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The ‘Unfinished Business’ of Malaysia’s Decolonisation: The Origins of the Guthrie ‘Dawn Raid’



In a ‘dawn raid’ on the London Stock Exchange on 7 September 1981, the premiere British rubber and oil palm conglomerate in Malaysia, the Guthrie Corporation Limited, was taken into local control in less than four hours. This was the most dramatic Malaysian acquisition of a foreign company during the restructuring of the country’s post-colonial economy during the 1970s and 1980s, and the Guthrie Dawn Raid remains a celebrated but, at the same time, contested juncture in contemporary Malaysian memory. Drawing upon a variety of sources – including original interviews and correspondence with key participants in, and observers of, the Guthrie Dawn Raid, as well as newly released British documents related to the Anglo-Malaysian events of September 1981 – this article presents a new interpretation of the origins of this most iconic of Malaysian corporate takeovers. In particular, it stresses the long-term aspirations of a key (but often overlooked) figure within the late and post-colonial Malay bureaucratic and economic elite, Ismail Mohamed Ali. At the same time, the article emphasizes the specific requirements of Malaysia’s New Economic Policy against the backdrop of burgeoning intra-Malaysian ethnic business competition.
Modern Asian Studies: page 1of 42 C
!Cambridge University Press 2010
The ‘Unfinished Business’ of Malaysia’s
Decolonisation: The Origins of the Guthrie
‘Dawn Raid’
Department of History, Faculty of Arts & Social Sciences and International
Institute of Public Policy and Management, University of Malaya, 50603,
Kuala Lumpur, Malaysia
Department of History, School of Social Science, Liverpool John Moores
University, 68 Hope Street, Liverpool, L19BZ, United Kingdom
In a ‘dawn raid’ on the London Stock Exchange on 7September 1981, the
premiere British rubber and oil palm conglomerate in Malaysia, the Guthrie
Corporation Limited, was taken into local control in less than four hours. This
The authors wish to acknowledge the generous financial assistance of the
Malaysian Ministry of Higher Education and Nottingham University Malaysia
Campus’s Business School in the research and writing of this paper. Nicholas White
would additionally like to thank the International Institute of Public Policy and
Management (INPUMA), University of Malaya, where he was a visiting fellow during
October and November 2007. Embryonic versions of this paper have also been
presented at the European Business History Association conference, ‘International
Business, International Organizations and the Wealth of Nations’, University of
Geneva, 1315 September 2007, at the Department of History Seminar Series,
University of Malaya, 9November 2007 and at the ‘The Economic and Social
History of Malaysia: Celebrating 50 Years of Independence’ conference,Nottingham
University Business School, University of Nottingham Malaysia Campus, 1517
November 2007. The authors are grateful for the comments of participants at these
academic colloquia. The writing of this paper would not have been possible without
interviews and correspondence with the following individuals: Tun Dr Mahathir
Mohamad, Tan Sri Abdul Khalid Ibrahim, Tan Sri Mohamad Desa Pachi, Mark Gent,
Sir Donald Hawley, Sir Evelyn de Rothschild, John Gullick and Henry Barlow, and
to whom the authors are particularly grateful for giving up their valuable time to
share their thoughts and reminiscences. However, the authors alone are responsible
for any errors of fact or interpretation. Extracts from the Tan Cheng Lock articles
was the most dramatic Malaysian acquisition of a foreign company during the
restructuring of the country’s post-colonial economy during the 1970s and 1980s,
and the Guthrie Dawn Raid remains a celebrated but, at the same time, contested
juncture in contemporary Malaysian memory. Drawing upon a variety of
sources—including original interviews and correspondence with key participants
in, and observers of, the Guthrie Dawn Raid, as well as newly released British
documents related to the Anglo-Malaysian events of September 1981—this
article presents a new interpretation of the origins of this most iconic of Malaysian
corporate takeovers. In particular, it stresses the long-term aspirations of a key
(but often overlooked) figure within the late and post-colonial Malay bureaucratic
and economic elite, Ismail Mohamed Ali. At the same time, the article emphasizes
the specific requirements of Malaysia’s New Economic Policy against the backdrop
of burgeoning intra-Malaysian ethnic business competition.
Introduction: The Setting and the Controversy
The term ‘dawn raid’ refers to a surprise assault on the shares of
a target company by a ‘raider’ soon after the opening bell of the
stock market. Hence, the raider acquires a substantial shareholding
without any prior notice to, or knowledge of, the target company.
This was precisely what happened on the London Stock Exchange
(LSE) on the morning of 7September 1981. In less than four
hours of the commencement of trading, Permodalan Nasional Berhad
(PNB; the National Equity Corporation), the Malaysian government’s
investment agency, increased its stake in Guthrie Corporation Ltd.
(GCL) from around 25% to more than 50% of the British company’s
31.34 million shares, ‘effectively skirting any kind of defence or battle
for better terms’.1This shocked the senior executives of GCL, the
premiere British-controlled plantation group in Malaysia.2PNB’s
lightning assault on GCL represented a ‘nifty bit of work’ for The
Economist and a ‘masterful deal’ for one British broker. Another UK
observer commented that Guthrie’s executives had been left ‘with
their trousers round their ankles’. In contrast, and not surprisingly,
Ian Coates, Guthrie’s managing director, referred to the takeover as
are cited courtesy of ISEAS Library, Institute of Southeast Asian Studies, Singapore:
Tan Cheng Lock Papers Collection.
1‘Requiem for a rubber planter’ in Economist,280,12 September 1981.
2The firm’s chairman, Mark Gent, was staying in a Cambridge hotel when he
heard the news of the takeover on the radio. Interview with Mark Gent, Sherborne,
Dorset, UK, 19 April 2007.
‘front door nationalization’, while the Financial Times dubbed PNB’s
assault ‘back door nationalisation’.3
This event appeared extraordinary in the context of Malaysia’s post-
colonial economic development strategy, which in contrast to fellow
Southeast Asian states had exhibited a remarkably liberal attitude
towards foreign—and especially ex-imperial—investments. In Burma,
for example, nationalisation of the teak forests and other natural
resources began in June 1948 within six months of independence
from Britain, and by 1963 government expropriation had also spread
to trading and shipping activities previously dominated by British
firms. During 1957 and 1958 the Indonesian government, within
eight years of independence from The Netherlands, chose a wholesale
sequestration of Dutch assets and expulsion of the majority of
the remaining Dutch business personnel.4Yet, in Malaya/Malaysia,
independence in 1957 had been followed by 13 years of acceptance
and indeed welcoming of the foreign, and particularly British, business
presence. As the ruling Alliance Party’s election manifesto of 1969
unashamedly declared, ‘we do not share the specious reasoning of
many of our critics who believe that foreign capital is exploitative
in character’. On the contrary, ‘the foreign investor has a significant
role to play in our economic advance’.5After 1970, Malaysia’s New
Economic Policy did aim to reduce the expatriate share of the
corporate economy to 30% by 1990, but this would be achieved
by growth in the indigenous business sector, purchases of shares
in foreign-owned companies by Malaysian private investors and
negotiated transfers to Malaysian government agencies. The Guthrie
3‘Requiem for a rubber planter’, p. 81; ‘Malaysia swoops for Guthrie’ in Far Eastern
Economic Review (hereafter FEER), 13 September 1981 cited in Jean-Jacques van
Helten and Geoffrey Jones, ‘British business in Malaysia and Singapore since the
1870s’ in R.P.T. Davenport-Hines and Geoffrey Jones (eds), British Business in Asia
Since 1860 (Cambridge: Cambridge University Press, 1989), p. 186; ‘It was a bargain
for PNB, says Guthrie MD’ in New Straits Times,9September 1981; ‘The sun sets on
Guthrie’ in Financial Times,8September 1981.
4Burma awaits its historian of economic nationalism, but see Nicholas J. White,
‘The Diversification of Colonial Capitalism: British Agency Houses in Southeast Asia
during the 1950s and 1960s’ in Ian G. Cook, Marcus A. Doel, Rex Y. F. Li and
Yongjiang Wang (eds), Dynamic Asia: Business, Trade and Economic Development in Pacific
Asia (Aldershot: Ashgate, 1998), pp. 225. The latest study of Indonesia is J. Thomas
Lindblad, Bridges to New Business: The Economic Decolonization of Indonesia (Leiden: KITLV
Press, 2008).
5Cited in Nicholas J. White, British Business in Post-colonial Malaysia: ‘Neo-colonialism’
or ‘Disengagement’? (London and New York: RoutledgeCurzon, 2004), pp. 589.
Dawn Raid significantly broke the mould, therefore, and represented
a ‘watershed’ event which continues to inspire and evoke nationalist
sentiments in contemporary Malaysia for both the takeover itself
and the daring mode in which it was executed. Notwithstanding the
violence of the communist insurgency between 1948 and 1960, Malaya
lacked a ‘struggle for independence’ since the Alliance had come
to power in 1957 largely through negotiation with Britain, and its
leaders shared power with British colonial officials between 1955 and
1957. Likewise, the creation of Malaysia between 1961 and 1963
involving the fusion of Malaya with North Borneo (Sabah), Sarawak
and (temporarily) Singapore—had been achieved at the conference
table and the ballot box rather than through non-cooperation or
violent confrontation with the colonial power.6The nationalist heroics
of the Dawn Raid, therefore, filled this void in the nation’s collective
memory as a coup de grace to what was perceived as decades of colonial
economic exploitation.
