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

10 Developing contexts of human

resource management and

industrial relations:

globalization and employment

relations strategies and

narratives

Naresh Kumar and Miguel Martínez Lucio

Learning objectives

• To understand the limitations of the discussion on developing countries \�and

to appreciate their greater complexity

• To engage with the way the state plays a role in relation to multination\�al

corporations in such contexts

• To use Malaysia as an example of proactive labour market strategies and \�

state planning in relation to foreign direct investment and national tra\�ining

• To outline some of the challenges in terms of employment relations and t\�he

way worker representation is developed

Introduction

There is an increasing trend among key texts on international human resource

management (IHRM) to question whether developing countries should be d\�ealt

with as a national or regional context deserving of special attention. At first

glance, this may seem to be slightly problematic as it appears to dismiss the

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realities and challenges of human resource management (HRM) and industrial

relations (IR) in developing countries. It appears that when we think about the

international dimension of these subjects, we should consider them in te\�rms of

transnational corporations and their impact across a range of contexts. However,

this new trend is related to the difficulty of defining what a developing country is.

In some cases, China is presented in a developing context, which in many respects

is not always plausible, given the extent of its social and economic development.

On the other hand, there is a concern that the use of binaries such as ‘developing’

and ‘developed’ ignores the more complex realities of the world in terms of the

crisis among developed countries and the emergence of powerful developing

countries such as India and Brazil. However, the term developing can still be used

because of the ongoing nature of income differentials; the dominance of specific

types of multinational corporation (MNC) and the nature of their activities in low-

income countries; the ongoing ethnic hierarchies between North and South; and

the problematic political issues in relation to the nature of trade union and par-

ticipatory systems in various developing contexts. Many discussions in IHRM may, in fact, conceal the specific challenges and

dilemmas facing countries and their workforces in terms of the rapid and/or

uneven economic and social changes that are taking place. What is more, they

may remain silent on political issues and on questions of human rights. This

silence may be driven by a particular view of management and economic

development dominated by Americanized, neoliberal/market economy or

managerialist understandings of organizational change and social context. This chapter aims to outline some of the debates concerning developing c\�oun-

tries in relation to HRM and IR. It will show how such debates have been

structured, and how changes since the 1990s, resulting from developments in

foreign direct investment (FDI) and the role of MNCs, have introduced a new set

of issues and dynamics. The chapter will then focus on a specific nation\�al con-

text in terms of the impact of FDI and the way this has influenced both \�manage-

ment and labour. The development of new forms of working and new groups of

workers in internationalized sectors of the economy will be outlined, de\�scribing

leading debates in the area. However, the chapter also aims to question the pas-

sivity implied in many of the dominant views of regulation, politics and par -

ticipation in terms of developing countries by arguing that national actors are

highly significant in the development of the local economic context, alb\�eit

within a specific, normally marketized, context and framework. It will also show

how the impact of developments such as FDI has actually contributed to n\�ew

sets of debates and issues within such contexts in terms of work and emp\�loy-

ment, as well as in management. Ethical issues have emerged in terms of work

and employment change alongside social issues regarding the composition of

the workforce, as well as regulatory dilemmas regarding managing interna-

tional elite interests and those of local populations as economies and societies

change. Furthermore, new agendas around employment representation and

politics have not been far from the surface of these contexts, as Chapter 14 outlines.

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This chapter therefore looks at two very different features of how employment

relations systems are affected by internationalization and by state responses to

it: in the first instance, the national case focuses on how the state attempts to

enhance the skills and ‘pliability’ of its workforce in relation to new forms of

external investment and employment; while the second part examines some

dilemmas and issues that are emerging in terms of ambivalence towards collec-

tive worker representation. The chapter focuses on Malaysia as a national con-

text which has been developing rapidly but which exhibits many of the po\�sitive

and negative features of a country balancing economic and social demands in

terms of HRM and labour relations. It uses various aspects of Malaysian HRM

and employment relations to present the different views and concerns that exist.

Understanding employment relations and the

management of labour in developing countries

The question of development has been less central to the study of HRM and IR

than one might imagine. The focus of many discussions has, until the pas\�t decade

or so, been on so-called developed countries. The argument that developments in

countries such as the United States or the United Kingdom need to be pri\�vileged

rests on a series of assumptions about the dominance of the liberal marke\�t econ-

omy within management texts (see Chapter 8). First, these are economies that

have developed market-oriented social and political structures, and where com-

petition has led to a greater investment in management development and strate-

gic innovation. Second, if one of the concerns of the study of employmen\�t, work

and management is to seek best practice, then this is likely to be found\� within

such national contexts. Third, where new forms of organizational innovation and

change are seen in other contexts such as Japan (see Chapter 7 for a discussion \�of

these developments linked to Japan), this can be attributed to the appl\�ication of

