shares bought
cheaply were resold almost immediately to the non-Malays at the market price (Crouch
1996a, 213).
To solve this problem, the government introduced the ownership-in-trust-
concept by establishing the Unit Trust Scheme (ASN), managed by PNB (Gomez &
Jomo 1999, 34). This was able to solve two problems in the distribution of capital
stock among the Malays: (1) preventing the stock from being concentrated in the hands
of high ranking officials and rich Malays; and (2) prohibiting the capital distributed to
the Malays from being resold to the non-Malays for quick gains, since the shares could
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227
be bought or sold only through the ASN (Jesudason 1989, 115). In other words, this
allowed the government to accommodate Malay demand for greater individual
ownership and to expand Malay ownership of equity capital while ensuring that these
assets remained in the hands of the Malays only.
The main trust agency, the PNB was formed in 1979 under the jurisdiction of
YBB (Bumiputera Investment Foundation) and headed by the Prime Minister. Its main
tasks were to implement the investment policies of YBB and to make actual investments
through the purchases of capital stocks, which were distributed by the National
Investment Trust Corporation (the Amanah Saham Nasional Berhad, ASNB) (Horii
1991, 296). The PNB bought shares on behalf of Malay individuals in the form of unit
trusts, and Malay individuals would be able to own shares in trust agencies through the
purchase of the unit trusts (Ho 1999, 67). In 1981 the government offered 31% of its
total shares for sale to the Malay individuals through PNB (Lim 1988, 30). Although
the trust agencies operating in behalf of Malays owned more stock than the individual
Malays prior to 1980, with the creation of the PNB, the individual Malays owned more
than twice as much as the agencies by 1988 (Wyzan 1990, 58). The exact data will be
further discussed in the next section.
The growth of the PNB was remarkable. By 1988, the PNB owned the shares of
some of the largest companies or business groups, including Malayan Banking (53.3%),
the former Guthrie (100%), Malaysia Mining (56.2%) and Sime Darby (36.2%) (Wyzan
1990, 67). By 1989, 45% of Malays had bought shares from the ASN; but most
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228
investments were small, 83.9% being worth less than S500 in 1985 (Crouch 1996a,
214). In 1990, the PNB held shares in 162 companies and its equity share comprised
20.6% of the financial sector, 26.4% of the manufacturing sector, 37.8% of the
plantation sector, 9.4% of the property sector, and 5% of the mining sector (Gomez
1996, 137).
Malay Party Enterprises. In addition to public enterprises, UMNO also
involved businesses to promote Malay economic power. In 1972 UMNO established
Fleet Holdings as investment holding company, which operated through its wholly
owned subsidiary, the Fleet Group. Fleet Holdings was created to limit foreign control
over the media and to generate enough funds for UMNO to reduce its financial
dependence on the MCA and Chinese businessmen (Milne & Mauzy 1999, 59-60). The
development of Fleet Holdings was closely related to Tengku Razaleigh and Daim
Zainuddin, successively party treasurers of UMNO (Searle 1999, 105). In 1972 Fleet
Holdings took control of a main newspaper company, renamed as New Straits Time
Press, and expanded into other related areas, such as publishing, printing, and book
retailing during the 1970s (Crouch 1996a, 215). Fleet Holdings began to play a major
role in the economy in the 1980s after Daim Zainuddin had served as the chairman of
the company in 1982. By the mid 1980s Fleet Holdings grew into a large conglomerate,
encompassing hotels, television, printed media, retailing, banking, insurance, property,
construction, plantations, and management services (Searle 1999, 106). However, after
the economic recession around 1986 and the collapse of property prices, the Fleet Group
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229
experienced heavy losses. To resolve the financial problem of the Fleet Group, the
Renong Group in 1990 purchased entire equity of the Fleet Group and took it over.
Although the Renong Group was not directly owned by UMNO, the party retained
majority control over the Renong Group through Malay businessmen closely related to
UMNO. Thus, UMNO corporate assets were consolidated under the Renong Group,
providing a pretext for UMNO, which was under criticism for party involvement in
business, to claim that the party was out of business (Searle 1999, 111-5). Controlled by
Daim Zainuddin through his protege, Halim Saad, the Renong Group effectively
controlled the media, construction, and financial sectors (Gomez 1996, 141).
The rapid growth of UMNO enterprises was facilitated by the symbiotic
relationship between the government and the party. That symbiotic relationship operated
through several mechanisms, including easy access to credit and finance, preferential
access to special Malay share issues, and the use of common directorships between
party-linked enterprises and public enterprises (Searle 1999, 116-26).
Domination over the Private Sector. To promote the Malay economic interests
in employment and corporate ownership through preferential treatment and the
expansion of the public sector, the government also increased its domination over the
private sector by instituting regulations and organizations to monitor private firms. The
Industrial Coordination Act (ICA), a legal system of licensing for manufacturing issued
in 1975, gave the Ministry of Trade and Industry sweeping powers to intervene in the
activities of the private companies. The ICA made it mandatory for the companies to
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230
comply with certain conditions for the approval of a license. The conditions in favor of
Malays comprised training, employment, distribution pattern, equity structure, and
composition of the board of directors. The ICA initially required non-Malay
manufacturing firms with more than $250,000 in shareholders' funds and employing
more than 25 full-time paid employees to reserve at least 30% of their equity to Malay
interests (Yasuda 1991, 333). In terms of employment restructuring, the private firms
were required to ensure that Malays held around 30 to 45% of the total employment for
granting or renewing the licenses; some enterprises were offered incentives or
exemptions from certain taxes to reach the employment quotas (Goh 1991, 79).
Employment Restructuring. With regard to employment restructuring, the main
strategy was preferential recruitment in favor of Malays in the public sector and in land-
development schemes in agriculture. Between 1970 and 1980, 92,300 rural jobs were
generated by the schemes, of which about 95% were held by the Malays. Between 1970
and 1977 Malays were 68% of the increase in workers employed of the public sector;
and this percentage in 1980 rose to 93% (Tai 1984, 48).
Education Policies. To promote long-term Malay economic interests in
employment, the NEP policies made a significant effort to enhance their educational
position. The Malays received preferential treatment ranging from admission quotas
and financial assistance for colleges and universities to the establishment of special
institutions, such as International Islamic University, which excluded the non-Muslim.
After the NEP, the admission quotas for Malays were enlarged and admission quotas
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231
were applied to specific fields of study for the first time. The quotas varied among fields
and universities (Means 1986, 107). In order to ensure the university admission of
Malay students in line with policy, the government founded a Central Unit for
University Student Selection under the Ministry of Education. Between 1970 and 1980,
the percentage of Malays recruited in higher education grew from 53.5% to 73 .4% of
the total; and by 1980 the proportion of the Malays in degree courses multiplied to
66.7% of the total (Tai 1984, 50). The Malay students were further encouraged to study
science, professional, and technical courses overseas through grants, scholarships,
fellowships and low or zero-interest loan. A large number of government scholarships
were available for advanced study abroad. It was estimated that more than 90% of these
scholarships were awarded to the Malays. In the field of science, by 1987 sixteen
residential science schools had been established with total enrollment of over 17,000. In
addition, to provide extra secondary science education, the MARA introduced 1 1
residential junior science colleges for the Malays (Selvaratnam 1988, 184-5, 187).
Financial Assistance. In addition to the restructuring of employment and
corporate assets, financial assistance to Malay businessmen was mainly offered by the
MARA, the UD A the Malaysian Industrial Development Finance, Bank Bumiputra, and
Bank Pembanguanan. For the small business, one of the notable examples was the
credit finance division of the MARA, generally issuing loans of less than $5,000 mainly
for projects in trade, industry, contracting, transportation, and professional services to
hawkers and traders. However, the commercial banks were the largest source of credit to
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232
the Malays because the banks were required to rapidly increase their lending to Malay
community (Liow 1986,6-8). In 1976, the commercial banks were requested to provide
a minimum of 20% of their new loans to the Malays (Ho 1999, 65-6). As a
consequence, bank lending to the Malays grew rapidly, from only 4% of the total
amount of loans approved in 1968 to 20.6% in 1980, and to 28% in 1985 (Jesudason
1989, 101).
Other Preferential Programs. Furthermore, licensing, contracting, and
consultancy services were provided by the government, which had direct control over
business entries and opportunities in favor of Malays. Licenses in such areas as mining,
logging, saw- milling, rubber dealing, timber export, printing, vehicle import, petrol
service stations, air and shipping transportation, and telecommunications were solely or
predominately issued to the Malays (Heng 1997,274). In 1985, for example, the Malays
held 73.5% of the licenses in logging and 63.9% in road transport (Jesudason 1989,
102). The Malays were also favored with the government purchases and contracts. For
instance, the government in the late 1970s withheld 30% of all contracts for the Malays
in construction (Jesudason 1989, 132). Business consultancy services were provided by
the MARA, the National Productivity Center, and the Ministry of Trade and Industry's
Bumiputra Participation Division (Bowie 1991, 96).
The NEP achieved its objective of bringing Malays into the business, but it
failed to create an independent Malay entrepreneur class. Most of Malay businessmen
depended on rentier profits in patronage networks without active participation in the
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233
production process and management of business. In other words, they used their
political connections to obtain special business treatment and were mainly concerned
with buying and selling shares, rather than establishing productive enterprises. Because
Malay-dominant government controlled political patronage, many Malay businessmen,
who were the major beneficiaries of the NEP, were politicians, retired bureaucrats, and
the members of royalty (Crouch 1993, 146).
Chinese Strategies in Response
Given the favoritism to Malays under the NEP, Chinese firms pursued three
major types of strategy—lobbies, the corporatization movement, and direct relations
with Malay patrons, to defend Chinese economic interests. The influence of lobbies was
limited under the structure of comprehensive programs of the NEP. The corporatization
movement generally did not play a major role in the economy. The forging of Sino-
Malay business alliance became the foremost channel of Chinese business success
during the NEP.
The Lobbies of Interest Groups. Small and medium-sized family enterprises,
which did not have direct links to Malay political elites, relied on the various Chinese
chambers of commerce (CCC), particularly the Associated Chinese Chamber of
Commerce and Industry of Malaysia (ACCCIM), and Federation of Malaysian
Manufacturers (FMM) to lobby on behalf of Chinese business (Crouch 1996a, 209).
For example, through ACCCIM and FMM, the Chinese succeeded in obtaining an
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234
amendment of the ICA in 1977. The amendment introduced consultation with the
private sector on conditions that would be required for licenses, creating an appeal
procedure; and it further exempted a range of enterprises from the provisions: only firms
with more than RM 500,000 in fixed investment were required to comply with 30%
Malay equity restructuring (Bowie 1991, 103; Heng & Sieh 2000, 138).