At the same time, because of the swift and secretive nature of the
GCL takeover and the momentousness of this event in Malaysia’s
post-colonial history, the causes of the Dawn Raid remain contested.
This article re-examines three principal interpretations which have
been advanced to explain this dramatic Malaysianisation. The first is
the argument that British business leaders’ conservatism, their desire
to maintain the status quo and their squeamishness with regard to
entering the emerging world of ‘crony capitalism’ drove the Malaysian
government to encourage complete local control of the agency houses
during the 1970s and 1980s.7In contrast, a second view would
have it that Guthrie was a victim of deteriorating Anglo-Malaysian
government relations and the specific policies pursued by Dr. Mahathir
Mohamad who became prime minister of Malaysia in July 1981.8
6See A. J. Stockwell, ‘Introduction’ in A. J. Stockwell (ed.), Malaya, Part I: The
Malayan Union Experiment, 19421948 (London: HMSO, 1995), pp. xxxi–lxxxiv; idem.,
‘Introduction’ in A. J. Stockwell (ed.), Malaysia (London: The Stationery Office, 2004),
pp. xxxv–xcv.
7Nicholas J. White, Business, Government, and the End of Empire: Malaya, 19421957
(Kuala Lumpur: Oxford University Press, 1996), p. 279; idem., ‘The beginnings of
crony capitalism: Business, politics and economic development in Malaysia, c. 1955
70’ in Modern Asian Studies,38,2(June 2004), pp. 40511; idem., ‘The survival, revival
and decline of British economic influence in Malaysia, 195770’ in Twentieth Century
British History,14,3(2003), pp. 23840; idem., Post-colonial Malaysia, pp. 678,2147.
8Roger Kershaw, ‘Anglo-Malaysian relations: Old roles versus new rules’ in
International Affairs,59,4(Autumn 1983), pp. 6401; Chew Huat Hock, ‘Changing
directions in foreign policy trends: A comparative analysis of Malaysia’s bilateral
Finally, and more persuasively (as will be argued), the Dawn Raid
can be viewed as a logical outcome of Malaysia’s New Economic
Policy (NEP) and the longer-term aspirations of a key figure within
the Malay elite, Tun Ismail Mohamed Ali, the former governor of
Malaysia’s central bank—Bank Negara—and the chairman of PNB
from 1978 to 1998. The Guthrie takeover, therefore, tells us much
about what Tim Harper has called the ‘unfinished business’ of merdeka
(independence)9—in this case, despite constitutional independence
for the Federation of Malaya in 1957 and the creation of Malaysia
six years later, the Malay(si)an economy remained dominated by
foreign (and especially British) companies, and, concurrently, the
widely held belief that there remained a perilous economic imbalance
between bumiputera (Malay and other ‘indigenous’ Malaysians) and
non-bumiputera communities.
This article can provide a more objective and searching analysis of
these issues given its interrogation of the currently available primary
sources. Unfortunately, the directly relevant government papers—
in both Malaysia and Britain—are not yet in the public domain.
Meanwhile, the Guthrie archives at the School of Oriental and African
Studies, London, consist of a few ledger books and marketing records
rather than high-level policy-making material. There was, however,
rich commentary on the Dawn Raid in contemporary magazines, journ-
als and newspapers, and these have been revisited and reassessed.
Moreover, under the UK government’s Freedom of Information Act,
access was granted to the Bank of England files which deal with the
raid and its aftermath. More importantly still, this archival material
has been supplemented by interviews and correspondence with key
participants on both the Malaysian and British sides.
In the course of the authors’ research, the Dawn Raid became a live
issue once again in Malaysia in the context of 50 years of merdeka. A war
of words broke out during the April 2007 Ijok by-election, when the
candidate for the opposition Parti Keadilan Rakyat (formerly known
as the National Justice Party, thereafter People’s Justice Party) and
chief investment officer of PNB in 1981, Abdul Khalid Ibrahim (now
relations with Britain and Singapore in 1981’ in Contemporary Southeast Asia,4,3
(December 1982), pp. 3513; Khoo Boo Teik, Paradoxes of Mahathirism: An Intellectual
Biography of Mahathir Mohamad (Kuala Lumpur: Oxford University Press, 1995),
pp. 547.
9T. N. Harper, The End of Empire and the Making of Malaya (Cambridge: Cambridge
University Press, 1999), p. 341.
the chief minister of Selangor), expressed nationalistic joy and pride
at having been a key actor in the Dawn Raid. However, Khalid’s
recollections were immediately disputed by Deputy Prime Minister
Najib Abdul Razak, claiming that Khalid had neglected to mention
the role of Najib’s late father, Tun Abdul Razak (the prime minister
of Malaysia, 19701976) in the GCL takeover, and that as chief
executive officer between 1995 and 2003 Khalid had attempted to
exploit the reconstructed Guthrie Berhad as a vehicle for his own
personal enrichment. As Khalid retorted, Tun Razak had passed away
five years before the swoop on GCL. Nevertheless, Khalid’s credentials
in ‘bringing Guthrie back home’ were also challenged by Mohamad
Desa Pachi, the first general manager and chief executive of PNB
(19781982) and member (albeit ‘non-active’) of the United Malays
National Organisation (UMNO), the dominant political party in
Malaysia’s ruling coalition. Desa Pachi claimed that the leading role of
other PNB executives had been overlooked in Khalid’s recollections.10
The ‘Conservatism’ of the Guthrie Group
Guthrie was an exemplar British agency house, tracing its origins to
the early nineteenth century. The agency houses became the Southeast
Asian agents for European, usually British, manufacturers and, at the
same time, marketed the primary exports of the region in the West.
The commerce in goods, however, was only one of the functions of
the agency house. From the 1900s, the traders also took on what
would prove a more significant and profitable role as promoters
and as the managing agents of direct investments in commodity
production, particularly rubber.11 Of the dozen or so agency houses
that continued to dominate the commanding heights of the Malayan
(peninsular Malaysian) economy at the time of merdeka (independence)
10 ‘Najib dead wrong on Guthrie’s history’ in Malaysiakini,25 April 2007; ‘Bukan
Khalid Bawa Balik Guthrie’ (Khalid did not bring Guthrie back) and ‘Khalid Perlu
Cakap Benar—TPM’ (Khalid Needs to Tell the Truth—DPM) in Utusan Malaysia,22
and 23 April 2007; ‘Najib: Khalid wanted bigger stake in Guthrie’ in The Star,27
April 2007; Interview with Tan Sri Desa Pachi, Kuala Lumpur, 12 September 2007;
Desa Pachi to Shakila Yacob, 20 May 2008.
11 Nicholas J. White, ‘AGENCY HOUSES, European’ in Ooi Keat Gin (ed.),
Southeast Asia: A Historical Encyclopedia, From Angkor Wat to East Timor (Santa Barbara,
CA: ABC-Clio, 2004), Vol. 1, pp. 1278.
in 1957, Guthrie remained the most prestigious.12 Through a group
of supposedly ‘free standing’ companies, usually chaired by Guthrie’s
truculent Scottish managing director, Sir John Hay, the agency house
oversaw some 150,000 acres of planted rubber, palm oil and tea,
plus two tin mines—an investment stake in Malaya estimated at
M$300 million (about £35 million) in 1958. The firm also continued
to maintain a significant merchanting business, worth over £600,000
annually to Guthrie at the beginning of the 1960s.13
Throughout the 1960s, British firms in Malaysia preserved a
large stake in the key sectors of the economy—not necessarily
because of a ‘neo-colonial’ decolonisation deal between Britain and
Malaya/Malaysia but thanks primarily to the reluctance of the latter’s
first prime minister, Tunku Abdul Rahman, to pursue a more
nationalistic economic policy in the interest of maintaining foreign
investor confidence and the allegiance of powerful Malayan/Malaysian
Chinese entrepreneurs-cum-politicians.14 As late as 1970, it is
estimated that over 60% of Malaysian corporate assets were still owned
by foreigners, and of that non-Malaysian stake two-thirds remained
British-controlled.15 Under such circumstances, Guthrie had managed
to increase its plantation holdings in Malaysia to approximately
175,000 acres by the beginning of the 1970s and to 194,000 acres
of rubber, oil palm, cocoa and tea estates by 1981.16
12 The standard text on the development of the Guthrie group is Sjovald
Cunnyngham-Brown, The Traders: A Story of Britain’s South-East Asian Commercial
Adventure (London: Newman Neame, 1971). See also the relevant pages of Geoffrey
Jones, Merchants to Multinationals: British Trading Companies in the Nineteenth and Twentieth
Centuries (Oxford: Oxford University Press, 2000); D. J. M. Tate, The RGA History of
the Plantation Industry in the Malay Peninsula (Kuala Lumpur: Oxford University Press,
1996); G. C. Allen and A. G. Donnithorne, Western Enterprise in Indonesia and Malaya: A
Study in Economic Development (London: Allen & Unwin, 1957); and, J. H. Drabble and
P. J. Drake, ‘The British Agency Houses in Malaysia: Survival in a Changing World’
in Journal of Southeast Asian Studies,12 (1981), pp. 297328. On one of the group’s
key plantation companies, see C. N. Parkinson, The Guthrie Flagship: United Sua Betong
(edited and abridged by J. M. Gullick) (Kuala Lumpur: The Malaysian Branch of the
Royal Asiatic Society, 1996).
