The Rule of Law, Legal Traditions, and Economic Growth in East Asia, Meredith Woo-Cumings

"More like them: common law ‘Looks East’

Malaysia is a fascinating case to compare to Korea and Japan, given that it long had a more liberal market and a state based in a common law background that was less interventionist than Japan’s (let alone Korea’s), yet under Mahathir it developed the aspiration to be more like Japan and Korea (during the so-called ‘Look East’ strategy), and even though it failed in that effort, it succeeded in destroying its own common-law based constitution. How did it do so, and what happened to its British common law tradition? The simple answer is that Mahathir expanded the power of the executive and used it first to hamstring and then to demolish the judiciary. Law did not appear to be the ‘proxy’ for the state or the determinant of the state-market nexus as the LLSV scholars would claim, but quickly fell away before the advance of a powerful state...

The Malaysian state frankly adopted the Japanese and Korean model, claiming that there was a trade-off between economic growth and democracy. The policy was anti- Western, and more especially, anti-British. Prime Minister Mahathir pursued an interventionist strategy partially modelled on South Korea’s Heavy and Chemical Industries industrial policy of the early 1970s, involving close collaboration between the government and big business. What was ‘Malaysia Inc.’ supposed to look like?

The Malaysian government established HICOM (Heavy Industries Corporation of Malaysia) to diversify manufacturing activity, increase local linkages, and generate local technological capacity. HICOM, however, suffered significant financial losses, and these, combined with a deterioration in the terms of trade (fueled by drops in world prices for major commodities such as petroleum and palm oil) and increasing external debt, alongside a slump in external demand in primary commodities and electronics and curtailed demand for steel, cement and cars, occasioned a recession lasting from late 1984 until 1987. As a consequence, Malaysia experienced negative growth rates, and investments, both public and private, dropped precipitously. In other words Malaysia tried to be Korea and it all ended in an embarrassing and massive failure, a fortunate outcome for rule-of-law believers attributable, among other things, to crashingly bad timing. Many of the firms the state has sponsored proved to be inefficient, usually due to cronyism, but also because there were simply too many competing firms in the region (Pillay 2000: 209).

But the economic failure did not stop Mahathir from decisively defeating judicial activism, at the hands of the executive; basically the independence of the judiciary was destroyed in a few years in the late 1980s. Let us trace this a little bit. Previously Article 4(1) of the Constitution had proclaimed the Constitution to be supreme, and borrowing from the US model, allocated certain powers, including judicial review, to the Malaysian courts. Judicial review was also one of the five pillars of the national ideology, called the Rukunegara: ‘The rule of law is ensured by the existence of an independent judiciary with powers to pronounce on the constitutionality and legality or otherwise of executive acts’ (Milne and Mauzy 1999: 46).

The year preceding the crippling of the judiciary saw a great deal of judicial activism, with a number of important decisions going against the government. For example, in 1986 the judiciary upheld a challenge against a government expulsion order against a foreign journalist; in 1987 it granted habeas corpus to an ISA detainee; but the upshot of this judicial activism (or resistance) was that Mahathir, who had encountered no resistance in the cabinet or the Parliament, felt that he faced resistance only from the judiciary—and so judicial independence had to go. Mahathir got much assistance from the Parliament, which passed the Federal Constitution (Amendment) Act of 1988, removing the powers of the judiciary from the Constitution, deeming instead that they would be conferred by parliament through statutory decree. By this Act, the Courts were summarily stripped of the power of judicial review previously granted in the Constitution (Milne and Mauzy 1999: 47).

Observers were understandably shocked that the whole judicial system could so easily be transformed, but Mahathir claimed that he was merely guarding the prerogatives of the legislature to ‘develop the law’ (Khoo 1995: 288). In general, laws which at first blush seemed to undergird the power of the judiciary and various checks and balances, over time were used to entrench the executive’s power. Rule-making in the executive expanded as its economic activism spread, despite the significant growth of lawyers in the economy (almost 6,000 advocates and solicitors in the country by the end of 1995) (Pistor and Wellons 1999: 91).

In short, there is precious little in the Malaysian case to suggest that the heritage of common law, a carefully-crafted democratic constitution, or several decades of human experience with the workings of the rule of law, offered much of an obstacle to an authoritarian reworking of the system."