The Corporatization Movement. The second strategy was to revive the
collective power of Chinese business through the MC A-led corporatization movement.
The MCA, having lost its ability to promote Chinese economic interests in the coalition
government, sought to actively involve itself in the corporate affairs of the Chinese
community in order to mobilize Chinese popular support. The MCA leaders believed
that most of the Chinese enterprises were too small to compete with the large public
enterprises, which aggressively acquired assets on behalf of Malays. To modernize and
enlarge the scale of the Chinese traditional family businesses for effective competition
against Malay state capital, the MCA established a number of Chinese holding
companies. (Heng & Sieh 2000, 139-40).
A key aspect of the corporatization movement was the incorporation in 1975 of
a major investment holding company, Multi-Purpose Holdings (MPH), in which almost
all the key position were occupied by influential MCA members. Failing to attract
support from Chinese business leaders, the MPH drew funds generally from the Chinese
small-scale investors in the lower middle class through the membership of the MCA
Youth Cooperative Society (Koperatif Serbagana Malaysia, KSM), which had been
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235
highly successful in the operation of plantations and real estate for the previous several
years (Heng & Sieh 2000, 140). The KSM became the largest shareholder in the MPH,
holding over 40% of its capital shares in 1985 (Gomez 1991,53). Under the leadership
of Tan Koon Swan, the MCA top official, the MPH relied heavily on bank loans to
finance expansion because the assets of the KSM can be used as collateral for bank
loans to finance its growth (Crouch 1996a, 210-11; Heng 1992, 136). Like the public
enterprises, the MPH specialized in taking over established enterprises and purchasing
property. Through an aggressive acquisition drive of some key companies in many
economic sectors, the MPH achieved phenomenal growth within a short span of time
(Gomez 1999, 86). By 1982, the MPH had become the second largest conglomerate,
with 40 companies and 20,000 shareholders, investing in such sectors as lotteries,
plantation, real estate, banking, insurance, shipping, wholesaling, and manufacturing
(Gomez & Jomo 1999, 46).
Although the MPH had business dealings with some of UMNO top leaders, the
MPH rarely benefited from government patronage. Instead, on a number of occasions,
UMNO prevented the MPH from effecting important transactions (Gomez 1994, 229).
From 1983, due to some poor investment ventures, the MPH began to incur loss (Gomez
1999, 88). In 1985 the MPH suffered near bankruptcy due to both the 1985 recession
and the fraudulent dealings of Tan Koon Swan. Meanwhile, a number of MCA-Iinked
cooperatives were also on the verge of bankruptcy as a result o f fraudulent dealings, in
which some top party leaders were implicated. In order to curb the eroding party
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236
support, the MCA was compelled to pledge in 1986 that the party would no longer be
involved in business (Gomez 1994, 42). In 1989 the MCA sold off its shares in the
MPH to a Chinese company with close links to some Malay UMNO leaders (Gomez
1999, 90). The MCA eventually abandoned the corporatization movement and its
attempt to take an assertive role for the Chinese business was in a dismal failure.
The initiative of the MCA also led to the formation of some holding companies
owned by Chinese clan/dialect associations and ACCCIM, an umbrella organization of
the Chinese chambers of commerce that traditionally did not directly conduct business.
At the MCA's urging, several Chinese clan/dialect associations established holding
companies to run businesses on behalf of their members (Heng & Sieh 2000, 140). The
ACCCIM inaugurated its own holding company—Unico, which was the largest holding
company in the economic network of CCC-associations (Heng 1992, 136). The Unico
was active in plantation, property, credit and leasing, trading, and management and
consultancy (Shieh 1992, 122). However, these holding companies failed to play an
active corporate role in the economy.
With the exception of MPH, which experienced a dramatic but short-lived
business success, none of the Chinese holding companies in this movement emerged as
significant player in the corporate sector. The corporatization movement also failed to
bring about the structural reforms in the operation of Chinese business, particular the
small- and medium-scale enterprises. Apart from corruption and some poor investment
decisions, the failure of the corporatization movement resulted from two major factors.
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237
First, Chinese business leaders only provided minimal support to the movement. Since
the MCA influence in the coalition government was in decline and was unable to protect
the economic interests of Chinese big business, the large Chinese capitalists sought
better connections with UMNO rather than MCA in order to have the access to Malay
patronage (Gomez 1999,92). Furthermore, the ethnic-based pooled-resources approach
of the MCA provoked hostility from Malay economic nationalists, who felt that the
MCA-led corporatization movement to mobilize Chinese economic resources along
ethnic lines, if successful, would impede the NEP's objectives. The Malays could not
tolerate further business success of the MCA and prevented the MPH from acquiring
crucial assets, as illustrated by the company’s failed attempt to take over United
Malayan Banking, then the country's third largest bank (Heng & Sieh 2000, 141).
Direct Relations with Malay Patrons. In the context of the declining influence
of the MCA in the BN coalition, as mentioned in the previous chapter, when legislation
such as the ICA promulgated to ensure the effective implementation of the NEP, it was
imperative for Chinese businessmen to choose the third strategy—forging direct
relationships with influential Malay patrons such as UMNO top leaders, the aristocrats,
bureaucrats, and military officials (Gomez 1999, 70). The Chinese businessmen often
sought them for positions on boards of directors and thus invited them to participate in
their businesses as minority shareholders. While the Malays received fees for securing
business deals in which access to high-ranking politicians and senior civil servants
played a critical role, the Chinese exerted control over the enterprises for making policy
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238
decisions and managing daily operations. Through connections with Malay patrons,
Chinese companies received licenses, permits, contracts, and other business
opportunities (Heng 1997, 274, 276).
Summary. In short, besides poverty eradication, the implementation of the NEP
mainly involved restructuring wealth through a variety of specific measures. On the one
hand, the government assisted the Malays to enter into businesses through provision of
business premises, preferential treatment in the allocation of licenses, contracts, credits,
subsidies, monopoly rights, tax incentives, and other concessions, as well as through
direct participation in the ownership and control of product assets by public enterprises.
On the other hand, the government exerted its control over the restructuring of the
private sector by placing heavy pressure on foreign and non-Malay enterprises to recruit
Malay partners and workers and to comply with the quota of equity shares for the
Malays. Related to these restructuring measures directly beneficial to the Malays, the
government also sponsored the Malays in education through quotas, scholarships, and
special training. In response, to defend their economic interests, the Chinese adopted
three main strategies, lobbies, the corporatization movement, and direct ties with Malay
patrons. The most effective strategy for Chinese big business was good relations with
Malay patrons.
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239
Ethnic Economic Power
This section will examine the balance of economic power between Malays and
Chinese from 1970 to 1990 in such aspects as employment, household income, and
enrollment in colleges, with special attention to corporate equity.
During the first decade after independence, with the relatively market-oriented
economic policy, the ethnic Chinese continued to exercise economic predominance.
During the late period of the NEP, however, the rise of Malay economic power through
the restructuring of employment and corporate ownership resulted in the relative decline
of ethnic Chinese economic dominance. Even though the Chinese earned higher
incomes and held larger share of corporate equity, dominance over the economy shifted
to the Malays because the Malays controlled key economic sectors, such as oil, tin,
plantations, and banking.
In 1970, the Chinese were still in a stronger economic position compared with
the Malays. Chinese economic activities were concentrated in construction and
transport, and in both of the sectors they outperformed foreigners (see Table 9.1). The
greatest sector growth was in construction and property development, followed with
banking (Jesudasion 1989, 60). Chinese construction enterprises, exceeding $100,000
in value, shared 88.5% of fix assets, and 84.7% of the value of construction output in
1970 (Heng 1997, 267). Chinese businesses were awarded most of the contracts partly
because the MCA played an important part in patronage by securing tenders and
contracts. More significantly, the Chinese also controlled the local banking system until
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240
the 1960s. The number of Chinese banks increased from eight in 1959 to sixteen in 1970
(Jesudason i989, 63-4).
Although there were Malay entrepreneurs, Malay participation in the modem
economy was still extremely limited in the 1960s. In general, according to Gomez and
Jomo (1999, 19-20) Malay ownership of share capital in limited companies in 1970
accounted for 1.9%, as compared with 22.5% for the Chinese and 60.7% for the
foreigners (see Table 8.1).
TABLE 8.1
Peninsular Malaysia: Ownership of Share Capital of Limited Companies
by Ethnicity and Industry, 1970 (%)
Malays Chinese Indian Foreigner
Agriculture 0.9 22.4 0.1 75.3
M ining 0.7 16.8 0.4 72.4
Manufacturing 2.5 22.0 0.7 59.6
Construction 2.2 52.8 0.8 24.1
Transport 13.3 43.4 2.3 12.0
Commerce 0.8 30.4 0.7 63.5
Banking 3.3 24.3 0.6 52.2
Others 2.3 37.8 2.3 31.4
Total 1.9 22.5 1.0 60.7
Source: Gomez, Edmund Terrance and Jomo K. S. 1999, Malaysia's Political Economy: Politics,
Patronage and Profits, p. 20.
Note: The shares owned by the ethnic groups in each sector do not include the shares held by
government agencies and nominee companies. According to Gomez ( 1 999), nominee companies hold
shares on behalf of their owners, who intend to conceal their ownership of corporate stock.
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241
In 1970 the Malays were still heavily employed in the agricultural sector,
followed by low-paid jobs in the public sector including the armed forces, while their
share was small in construction, commerce, mining, and manufacturing (see Table 8.2).
The Malays continued to be poor in general and were mainly employed outside the
modem corporate sectors, with very few entrepreneurs and professionals among them;
they remained concentrated in agriculture and the public sector.
TABLE 8.2
Peninsula Malaysia: Ethnic Composition of Employment by Ethnicity
and Industry, 1970 (%)
Malays Chinese Indians
Mining & Quarrying 24 67 8
Agriculture* 69 21 10
Mamtfacturing 29 65 5
Construction 22 72 6
Utilities 48 18 33
Transport* 42 40 17
Commerce 23 65 1 1
Service 47 37 14
Source: Goh Ban Lee, "Restructuring Society in Malaysia: Its Impacts on Employment and
Investment" In Economic Dimensions o f Ethnic Conflict, 1991 , p. 77.
Note: Agriculture includes forestry, fishing, and agricultural food processing. Transport
includes communication.