13 White, Post-colonial Malaysia, pp. 45.
14 The central argument as per ibid.
15 van Helten and Jones, ‘British business’, p. 184; Junid Saham, British Industrial
Investment in Malaysia, 196371 (Kuala Lumpur: Oxford University Press, 1980),
p. 14 n. 23.
16 N. J. Funston, Malay Politics in Malaysia: A Study of the United Malays National
Organisation and Party Islam (Kuala Lumpur: Heinemann, 1980), p. 8; ‘Out of the
doldrums’ in FEER,26 June 1981.
Under Hay, the Guthrie group was highly efficient, pioneering
diversification from rubber into oil palms, the production of
concentrated rubber latex, the replanting (and new planting)
of estates with selected high-yielding strains of rubber and the
scientific use of fertilizers and cover crops. Yet, Sir John was
opposed to diversification into manufacturing industries and into
countries other than Malaysia, essentially arguing that Guthrie’s
competitive advantage lay in its expertise in managing Southeast
Asian plantations—a specific skill which was not transferable to other
activities or parts of the world. This stubbornness in an era of intense
competition from synthetic substitutes for both rubber and palm oil,
as well as Hay’s age (he was born in 1883) and his reluctance to
prepare for a less acerbic successor, led to Sir John’s unceremonious
deposition during 1963. His fellow directors, Bank of England officials
and City of London investors combined to overthrow Hay, fearing
that substantial British assets could easily fall prey to takeover bids
from Malaysian interests supported by American financiers.17 Sir John
quite literally died of a broken heart in 1964. His successor as chief
executive, Sir Eric Griffith-Jones (a former civil servant far more
amenable to the ‘gentlemanly capitalists’ of the City) was concerned
by the uncertainty induced by Singapore’s expulsion from Malaysia in
1965, the dangers of communal violence and low rubber prices in the
late 1960s. Hence, Griffith-Jones initiated a strategy of diversification
into a variety of manufacturing industries in the United Kingdom, the
United States, Australia and South Africa.18 But these new ventures
were not particularly fruitful and, at the time of the PNB takeover
in 1981, the core plantation business still produced 8090% of group
17 Nicholas J. White, ‘British business groups and the early years of
Malayan/Malaysian independence’ in Asia Pacific Business Review,7,2(Winter 2000),
p. 157; idem., ‘Diversification of Colonial Capitalism’, p. 21; Bank of England
Archive, Threadneedle Street, London (hereafter BoE), G1/183, Governor’s Note of
Conversation with Mr. G. L. C. Touche (Chairman of the Association of Investment
Trusts); note by L. P. Thompson-McCausland for Mr. O’ Brien and the Governor, 14
October 1963; Sir Eric Griffith-Jones to Lord Cromer, 30 July 1964.
18 White, Post-colonial Malaysia, pp. 45,129,170; Cunnyngham-Brown, Traders,
pp. 308,3134; Drabble and Drake, ‘Agency Houses’, p. 318.
19 Note by J. M. Gullick enclosed in J. M. Gullick to Shakila Yacob, 26 April 2007.
The former colonial civil servant, John Gullick, was company secretary at Guthrie’s
London Office between 1959 and 1962, London solicitor to GCL between 1966 and
1973 and subsequently a non-executive director of GCL between 1973 and 1982.
In 1968, Dr. Leslie Bateman, Malaysia’s rubber research supremo,
reported to UK Ministry of Overseas Development officials that
Guthrie was ‘the most far-sighted’ of the plantation agencies in
Malaysia but the firm’s executives combined their entrepreneurial
dynamism ‘with a lack of appreciation of the political and psychological
realities’; Malaysians did ‘not like being patronised’.20 Indeed, the firm
had developed a reputation for defensiveness and obstructionism: Sir
John Hay, for example, had opposed government replanting schemes
for Malay smallholders, as well as officially recognized moderate trade
unions, in the late colonial period.21 Among the agency houses, Guthrie
had pioneered an on-the-job training scheme to Malaysianise the
management of its plantations after 1954, and, by the mid-1960s,
was offering scholarships for Malaysian assistants to undergo further
training either locally, in the United Kingdom or in The Netherlands.
Combined with increasing government restrictions being placed on
the employment of expatriates during the 1960s and 1970s, this
meant that, by 1981, the management staff on the Guthrie estates
was entirely Malaysian. However, the Kuala Lumpur head office still
retained expatriates in a handful of key supervisory posts such as
planting and engineering advisors and in the management of group
Indeed, on the question of ownership and control, the ghost of Hay
continued to inform Guthrie’s executives in London. In 1958, Hay
had appraised shareholders and the Malayan press on the need for
‘free economic cooperation’ between Malaya and Britain. In other
words, despite political independence, minimal changes should be
made to the long-established colonial export economy—capital should
be allowed to flow unimpeded within the Commonwealth and head
offices (and the ultimate control of investments) should continue to
reside in the City of London.23
20 The National Archives, Kew, London (hereafter TNA), OD 39/136, note of
meeting at the Ministry of Overseas Development, 15 August 1968.
21 White, End of Empire, pp. 2089; idem., ‘The limits of late-colonial intervention:
Labour policy and the development of trade unions in 1950s Malaya’, in Indonesia and
the Malay World,36,106 (November 2008), p. 433.
22 Gullick note, 26 April 2007; Tate, RGA, p. 597, n. 37; Arkib Negara Malaysia
(hereafter ANM), H. F. O’ Brien Traill papers, SP 95/B/12, note on training schemes
etc., 14 June 1966, enclosed in ‘Note of a Discussion on Malayanisation, United
Planting Association of Malaysia Proprietors’ Section Meeting, 15 July 1966’; White,
Post-colonial Malaysia, pp. 747; Drabble and Drake, ‘Agency Houses’, pp. 3212.
23 White, Post-colonial Malaysia, p. 87.
From the mid-1960s, the new chief executive, Griffith-Jones, as
advised by the merchant bankers, Baring Brothers, did seek to make
major changes in Guthrie’s organisation. Up until then, the Guthrie
group of plantation companies retained its original structure as a
group of separate operating units. The holding company, Guthrie &
Company, was registered in Singapore with the board of directors in
London enjoying de facto authority. The group of plantation companies
was unified through sharing a common management provided by
Guthrie & Company and interlocking sets of directors who also
made up the Guthrie board. In 1961, Guthrie’s trading and estate
agency businesses had formally separated. The former continued as
the Singapore-registered Guthrie & Company (and during 1968
1969 merged with Henry Waugh Limited, the Jardine Matheson
subsidiary, to form Guthrie-Waugh Limited, and returned to full
Guthrie control as Guthrie Berhad in 19721973). In the far more
important latter, the plantation companies took over the management
service from Guthrie & Company and shared its ownership in the
Guthrie Estates Agency Limited, registered in the United Kingdom
with a local subsidiary, Guthrie Agency (Malaya) Limited. In 1965,
the plantation group was further rationalized when the 14 estate
companies merged into a new parent company, the London-registered
GCL.24 Although publicly justified on grounds of economies of scale
and administrative efficiency, the formation of GCL was primarily
motivated by a fundamental fear of losing financial control. The
main concern in the 1960s was that more loosely controlled and
undervalued individual plantation companies were vulnerable to
takeover through Malayan/Malaysian Chinese speculators acquiring
large shareholdings. In particular, the Malayan/Malaysian Chinese
Association senator, Lee Loy Seng, was beginning a process of
acquisitions which would see him emerge by the 1970s as one of
the country’s largest rubber plantation owners.25
When Griffith-Jones reorganized the Guthrie group during 1965,
he notified the Bank of England that some ‘Malaysianisation’ would
be required and ‘must be put in hand soon’. It was not his intention,
however, to ‘peddle out shares’ in Malaysia. Rather, Guthrie’s new
boss intended to group together a separate unit of lands and estates
24 Drabble and Drake, ‘Agency Houses’, pp. 314,3167; Gullick note, 26 April
25 Edmund Terence Gomez, Chinese Business in Malaysia: Accumulation, Accommodation
and Ascendance (London: Curzon, 1999), pp. 1578.
selected from several of the Guthrie rubber and oil palm companies,
and turn this into a locally registered concern with a strong Malaysian
element in the management and on the board. However, ultimate
financial control would still reside with GCL in London since no
more than 49% of the Malaysian subsidiary’s shares would be offered
This strategy might have appeared more palatable to the Malaysian
regime had Griffith-Jones’s scheme for Tun Dr Ismail bin Datuk Haji
Abdul Rahman (a former minister of Commerce and Industry) to
head the new GCL subsidiary in Kuala Lumpur remained permanent.