‘western’ management thought, albeit within a distinct mediating c\�ontext. Yet the

problem with this approach and set of assumptions is that it supposes that

employment practices and management strategies in developing countries c\�an

best be improved by mimicking and integrating those of developed countries, and

that such practices are potentially transferable. Hence, there is a view of develop-

ing countries that stresses their passivity and fundamentally recipient status in

terms of organizational development and HRM change. Developing countries are

seen as receivers and accommodators of international developments in terms of

markets and organizational processes. Developing nations are understood in terms of the dominance of industrial sec-

tors such as agriculture and the public sector, which are renowned, albeit for quite

different reasons, for being hampered by bureaucratic and command-style

management processes: in the former through direct forms of supervision or

results-related payments, and in the latter through highly immobile bureaucracies

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(Blunt and Jones 1992). Yet Jackson (2004: 229), in a synthesis of the study of devel-

oping countries, tried to widen this view and explain a broader range of factors

seen by many to constitute the core characteristics of developing countries that

inhibit development and change: authoritarian management, which can be

explained by the political context of various developing countries; a st\�rong

bureaucracy that emerges because of the importance of the state and formal inter-

ventions resulting from weak civil societies; a tendency to put the emphasis on

inputs and direct control by management, rather than on outputs and quality,

because of the limited nature of production processes and markets; the impor -

tance of informal and family links because of an absence of principles o\�f equity in

the labour market; a lack of worker involvement and a restrictive view of human

resources; and a fundamental lack of management skills related to the absence of

extensive education, among other factors. Many studies have focused on s\�uch

features, seeing them as representative of a ‘primitive’ state of affairs within such

countries. Moreover, they do so in many cases without explaining the colonial

history of such contexts – as in the impact of the British or Belgian\� empires, say,

in sustaining underdevelopment, or the impact of neocolonial actors such as the

United States in focusing investment support on limited and primary sect\�ors

within such contexts as Costa Rica and Guatemala. There is also the ongoing

problem that many developing countries, as in Africa, for example, are studied

in relation to the European and North American contexts – as if the developments

in the Far East had not taken place and reference points for development were

narrower (Kamoche 2002). In addition, the political context is normally ignored in the study of HRM, and

even part of IR, for example, the manner in which contexts of authoritar\�ianism can

systematically suppress or inhibit the development of democratic voice mecha-

nisms within industrial relations, and therefore traditions of social dialogue. The

study of management and work in such contexts is normally skewed, partly\�

because of the need to sanitize and neutralize political discussion in t\�he manage-

ment classroom, placing the focus on matters of technique and ‘best practice’\�. Some try to remedy this issue by invoking the role of culture and the need to

gain a broader understanding of a country’s context and possible influence on \�

HRM developments and IR traditions. Within management and organizational

studies, the use of Hofstede’s (2001) work, Culture’s Consequences, continues to be

invoked as a means of understanding the differences between cultures and

nations in organizational terms: and even in recent contexts, it remains a point of

entry (Marchington and Wilkinson 2008) for the comparative study of HRM.

Differences are measured in terms of the acceptance of hierarchy, risk aversion,

individual and collective identity, and masculine versus feminine approaches.

The accepted norm is that developing countries in the main are more hierarchical

(or accepting of hierarchy), more masculine and in some cases more collectivist.

That these terms are highly problematic is clear; however, the developing context

is often seen as being locked into a particular cultural perspective: po\�litical and

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regulatory traditions are rarely accounted for in such views (Hofstede 2001). Such

explanations can run the risk of making social development seem difficult, or they

may make the process of change in qualitative terms appear to be less achievable

(for example, the emergence of social and worker rights). Such countries appear

to be complex and opaque in such approaches. Harvey (2002) warns us that the

organizational and employment complexity of African nations, for example, may

have been exacerbated by the impact of colonization and imperial control, which

have disrupted ethnic communities and led to uneven urbanization and change.