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242
In addition, the economic position of Malays was partially reflected in the area
of education. Although the ethnic imbalance in the overall student population in tertiary
education was adjusted by 1970 and nearly reflected the ethnic composition of the total
population, the Malays were overwhelmingly concentrated in art and heavily
underrepresented in science, engineering and medicine. In 1959 the share of Malay
students was only 20% of the total of student population in University of Malaya
(Selevaratnam 1988, 180); in 1970, it accounted for 40% of the total compared with the
Chinese at 49% (Goh 1991, 78). However, in 1970 Malay students were only 1.4%,
4.5%, and 5 .9% of the graduates in the faculties of engineering, science and medicine
respectively in the University of Malaya (Selvaratnam 1988, 180).
As a result of the NEP, however, Malay economic power increased, which was
manifested in the economic structural transformation, the changing employment
structure, the rise of the middle class, the enrollment of local tertiary education, and the
accumulation of corporate wealth. In comparison with Malay economic power, Chinese
economic power grew in absolute terms, but its relative economic power declined.
First of ail, Malay household income improved significantly in comparison with
Chinese. The mean monthly household income in 1970 was RMS394 for the Chinese
and only RMS 172 for the Malays (Chee & Lee 1994, 169). In 1970, 33% of Chinese
households earned an average monthly income of less than RMS200, compared to 74%
of Malay households (Bowie 1991, 81). In 1990 Malays earned an average of
RMS928, while Chinese earned RMS1631 (see Table 8.3). The overall ratio of mean
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243
income of the Malays to that of the Chinese improved from about 44% in 1970 to 59%
in 1990 in Peninsula Malaysia (Chee & Lee 1994, 169, 171).
TABLE 8.3
Mean Monthly Household Income by Ethnic Groups in Malaysia (1970-90)
1970* 1976 1990
Malays 172 339 928
Chinese 394 796 1631
Indians 304 537 1201
Source: Adapted from Stephen Chee and Cassey Lee. "Social Cost of Economic
Restructuring: the Malaysia Case" In Social Cost o f Economic Restructuring in Asia and the
Pacific, 1994, p. 169.
Note: * Peninsular Malaysia only.
The NEP played a essential role in transforming Malay class and employment
structure. Between 1970 and 1990, while the agricultural labors decreased from 62.3%
to 37.4% of the Malay total, the industrial workers grew from 18.7% to 23.1%, and the
workers in the service sector from 15% to 21.7% (Jesudason 1997, 131). The
implementation of the NEP through preferential treatment in both the public and private
sectors also brought about a large increase in the Malay middle class, namely
professional and technical, administrative and managerial personnel, as well as clerical
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244
and sales workers. From 1970 to 1990 the Malay middle class rose from 12.9 to 27%
of the total middle class population. The Malay proportion of the leading professionals
also increased from 3.7 to 27.8 % in the case of doctors, from 6.8 to 11.2% in the case
of accountants, from 4.3 to 15.6% in the case of architects, and from 7.3 to 34.8% in the
case of engineers (Crouch 1994, 25-6).
With respect to education, enrollment for Malay students for degree courses in
local tertiary education institutions between 1970 and 1988 grew from 39.7 to 61.8% of
the total, increasing tenfold from 3,084 to 30,085 (Crouch 1996b, 126; see Table 8.4).
TABLE 8.4
Malaysia: Enrollment for Degree Course in Tertiary Education by Ethnicity, 1970-
1988 (%)
Years Malays Chinese
1970 39.7 49.2
1980 62.0 31.2
1988 61.8 31.2
Source: Rajakrishnnan Ramasamv, "Racial Inequality and Social Reconstruction in Malaysia,"
Journal o f African and Asian Studies 28: 223.
In the view of some sectors, Chinese continued to maintain their considerable
economic power. By the end of the 1980s, it was unofficially estimated that the Chinese
owned 50% of the construction, 82% of the wholesale trade, 58% of retail trade, about
70% of small-scale enterprises and around 40% of the manufacturing sector (Gomez
1996, 151). At the same time, the decline in the economic power of the Chinese was
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245
reflected in the decline of the MCA's most prominent investment company, Multi-
Purpose Holdings and the decline in the MCA as the patrons of Chinese capitalists,
leading to direct private ties of big capitalists with Malay patrons.
In contrast, the NEP had resulted in the widespread penetration of Malay state
capita] into key sectors. The Malay share of corporate equity was higher than the
Chinese in the most important sectors, including banking and finance, heavy industries,
high technology, manufacturing, minerals, petroleum extraction, and staple plantation
(Heng 1992, 130). By 1981, the government controlled the major sectors of the
economy—60% of both tin mining and in planted acreage and virtual monopoly of the
petroleum (Hing 1984, 309). Moreover, by 1980 the Malays had remarkably increased
the control of banking; the government owned 50% of total banking, along with 77% of
the local banking (Lim 1985a, 264). In 1984 the Malay ownership of share capital in
finance and banking increased to 75% (Heng 1992, 131).
In the manufacturing sector, according to the statistics complied by the Malaysia
Industrial Development Authority, the capital structure of companies showed that
Malays by 1987 had occupied the largest share of the paid-up capital. Malay capital
investment exceeded the capital held by the Chinese firms in such industries as food
processing, transportation equipment, electrical and electronic products, textile and
textile products, and paper and paper products (Heng 1992, 131).
Malay small businesses also grew rapidly; their overall growth rate was twice
that of the Chinese during the 1970s. Between 1974 and 1979, Malay small businesses
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246
rose from 18.2% to 23.2% of the total. Malay ownership in sectors like trading,
transportation, and construction, once the domain of Chinese capital, grew rapidly. For
example, the ratio of Malay registered contractors increased from less than 30% in 1970
to 63% in 1980, and the licenses in road transportation held by Malays grew to 63 .9% in
198S (Jesudason 1989, 102; Lim 1988, 28). In the rural areas, Malay small businesses
were generally active in construction, food processing, handicraft, and retailing and
wholesaling of primary commodities (Shamsul 1997, 252).
In brief, then, while the Chinese still controlled trading, especially wholesale
trade, and small business, the Malays dominated finance and banking, manufacturing,
heavy industry, high technology, minerals, petroleum, and plantation.
In terms of total corporate assets, however, it seems that the Malay allotment of
the corporate equity did not attain the 30% target; the Malay shares rose from 9.2% in
1975, to 12.5% in 1980, 18.7% in 1983 andl9.3% in 1990 (Jomo 1994, 13). On the
other hand, the Chinese augmented their corporate equity from 27.2% to 45.5% between
1970 and 1990 (see Table 8.5).
TABLE 8.5
Malaysia: Ownership of Share Capital of Limited Companies by Ethnicity (%)
Years 1970 1990
Malays 2.4 19.3
Chinese 27.2 45.5
Indian 1.1 1.0
Foreigners 63.4 27.7
Source: Third Malaysia Plan, 1976-80.
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247
Nonetheless, these figures probably overestimated the actual non-Malay shares.
In other words, Malay share ownership is believed to be much higher than indicated in
the official statistics.
Owing to difficulties in identifying ethnic categories in nominee companies and
locally controlled subsidiaries of foreign companies, in which Malay ownership was
considerable, the shares held through those companies were regarded inclusively as the
shares of non-Malays. In fact, those shares were more likely to be owned by Malay
individuals; especially politicians and senior civil servants who wanted to conceal their
business interests (Jomo 1989b, 46; 1990-1,476). Arguably, capital ownership should
be weighted in favor of more profitable sectors, such as banking and finance,
manufacturing, mining, and petroleum extraction. It is probable that Malay shares were
usually worth much more in the market because Malay ownership through acquisition of
large foreign firms tended to be concentrated in more lucrative sectors (Jomo 1986,47;
Lim 1988, 46). Finally, according to Heng Pek Koon (1992, 130), there was one more
reason that these figures in official statistics were misleading—the substantial Malay
ownership of plantation corporations was excluded from the calculation of Malay
figures.
Because of the above reasons, the Gerakan party estimated that the Malays might
have attained their 30% target of corporate shares as early as 1983 (Heng 1992, 130;
Lim 1988, 4S-6). Based on the data of Kuala Lumpur Stock Exchange, Chan and Horii
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248
(1986,78-9) also endorsed the estimation of Malay corporate assets in 1983 (see Table
8.6).
TABLE 8.6
Estimated Malay Ownership of Share Capital in the Corporate Sector by Industry
1983 (%)
Malay Ownership
M odem Agriculture 45
M ining 50
Finance and Banking 70-80
Manufacturing 18
Construction and Others 10-15
Weighted A verage 30
Source: Paul Chen and Kenzo Horii, Impacts of the New Economic Policy on the Malaysia
Economy: with Special Reference to Ownership and Control. 1986. p. 79
As an economist and top official of the MCA, Fong Chan Onn, who also used
the information of the companies listed on the Kuala Lumpur Stock Exchange, held that
Malay corporate assets had already reached 34.5% in September 1988 while the share of
non-Malays adjusted to 33.3% (Gomez 1994, 24; Jomo 1990-1, 477). Finally, the
MC A’ s think tank, the Institute of Strategic Analysis and Policy Research, argued that
the Malay proportion of equity ownership sought by the NEP had been achieved by late
1989 (Heng 1997, 284). According to these analysis, no matter whose statistics was
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249
more accurate, the Malays had already attained the target for corporate assets before the
target year— 1990.
Concluding Remarks
During the first decade after independence, the Malay share of the economy
remained much lower than that of Chinese, which dominated the middle level of the
economy. During the period of the NEP, however, the Malays rapidly increased their
economic share, and by 1990 the Malays controlled a significant share of the economy
in terms of corporate equity, and in some key sectors were in stronger economic position
than the Chinese.
At independence, the economic position of foreign interests was the strongest,
followed by the Chinese and the Indians, while that of Malays was the weakest. The
foreign interests, with about 60% of the corporate ownership, dominated mining,
plantation, finance, and international trading. The Chinese, who owned most of the
small and medium-sized enterprises, dominated local trade and services, and played a
significant role in tin mining and rubber plantation. By contrast, the Malays were poorly
represented in the modem urban sector, and most of the Malays were impoverished
peasants.
During the first decade after independence, the market-oriented economic policy
reinforced the economic position of the stronger groups—the foreigners and the
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250
Chinese. The Malay government attempted to improve Malay economic position
through rural development programs targeted rural Malays and through urban programs
aimed at Malay businessmen. However, due to the small scale of the urban programs,
the infrastructural nature of the rural programs, and the market power and business
networks of Chinese and foreigners, the economic progress for the Malays was very
limited. The Chinese retained their strong position in mining, rubber, transport, trading,
and professional services. Making considerable progress in property, construction, and
banking, the Chinese were also in dominant position of these sectors. As a result, while
the Chinese exercised substantial economic power, Malay economic power remained
weak.