Dr. Ismail did chair the new Malaysian concern from 1967, but,
despite ‘earning a salary three times’ that of a cabinet minister,
Ismail returned to government office as Minister of Home Affairs
following the political crisis induced by the May 1969 ethnic riots in
Kuala Lumpur.27 Instead, Mark Gent, the son of Sir Edward (the ill-
fated first and last governor of the Malayan Union), became head of
GCL’s operations in Kuala Lumpur after 1969. Gent had worked in
Guthrie’s London office from 1952, and would become chairman of
GCL after Griffith-Jones’s death in 1979.28 It fell to Gent, therefore,
to implement the Griffith-Jones financial scheme, designed to appease
Malaysian economic nationalism but without surrendering ultimate
control from the City. This was known as Guthrie Ropel, and it involved
the gradual transfer of shares to Malaysian interests—amounting to
40% by 1990—through the division of the GCL constituent companies
into six locally registered block subsidiaries organized by locality.
Guthrie Ropel Sendirian Berhad was first registered in 1966, and
the initial step was to transfer one block into a Malaysian subsidiary
of Guthrie Ropel, and then offer 40% of the shares of that subsidiary
to Malaysian investors on the Kuala Lumpur Stock Exchange (KLSE).
Concurrently, Malaysian dignitaries—often ex-civil servants and
politicians—would join the board of the subsidiary to represent the
local stockholders. When the first stage was successfully completed
26 BoE, ADM 14/82, note for the Governor and the Deputy Governor by L. P.
Thompson-McCausland, 10 March 1965.
27 Drabble and Drake, ‘Agency Houses’; Ooi Kee Beng, The Reluctant Politician: Tun
Dr Ismail and His Times (Singapore: ISEAS, 2006), pp. 171,181; Tunku Abdul Rahman,
Looking Back: Monday Musings and Memories (Kuala Lumpur: Pustaka Antara, 1977), p.
171. Race riots broke out on 13 May 1969 in Kuala Lumpur after ‘victory’ processions
and counter-processions in the immediate aftermath of the gains made by opposition
parties in the general election.
28 Mark Gent to Nicholas J. White, 21 April 2003.
and running smoothly, the process would be repeated with another
group of estates, passing to what would become a partly Malaysian-
owned Guthrie subsidiary. When the whole operation was completed,
40% of the ultimate ownership (30%bumiputera,10% other Malaysian)
would be in local hands. In 1974,26% of the equity in Guthrie Ropel
(which by then owned about one-sixth of the group’s planted area)
was finally placed with the Malaysian public, and three years later
a further 15% was offered to approved bumiputera individuals and
institutions, thus giving Malay interests the intended 30% of issued
capital. The plan thereon was to transfer the remaining 150,000 acres
to Guthrie Ropel by 1990.29 But, crucially, the steadfast intention of
the Guthrie board was that 60% of ownership would still reside in the
hands of GCL’s shareholders. Meanwhile, as Henry Barlow, formerly
head of his family’s plantation business in Kuala Lumpur and until
recently a director of Guthrie Ropel, discovered subsequently, the
initial lands transferred were the worst of the agricultural estates, a
high proportion of which were on hilly land. This also laid the sincerity
of GCL’s Malaysianisation plans open to question.30
Guthrie Ropel had been planned with the cognisance and approval
of Ismail Ali, as head of Bank Negara.31 But the determination of
the London board to maintain control increasingly conflicted with
Malaysian economic aspirations. Indeed, as Malaysia’s Business Times
opined on 17 December 1980:
It is a clearly and firmly stated objective of official policy that the Malaysian
stake in resource-based enterprise like plantations and agro-industry must
go up to 70 per cent. Guthrie’s restructuring falls far short of this target,
and Malaysian institutions may understandably want to see that this group
is made to fall into line.
This was indeed manifest in the early months of 1979 when an
attempt to take over GCL was mounted by Sime Darby, the former
British agency house by then under the control of the government-
controlled Perbadanan Nasional Berhad (PERNAS; the National
Trading Corporation).32 This was resisted but Sime Darby was left
29 Gent interview, 19 April 2007; Gullick note, 26 April 2007; Drabble and Drake,
‘Agency Houses’, pp. 318,323.
30 Interview with Henry Barlow, Kuala Lumpur, 17 November 2007.
31 Letter from Gent to Shakila Yacob, 21 April 2007.
32 Controlled by the Ministry of Finance Incorporated, the Malaysian Treasury’s
holding company, PERNAS, was under the presidency of Tengku Razaleigh Hamzah,
who was Minister of Finance at the time of the Dawn Raid.
with a near 30% stake. An expected re-bid never materialized, but
as Sime Darby saw its holdings diluted by other Guthrie takeover
bids, it sold its interests to other Malaysian investors, notably 25%
to PNB in December 1980.33 Concurrently, GCL was divesting from
Malaysia as a hedge against another possible takeover bid: by the latter
half of 1980, the board in London was searching round for possible
acquisitions of US$100 million in North American heavy industry,
while also developing 40,000 acres of plantations on the islands of
Hainan (China) and Mindanao (The Philippines). Meanwhile, 58,000
acres had been acquired in Liberia, including 18,000 acres of planted
rubber from B. F. Goodrich of the United States. At the same time,
Nigeria was being targeted for plantation joint ventures, while GCL
had bought an investment trust and a fire-fighting equipment firm in
the United Kingdom. Moreover, GCL sold its 73% stake in Guthrie
Berhad. Guthrie director, Bernard Lewis, may have publicly welcomed
the change of shareholder from Sime Darby to PNB in 1980.34 But, as
PNB chairman, Ismail Ali, told the press in September 1981, he had
been deeply unhappy with this geographical diversification—despite
being the leading minority shareholder, PNB had been denied board
representation and had not been consulted on the divestment strategy.
Hence, the Dawn Raid was launched to ‘preserve the Guthrie group’s
Malaysian involvement and its presence in Southeast Asia’.35
It is easy, therefore, to argue that Guthrie and indeed other
British agency houses in Malaysia ultimately ‘failed’ by not fully
embracing the possibilities of a post-colonial, Commonwealth
economic partnership. However, if entrepreneurial conservatism was
the root cause of the Dawn Raid, then the UK agency house most likely
to have been targeted by PNB in September 1981 was Guthrie’s arch-
rival in the Malaysian plantations, Harrisons & Crosfield (H&C). Mark
Gent recalls that the governor of Bank Negara, Ismail Ali, was ‘always
civil to Eric [Griffith-Jones] and myself’ (although ‘in a rather sphinx-
like way’ and before meetings Griffith-Jones and Gent were ‘nearly
always’ ‘kept waiting outside his office for 1
/2an hour’). By contrast,
33 ‘Requiem for a rubber planter’, 12 September 1981.
34 Gullick note, 26 April 2007; Gent interview, 19 April 2007; ‘A respite, not a
reprieve’ and Hugh Peyman, ‘Plantation giants eye new conquests’ in FEER,19 and
26 December 1980; Barlow interview, 17 November 2007; Abdul Khalid Ibrahim,
‘Business investments and growth’ in Malaysian Management Review,20,2(August
1985), pp. 1118; Chew, ‘Changing directions’, p. 352; Interview with Tan Sri Abdul
Khalid Ibrahim, Petaling Jaya, Malaysia, 2November 2007.
35 ‘PNB launches 901p a share bid for Guthrie’ in Business Times,8September 1981.
however, Ismail ‘would never talk to H&Cs’, an antipathy apparently
based upon Finlay Gilchrist, H&C’s chairman from 1962 to 1977,
‘never visiting Malaysia and calling on him [Ismail]’.36 Harrisons
was ‘deeply resented’ by leading bumiputera, given its intransigent
attitude towards Malaysianisation. Whereas GCL had at least devised
the Guthrie Ropel scheme, Harrisons in the early 1980s was still in
negotiation for the Malaysianisation of its major subsidiary, Harrisons
Malaysian Estates (in which H&C held 80% of the shares), discussions
which had been going on since 1976. PNB held only about 8% of H&C
in 1981 compared to one quarter of Guthrie.37
As Khalid Ibrahim has revealed, the principal reason why Guthrie
was targeted in 1981 was the dispersed pattern of GCL’s ownership,
involving a number of share blocks which were easily identified and
could be negotiated with either by PNB directly or by the London
merchant bank, N. M. Rothschild & Sons Ltd., acting on PNB’s behalf.