Hence, culturalist analysis might have limitations in explaining such co\�ntexts and

understanding that cultures emerge from repression, resistance and change and

are not static entities deeply embedded in general traits.Others have tried to move away from characterizing cultural traits or economic

customs and practices in a quixotic manner, and studied newly emerging centres

of power such as in Latin America or the Middle East with a greater sensitivity to

the actual context and the challenges of change (Vassolo et al. 2011). There is an

increasingly great sensitivity – relatively speaking – in attempts to understand the

role of political elites, economic/political networks, the informal econo\�my, the

impact of new forms of multinationals, human resource development gaps, and

the impact of growing expectations and rights-related concerns. In addition, inter-

and intra-regional collaboration between governments and social actors has

emerged as a theme of growing importance. In such approaches, developing

countries appear to be more complex spaces, and more dynamic and changeable

than traditionalist views would indicate. The way they interact with the global

context is therefore deeper and richer than might be imagined from quasi-colonialist/

managerial readings. What is also becoming clear is that there is a need to view MNCs as more than

just depositors of investment, and developers of technical and organizational

knowledge, on the positive side; or, from a more critical perspective, as organiza-

tions that seek cost advantages and can do so with very little engagemen\�t with

local states. The image of MNCs as simply being able to enter and leave \�such

economies at will – exploiting their cost advantages in terms of both\� physical and

human resources – is highly questionable (Lillie and Martínez Lucio 2011). In fact,

in some cases, MNCs find themselves being forced to operate at a more ‘sophisti-

cated’ political level, given a range of host country challenges: inc\�reasing political

change in developing countries; greater awareness of qualitative issues at work

such as workers’ rights; the problem of local developing professional elites and

their positions within new investment and employment networks; and greater

governmental collaboration in a variety of regions. The social and learning agenda

has shifted from the approach seen in the 1960s–80s, when investment was domi-

nated primarily by a set of specific MNCs and national host countries. T\�he politics

of investment is more complex. Greater capacity within developing states has

meant that the host country interaction with MNCs and international capi\�tal is

changing.

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Regardless of the positive impact on poverty generated by some aspects of FDI\�

(Dollar and Krayy 2001), issues have emerged as a result of the rapid and uneven

nature of change and the social consequences attendant on it. The impact on

women and children through their inclusion in the labour market within an unsta-

ble pattern of employment has generated increasing interest in health and safety

issues, and a broad concern with both human and employment rights. Structural

adjustment and privatization in the context of developing countries has \�had a

disproportionate impact of women as they attempt to combine a traditional role

within a new employment role, normally within hidden economies (Pyle and

Ward 2003). These increasing concerns with rights vary greatly within developing

countries, but the shift in concerns has led to a more complex set of debates with

international corporate interests. Much depends on the level of autonomy and power of independent social in\�ter -

ests and groups such as trade unions or social movements within a national con-

text. There remain enormous disparities in the manner in which organized labour

influences social and political policy at work, yet the political and regulatory

context can shape policies or create political concerns, as in the case of Saudi

Arabia, where the state regulation of employment quotas for nationals and prac-

tices of segregation at work are highly significant. Traditions of labour regulation

vary greatly in developing contexts, from highly submissive and repressed con-

texts where labour organization and labour regulation has been minimal (for

example, what was Colonel Gadaffi’s Libya in terms of both; and Saudi Arabia in

terms of the former?) through to systems which, while being politically repressive,

have had to put in place a semblance of minimal labour regulation to avoid the

need for independent unions, as in Chile under the dictator Augusto Pinochet in

the 1970s and 1980s. Then there is the case of countries where labour representa-

tion and regulation is quite extensive but under the tutelage of a centralized one-

party state which dominates labour representation, as in China or Vietnam. Yet

there are countries where industrial relations systems and trade union roles have

been influenced by a colonial heritage with a particular model of indust\�rial rela-

tions, that while being limited in terms of union influence does have a \�degree of

independence and liberty (for example, Malaysia). And it is not solely in relation to organized labour representation and regulation

that we may see considerable variety. Within developing countries, there are also

changes in management circles. Increasing management education and rising

professional expectations in relation to MNCs have begun to emerge, driven

partly by exogenous factors (the increasing transnational orientation of MNCs in

terms of policies and staffing) and endogenous ones (the increasing presence of a

professional middle class and the impact of new forms of management expect\�a-

tions). Zahra (2011) has argued that, in the Middle East, the growing clash between

formal organizational cultures and traditional informal and hierarchical customs –

coupled with major political change within both the state and society –\� means that

the process of organizational change, greater external investment and the systematic

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use of local natural resources will reveal a new set of political and academic agen-

das, as well as competing management views and values. Hence, MNCs and investment within developing countries have contradic-

tory effects and can lead to greater political learning and organizational

tension. The issue of changing expectations and debates is not unilinear, lead-

ing to a certain and pre-established outcome, but rather it is disruptive in both

positive and negative ways. In terms of HRM and IR, we need to appreciate

this dual effect of the impact of disruption and change. It unsettles communi-

ties in their rural or local contexts but also creates new communities and new

struggles:

The irony here is that at the same time as capital escapes regulatory contexts

and national systems in search of increased value and surpluses, it also\�

re-encounters regulatory systems. This creates a constant dilemma for

capital in terms of escaping, encountering and rethinking relations within

and between contexts. In a sense, however, focusing on the inevitability\� of

re-regulation, and the sometimes high cost to capital of regulatory flux\�,

misses the point. (Lillie and Martínez Lucio 2012)

Hence, host country states at the local level may accommodate international capi-

tal and MNCs, but they can also create a degree of mutual dependency, as in the

role of the state in areas such as labour market policy, learning and regulation,

which facilitate the work of MNCs. The context of developing countries i\�s some-

what passive – coming into itself only when MNCs appear to employ loc\�al

resources (human, material and market) – yet over time these dynamics can\� be

become more complex and interactive. It is for this reason that the role of the state and social and economic actors

within the national context need to be seen as important to any attempt \�to under -

stand how developing countries engage with international capital, work o\�n the

political space of their national context in relation to change and establish a range

of practices and institutions. When discussing the state in a developing\� context,

we see these more strategic roles emerge:

Rather than simply retreating to the sidelines to function as the game’\�s

referee, the state must strategically co-ordinate the interaction between key

economic actors in a way that will stimulate deep and crosscutting

developmental linkages. These linkages are necessary to facilitate infor\�mation

flow, increase vested interests through participation (as opposed to si\�mply

consultation), and improve cross-checked monitoring and implementation —

all while maintaining appropriate autonomy from distributional interests\�.

But this new role for the state is also dramatically different from the \�

theoretical role of the developmental state. Instead of simply directing\�

investment and ameliorating risk, the state must now encourage, facilitate,

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and co-ordinate the formation of intangible assets, which often requires more

private-sector leadership. (Ritchie, 2002: 32)

The interaction between local institutions and processes of globalization is

much more complex in terms of economic and political inputs (local state strate\�-

gies on regional development zones, for example) and social and political out-

comes (for example, the impact on local management traditions or emergent

politics of social rights and organization by groups such as women, both locally

and internationally). A case study from Malaysia (see below) will highlight these

complex processes and the tensions that can emerge.

Interpreting national contexts and the politics of

industrial relations in the developmental context of

Southeast Asia

The role of international economic investment has begun to transform a range

of national economies and the regulatory structures within them, and the

sheer scale of this investment has been remarkable. The World Investment

Report 2013 by the United Nations Conference on Trade and Development

(UNCTAD 2013) revealed that developing and transition economies absorbed

more than half of global FDI inflows from 2010-2012 against a notable decrease

in FDI inflows to developed countries. Total FDI inflows to South-East Asia

rose by 104% in 2010, reaching US$97,898 million and this explain a fast recov-

ery from the financial crisis of 2007-2008. Association of Southeast Asian

Nations (ASEAN) countries saw a significant influx of FDI inflows in 2\�012,

with Singapore being the largest recipient (US$56,651 million), followed by

Indonesia (US$19, 853 million), Malaysia (US$10, 074 million), Vietnam (US$8,

368 million), Thailand (US$8, 607 million), the Philippines (US$ 2,7\�97 million)

and Cambodia (US$1, 557 million). FDI has been seen as a key driver in\� pro-

moting the economic growth of Asian countries. For example, the introduction

of the Investment Incentive Act in 1968, the establishment of free trade zones

in the early 1970s and the provision of export incentives in conjunction with

the acceleration of open economies in the 1980s have encouraged MNCs to

reposition their labour-intensive production in countries such as Malaysia

since the late 1980s (Jomo 2007b; Ang 2008, 2009). The Malaysian population was 27.9 million in 2009, of which 63.3% was ur\�ban-

based. Being an emerging economy in Asia, Malaysia recorded a total labour force

of 12,061,100 in 2009, with 63.1% being economically active in the worki\�ng age

population of 15 to 64 years (Government of Malaysia 2010). Employment\� in the

different industrial sectors increased from 9.275 million in 2000 to 11.621 million

in 2009. The average annual employment growth rate for the decade 2000 to 2009

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was 2.8%. The average unemployment rate for the period 2000 to 2009 was \�3.4%.

Labour shortages have encouraged the influx of low-skilled foreign labour, which

between 2000 and 2009 rose to 1.9 million (Government of Malaysia 2010, p. 234).

Malaysia has recovered from the Asian economic and financial crisis of 1997 and

appears to be

heading towards a higher average level of income. Malaysia

enjoyed high inflows of FDI in the 1980s and early 1990s compared to other coun-

tries in this region, since few countries have such flexible and attractive trade and

investment policies as Malaysia. The dramatic economic transformations i\�n

South-East Asia have led governments to develop and implement plans to attract

high value-added FDI while competing with countries in the immediate region,

and in South America and Eastern Europe. The UNCTAD (2013) report makes it

clear that the strong FDI inflows into the South-East Asian countries are a result

of proactive policy efforts by the various governments to attract FDI inflows.