In the late 1960s, Malay businessmen began to realize that a more radical
approach must be adopted to increase Malay economic power. The 1969 ethnic riots
offered a great opportunity for the Malays to launch a comprehensive and integrative
restructuring program, known as the New Economic Policy, for redressing the ethnic
imbalance of economic power. While the NEP continued to promote the rural
development for poverty eradication, it concentrated on increasing Malay participation
in the modem urban sector through credit, quotas, training, regulation, corporate share
transfers, and the expansion of public enterprises.
When the NEP ended in 1990, the Chinese had increased economic power in
absolute terms as a result of economic growth. Nonetheless, compared with the increase
in Malay economic power, Chinese economic power had declined in relative terms.
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251
Although the Chinese still earned a higher mean monthly income than the Malays, and
played a significant role in construction, manufacturing and domestic trade, especially in
wholesale trade, they lost their position in finance and banking, and were excluded from
heavy industry, high technology, and petroleum extraction.
During the NEP period, the Malay economic position was greatly improved and
its economic power rapidly increased. By 1990 there had been an increase in the Malay
middle class and small businesses. Although statistics do not show this, it is generally
believed that the Malays actually reached its target of economic restructuring—30% of
corporate equity. Most importantly, through the public enterprises the Malays controlled
oil, mining, plantations, and finance.
In short, while Chinese economic power was in relative decline, Malay
economic power was on the rise. The Malays succeeded in expanding their economic
power under the NEP. Although the Chinese still could exert some degree of economic
power, they lost the dominant economic position by losing the control of some key
sectors. Since the Malays improved their economic position by capturing economic
share from the foreigners and the Chinese, they were no longer in economic subordinate
position.
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CHAPTER 9
SUMMARY AND CONCLUSION
This chapter reviews the previous chapters on the case of Malaysia, and discusses
changing ethnic power between the Malays and the Chinese In comparing the balance of
ethnic power between Malays and Chinese, it argues that the increase in political and
economic power of the Malays, the political dominant group, was conducive to the
democratic setback in Malaysia.
Summary
During the era of colonial rule, British policies concerning the ethnic division of
labor and decolonization affected the power structure of ethnic politics in Malaysia.
Those areas of commerce and industry not dominated by foreign capital had been left
largely in the hand o f Chinese businessmen. The Chinese generally were concentrated in
tin mines, rubber plantations, and commerce. By contrast, the overwhelming majority of
Malays worked in traditional rural occupations. Although most Chinese were in fact
poor, the middle and upper classes were usually the Chinese while the Malays constituted
the majority of the poor.
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On the other hand, the Malays dominated political power. While non-Malays
elites predominated over commerce and professional jobs, Malay aristocrats monopolized
the upper echelon of bureaucracy. Malay political power was strengthened in the
Japanese occupied period (1941-1945). The Japanese collaborated with the Malays,
entrusting the Malays to take over the administration left by the British and nurturing
Malay nationalism for social support. When the British returned to rule in 1945, Malay
nationalism demonstrated ethnic cohesion and ideological power through mass
mobilization and campaign platform, resulting in the change of the British decolonization
policy from equal treatments toward all ethnic groups to pro-Malay position.
Subsequently, domestic Chinese communist insurrection convinced the British that the
Malays were more politically reliable than the Chinese. For political stability, while
fighting against the communists, the British promoted inter-ethnic communications. As a
result, the ethnic accommodation, known as the Bargain, finally institutionalized in the
Constitution of 1957 in which Malays claimed political supremacy and Chinese accepted
a subordinated political position in exchange for expanded citizenship and economic
security in free market.
At independence, the Malays exercised political power mainly through the control
of the state apparatus. Except for some technical and professional posts, the Malays
dominated the key organs of the government—the bureaucracy, the judiciary, the
military, and the police. As to party system, the Malays, represented by UMNO, led the
multiethnic coalition party, the Alliance, which also constituted Malayan Chinese
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Association and Malayan Indian Congress. Given Malay political dominance, the Malays
exercised the control of ideological power. It was clearly manifest in the Constitution,
which established the legitimacy of Malay rule and the principle of Malay dominance
expressed in national symbols such as the Malay sultans being appointed as the Head of
State, Islam being the state religion and Malay being the national language. Meanwhile,
the failure in the insurgency of Chinese communists to challenge the political supremacy
of the Malays signified that the Chinese could no longer use coercive means to contend
for the control of the state apparatus or to change the political subordinated position for
the Chinese.
During the first decade after independence, the Chinese failed to increase its
political power due to the exclusion of Singapore from the federation. Initially, the
Chinese, led by the MCA, cooperated with Malays, represented by UMNO, in the
politics, with no attempt to challenge the political dominance of the Malays. However,
after the merger of Singapore into the federation in 1963, the delicate balance between
the Chinese and the Malays was undermined. The merger meant that the Chinese became
the largest ethnic group, along with an increase in economic power drawn from
Singapore, the most prosperous urban area in the peninsula. For this reason, the merger
of Singapore raised the Chinese expectation on their political position. The Singapore
party, the PAP, entered the electoral politics with the campaign for a “Malaysian
Malaysia,” which stressed equal treatment toward each ethnic community. That campaign
enhanced Chinese ideological power and ethnic cohesion by uniting the Chinese with the
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alternative ideology which challenged the principle of Malay preeminence in politics.
Since it threatened the political power of the Malays, Malay-controlled government
decided to expel Singapore from the federation in 1965. As a consequence, Chinese
efforts to increase its political power through economic power, ideological power, a
larger number of voters, and greater ethnic cohesion were aborted.
In the meantime, the Malays attempted to increase its economic power through
special treatments in rural and urban programs. Because of most Malays employing in
traditional agricultural sector, the Malay-controlled government committed itself to
extricating Malays from poverty and to improving their economic status. Since most of
the Malays resided in the rural areas, the programs appeared to be rural-oriented until the
mid-1960s. However, British and other foreign companies continued to control the
commanding heights of the economy—rubber plantations, tin mines, banks, and the big
trading firms; and Chinese business dominated much of the rest. The failure of the rural-
oriented programs was associated with several factors. First, the rural development was
basically infrastructural in nature, resulting in the benefits of the programs largely going
to the Chinese who dominated transport, construction, and property. Second, the urban
programs were too small in scale and moderate in approach to be effective in the
expansion of Malay economic power within a short span of time. Finally, market-oriented
development policy in the sector of industry and commerce as well as Chinese business
acumen and networks helped obstruct the rapid development of a Malay business class.
Consequently, while the Chinese secured their economic position and even made some
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256
progress in banking, construction, and manufacturing, Malay failed to significantly
increase their economic power by promoting Malays into the modem sector of the
economy.
After the expulsion of Singapore from the federation, the Chinese did not
abandon the attempt to increase its political position. The Chinese who were not satisfied
with the MCA continued to endorse “Malaysian Malaysia” campaign through the newly
established opposition party, the DAP. The sense of crisis resulted from the persistent
Chinese campaign motivated the Malays to demand for a larger share in the economy
through more radical approach of development policy: comprehensive restructuring
programs to redistribute wealth and economic activities from foreigners and non-Malays.
The Malay-dominated government took the opportunity of the 1969 racial riots
to increase Malay political power. To avoid further ethnic conflicts, the government
declared a national state of emergency and suspended the parliament. Furthermore, the
government exercised extraordinary power through the establishment of the National
Operations Council, which legitimated various security and sedition laws, such as the
Sedition Acts. When parliamentary democracy was restored in 1971, the government had
undergone substantial changes in authoritarian direction through constitutional
amendments. The Malays tightened their control over ideological power through
cultural, language, and education policies, including restricting non-Malay cultural
expression, promoting Malay as sole official language, promoting Malay-medium and
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Islam education, and prohibiting the challenge of the ideology of Malay dominance. The
Malays further increased their political power by redrawing constituency boundaries in
favor of Malays and by recruiting some Chinese-based parties, notably the Gerakan, in
the expanded ruling coalition (renamed it as National Front). Consequently, the Malays
gained more seats in the parliament and thus the bargaining power of the MCA was
decreased in the National Front. The increase in Malay power could also be found in the
weakening of consociationalism in the cabinet posts. The Chinese lost the Ministry of
Commerce and Industry in 1969 and the Ministry of Finance in 1974. Since then the
Chinese never held important cabinet posts. In addition, despite intensive factional
conflicts in UMNO, the degree of ethnic cohesion was not a serious problem for Malay
political power when compared with that of Chinese.
When democracy was restored, the Malays attempted to increase their economic
power by imposing the New Economic Policy (1971-1990) on the non-Malays. The
NEP focused on the two main aspects of promoting the Malays into the modem sector of
the economy—access to education and employment as well as corporate shares—
through the series of affirmative action programs such as quotas, credits, training,
corporate equity transfers, and through the expansion of public enterprises. Under the
NEP, it was estimated that the Malays had about 30% of the total corporate equity (the
revised data) in the late 1980s, but their estimated corporate equity in some key sector
was higher than the total; for example, modem agriculture was 45%, mining 50%,
finance and banking 70-80% in 1983. Although the Malays did not achieve dominance in
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terms of total equity shares, they gained their significant economic power through the
rise of Malay middle class and through the control over the key sectors such as banking,
heavy industry, high technology, and petroleum extraction.
In response, the Chinese intended to defend its economic and political power. The
foremost task for the Chinese was to enhance ethnic cohesion, in which important issues
were interparty and intraparty rivalries. Because of the local interests and the Gerakan
being the shelter of the MCA defectors, the attempt to the merger between the MCA and
the Gerakan was unsuccessful. The Chinese even intended to unite both Chinese ruling
parties (the MCA and the Gerakan) and Chinese-based opposition (the DAP) in the
Chinese unity movement during the early 1970s period, but this effort was a complete
failure. In terms of intraparty conflicts, the internal divisions in the MCA happened in
1972 and 1983 generally resulted from power struggle and disagreement on government
policies. Even the DAP which resource was less than the MCA constantly suffered from
factional conflicts. The problem of Chinese ethnic cohesion also manifested in their
voting pattern because it was not clear whether their interest would be better protected
through the support for the MCA and the Gerakan or for the DAP. Thus, the lack of
ethnic cohesion led to Chinese failure to increase their political power.