Moreover, a number of those blocks were held by parties ‘friendly’
with PNB. With the 25% which PNB already held, acquisition of these
congenial holdings would allow the investment agency to control over
40% of GCL’s equity, and hence the London board.38 These pro-PNB
interests were Genting Berhad (through building up a casino and
resorts business from the 1960s, Genting’s chief executive, Lim
Goh Tong, necessarily developed a close relationship with successive
Malaysian prime ministers, and it was partly through sales from
Genting that PNB had earlier picked up 8% of H&C’s shares); Bank
Simpanan Nasional (Malaysia’s national savings bank under Finance
Minister Tengku Razaleigh Hamzah); the Kuwait Investment Office
(Ismail Ali was also head of Malaysian-Kuwaiti Investment); and the
Oversea-Chinese Banking Corporation (OCBC) (which in remaining
a ‘neutral’ shareholder had permitted PERNAS to secure control of
Sime Darby in 1976).39
As it turned out, the OCBC chairman, Tan Chin Tuan, decided not
to sell his bank’s block of Guthrie shares despite a long, late lunch
36 Letter to White, 21 April 2003.
37 ‘A respite, not a reprieve: Sime Darby gives up its chase of Guthrie Corporation
and pockets a healthy profit in the process’ and ‘Out of the doldrums’ in FEER,19
December 1980 and 26 June 1981.
38 Interview with Khalid Ibrahim, 2November 2007; Leela Barrock, ‘When the big
boys came home’, Merdeka Special in The Edge,3September 2007, pp. 3031.
39 ‘Genting group: Farewell to our founder: Tan Sri Dato Seri (Dr.) Lim Goh Tong’
in New Straits Times,26 October 2007; ‘Out of the doldrums’, 26 June 1981; Gomez,
Chinese Business, pp. 4958.
with Ismail Ali in Singapore on 7September to coincide with the
opening of the exchange in London. However, the other Kuwaiti and
Malaysian ‘friendly’ shareholders did agree to sell, while, in London,
Rothschilds was able to secure the support of the M&G Investment
Trust, which held 11% of GCL. M&G (in conjunction with the K.
C. M. G. Anderson Trust, holding 1617% of GCL)40 had scuppered
the Sime Darby takeover attempt on GCL in 1979, arguing that the
bid of 523.75p per share was too low.41 M&G was hoping for £10
11 per share back in 19791980, but something between this figure
and £7.25 following Sime Darby’s sale of Guthrie shares to PNB.
Performance-conscious M&G kept a close watch on its investments
and Mark Gent was visited several times in Malaysia during the 1970s
by the investment trust’s managing director, David Hopkinson. Gent
was aware that Hopkinson had been approached to sell his holding,
and Hopkinson’s response was that M&G was not a seller below £9
a share. Hence, it is no coincidence that PNB’s offer price on the
morning of 7September was £9.01.42 With the 5% purchased for PNB
from small shareholders by the brokers Rowe & Pitman on the ringing
of the LSE’s opening bell, this ensured that by midday on 7September
PNB had just about achieved majority control of GCL. The principal
remaining British shareholders—the Anderson Trust, Barings and
Save & Prosper—were left out in the cold.43
In contrast, H&C was much more tightly controlled, with, for
example, a large slab of shares owned by the Scottish Widows pension
fund, and Khalid Ibrahim had been cautioned by Rothschilds that he
would have to consume vast quantities of whiskey if PNB’s investment
40 Keith Anderson, a former chairman of Guthrie & Company, was the third
son of Sir John Anderson, who had become a partner in the Singapore agency
house in 1876 and its senior partner and majority owner after 1902. With the
assistance of Sir John Hay in London, Sir John Anderson had been the dominant
influence upon Guthrie’s diversification into the promotion and management of
rubber companies. Cunnyngham-Brown, The Traders; John Orbell, ‘Anderson, Sir John
(18521924)’, Oxford Dictionary of National Biography (Oxford: Oxford University Press),
2004[, accessed 8April 2008].
41 ‘Guthrie: What happens now?’ and ‘PNB launches 901p a share bid for Guthrie’
in Business Times,17 December 1980 and 8September 1981.
42 ‘A respite, not a reprieve’, 19 December 1980; Gent to White, 11 November
2007. Khalid had calculated that it was futile approaching Save & Prosper, the other
UK investment trust holding substantial shares in GCL, because its directors were
considered too ‘anglophile’. Barrock, ‘When the big boys came home’, 3September
2007, pp. 3031.
43 ‘Requiem for a rubber planter’, 12 September 1981.
manager had any chance of concluding a deal in Edinburgh!44
Moreover, one London broker had told the Far Eastern Economic Review
(FEER) in December 1980 that ‘Harrisons has a certain mystique’
and ‘The City would defend it come hell or high water’ as a ‘bastion
of old fashioned integrity and diligence’.45 GCL was also attractive to
PNB because it held prime properties for industrial and residential
development outside of Kuala Lumpur along the Klang Valley: as
Khalid appreciated at the time, by increasing the value of Guthrie
land by 2030% PNB would be able to recoup its purchase price of
£282 million.46
It should also be appreciated that the GCL management was faced
with an impossible dilemma. Necessarily, the Guthrie board had
obligations to its existing British shareholders. As John Gullick, a
non-executive director of GCL in 1981, has explained:
The GCL directors were willing to facilitate a substantial Malaysian
participation in the ownership of the Guthrie group. But as directors of a
UK public company they deemed it essential to retain majority control of its
enterprise, if only at a level of 51 per cent. To go further than that would
require the approval of GCL shareholders in a general meeting, and the
directors were unwilling to recommend such a policy to shareholders, since
they did not think that retaining only a minority stake would be satisfactory.47
Ranked 68 out of the top 100 British companies on the LSE in
September 1981, GCL shares were also well worth hanging on to.48
At the same time, GCL’s diversification strategy should be
contextualized and rationalized. The group did have plans to develop
new plantations in partnership with state development corporations
in both peninsular and East Malaysia, but, as the FEER appreciated,
plantation companies had not been able to expand their acreage in
Malaysia since the early 1970s. There was no official policy barring
land alienation to non-Malaysians: ‘The answer has never been no
when such projects have been proposed—it simply has never been
yes’. The only alternative—again to meet shareholder obligations—
was to expand outside Malaysia. Yet, it was precisely the GCL
board’s strategy of diversifying with capital earned in Malaysia that
44 Interview with Khalid Ibrahim, 2November 2007.
45 ‘A respite, not a reprieve’, 19 December 1980.
46 Interview with Khalid Ibrahim, 2November 2007; ‘When the big boys came
home’, 3September 2007.
47 Gullick note, 26 April 2007.
48 Gent interview, 19 April 2007.
provided the casus belli for PNB to move against Guthrie.49 Nor did
GCL necessarily stall its Malaysianisation strategy: when Gent first
mooted the Ropel scheme in mid-1969 (notably two years ahead of the
beginning of the NEP), a ‘big bang’ flotation of 40% on the KLSE was
blocked by Governor Ismail on the grounds that ‘it was too big for the
market to swallow’ at that juncture. Hence, to avoid overloading the
local capital market, GCL had to proceed slowly through six stages.
Subsequently, Gent recalls being told by various ministers and officials
‘on a number of occasions’ that organisations already operating in
Malaysia did not need to ‘do anything’: the NEP was merely intended
to apply to new investment, but anything that existing enterprises
were able to do to increase Malay participation would be appreciated.50
The board was ‘indignant’, therefore, when in the course of 1980 PNB
proposed to GCL that the investment agency should acquire a 51%
shareholding in a single Malaysian subsidiary of GCL to which all
the estates would be transferred. This was a unilateral repudiation of
the scheme negotiated previously with Ismail Ali as governor of Bank
Negara, and already partly implemented.51 Perhaps, then, it is better
to locate the causes of the Dawn Raid within the ‘bigger picture’ of
Anglo-Malaysian relations in the early 1980s.
Mahathir, Thatcher and a Breakdown in Anglo-Malaysian
Ismail Ali, the chairman of PNB in September 1981, was Mahathir
Mohamad’s brother-in-law. There remains an obvious suspicion that
this relationship may have constituted a significant influence on
PNB’s resolve to take over GCL. Mahathir had been educated in the
English language at the University of Malaya (in Singapore), but he
49 ‘Plantation giants eye new conquests’ and ‘The buyers are willing, the sellers are
weak’ in FEER,26 December 1980 and 2October 1981.
50 Letter to Nicholas J. White, 11 November 2007.
51 Gullick note, 26 April 2007. The position of large public companies such as
GCL and H&C was quite different to the Danish United Plantations group, which
was largely family-owned, was relatively small and geographically concentrated in
Perak and was able to come to terms with a Malaysian controlling interest after 1982.
See Susan Martin, The UP Saga (Copenhagen: NIAS Press, 2003), pp. 1167,2346,
2558; idem., ‘European Plantation Firms and Malaysia’s New Economic Policy since
1970’, paper presented at the International Economic History Congress, University
of Helsinki, August 2006, Session 94: Foreign Companies and Economic Nationalism
in the Developing World after World War Two.