Malaysia has implemented more liberalized economic policies similar to those of

other ASEAN countries that facilitated the entry of transnational corporations

(TNCs) and FDI inflows (World Bank 2011: 41)Malaysia was ranked 14th in the

Institute for Management Development’s World Competitiveness Yearbook

2012/2013. Besides, the country also was ranked 12th in the World Bank’s Ease of

Doing Business Report 2013; while AT Kearney’s Foreign Direct Investor

Confidence Index 2012 placed Malaysia as the 10th best FDI destination (The Star,

2013). However, the FDI inflows to Malaysia in 2012 fell 17.4% in investments to

US$10.1 billion compared to US$12.2 billion in 2011, as a result of global slump in

manufacturing sector in which Malaysia depends decidedly for FDI. Indeed\�, the

global economic slowdown, the presence of strict fiscal constraints in Europe,

fall in cross-border mergers and acquisitions, rising cautious in investment

decisions by TNCs were some common reasons for the decrease in FDI inflows

to South-East Asia (UNCTAD , 2013) It has been alleged that the increasing quantity of FDI and number of MNCs in

developing countries has led to the emergence of western HRM policies and practices

that could strengthen people management, transferring from ‘personnel manage-

ment’ to ‘HRM’ in affiliated local firms (Budhwar and Debrah 2001; Budhwar 2004;

Rowley and Warner 2004). Since developing countries uphold unique national man-

power development policies and are at different stages of HRM practices, we main-

tain that local firms could emulate the best practices of western HRM that suit the

local working culture, and the social, political and economic values of the country. The case study focuses on Malaysia. The study will outline some of the w\�ays in

which the state and the industrial relations system engage with internationaliza-

tion but also with related indigenous development. We look here at some of the

formal strategies and rhetoric of developmental states. It will, however, be fol-

lowed by an alternative reading of the way that state and industrial relations

strategies are developed in ways to contain workers’ opinions and more positive

possibilities of participation. There are various readings of how employment and

HRM systems have developed. Readers need to be alert to the different narratives

and interpretations that may exist.

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Case study: The state and industrial relations in

Malaysia – Creating a context supportive of

investment and support

overnments in Malaysia have argued since the early 2000s that knowledge, skills, abilities

and other relevant competencies among the workforce are the key to succeeding in a

competitive world. The wave of inward investment and the increasing internationalization of the

economy have meant that the public authorities foster strategic reform initiatives on human

capital and programmes aimed at accelerating the quality and performance of Malaysian

workforce. The government has therefore begun to devote more resources to science and technology

(S&T) and research and development (R&D), which are vital for human resource development

(HRD). In fact, the importance of HRD has been recognized and was given significant emphasis

in Malaysia’s earlier development plans (Malaysia Government 1991, 2001), though innovation

capacity and patent production are still small (Wong 2011). Besides, poor performance culture

and low productivity levels remain a focus of national political discourse (The Star 2013). Much

is said formally about the priority given to education and training, which provides opportunities

for academic pursuits and the advancement of knowledge, skills, abilities and other

competencies as a way of boosting intellectual capital among the workforce and making

Malaysia more competitive globally. Therefore, to assume a passive state role that only

responds to and works around MNCs is ill-advised. The evolution of the country’s development

policies can be classified into the following major phases: the New Economic Policy (NEP),

1970–90; the National Development Policy (NDP), 1991–2000; and the National Vision Policy

(NVP), 2001–10. The Third Outline Perspective Plan (OPP3), 2001–10, which was launched with

a focus on building a resilient and competitive nation and embodying the NVP to be implemented

over a decade, marks the third phase of development. The Economic Transformation

Programme (ETP) was launched in 2010 to build on the policy directions, strategies and

programmes of the 10th Malaysia Plan, 2010–15. It also complements existing agendas, such

as the Government Transformation Programme (GTP). The programmes under the ETP such as

the National Talent Enhancement Programme, MSC Malaysia MyProCert programme

(professional certification in ICT industry) and TalentCorp’s (established on 1 January 2011

under the Prime Minister’s Department) Returning Experts Programme are deemed central to

crafting a high-performance Malaysian workforce. Malaysia’s global competitiveness depends

heavily on new initiatives driven by ETP and indeed efficient development of human capital will

be able to attract unremitting inflows of FDI. Hence, planning remains a central part of this

logic of regulation. The government also facilitated efforts in benchmarking and the adoption of best practices on

human capital development from other countries as well as from international commitments and

conventions. There has been much rhetoric and policy related to ensuring continuous employment

and a smooth transition to an advanced level and quality of work among the workforce, and the