The Chinese made intensive efforts to defend its economic interests. Since most
of the Chinese enterprises were small and medium-sized, they pursued three types of
strategy: appeals through the Associated Chinese Chamber of Commerce and Industry of
Malaysia, corporatization through holding companies, and direct relations with influential
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Malay patrons such as politicians, bureaucrats, aristocrats, and military officials. The last
strategy seemed to be the most effective for Chinese economic power. Moreover,
economic growth also played a significant role in offsetting the impact on ethnic
redistribution through the expansion of the economy. Although Chinese increased its
economic power in the absolute terms and preserved their economic position in some
sectors including trading and small business, Chinese economic power was in decline in
relative terms.
Discussion
Why were the Malays able to exercise political power over the Chinese and
increase their political power after1969? In terms of ethnic politics, the ethnic division of
the Chinese and the ethnic cohesion of the Malays in the period of decolonization was a
fundamental factor. To contending ethnic groups, ethnic cohesion is a vital issue. Given
the fact that the Chinese have a moderately smaller population than the Malays, ethnic
cohesion became even more critical to the Chinese.
The importance of ethnic cohesion could be traced back to the colonial period,
during which the ethnic cohesion of the Chinese was weak and that of the Malays was
strong. As mentioned in the earlier chapter, the basic causes of Malay cohesion were
related to religious homogeneity and political culture. The unity of Malays was also
associated with Malay nationalism in the decolonization period. The Malays united under
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the leadership of the UMNO, which mobilized Malays for fighting against the Malay
Union, the British proposal for equal treatments among ethnic groups for the preparation
of the independence. In response, the British were forced to renegotiate with the Malays
without non-Malays participation. As a result, the British shifted to pro-Malays policy in
which the Malays retained their special rights. The special political rights of Malays
legitimized their controlling the state apparatus and secured their political supremacy.
By contrast, the Chinese lacked ethnic cohesion in the colonial period. Apart
from the causes mentioned in the previous chapter, the causes of the weak cohesion of
the Chinese could be found in the political apathy of most Chinese who immigrated to the
peninsular for livelihood. Before the independence, the mentality of many Chinese was to
get rich as soon as they could and returned to their homeland. Many disassociated
themselves from politics, which was time-consuming and could be free-riding, and did
not unite together for more political rights and power against British pro-Malay policy.
As a result of political indifference, they lost the first and foremost battle against the
Malays, missing the best opportunity to request equal treatments and a greater share of
political power. After independence, this kind of opportunity would be less feasible
because it was more difficult to receive more gain and concession from the Malays, the
dominant ethnic group, than from the British, the mediator.
No evidence suggests that class division caused the lack of Chinese cohesion.
Without class-consciousness, class itself does not result in class division, which in turn
could not afreet ethnic cohesion. Class divisions in the Chinese community were so weak
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that they would not affect Chinese cohesion. Except for the communists, the Chinese in
general lacked class-consciousness. However, the Chinese communist did not develop
class alliance across other ethnic groups, especially the Malays, because the class-
consciousness was not popular in the Malay community and Chinese communist
insurgency made the Malays hostile to the Chinese. In general, the effect of class on
politics can be seen by class voting (Rempel & Clark 1995,243). However, class voting
did not exist in the Chinese community. The leadership of the MCA before the early
1970s was indeed upper class, but, originally as a welfare organization, the MCA drew
support from the poor, especially in the rural areas. Some Chinese-educated businessmen
withdrew their support from the MCA, which compromised on Chinese language and
education. While receiving support from the urban poor, the DAP also attracted the
votes from middle class. Chinese electorate support shuttling between the MCA and the
DAP was the strong evidence of the lack of class voting in the Chinese community.
Malay control of the state apparatus, the result of their greater ethnic cohesion
before independence, was also important in explaining the increase in Malay political
power. The preference policies in favor of Malays in politics, economy, and education
offset the economic power of Chinese. In the realm of politics, Malays controlled the
MCS, the elite civil service, through recruitment with a four-to-one ratio in favor of
Malays. More importantly, Malays dominated all key cabinet posts except those related
to the economy : the ministry of trade and industry and the ministry of finance; and they
gained control of these in 1969 and 1974, respectively. Moreover, Malays tightly
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262
controlled security, dominating the top positions and the rank and file of the police and
the military. Likewise, in the party system, UMNO, a Malay party controlled the
Alliance, the multi-ethnic coalition party, in which the MCA acted as a junior partner.
With the control over two-thirds of parliamentary seats, the Malays also manipulated
laws and the constitution to their advantage. They blocked the potential political
challenges of the Chinese through the frequent constitutional amendments in such areas
as constituency delineation, the Sedition Acts, the Official Secret Acts, and the Internal
Security Acts.
With the control of the state apparatus, the Malays further increased their political
power through the increase in their economic power after 1969. Under the NEP
affirmative action programs, the Malays became strong in some important economic
sectors through capital equity transfers. The rise of the Malay middle class was the result
of credits, quotas, training, and educational preference. With more economic resources,
the Malays enhanced their bargaining power with the Chinese. Not only did UMNO not
rely on the campaign fund contributed by the Chinese, but UMNO also secured support
from majority of Malays and certain population of the Chinese through political cooption
and patronage. Although political patronage made intraparty rivalries within UMNO, it
did not affect Malay political power substantially; on the contrary, the decrease in their
ethnic cohesion revealed their increase in political power.
The increase in the balance of ethnic power in favor of Malays was manifest in
greater state autonomy from the Chinese, the politically subordinated group. The
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Malaysian state which pursued an ethnic ideology was established by the principle of
special Malay rights and Malay political domination. Since the state was controlled by the
Malays, it lacked autonomy from the Malays after independence. Before the early 1970s
state autonomy from the Chinese was weaker because the Chinese held considerable
economic power relative to the Malays. In that period, Chinese business, heavily
dependent by the state in finance, were generally free from state intervention. From a
class perspective, since most of the businessmen were Chinese, the Malaysian state
lacked autonomy from the dominant class. After the early 1970s, however, state
autonomy became greater from the Chinese when the state pursued the New Economic
Policy that allowed more intensive and extensive state intervention in terms of
redistribution despite some resistance from the Chinese community.
The increase in Malay political power can also be seen in political struggle among
Malay elites without significant damage of Malay power in Mahathir regime. Mahathir
might withhold the power of a few radical Malays for the purpose of regime stability, but
he did not withhold Malay political power to the extent that Malay political supremacy
would be questioned. For example, while Mahathir seemed to withhold radical Malay
political power through control and repression from extreme actions which would have
radicalized ethnic politics, he continued to strengthen Malay domination in politics and
the economy, as mentioned in the previous chapters.
There is no evidence suggesting that international factors were significant to
ethnic political power in Malaysia after independence. China did not support the Chinese
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264
communists and other Chinese opposition parties such as the DAP in Malaysia. China did
not have hegemonic interest in Southeast Asia except for Vietnam in the cold war era.
Although there was verbal support mainly through radio broadcasts oriented to ethnic
Chinese communists in Malaysia, Chinese did not offer financial and military support for
them (Milne & Mauzy 1986, 158). China also did not support the DAP which had
capitalist ideology incompatible with communism. After 1978 when Cambodia was
occupied by Vietnam that the former Soviet Union supported, China and Malaysia had
common interests in the containment of expansion of the influence o f the former Soviet
Union (Stubb 1990, 111-113). Under these circumstances, there was no incentive for
China to help ethnic Chinese increase their political influence in Malaysia.
Although the precursor of the DAP had been the branch of the PAP of Singapore
in the period of the merger, it was possible for Singapore to support the DAP because
Singapore, as a city-state without natural resources, was very vulnerable in terms of
security and heavily dependent on Malaysia for the supply of produce and water.
Inevitably, some disputes and competitions happened between Singapore and Malaysia,
but no evidence was found that dispute resulted in Singapore’s political intervention
through the DAP (Milne & Dauzy 141-2).
After independence, the British supported Malaysia’s defense through the
presence of its military until 1971. However, there is no evidence that the British became
involved in domestic politics in Malaysia. Although Malaysia welcome the political
influence to counterbalance that of China and the former Soviet Union in the Southeast
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265
Asia, no evident indicates that the United States became involved in domestic politics in
Malaysia.
In the first decade after independence, the Malays continued to control politics
while Chinese still dominated the economy. Since Chinese economic power
counterbalanced Malay political power, parliamentary democracy inherited from the
British was kept alive. For example, there was relative freedom of expression because the
press was generally free to express views (Khoo 1997,46). With the control of the state
apparatus, Malays enhanced their political power through constitutional amendments and
expansion of the ruling coalition, and also increased their economic power through the
NEP. The increase in Malay economic power provided economic patronage to gain
political support and thus reinforced their political power. In contrast, Chinese political
and economic power was in relative decline because of their disunity and failure to
increase their political power and retain their economic power. Due to ethnic balance of
power shifted in favor of Malays, the ruling ethnic group, Malay-dominant state was able
to frequently amend the constitution, leading to democratic erosion beginning in the
1970s and further democratic setbacks in the 1980s. The deterioration of democracy has
been manifest in engineering elections, a steady diminution of freedom of association and
assembly, and a tightening domination of the mass media by legislative prohibitions,
bureaucratic controls, police surveillance, and outright ownership by the ruling party
(Khoo 1997,48). For example, the campaign period was shortened from 49 days in 1959
to 23 days in 1974 and further to 15 days in 1986 (Sothi Rachagan 1993,40). In 1987,
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266
the Printing Press and Publication Act was amended radically that, with absolute
discretion, the Minister of Home Affairs was able to ban or resist publications, which
were prejudicial to morality, security, public opinion, and public interests (Crouch 1996a,
85).
From the perspective of ethnicity, in short, the setback of democracy from
consociationalism to control model in Malaysia was associated with ethnic balance of
power. While the political system of Malaysia, inherited the democratic tradition from
the British, basically was democratic in appearance, but authoritarian controls have been
increased mainly because of ethnic politics. The gradual increase in Malay political and
economic power after 1969 led to the substantial decline of democracy beginning in the
1980s.
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CHAPTER 10
CONCLUSIONS: COMPARISON AND DISCUSSION
This concluding chapter will compare Taiwan and Malaysia in terms of
collective ethnic power. It will also compare ethnic balance of power with the structure
of ethnicity and other structural causes of democracy for the two countries. It
demonstrates that although there is no single dominant cause in explaining the contrast
of democratic performance in the two countries, ethnic power has a significant role that
must be taken into account.