‘never socialized in the British tradition’.52 The first non-smoking,
non-drinking and non-golfing Malaysian prime minister had limited
sympathies for Britain unlike his predecessors, Tunku Abdul Rahman,
Abdul Razak and Hussein Onn, who were of aristocratic lineage,
had been educated in the United Kingdom and retained ‘nostalgic
memories of youthful days in the halls of English inns of court.’53
Through his own admission, Mahathir had no British friends.54
According to Gent, Mahathir ‘had a big chip on his shoulder’ and ‘this
accounted for a part of the problem between Britain and Malaysia
at the time of the dawn raid’.55 As early as 1966, as a back-bench
MP, Mahathir had criticized the ‘old lion’ whose ‘Empire, the blissful
source of booty, is now disappearing’ in the Dewan Ra’ayat (the lower
house of the Malaysian parliament).56 The Malay Dilemma, Mahathir’s
polemical book first published in 1970 (which was banned in Malaysia
and resulted in his expulsion from UMNO), has a reputation as a
Malay chauvinist, anti-Malaysian Indian and anti-Malaysian Chinese
text. Yet, ‘the only ethnic group towards which The Malay Dilemma was
unmistakably hostile was the British’, holding the colonials ‘primarily
responsible for aggravating the economic backwardness of the Malays
when their liberal immigration policy in the late nineteenth and early
twentieth centuries swamped Malaya with immigrants from India and
China’.57 At the same time, Mahathir lambasted what he saw as a
corrupt and decadent colonial capitalism:
...It is true that British firms ...were favoured by the [colonial] Government,
but this was not a stated policy. Usually this help took the form of large
contracts negotiated not officially but over whiskies in the various exclusive
clubs in the country ...
...[As such] there was no real competition between the British firms and the
local firms. The British firms were protected, not legally but by race loyalty
and chauvinism. The British businessmen and the British administration
together ensured that certain businesses remained in British hands ...
Independence in 1957 put an end to British monopoly, but the Chinese
52 Chew, ‘Changing directions’, p. 357.
53 ‘A message from Mahathir’, FEER,25 September 1981.
54 Interview with Tun Dr Mahathir Mohamad, Kuala Lumpur, 17 July 2007.
55 Gent to Shakila Yacob, 21 April 2007.
56 Cited in Khoo, Paradoxes, p. 90, n. 15.
57 Kershaw, ‘Anglo-Malaysian relations’, p. 630; Chew, ‘Changing directions’,
p. 358.
became the principal beneficiaries. In a plural Malaysian society this can
hardly be regarded as fair ....58
This disenchantment with things British was exacerbated by
Mahathir’s interactions with the UK prime minister, Margaret
Thatcher, whose government had in 1979 withdrawn subsidies for
Malaysian students wishing to study at British universities (as part
of the general monetarist policy of reducing UK public spending and
emblematic of the economic disengagement from the Commonwealth
in favour of the European Economic Community). For the 17,000
Malaysian students still studying in UK institutions in 1981, however,
this amounted to a 20% hike in fees and at a juncture when the
nascent Malaysian higher education sector could not provide sufficient
places for the large number of applicants. The Guthrie takeover
was, therefore, regarded as retaliation for this Scrooge-like British
government action. Mahathir let it be known to his opposite number
in London how the withdrawal of student subsidies would ultimately
be to Britain’s loss. The Malaysian premier outlined the potential
ramifications in terms of government procurement orders, consultancy
services and loss of the Malaysian market to the British higher
education industry. Britain stood to lose its early mover advantages
since old ties would be destroyed and new ties would not be given
a chance to develop. Malaysian students pursuing their tertiary
education in the United States, Japan and Korea would forge new
alliances that would eventually lead to new directions in business
and economic relations.59 The student fees issue was compounded
in March 1981 by the faux pas of Britain’s new High Commissioner
to Malaysia, William Bentley, when at his first press conference in
Kuala Lumpur Bentley lectured his audience on how the United
Kingdom had expended ‘not only money but lives and blood on
Malaysia in ensuring that this country enjoys its independence in
peace and stability’.60 A further source of Anglo-Malaysian tension
was the Concorde issue. No permission had been sought from the
Kuala Lumpur government to use Malaysian airspace for Britain’s
58 Mahathir bin Mohamad, The Malay Dilemma (Times Books International:
Singapore, 1970), pp. 39,52.
59 Mahathir interview, 17 July 2007.
60 Cited in Kershaw, ‘Anglo-Malaysian relations’, p. 640 and Chew, ‘Changing
directions’, pp. 34950.
supersonic aircraft on its flights to Australia.61 Mahathir regarded
this as a ‘cavalier attitude’, epitomising the lingering of a colonial
‘master–servant mentality’ in the United Kingdom.62
Moreover, immediately after the Dawn Raid, Malaysian leaders
were convinced that the amendment of the Substantial Acquisition
of Shares Rules on the LSE, allowing minority shareholders a
greater period of reflection during takeover attempts (see below for
more details on this complex issue), was directed at Malaysia as a
consequence of PNB’s acquisition of GCL. The amended rules came
into effect barely two weeks after the Dawn Raid, and following
the ‘strong and open hints of possible future take-overs of other
British companies in Malaysia, for instance Dunlop, Barlow, Harrisons
& Crossfields [sic], along similar lines to the Guthrie take-over’.63
The Malaysian view was that the amended legislation was another
hangover from the colonial past, demonstrating Britain’s stubbornness
in clinging to its economic legacy in Malaysia. As Mahathir told
the FEER in October 1981, British complaints about ‘back door
nationalisation’ on the part of Malaysia when PNB was openly buying
equity at the market rate and according to LSE rules, followed
by British amendment of those dictates, seemed ‘more like British
economic nationalism rather than Malaysian economic nationalism’.64
Three months after his appointment as prime minister and just over
a month after the Dawn Raid, Mahathir officially announced the ‘Buy
British Last’ campaign. After 10 October 1981, the Prime Minister’s
Department vetted every proposed future Federal government
purchase of British goods. This hit certain British companies hard—for
example, Dunlop Malaysia Industries, the local manufacturing plant
of the British multinational, had held a government contract for the
supply of truck tyres since it began production in 1963. But this was
suddenly lost to Goodyear of the United States, and the ‘uncertain’
future in Malaysia was a factor in Dunlop’s decision to sell out to local
61 Gent interview, 19 April 2007; Kershaw, ‘Anglo-Malaysian relations’, p. 637,
n. 16.
62 Mahathir interview, 17 July 2007.
63 Chew, ‘Changing directions’, p. 353.
64 ‘A tough guy takes over’ in FEER,30 October 1981. Mahathir was still smarting
in 1996 during an address at St. Catherine’s College, Cambridge: ‘The British
Government immediately stepped in, declaring that “dawn raids” were henceforth to
be regarded as illegal. Since we did it before it was declared illegal, it should have been
accepted in good spirit. However, Malaysia was accused of back door nationalisation’.
‘Market Economy and Moral and Cultural Values—A Malaysian Perspective’, 16 April
interests in 1982. Mahathir also made the decision to introduce Malay
rather than English as the official language in the lower courts by
1985. Moreover, just after the Dawn Raid, Malaysia’s prime minister
publicly announced that he would not be attending the upcoming
Commonwealth Heads of Government Meeting in Melbourne, given
the unsympathetic attitude of the old ‘White’ Commonwealth towards
the less-developed members of the ex-colonial club, and the long-held
criticism of Britain that it had abandoned Commonwealth obligations
for a protectionist EEC.65 Three months later, on 15 December 1981,
Mahathir issued his first statement on the ‘Look East’ policy, which
would be officially announced in February 1982, and which aimed
to introduce new forms of Japanese-, Korean- and Taiwanese-style
industrial management methods and work ethics as part of Malaysian
aspirations to ‘re-orient’ towards becoming a newly industrialized
But, the Thatcher–Mahathir tiff should not be over-played as a
causal factor in PNB’s raid on GCL. For one, the relative ease
with which relations were restored between Britain and Malaysia
after the Dawn Raid suggests that Anglo-Malaysian relations had
not reached a terrible impasse. Admittedly, Malaysian officials were
distinctly unimpressed by a ‘paltry’ offer in December 1981 from
the British-Malaysian Industry and Trade Association (BMITA) to
contribute M$1.5million over three years to help Malaysian students
abroad. This contribution would amount to a mere M$250 per major
company per month, and some long-established firms (notably H&C)
had declined to assist. But, at the same time, Foreign Minister
Ghazali Shafie emphasized that the ‘Buy British Last’ campaign did
not amount to a boycott of British goods, and action taken against
some British firms had gone against the spirit of Mahathir’s directive,
while, in London, Deputy Finance Minister Najib parlayed with the
Treasury, the Bank of England and the Council for the Securities
Industry, and sought to redress the UK surplus in Anglo-Malaysian
trade by increasing Malaysian exports of manufactured goods to
Britain. The contract to supply British tanks for Malaysia’s armed
forces, meanwhile, was not abrogated. Lord Carrington, UK Foreign
Secretary, also visited Kuala Lumpur as part of an ASEAN tour in
65 ‘Message from Mahathir’, ‘Tough guy takes over’ and ‘Exit Dunlop, smiling’,
in FEER,25 September and 30 October 1981, and 23 July 1982; Kershaw, ‘Anglo-
Malaysian relations’, p. 637.