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Ministry of Human Resources (MOHR) officially released the National Action Plan for Employment

(NAPE), 2008–10 on 20 November 2008. The measures highlighted in NAPE have been outlined

under ten main guidelines: (1) active and preventive measures for the unemployed and the

inactive; (2) promoting job creation and entrepreneurship; (3) promoting adaptability and mobility

in the labour market; (4) promoting development of human capital and lifelong learning; (5)

promoting active employment of older workers and the ageing; (6) strengthening gender equality

in employment; (7) promoting the integration of special groups into the labour market; (8)

ensuring decent wages; (9) transforming informal work into regular employment; and (10)

overcoming regional and sectoral employment disparities (Ministry of Human Resources

Malaysia, 2009). In essence, NAPE is a national agenda that aims to provide direction and outline

priorities for employment. Workers’ rights in employment are seen as key priorities and given

adequate emphasis to ensure that workers are not deprived of legal rights and benefits, though,

as we shall see, the reality is more complicated. For example, the Human Resources Development

Act of 1992, which came into force in January 1993, led to the establishment of the Human

Resources Development Fund (HRDF), thus officially ending the training tax incentive scheme

that had been in operation since 1987. The HRDF was administered by a Human Resources

Development Council (HRDC) including representatives from the private sector and various

government agencies, though the role of worker representatives was limited. The Human

Resources Development Levy is a mandatory payment imposed by the government on specific

groups of employers for the purpose of employee training and skills advancement. Eligible

employers are required to contribute 1% of the monthly wages of each employee to the HRDF. The

Minister of Human Resources is empowered to reduce or increase the specified levy rate from

time to time, and to grant employers full or partial exemption from levy payments.While evidence from surveys examined by the World Bank suggests that despite being efficient in

reimbursing claims and making application procedures easy for employers to comply with, the

training impact of the scheme appears to be modest (Tan 2001). Similar concerns surrounded the

mandatory National Service Training Programme, or Program Latihan Khidmat Negara (PLKN), as

provided for in the National Service Training Act, 2003. Young people aged 16 to 35 years are selected

randomly from different ethnic groups and required to attend PLKN for three months to undertake

four modules: (1) the physical module; (2) nation building; (3) character building; and (4) community

service. Hence, the technical is combined with the cultural in such forms of state intervention,

though the Auditor-General’s report of December 2007 pointed out that many of the programme

instructors were not well trained, the locations of the camps were unsuitable, the facilities were

inadequate and rigid contracts caused government losses of up to RM110.1 million between 2004

and 2007 (The Star 2008). In addition, since 2004, sporadic serious incidents and accidents, including

deaths of trainees (total fatalities at National Service camps since the programme’s inception stand

at 18 up to the time of writing), were highlighted by the local press (The Sun 2012). The ‘decent work’ agenda has also been an increasing point of reference for the MOHR

under its list of ‘deliverables’ within national developmental policies, and it links to the

statements of the International Labour Organization (ILO) in terms of working conditions.

The MOHR’s ‘decent work’ agenda is as follows (MOHR 2009):

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1. To develop a workforce that is productive, informative, disciplined, caring and responsive to the

changing labour environment towards increasing economic growth and hence creating more

job opportunities.

2. To encourage and maintain conducive and harmonious industrial relations between employ-

ers, employees and trade unions for the nation’s economic development and well-being of the

people.

3. To uphold social justice and ensure harmonious industrial relations by solving industrial

disputes between employers and employees.

4. To ensure that trade unions practice democracy, are orderly and responsible for helping to

achieve the objective of industrial harmony.

5. To be the leader in the development of the nation’s human resources.

6. To ensure the health and safety of the workforce.

7. To develop a skilled, knowledgeable and competitive workforce in an environment of harmonious

industrial relations with social justice.

(Italics added by the authors)

The development of a ‘decent work’ agenda has attempted to create a progressive counter-space

within the state running alongside a narrative led by the Ministry of Higher Education. This

emphasizes that technical and soft skills in particular are to be included in education and training

programmes, and should be consistent with contemporary industry’s needs; so as to increase the

marketability of Malaysian graduates, higher learning institutions incorporate the following soft

skills: communication skills; critical thinking and problem solving skills; life-long learning and

information management; team work; entrepreneurship; professional ethics and moral; and

leadership skills in their education and training programmes. The decent work agenda thus

appears, however, to be linked to a more functional agenda of worker flexibility based on cultural

and social pliability in the face of new employer needs and forms of inward investment fitting the

more job-loading dimensions of lean production. Much of the agenda is tied to a specific

hierarchical and controlled view of work. In addition, there are also concerns about access and

equality issues across the different constituent populations of Malaysia as it is a country with

strongly embedded and large minority ethnic groups in the form of Indian and Chinese

communities.