Comparison: Taiwan and Malaysia
The two cases under research generally support the hypothesis: given an
ethnically divided country, the greater the increase in the ethnic power of the dominant
group, the more likely a decline in democracy; the greater the increase in the ethnic
power of the subordinate group, the more likely an increase in democracy. It is because
democracy, as mentioned in the first chapter, is a matter of power and access of power;
it is basically a power struggle between the dominant group and the subordinate group.
In the case of Taiwan, where the Mainlanders had controlled economic and
political power, the increase in Taiwanese collective power promoted democracy. In
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the case of Malaysia, where the Malay political elite took advantage of their control of
government to expand their political and economic power, the decrease in Chinese
collective power was conducive to the setback of democracy.
In Taiwan, the Taiwanese, the political contender, increased first their economic
power beginning in the 1960s mainly through small and medium-sized enterprises and
business groups, and then increased their political power beginning in the 1970s through
the Taiwanization program, national supplementary elections, and particularly through
the rise of a Taiwanese democratic ideology and the integration of the Taiwanese
opposition with a support network from the SMEs, the Presbyterian Church, the
overseas Taiwan Independence Movement and the United States Congress. In Malaysia,
beginning in the early 1970s the Malays, the politically dominant group, increased their
political power through the control of the state apparatus, an expanded coalition,
constituency redrawing, and the constitutional amendments, and then increased their
economic power through the expansion of public enterprises and affirmative action
programs under the New Economic Policy. This synthesis will be elaborated in the
following paragraphs.
In the early years, Taiwan was different from Malaysia in the distribution of
collective ethnic power, which is defined as the political power, the economic power,
and their ethnic cohesion of their respective ethnic groups. In Taiwan, the Mainlanders
who had strong ethnic cohesion controlled both political and economic powers, while
the Taiwanese were weak economically and politically as well as in ethnic cohesion. In
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Malaysia, the Malays, who had strong ethnic cohesion, dominated political power, while
the Chinese, with weak ethnic cohesion, gained the upper hand in economic power.
Considering political power, which is divided into bureaucratic/institutional
power, ideological power, and external support, the Malays in Malaysia did not
dominate politics to the extent that the Mainlanders did in Taiwan. First, both the
Mainlanders and the Malays controlled the bureaucracy, the judiciary, the military, and
the police. What made the Malays different from the Mainlanders was in party politics
and the cabinet. While the Malays left two important ministries— the Ministry of Finance
and the Ministry of Industry and Trade in the hands of ethnic Chinese, the Mainlanders
monopolized all key posts in the cabinet. And whereas the Mainlander elite dominated
the KMT, which was reorganized along Leninist lines, and forbade the existence of
Taiwanese opposition parties under martial law, the Malays cooperated with the
Malaysian Chinese Association, with the Chinese party serving as a junior partner in the
coalition, and allowed electoral competition with Chinese opposition parties such as the
Democratic Action Party. Second, in Taiwan, the Mainlanders controlled political
ideology by means of language, education, and the media. In contrast, although the
Malays controlled ideological power through the principle of the legitimacy of Malay
rule, and the Malay political supremacy was firmly established in the constitution; the
Malays did not control ideological power in terms of media, language, and education
because they allowed Chinese-language publication and news media as well as Chinese-
language schools at the elementary and secondary levels. Third, the Mainlander regime
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was endorsed by the United States security pact and economic aid, while the Malay
government did not receive strong external support, although the British helped in the
defense of Malaysia, particularly through the presence of British military officers who
occupied some of the top military posts until the 1960s.
With respect to economic power, the Mainlanders dominated the economy in
Taiwan but the Malays were subordinate in terms of the economic power to both
foreigners and, to lesser extent, the Chinese in Malaysia. Having inherited economic
power from the colonial Japanese, the Mainlanders controlled state-owned enterprises,
ranging from trade, raw materials, and transportation to finance. Moreover, Mainlander
businessmen dominated manufacturing, notably the textile industry. Under the ISI, the
KMT government favored the Mainlanders far more than the Taiwanese in state
patronage. In contrast, the Malays, most of whom worked as peasants, lacked capital
and business experience in industries and services, which were controlled by foreign and
Chinese interests.
As to ethnic cohesion, both the Malay majority and the Mainlander minority
were strong compared with their respective contending groups, the ethnic Chinese and
native Taiwanese. The Malay community generally supported United Malaysian
National Organization with the exception of some radical Malay Muslims. By contrast,
the ethnic Chinese community was divided by class, subethnicity, language and
education. Competing with a number of smaller Chinese opposition parties, the MCA
was unable to provide the leadership to the Chinese community that UMNO did for the
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271
Malays. In the case of Taiwan, virtually all Mainlanders under the centralized leadership
of the KMT were the loyal supporters of the Mainlander regime. In contrast to the
Mainlanders, the Taiwanese were politically divided by many local factions, most of
which were co-opted by the KMT. More importantly, without an ethnic party,
independent local Taiwanese opposition could not be united as an opposition force
countrywide.
The centralization of all power resources in the hands of the Mainlanders who
had strong ethnic cohesion was conducive to an authoritarian regime, while the
counterbalance of Chinese economic power to Malay political power was conducive to
democracy in the 1950s.
In the 1960s, both the Taiwanese in Taiwan and the Chinese in Malaysia
increased their economic power. The Taiwanese began to increase their limited
economic power through the emergence of the SMEs; but the Mainlanders maintained
their economic dominance due to the important role of the SOEs in the economy and
their considerable strength in the private sector. Politically, the Taiwanese were still
confined to local politics under the Temporary Provisions and were forbidden to
establish a political party under martial law. Since the Taiwanese elites were unable to
compete with the Mainlanders in national politics through an opposition party, the
Taiwanese remained under one-party authoritarian rule. In the case of Malaysia, the
Chinese economy developed in the modem urban sector and continued to dominate
economic power as a result of the market-oriented policy and their exclusive ethnic
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272
business networks. However, the Chinese failed to increase their political power because
Singapore, which as part of Malaysia increased Chinese economic power through its
prosperity and Chinese population, was repulsed from the federation in 1965. As long
as the Chinese remained in a politically subordinated position, and the Chinese did not
use their economic power to exert more political influence on national politics,
democracy in Malaysia was maintained in the 1960s.
In the 1970s and the 1980s, the ethnic distribution of power began to change in
the two countries. While the Taiwanese increased their collective power in Taiwan, the
ethnic Chinese in Malaysia lost collective power. The increase in Taiwanese economic
power was evident in the rise of the Taiwanese private sector through the channels of
state patronage and through market policies in export-oriented industrialization. The
SMEs, most of them owned by the Taiwanese, played an increasingly important role in
export, employment, and industrial output.
While the Taiwanese converted their economic power into political strength in
the struggle for democracy in the 1970s and the 1980s, the Chinese in Malaysia could
not use their economic power to generate sufficient political power to promote
democracy. In the 1970s the Taiwanese began to convert their economic power into
political power when the Mainlander regime allowed the Taiwanese to enter into
national politics through Taiwanization program and national supplementary elections,
and more and more Taiwanese SMEs provided financial support to the Taiwanese
opposition movement, which posed an ideological challenge to the legitimacy of the
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273
KMT regime. By contrast, in the case of Malaysia, the further expansion of Chinese
economic power was checked by the New Economic Policy, which endorsed the
expansion of public enterprises, and affirmative action programs favoring the Malays
through such means as credit, training, capital equity transfers, and quotas in contracts,
licensing, education and employment. Owing to the expansion of public enterprise and
capital equity transfers, the Malays dominated key economic sectors including oil, tin,
rubber, banking, heavy industry, and high technology. As a result of quotas in education
and employment, a Malay middle class emerged. The relative decline in Chinese
economic power was evident in its position with respect to the bureaucracy. The
Chinese lost the two ministerial posts in charge of economic and financial affairs in
1969 and 1974, and never held key post in the cabinet after 1974.
In the meantime, the Taiwanese increased their political power through the
integration of opposition forces, known as the Tangwai, and by challenging the political
ideology of the KMT. With the domestic support of the SMEs and the Presbyterian
Church and the external support of the overseas Taiwan independent Movement and the
United States Congress, the Taiwanese utilized their political power to struggle for
democracy. In Malaysia, the Malays increased their political power first through the
state of emergency, constituency redrawing, and constitutional amendments such as the
Sedition Act and then through the expanded coalition in 1974 in which the MCA was
marginalized through the entry of other Chinese-based parties, especially the Gerakan.
With their increased economic power, the Malays further increased their political power
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274
in the Mahathir regime through constitutional amendments and the expansion of
executive power at the expense of judicial power.
While ideology and external support did not play a substantial role in the
political power of the ethnic Chinese in Malaysia, these two elements were critical to the
increase in the political power of the Taiwanese in Taiwan. The withdrawal of the
United States support from the Mainlander regime led to the decline in the legitimacy of
Mainlander rule, based on a martial law regime justified by the one-China claim.
Although the Taiwanese did not control the major means of ideology: education and the
media, the decline in the Mainlander political ideology was advantageous for them to
further challenge the legitimacy of the KMT rule through publications and mass
activities. External support from the overseas Taiwan independence movement and the
United States Congress, along with a radical ideology that identified democracy with
Taiwanese self-determination, greatly encouraged members of the radical opposition of
the Taiwanese to jeopardize their future or even their lives in the event of political
repression in their struggle for democracy. In contrast, there was no evidence to suggest
that the ideology of Chinese opposition threatened the legitimacy of Malay political
domination in Malaysia, or that the Chinese opposition received external support from
overseas Chinese in Singapore or from great powers such as Communist China or the
United States.
As to ethnic cohesion, the increase in the ethnic cohesion o f the Taiwanese
opposition helped increase Taiwanese collective power, whereas the decline in ethnic
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275
cohesion in the Chinese community in Malaysia weakened its collective power. The
decline in Chinese cohesion was evident in increasingly intensive inter-party
competition among the MCA, the Gerakan and the DAP and more intensive intra-party
rivalries within each party, while the Taiwanese increased their cohesion through the
opposition movement, in which independent opposition politicians integrated
nationwide. In Malaysia, the Chinese community failed to unite under the leadership of
a single party in the unity movement in the 1970s. The inter-party rivalries between the
MCA and the DAP were so intense that many Chinese alternated their votes between the
two parties in subsequent elections. After the Gerakan entered into the national Front
coalition in 1974, the competition between the MCA and the Gerakan weakened
Chinese bargaining power within the coalition. Moreover, intra-party divisions for party
leadership in the MCA and the DAP further split the Chinese community. Unlike
Malaysia, inter-party cleavages were not an issue in Taiwanese cohesion because the
government had prohibited the establishment of a nationwide opposition party before
democratization. The main problem for ethnic cohesion in Taiwan was intra-party
divisions; the Taiwanese within the KMT were factionalized in the local areas and
competed among one another for state patronage. Taiwanese local factions were not able
to increase their cohesion mainly due to the KMT strategies of checks and balances and
patronage networks. The increase in Taiwanese ethnic cohesion for democracy rested on
the integration of the Taiwanese opposition nationwide beginning in the late 1970s.