66 Kershaw, ‘Anglo-Malaysian relations’, p. 642; Khoo, Paradoxes, pp. 6574.
February 1982 in which bilateral relations, particularly with regard
to trade and education, were discussed.67
A year later, Her Majesty’s Government announced that it would
give Malaysian students special preference under a new scheme
providing £4million in additional Commonwealth scholarships. Over
600 Malay students were now able to enter Oxbridge. The intercession
of Sir Donald Hawley (former British High Commissioner to Malaysia)
and Ismail Ali also paved the way for Thatcher and Mahathir to
dine together in March 1983 at 10 Downing Street in the ‘presence
of assorted nabobs’.68 The following month, the ‘Buy British Last’
directive was withdrawn. In July, Ghazali began an official two-day
visit to Britain, and in August a new programme of technology
transfer, sponsored by the BMITA, in conjunction with Malaysia’s
Public Services Department, allowed 20 senior Malaysian government
employees an 11-month secondment at British firms such as BP
Malaysia, Lever Brothers, Inchcape, the Chartered Bank, Malayan
Cement, ICI Malaysia and the General Electric Co. to enhance their
management expertise and skills. Funded also by the UK’s Overseas
Development Administration, this was the end result of talks between
Mahathir and British business leaders following the ‘Buy British Last’
announcements.69 Despite Mahathir’s bravado, therefore, there was
never any intention of ditching the Commonwealth relationship—
British investments were still welcome in Malaysia, so long as these
complied with NEP requirements, and British firms were assured that
if they were taken over, expatriate managers would be retained as
long as they cooperated with Malaysia’s development objectives.70
At the same time, Mahathir was not personally instrumental in the
planning or execution of the Dawn Raid. As Deputy Prime Minister
after 1976, and particularly after his additional appointment as
Minister of Trade and Industry in 1978, Mahathir had certainly
been concerned with boosting bumiputera equity participation, and
was therefore fully in support of PNB’s objectives to acquire large
companies to rapidly increase the Malay share of the corporate
economy. Yayasan Pelaburan Bumiputera (YPB; the Bumiputera
67 ‘Studiously ignored’ in FEER,18 December 1981, pp. 523; Chew, ‘Changing
directions’, pp. 358,359.
68 Mahathir interview, 27 July 2007; Interview with Sir Donald Hawley, Salisbury,
UK, 10 April 2007; ‘Malaysian students get more British aid’ in FEER,24 February
69 ‘The thaw continues’ in FEER,4August 1983.
70 Chew, ‘Changing directions’, p. 357; Mahathir interview, 17 July 2007.
Investment Foundation) was PNB’s parent organisation, and till 1981
was headed by Mahathir as deputy prime minister. Mahathir, with
his trade and industry hat on, as well as Finance Minister Razaleigh,
were certainly briefed and were enthusiastic in late 1980 about the
possibility of taking over GCL. But planning within PNB preceded
these meetings.71 As Prime Minister, Mahathir merely endorsed
the proposal put forward to him by the key player, Ismail Ali, who
paradoxically did know both the British players in Kuala Lumpur and
London ‘very well’.72
Moreover, as the Bank of England records reveal, no stock exchange
rules were actually broken during the raid, suggesting longer-term
planning before Mahathir became prime minister, and an intimate
knowledge of City of London procedures which, however omni-
competent or omnipresent Mahathir may have been, he could not
have been aware of or mastered. In the United Kingdom, the takeover
code of the Council for the Securities Industry (CSI) considered that
control of a company had transferred to a person or group of persons
acting in concert when said individual or individuals acquired 30% or
more of the voting rights stemming from the acquisition of shares of
the same quantity. Prior to 1980, the purchaser(s) could buy up as
many shares as they could in a mere matter of hours, and by extension
exceed the 30% limit through which effective control of the company,
under the takeover code, would pass to the same purchaser(s). The CSI
had taken stock of the ramifications of dawn raids when a precedent
was set by the Johannesburg-based De Beers mining group through
its contentious acquisition of a controlling interest in Consolidated
Gold Fields. On the morning of 12 February 1980, De Beers acquired
11% of the shares of Consolidated Gold Fields within 45 minutes at
a price substantially higher than the closing market price. Prior to
this, De Beers had covertly acquired 14% of the international gold-
producing group’s shares. De Beers’ dawn raid proved contagious and
by July 1980 there were five cases involving De Beers-style takeovers.73
As such, the CSI, as an interim measure, imposed a ban on such
Blitzkrieg-style operations.74
71 ‘Najib dead wrong’, 25 April 2007; ‘When the big boys came home’, 3September
2007; Interview with Khalid Ibrahim, 2November 2007.
72 Interview with Mahathir Mohamad, 27 July 2007.
73 BoE, General File No. 161890, ‘CSI: Recent Developments in Market Purchases’,
12 October 1981, Appendix 2, ‘Extract from the Council’s Annual Report for the year
to 31 March 1981’.
74 Ibid., ‘CSI: Recent Developments in Market Purchases’, 12 October 1981.
This short-lived ban was lifted when the ‘Rules Governing
Substantial Acquisition of Shares’, approved by the CSI, came into
effect on 11 December 1980. The rules sought to provide a level
playing-field for minor shareholders who either in practice were not
well informed of prevailing market conditions or who constituted a
negligible proportion of the ownership, so that they too could be
advised properly and profit from the high (or above the market) price
which was offered at dawn raids by the purchaser(s). The purchasers
affected by the new rules were those interested in acquiring 5% or
more of the voting rights if such a move would increase their present
holdings to 15% but fall short of the 30% mark. A seven-day provisional
‘taking stock’ period was imposed for this category.
The CSI’s new regulations also sought to address existing concerns
about dawn raids which were open to a number of objections
from boards of directors or management, shareholders and industry
observers. Dawn raids effectively presented a fait accompli to the
directors and shareholders who were not given adequate time and
opportunity to consider and debate the issues relating to the future
of the targeted company. Such scenarios were remedied through the
application of the seven-day period—which was already operational
for the 15%–30% category—for the purchaser who was considering
topping up their acquisition, exceeding the 30% limit. This was
implemented with the same intention of slowing down the buying
process and allowing a period of reflection and mental ‘stock-taking’,
alongside debate and formulation of views within the target company.
In addition, dawn raids denied the opportunity for a better bid to be
offered by other prospective purchasers. The only difference was that
the stalling mechanism was in place when the purchaser was already
in sight of control of the target company, that is, on the verge of the
takeover rather than setting its sights on moving towards the takeover
stage. Yet, this 1980 rule ‘did not apply to an offeror who was making
a bid for all the shares or who was acquiring 30 per cent or more
of a company and who under the Take-over Code had to make a bid
for other shares’ (emphasis added).75 The existence of this loophole
in the amended 1980 rule led to two cases of rapid acquisitions by
British companies on British companies in mid-July 1981.76 A third
case involved PNB when raiding GCL on 7September 1981.
75 Ibid.
76 On 15 July 1981, bids were made by Churchbury Estates for Law Land and
by Northern Engineering Industries for Amalgamated Power Engineering. Ibid.,
Appendix 3, ‘Details of recent rapid acquisitions’.
In order to plug the loophole, the CSI decided on 24 September 1981
that ‘anyone who announces a takeover bid, or who is endeavoring to
secure control by acquisitions, is not allowed for seven days to acquire
shares carrying 5% or more of voting rights, from more than one
shareholder, if his [sic] existing holding gives voting rights of 15% or
more’.77 The CSI amendment, therefore, was not a reactionary policy
in response to PNB’s dawn raid, but a logical climax to the 1980
Substantial Acquisition of Shares Rules which had hitherto applied
only to purchasers who acquired 15% or more but less than 30% of
the shares in a company. Such a scenario was interpreted as a gradual
step leading to a takeover of the target company. The 1980 Rules
were crafted precisely to deal with such situations. At the time, it
was thought that because a 30% acquisition or more amounted to a
de facto takeover, the 1980 Rules need not apply. But a recent spate
of dawn raid cases, of which PNB’s on GCL was merely one, affected
the new rules. Therefore, the CSI’s decision was not directed solely
at Malaysia but reflected a wider concern in the securities industry
about the ramifications of dawn raids on the affected parties. Indeed,
the amendments of 24 September had been immediately preceded
by a rapid takeover of the British mining group, Tanks Consolidated
Investments, by Belgian interests.
Moreover, the central issue for the CSI was the international
reputation of London as a financial centre. As one financial advisor
commented, ‘Few things ...strengthen the widely held conviction that
the City is the home of sharks and charlatans more than aggressive
market transactions leading to an immediate change of control.’78
The key point here, however, is that PNB and its advisors were
regarded by the CSI as having ‘acted entirely properly within the rules
as they then existed’ on the morning of 7September 1981.79 PNB
began by purchasing 5% equity in GCL. This initial manoeuvre was
completed by 0935. Later in the morning, PNB purchased a further
12% outside the market in Malaysia and London. Just after 1100, PNB
announced a bid for the whole company and continued buying in the
market until approximately 1230 when, with the 25% stake which PNB
had acquired from Sime Darby prior to 7September, PNB held just
over half of GCL’s share capital.80 Hence, PNB did not act arbitrarily
77 Ibid., ‘Dawn Raids and Malaysia’, Note for Dawkins by Fuggle, Financial
Supervision—General Division, 8December 1981.