Questions

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

portive environment for overseas investment in the country?

2. Why is the quality of working life an emergent issue in such contexts?

3. What might be the challenges in terms of such forms of state policy, and developments in

terms of costs and expectations? How realistic might such initiatives be in the light of the

pressures to contain labour costs as a result of the importance of FDI?

4. What are the particular views of employment and industrial relations that are embedded in

this policy approach (e.g., the use of the terms harmony and orderly)?

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The external environment Developing contexts of human resource management and industrial relation\�s 213

Inward investment and economic development are engineered as much through

local state policies as they are through external global economic trends and pro-

cesses. Malaysia is an example of a nation that has begun to create a framework

of skills development and ‘national progress’, which has helped to create a politi-

cal and regulatory context that parallels and interacts with capital flows and

changes. As MNCs seek environments with cost benefits in terms of labour, for

example, or access points to new markets, they also draw a response from the

institutions of the host country context in which they are investing. In many cases,

these are framed in a negative way, in that they create a context where MNCs may

not be challenged by workers and their representatives, or where development

zones are constructed in which worker rights are limited or suspended for finan-

cial reasons or health and safety related issues. Hence, in the case of Malaysia,

there are other narratives that are more critical of the extent of state support.

Case study: The politics of industrial relations

and worker rights in Malaysia – The reality of

rights in Malaysia

hile facing the Asian economic and financial crisis in 1997, Malaysia worked assertively

towards a ‘knowledge-based’ economy with the aim of achieving the status of a newly

industrialized country, which necessitates sound industrial harmony via a tripartite labour

system. The Employment Act, 1955 (EA), Trade Unions Act, 1959 (TUA) and the Industrial

Relations Act, 1967 (IRA) collectively form the basis of the industrial relations (IR) system in

Malaysia. However, the Malaysian government receives constant criticism of its long-standing IR

and labour laws, which, at the time of writing, have not been revised to accommodate current

economic and workplace demands by employers (Arudsothy 1990; Arudsothy and Littler 1993;

Jomo and Todd 1994; Rasiah 1995; Kuruvilla 1996; Sharma 1996; Anantaraman 1997; Ariffin 1997;

Bhopal and Todd 2000; Ramasamy 2000; Todd and Peetz 2001; Ayadurai et al. 2002; Bhopal and

Rowley 2002; Suhanah 2002; Mellahi and Wood 2004; Parasuraman 2004; Todd et al. 2004; Wu

2006; Aminuddin 2007). The Malaysian IR system has become increasingly more restrictive than

pluralistic (Kuruvilla and Arudsothy 1995), based on a system of state–employer domination

(Kuruvilla and Venkataratnam 1996), and repressive confrontation rather than being

accommodating and cooperative (Sharma 1996). Todd and Peetz (2001) maintain it is a ‘controlled’

rather than a ‘commitment-based’ structure delineated by the early British colonial government

and maintained by Malaysia since independence. Deficiencies in the democratization of labour

legislation have apparently worked against the achievement of collaborative workplace relations.

Anantaraman (1997) and Suhanah (2002) argue that Malaysian labour policies since 1958–70,

when the emphasis was on import substitution industrialization (ISI), encapsulated in relevant

laws, threaten cooperative IR as the government attempts to turn Malaysia into a fully

BK-SAGE-MARTINEZ-130603-130010.indd 213 10-09-2013 19:14:26 214

industrialized country by 2020. The government viewed the growth of manufacturing for export

purposes as a central feature of economic development, allowing for strong competition among

the Asian newly industrializing economies (NICs). Thus, the nature of IR policies appeared to be

a form of ‘controlled pluralism’ based on significant state control aimed at avoiding industrial

conflict in the interests of accelerating the industrialization process (Jomo 2007a, 2007b;

Kuruvilla and Arudsothy 1995).The Department of Trade Union Affairs (DTU) governs trade unions and deals with issues such

as registration, internal organization, the election of officers, union finances and, in particular,

specifies unions’ rights, powers, duties and responsibilities. However, certain acts strictly forbid

unions from representing workers from different establishments, trades, occupations or

industries. The Department of Industrial Relations regulates relations between employers, workers and

their trade unions, and aims at the prevention and settlement of any tra\�de disputes and related

matters. Workers have the right to form or join trade unions, with the exception of members of

the police, the prison service, the armed forces and public sector employees employed in a

confidential or security capacity. The IRA grants the director general absolute authority to

determine the classifications of employees, and prohibits the formation of unions in ‘pioneer

industries’. Indeed, the focal point of criticism in labour studies is that the director general