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276
In sum, by the late 1980s the ethnic balance of power in Taiwan was beneficial
to democratization, but that in Malaysia was not. In Taiwan, the Taiwanese gained the
upper hand in economic power and could exercise political power in terms of ideology
and with the help of external support. In Malaysia, the Malays dominated political
power in terms of military, bureaucracy, electoral institutions and ideology, and also
dominated economic power through control of key economic sectors.
Beyond the Explanation of Ethnic Politics
This section discusses other possible explanations for the contrast in democratic
prospects in Taiwan and Malaysia. The first part examines other factors in ethnic
politics, while the second section analyzes other structural explanations for democracy
in comparison with collective ethnic power.
Ethnicity as a Factor of Explanation
In addition to ethnic power, the size of the ethnic group can be viewed as an
ethnic factor in explaining the prospects for democracy because it usually affects the
power structure among ethnic groups. In principle, the legitimacy of minority rule is
more vulnerable than that of majority rule mainly for two reasons. The opposition
leaders o f the majority group may have an advantage over the minority regime in being
able to draw mass support into their political struggle. Moreover, a majority group is
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277
more likely to exert greater economic influence on a minority government that depends
on economic performance for its legitimacy. In this sense, the Taiwanese majority had
an advantage in promoting democracy in Taiwan that the minority Chinese in Malaysia
lacked. However, the size of ethnic group is not a sufficient cause, and it combines with
ethnic power to affect democratic development. This is the reason that the Taiwanese
majority, weak in ethnic power, did not promote democracy in the early years of
Mainlander minority rule.
In addition, it may be argued that the distinction between immigrant and
indigenous ethnic groups provides an explanation for political change. The immigrant
regime is more vulnerable to political opposition than the indigenous regime due to its
weaker legitimacy, based on the criteria of indigenousness. In this perspective, the
Mainlander alien regime would pay increasingly high costs to keep suppressing the
indigenous Taiwanese opposition who questioned the legitimacy of the regime; while
the indigenous government could resist the challenge to its legitimacy even when the
government gradually eroded democracy. Compared to the indigenousness of ethnic
groups, however, ethnic power played more important role in political change.
Indigenousness only involved ideological power in terms of legitimacy, but ethnic
power is more inclusive, including ethnic cohesion, ethnic economic power, and ethnic
control of other elements in political power such as military, bureaucracy and
institution. The Taiwanese opposition not only relied on ideological power to undermine
the legitimacy of the Mainlander regime, they also depended on economic power and
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278
external support to exert democratic pressure on the regime. Likewise, the Malay
government also relied on its institutional power through such measures as the
declaration of a state of emergency, constituency redrawing, and constitutional
amendments and the increase in Malay economic power to strengthen its authoritarian
rule.
Moreover, it may be argued that the different nature of ethnic identity between
Taiwan and Malaysia is conducive to the contrast of democratic performance in both
countries. In the case of Taiwan, what distinguished the Mainlanders from the
Taiwanese can be explained by historical memory and the KMT policies rather than
culture. Although the Taiwanese have their own local culture such as customs and
dialects, both Mainlanders and Taiwanese shared the Han Chinese culture, such as the
Han written language and some basic values. This is why some Chinese prefer the term
subethnic identity to illustrate the relations between the Mainlanders and the Taiwanese.
In the case of Malaysia, however, the Chinese and the Malays are different ethnic
groups and they display distinct cultures. The Malays viewed the Chinese immigrants as
a threat to their survival, but most of the Taiwanese have never regarded the
Mainlanders in this way. Partly for this reason, while ethnic conflicts in Taiwan
impelled the Mainlander regime to be more inclusive in power-sharing, leading it to
liberalize and democratize the political system, the ethnic cleavages in Malaysia made
the Malay more exclusive in power-sharing, posing an obstacle to democratization.
Nevertheless, this distinction should be combined with ethnic power to fully understand
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279
the dynamic of democracy. If Taiwanese economic power had not increased and
Mainlander ideological power in terms of legitimacy had not declined, it is probable that
the Mainlanders would have been more reluctant to share power with the Taiwanese.
In short, other factors of ethnicity cannot be neglected, but they cannot be
overestimated as decisive factors in ethnic politics because the ethnic balance of power
interacted with them and affected their significance as an explanation.
Other Structural Explanations
This section will look briefly at structural preconditions of democratization for
explaining the contrast of democratic performance in the two countries. It is worth
noting that a full analysis of the two cases in light of structural preconditions is beyond
the scope of this dissertation, but a preliminary examination raises questions about their
significance in the two cases.
The level of economic development cannot explain the contrast of
democratic experience between the two countries both in terms of GDP per capita and
GNP per capita. Taiwan experienced a democratic transition in the late 1980s and
Malaysia underwent democratic erosion in the same period, although both Taiwan and
Malaysia had a similar level of economic development in terms of GDP per capita in
1985: US$ 3415 for Malaysia and US$ 3581 for Taiwan (Lane & Ersson 1990, 69). In
Taiwan, the democratic movement began in 1979, when Taiwan’s GNP per capita was
US$1920; however, Malaysia experienced democratic regression in the 1980s when
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280
their GNP per capita reached US$1940 in 1984 and US$1960 in 1987, similar to that of
Taiwan in 1979 (Chan & Clark 1992; World Tables 1995).
The level of economic development cannot explain the contrast of the
democratic performance in Malaysia and Taiwan because its impact on democracy relies
on several major intervening variables in a causal chain, as mentioned in the chapter
one. From the perspective of ethnicity, one of the intervening variables neglected by the
modernization approach is balance of ethnic power, which should be taken into account
in explaining the different prospects for democracy in ethnically divided countries. In
Taiwan, economic development favored democracy because the Taiwanese, the political
contending group, used their increased economic power, which resulted from economic
development, to affect democratic development. In Malaysia, economic development
did not benefit the prospects for democracy because the Malays, the dominant political
group, used their increase in economic power resulting from affirmative action and
economic development to support the government, leading to ethnic suppression and
democratic erosion.
Can changing relations between the state and the society explain the contrast in
outcome for the two countries? In Taiwan, beginning in the late 1970s, industrial
development created a new civil society, which started to press for change in the
existing state-society relations. The civil society expressed itself in social movements
such as consumer movement and anti-pollution movement, bringing social forces in
mobilization (Hsiao 1992). In contrast, there was no evidence suggesting that a dense
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281
civil society mobilized for social change in the 1980s in Malaysia. Civil society in
Taiwan was stronger than that in Malaysia because the increase in societal power
relative to the state power in Taiwan was higher than that in Malaysia. In this
perspective, the increasing strength of civil society relative to the state in Taiwan was
responsible for the increase of democracy, and the increasingly strong state relative to
civil society in Malaysia was conducive to democratic regression.
The problem of this thesis is that it does not take ethnic politics into account.
Ethnicity played a vital role in the shifting balance of power between the state and the
society in the two countries. It was the Taiwanese that increased the strength of society
through the rise of their economic power and consequently changed the relations
between the state and the society in Taiwan. If the Mainlanders had contributed the
majority of industrial output in the private sector, society would not be strong relative to
the state because most Mainlanders supported the KMT state. In Malaysia, although the
society became stronger than before as a result of ethnic politics, society was still weak
compared with the expanded state. Even though the Chinese who constituted the
majority of the private sector were stronger than before, the Malays controlled the
public sector made the state even stronger than the society when the Malays in the
society supported the Malay state.
Class analysis alone cannot explain the different prospects for democracy in the
two countries. The middle class in Malaysia was sharply divided along ethnic lines and
remained weak in the struggle for democracy. While the middle class of the Chinese
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282
minority generally endorsed democracy, the middle class of the Malay majority was
more concerned with Malay political supremacy than democracy (Crouch 1996a). The
Malay middle class, who were mainly created by state favoritism under the NEP and
were economically dependent on the government, actively supported Malay regime,
without objecting to the increasingly authoritarian controls imposed on non-Malays
(Crouch 1996a). In Taiwan, the democratic movement was supported by the owners of
the SMEs, a portion of the middle class. However, regardless of ethnicity, the middle
class in the public sector, consisting of 33% of the middle class, generally supported the
KMT regime. In the 1986 Legislative Yuan election, for instance, regardless of
ethnicity, 84.8% of the middle class in the public sector and 70.5% of that in the private
sector supported KMT candidates (Wu & Lin 1993, 211). Thus, the middle class as a
whole did not act as an opposition force against the KMT regime. Since the middle class
in both countries tended not to oppose their respective governments, the middle class
thesis cannot explain the difference in democratic performance in the two countries, as
suggested by the modernization school.
Could the Marxist version of class analysis that stresses the working class and
class alliances be applied in explaining the contrast in democratic performance in both
countries? The working class did not play a significant role in the politics of either
country. In Malaysia the working class, like the middle class, was divided along ethnic
lines (Crouch 1996a, 194). Moreover, the working class in each country was controlled
by state corporatism under which trade unions were strictly governed by the state. In
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283
Taiwan, the working class played a marginal role in the transition to democracy (Chu
1996, 497). The weakness of the working class may help explain why democracy
suffered a setback in Malaysia, but it could not explain why democratic development
occurred in the 1980s in Taiwan. Consequently, the working class does not provide the
answer for the contrast of democratic experience in both countries.
Class alliances between the middle class and the working class occurred both in
Taiwan and Malaysia. In Taiwan, the Tangwai opposition attracted support from the two
classes, and in Malaysia the DAP, the most important opposition party, also drew
support from both classes. However, the democratic performance of Taiwan contrasted
with that Malaysia. This suggests that class alliance cannot explain the contrast of the
two cases.