(previously the Registrar of Trade Unions) allowed in-house unions (enterprise unions) to

represent workers in the electronics sector after unremitting pressure from international bodies,

but exercised arbitrary power to prevent the formation of a national trade union in the electronics

sector (unlike their counterparts in the electrical industries) since it comes under the ‘pioneer

status’ consistent with the government’s pursuit of a low-cost export-oriented strategy (Jomo

2007a; Jomo and Todd 1994; Kuruvilla and Arudsothy 1995). Furthermore, workers in ‘pioneer

status’ industries were prohibited from having their terms determined by bargaining beyond the

minimum standards stipulated in the Employment Act, 1955: this undermines the efforts of

unionization in such companies (Peetz and Todd 2001). For some employees, the provisions of the

Employment Act, 1955 guarantee their minimum employment protection and benefits, so the

attractiveness of trade union membership is questionable. However, while the IRA consents to

collective bargaining, its scope is limited to the provision of training, the annual review of wages

and the development of performance-based remuneration systems. The Malaysian labour laws

seem to some extent to be more favourable to employers than to unions or employees, and

discourage genuine employee participation in workplace decision making at the in-house or

enterprise level (Anantaraman 1997; Ariffin 1997; Suhanah 2002; Parasuraman 2004; Todd et al.

2004). Wad (2001: 4) views in-house unions as ‘weak, management-controlled lapdogs, more or

less unable to defend and improve employees’ rights and interests, and that they do not provide

for concomitant wage and productivity increases’. Hence, the way that the industrial relations environment has been constructed, and the way

unions have been constrained, means that the positive features of dialogue, mutual gains and more

inclusive HR strategies may not easily be developed. The development of a fair and inclusive

workplace may be hampered by the failure of union renewal and the lack of external support for it.

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The external environment Developing contexts of human resource management and industrial relation\�s 215

Conclusion

The case of Malaysia therefore raises curious issues and concerns about the role

of the state and the nature of industrial relations within such contexts. In a lead-

ing intervention, Bhopal and Rowley argue that the national state is a key medi-

ating factor that is central to the narrative of investment, human resource

management and labour related issues: The oppression of labour is not simply something desired per se by dependent

states in all circumstances. The State has other considerations, which c\�an give

rise to concessions to labour. Yet, the degree of dependence on capital \�may

determine the ability of the State to pursue a policy designed to meet i\�ts internal

needs. If dependent states are less able to determine their labour polic\�ies owing

to MNCs, the implication for those advocating trade/aid and labour right\�s links

is that they need to address the fact that labour suppression may be the\� result of

the actions of MNCs and inactions of states. The complicity of capital a\�nd its

home state needs to be at the centre of any discussion on human rights a\�nd

trade. A failure to do this not only leaves dependent developing countri\�es

caught between a ‘rock and a hard place’ (economic sanctions and \�failure to

attract FDI), but fails to identify the role of home and dependent host\� states in

the inherent contradictions between capital and labour. (Bhopal and Rowley 2002: 1181–1182)

The importance of the way the state therefore acts as a dimension of the globaliza-

tion of capital is key. The question of globalization is not purely an economic or

cultural phenomenon but is a process of interactions (albeit increasingly accelerated

ones) between local organizations, regulatory bodies and transnational corporations

and networks. What is more, the manner in which the local context responds in

terms of HR and IR policies constitutes a complex set of political facto\�rs. The state also has to deal with contradictory outcomes and the manner in\� which

expectations and the understanding of rights change as a result of globalization.

Even if only rhetorically, the state and the political elites have to balance a range

Questions

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

worker participation?

2. In the case of Malaysia, how has the state attempted to shape industrial relations?

3. What impact might this have on the character of industrial relations and trust within the work-

place?

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

boxed text? How do they differ, and why?

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of competing interests and social developments as investment regimes impact and

change the way that people work and live. The Malaysian state is caught \�between

developing supporting mechanisms in terms of training and investment str\�ategies

while also creating some semblance of order and supposed equity in what it does.

It is likely that in a developmental context, there exists a tension between the

softer human development aspects and the harder positions on worker rights and

forms of representation, and the contradictions between these may play them-

selves out and create a new set of issues and political dynamics. Reflective questions

1. What opportunities may MNCs bring to a context of economic development?

2. How can governments and social actors ensure that these benefits are bui\�lt

upon and consolidated in relation to work and employment?

3. What are the main problems that MNCs may bring in terms of dependency

or the nature of work they develop?

4. What are the issues that may emerge in terms of worker rights and repre-

sentation?