Why did the divided middle class and class alliances in Taiwan promote
democracy, but not in Malaysia? The answer for the failure of class analysis as an
explanation of the two contrasting cases rests on ethnic politics. In both Taiwan and
Malaysia, the dynamic of the opposition came from the ethnic group, rather than a
particular class or class alliances, since virtually all of the middle class and working
class members of the opposition were Taiwanese in Taiwan and generally ethnic
Chinese in Malaysia. What made democratic prospects different was the collective
power o f the opposition. In Taiwan, the Taiwanese opposition, integrated nationwide as
a united opposition force, was financially supported by the owners of the SMEs which
were the major force of exported-led economic growth. The opposition ideology also
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284
challenged the legitimacy of Mainlander minority authoritarian rule. Moreover, its
political power was further strengthened by external support from the Presbyterian
Church, the United States Congress, the overseas Taiwan Independence Movement and
particularly important, the United States Congress, which controlled Taiwan security
through the Taiwan Relations Act. In Malaysia, the Chinese opposition was divided
between the DAP and the MCA, which the Chinese voted for alternately, and was
unable to form an integrated opposition similar to the Taiwanese Tangwai opposition
movement. Further, the Chinese opposition received no support either from ethnic
Chinese in Singapore or from the great powers, and was unable to challenge the
ideological power of Malays who claimed legitimacy and political supremacy based on
their indigenousness.
In sum, under preliminary examination, ethnic politics is generally more
significant than other structural factors in explaining the contrast of democratic
prospects of the two countries. Except for the notion of state-society relations, other
structural factors fail to give an explanation for the contrast of the two cases. The
economic development thesis can explain the increase in democracy in Taiwan, but
cannot explain the decrease in democracy in Malaysia. The middle class and working
class argument would explain the setback of democracy in Malaysia, but not the
progress of democracy in Taiwan. Class alliances, which occurred in both countries, fail
to elucidate the contrast of the two cases. These analyses fail to offer an adequate
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285
explanation for the contrast of the two countries because ethnic politics is not taken into
account.
Final Remarks
Why in an ethnically divided society is the balance of ethnic power an
important element in democracy? As the first chapter mentioned, the ethnic conflict
argument fails to explain the prospects for democracy in many ethnically divided
countries. Ethnic institutional analysis provides a better explanation than the ethnic
conflict thesis, but since ethnic institutions are the result of the power structure of
ethnic groups, the balance of ethnic power argument is preferable to the ethnic
institution perspective. As mentioned in the first chapter, the concentration of power
resources is a hindrance to democracy while the dispersion of power is conducive to
democracy. Given that each ethnic group competes for power resources, in ethnically
divided countries the more power concentrates in an ethnic group, the more likely
the decrease in democracy. The dominant group can concentrate power resources
and exercise political supremacy through the control of the state over the subordinate
group. Thus, the more the ethnic power of the dominant group increases, the more
likely the prospects for democracy decrease; the more the power of the subordinate
group increases, the more likely the prospects for democracy increase.
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286
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APPENDICES
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324
APPENDIX 1
Chronology
Malaysia
1874-1957 The Malay states under the British colonial rule except for the
Japanese occupation period.
1910 Malay Administrative Service was established to recruit Malays
elites for civil service.
1914 The British ruled the entire peninsula.
1941-45 The Japanese Occupation Period nurtured Malay nationalism.
1946 The United Malay National Organization (UMNO) was
established.
1948 The Federation of Malaya was established in which the special
rights of Malays was constitutionally secured.
1948-60 The period of Emergency. Ethnic Chinese communist insurgency.
1949 Communities Liaison Committee and Malaya Chinese Association
(MCA) were established.
1951 The establishment of Pan-Malaysian Islamic Party (PAS).
1954 The Alliance was established when UMNO and MCA cooperated
in an election.
1955 The Bargain provided for Malay political domination in return for
a free market system, which would allow the maintenance of
Chinese economic power.
1957 The Independence terminated the British colonial rule.
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325
1957-69 In the period of economic liberalism, economic benefits favored
the foreigners who dominated the economy and the Chinese who
wee active in the modem sector.
1957-70 Tuku Rahman served as the first prime minister.
1963 The merger of Singapore and East Malaysia into the Federation.
1965 The separation of Singapore from the Federation.
The establishment of MARA.
1 966 The establishment of Chinese-based Democratic Action Party, the
biggest opposition party.
1968 The establishment of the Gerakan, a regional-based Chinese
party.
1969 Ethnic riots between the Chinese and the Malays.
The Chinese lost the Ministry of Commerce and Industries.
The Pemas was established to increase Malay corporate equity.
1 969-71 The government declared the state of emergence and suspended
democracy.
1970-76 Tun Razak served as prime minister.
1971-90 In the period of New Economic Policy, the government restricted
market mechanism in favor of the Malays with the goal of
developing a Malay capitalist class.
1972 The Fleet Holdings was established as UMNO party enterprise.
1974 Barision Nasional (National Front) was formed in which the
MCA political power was diluted mainly by the entry of the
Gerakan.
The Chinese lost the Ministry of Finance.
1975 The Muti-Purpose Holdings was established as MC A enterprises.
Industrial Coordination Act was introduced.
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326
1979 National Equity Corporation (PNB) was established to increase
Malay corporate share.
1976-81 Hussein Onn served as the prune minister.
1981 Dr. Mahathir Mohamed began to serve as the prime minister.
1987 In Operation Lalang, the government arrested the opposition in a
large scale and further restricted the freedom of speech.
Taiwan
1662 The Chengs began to govern Taiwan as a political base of the
Han Chinese military resistance against the Manchu who ruled
Mainland China under the Ching Dynasty.
1683 The Chengs regime submitted its sovereignty to the Ching
Dynasty.
189S China ceded Taiwan to Japan.
1945 China under the KMT rule reasserted Chinese sovereignty over
Taiwan because the Japanese was defeated in Sino-Japanese War.
1947 The February 28 incident: the islandwide violence between the
Mainlander state and Taiwanese society.
1948 The Temporary Provision provided legal base for martial law
regime in Taiwan.
1949 The KMT relocated its regime in Taiwan as a result of the
defeat in the civil war against Chinese Communists. Chiang
Kai-shek was the president.
1949-53 The White Terror: the KMT carried out the total destruction of
the underground Chinese communists in Taiwan.
The KMT regime implemented the land reform.
1950-52 The KMT was reorganized along Leninist lines.
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327
1960
1972
1977
1978
1979
1984
1986
Taiwan changed development strategy from import substitute to
export-oriented industrialization.
The beginning of the diplomatic isolation: Taiwan withdrew its
membership from the United Nations.
The KMT regime launched Taiwanization program in which
Taiwanese were promoted from the local politics to the central
politics and were promoted to higher levels in state apparatus,
including the party, the administration, and the armed force.
The Chungli Incident, the first mass protest under martial law,
encouraged the Taiwanese opposition to regard the mass
activities as the last resort.
The term “Tangwai,” represented Taiwanese opposition, gained
popularity when they began to coordinate its efforts in organizing
campaign and mobilizing votes for non-KMT candidates in
elections nationwide.
The United States terminated diplomatic relations with Taiwan.
Chiang Ching-kuo served as the president.
The Kaohsuing Incident: the Tangwai leaders were arrested
because of the mass violence breaking out in the demonstration in
the city of Kaohsuing.
The Tangwai founded a’Tangwai Research Association of Public
Policy’, which exercised quasi-party functions in electoral and
political activities.
The Tangwai established Democratic Progressive Party.
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328
A ppe n d ix 2
T h e L is t ©e E otej& v ie w e e s
TAIWAN
Chai, Trong
Legislator, Democratic Progressive Party.
November, 19, 1999.
Hsiao, Hsin-huang,
Research Fellow, Institute of Sociology, Academic Sinica
November 15, 1999.
Lin, Chung-cheng,
Legislator, Democratic Progressive Party.
November 16, 1999.
Yu, Hsi-K’un,
Secretary General, Democratic Progressive Party.
Noveemberl6, 1999.
MALAYSIA
Azman Amin Bin Hassan.
Director of Neighborhood Association, Department of National Unity, The Ministry
of National Unity and Social Development.
December 9, 1999.
Bock, Tai Hee.
Chief Executive Secretary,
United Chinese School Committees’ Association of Malaysia.
November 27, 1999.
Chew, Mei Fun.
National Organization Secretary, The Women Department of the MCA.
The Member of the Parliament.
December 8, 1999.
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329
Chiu, Kuan Yew.
Secretary, the Department of National Organization, Democratic Action Party.
December 16, 1999.
Chong, King Liong,
Electrical Supervising Engineer.
December 8, 1999.
Chua, David.
Deputy Honorary Secretary General, The Associated Chinese Chamber of
Commerce and Industry of Malaysia.
December 3, 1999.
Dr. Hussain Mohamed.
Professor, Department of Sociology/ Anthropology, University of Malaysia.
November 26, 1999
Johari bin Mat.
Secretary General, The Ministry of Education.
December 14, 1999.
Leong, Sik Khoon.
Treasurer, The Federation of Alumni Association of Taiwan Universities.
December 8, 1999.
Leow, Yit Kan.
Political Secretary to the Minister of Health.
December 6, 1999.
Lo, Jeng Wung.
Chief Leader Writer, Sin Chew Jit Poh (a newspaper company).
December 2, 1999.
Dr. Mohamed Abu Baker.
Professor, Coordinator of International Studies, University Of Malaysia.
November 26, 1999.
Mok, Ah Hoo.
Deputy Chief Administrative Director, Malaysian Chinese Association (MCA).
December I, 1999.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
330
Datuk Ng, Teck Fong.
Executive Chairman, Tomei Gold and Jewelry Company.
December 1, 1999
Dr. Nidzam Sulaiman.
Professor, Department of Political Science,Universiti Kebangsaan Malaysia.
December 13, 1999.
Ong, Tee Keat.
Deputy Minister of the Youth and Sport.
Former Deputy Speaker of the Parliament.
December 11, 1999.
Tan Sri Dato Soong, Siew Hoong.
Honorary Secretary General,
The Associated Chinese Chamber of Commerce and Industry of Malaysia.
December 7, 1999
Tan, Wah Ching
The Chairman, The Federation of Alumni Association of Taiwan Universities.
December 9, 1999.
Tang, Ah Chai
Director, Action Foundation.
December 3, 1999.
Thock, Kiah Wah
Staff Correspondent, AsiaWeek.
December 2, 1999.
Wong, Ka Min
Director of Ethnic Relations, Department of National Unity,
The Ministry of National Unity and Social Development.
December 9, 1999.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

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Asset Metadata

Creator Chiu, Pai-Ming (author)

Core Title Ethnic politics and democracy in Taiwan and Malaysia

School Graduate School

Degree Doctor of Philosophy

Degree Program Political Science

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag OAI-PMH Harvest,political science, general,sociology, ethnic and racial studies

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Advisor Hamilton, Nora (committee chair), Nielsson, Gunnar (committee member), Rosen, Stanley (committee member)

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