78 Ibid., ‘CSI: Recent Developments in Market Purchases’, 12 October 1981.
79 Ibid.
80 Ibid., copy of note by G. H. Campbell and S. E. Taylor, Far East and South-East
Asia Department, Confederation of British Industry of a meeting with John Hignett,
in a ‘knee-jerk’ reaction but acted professionally and properly to secure
control of Guthrie. As Chew appreciated, ‘The PNB’s success was the
culmination of a meticulous effort to master the technicalities of the
LSE’.81 Indeed, it had taken four months before 7September 1981
for Khalid Ibrahim and his team at PNB to get everything in place
to mount their lightning attack.82 This suggests long-term aspirations
and planning before Mahathir’s arrival at the helm of the Malaysian
state and a more extended set of origins of the Dawn Raid within the
requirements of the NEP and the interpretation of those requirements
by PNB and its chairman, Ismail Ali.
The NEP, PNB and Ismail Ali
Much of the existing literature on the Guthrie Dawn Raid neglects or
downplays this wider Malaysian domestic context. A huge, unique
exercise in social engineering, Malaysia’s NEP was promulgated
in 1971 to restructure the country’s economy and society and
achieve a much more equitable distribution of wealth among the
various Malaysian ethnic groups, extending affirmative action for the
bumiputera into the corporate economy. This was in tandem with the
‘Malaysianisation’ process to ease foreign domination in major sectors
of the economy such as rubber and oil palm plantations.
director general of the panel on takeovers and mergers, LSE, 16 October 1981. Under
LSE rules, PNB subsequently offered to purchase the ordinary and preference shares
of the remaining shareholders at the same price (£9.01) per share as it had paid in
the raid. As the GCL board privately valued the shares at about £7, and doubted
the ability of minority shareholders to exercise control in the future, the directorate
recommended to all its shareholders that they should accept this advantageous offer.
Thus PNB came to own 100% of the share capital by the end of 1981. Gullick note,
26 April 2007; Gent to White, 11 November 2007. Ismail Ali replaced Gent as
chairman and PNB nominees also took the place of the British managing and finance
directors. Gent and Gullick were kept on as non-executive directors until 1983 as a
‘face saver ... for the nervous expatriate staff’ (Gent to White, 11 November 2007),
especially those in the non-Malaysian enterprises which PNB had little knowledge of.
Neither, however, had any part in the management of GCL after the raid since the
London office was closed and de facto headquarters moved to Kuala Lumpur. At the
intermittent board meetings held in London ‘a few very general financial statements
were tabled but hardly discussed’ (Gullick note, 26 April 2007). In 1988, the non-
Malaysian interests were sold back to British investors, and in 1989 the new Guthrie
Berhad was listed on the KLSE.
81 Chew, ‘Changing directions’, p. 353.
82 ‘When the big boys came home’, 3September 2007.
A ‘new breed’ of Malay political leaders pursued a changing politico-
economic agenda which was clearly reflected in both Malaysia’s
internal and external relations after the inter-communal violence of
May 1969 in Kuala Lumpur. The Malay ‘anglophiles’ were replaced by
the ‘ultras’ such as Harun Idris, Mahathir Mohamad and Musa Hitam
who questioned the viability of economic liberalism being pursued by
the Alliance government and insisted that Malay/bumiputera economic
and political ‘rights’ be addressed via the restructuring of the economy.
The Abdul Razak and Hussein Onn administrations of 19701976
and 19761981, concerned with reducing British ownership, took
a number of measures to gain control of British-owned firms in
the resource-based industries as a means to ensure the successful
implementation of the NEP. Indeed, as early as November 1974, the
Sunday Telegraph’s Kuala Lumpur correspondent reported that ‘the
winds of change are now blowing strongly’ through Malaysia’s primary
industries, and the Malaysian government ‘will press ahead with its
policy of bringing 70 per cent equity control plus the management of its
major industries to Malaysia and it could happen in a shorter time than
anticipated’. There would be ‘no question of nationalization or forced
acquisition of shareholdings at low prices but published guidelines
on acquisitions and takeovers and the mid-term review of the Second
Malaysia Plan leave little doubt that running tin mines and plantations
from boardrooms in London and Singapore is no longer acceptable’.83
This determination to reduce British control of the primary
producing sectors coincided with increasing state intervention in the
economy and public–private partnerships in ‘Malaysia Inc.’ modelled
on Japan.84 The growth of government-linked corporations from the
mid-1960s, and particularly after 1971, led to an increased volume
of equity assets in the Malaysian economy being held ‘in trust’ for
the ‘indigenous’ peoples by bumiputera-dominated institutions. The
most important of these parastatals was PERNAS, formed in 1969
following the second government-sponsored Bumiputera Economic
Congress in Kuala Lumpur. From the mid-1970s, under the leadership
of Tengku Razaleigh, PERNAS turned away from majority control
of joint ventures with foreign interests in the manufacturing sector
83 Ivan Fallon, ‘British firms under pressure to toe the line’ in New Straits Times,5
November 1974.
84 Khadijah Khalid, ‘Malaysia-Japan Relations: Explaining the Root Causes of the
Pro-Japan Orientation of Malaysia in the post-1981 Period’, PhD Thesis, School of
Oriental and African Studies, London, 1999, chapter 2.
towards replacing British investments in primary production. But this
had not led to increased equity participation by the Malay and other
‘indigenous’ masses.85
The origins of the Guthrie Dawn Raid lay largely, therefore, in a
second, more radical phase of the NEP. The creation in 1978 of YPB,
and its subsidiary PNB, represented an attempt to turn some of the
poorer classes into stockholders (and ultimately entrepreneurs) by
boosting individual bumiputera participation in private enterprises. In
May 1979, PNB established a unit trust scheme, Amanah Saham
Nasional (ASN), to transfer equity from bumiputera trustees to
individuals and companies. PNB was thus charged with creating
a pool of shares which could be subsequently sold as ASN units
to mobilize bumiputera savings.86 Rural Malays traditionally valued
land as an investment. But this was believed to be a brake on
development and capital formation through tying up vast potential
savings in relatively unproductive assets. When bumiputera individuals
did acquire shares through Malayisation strategies, PNB officials were
aware that these were frequently sold on to Malaysian Chinese and
Malaysian Indian investors. As early as 1961, the Malayan federal
government had organized the National Investment Company (NIC)
which had worked to increase the ratio of Malay-owned capital in
nascent import-substitution industrialisation. Four years later, the
Ministry of Commerce and Industry (MCI) made it compulsory for
companies receiving tax holidays as pioneer industries to reserve
10% of their equity capital for bumiputera. However, neither the NIC
nor the MCI could prevent Malay shareholders from selling to non-
bumiputera Malaysians.87 Meanwhile, rural cooperatives, licensed as
Malay enterprises, such as bus and taxi companies, were frequently
either bankrupt or mere fronts for Chinese entrepreneurs.88
85 ‘A dividend for the people’ in FEER,23 January 1981; interview with Khalid
Ibrahim, 2November 2007; Keiko Saruwatari, ‘Malaysia’s localisation policy and its
impact on British-owned enterprises’ in The Developing Economies, XXIX, 4(December
1981), pp. 3734.
86 Rajah Rasiah and Ishak Shari, ‘Market, government and Malaysia’s new
economic policy’ in Cambridge Journal of Economics,25,1(2001), p. 73.
87 Saruwatari, ‘Localisation’, p. 374; ‘A dividend for the people’, 23 January 1981.
88 Khalid interview, 2November 2007. Under so-called ‘Ali Baba’ arrangements,
a Malay (‘Ali’) could obtain a business licence on behalf of a Chinese entrepreneur
(‘Baba’). The business was covertly run by Baba with Ali remaining a sleeping partner.
The British High Commission in Kuala Lumpur found the practice widespread by the
late 1960s. TNA, FCO 24/250, enclosure by Guy Duncan in High Commissioner to
Commonwealth Secretary, 2April 1968.
Through ASN, therefore, PNB aimed to demonstrate to ordinary
Malays that there was greater potential for individual wealth creation
through investing in the capital of companies rather than in land.
Promising a minimum 10% annual dividend, the attraction would be
the superior rates of return on ASN units compared to those from
existing Malay-Muslim savings institutions such as Tabong Haji (the
Mecca pilgrimage fund). Any bumiputera over the age of 21 could
acquire up to 50,000 M$1units in ASN before 1990. The minimum
individual investment would be M$10, and while certificates would be
issued in amounts of 100 units, small investors could save through a
passbook scheme until they had accumulated sufficient savings to buy
the certificates.
The initial tranche of shares to support ASN came from the
corporate equity of state-owned corporations which was gradually
acquired by PNB. In other words, public assets were being pooled
in anticipation of their sale to bumiputera commoners. Of about 669
million shares in some 21 companies held by the government, over
80% would be transferred to PNB—some of these assets (such as
PERNAS’s stakes in the Malaysian Mining Corporation, Sime Darby
and the Highlands and Lowlands plantation group) had first been
acquired from British investors. PNB would warehouse these shares
and, at the same time, buy and sell further issues on behalf of ASN.
To underpin these operations in the capital markets, and confirming
the centrality of PNB within the fulfilment of the NEP, the initial
sum of M$500 million received from the government under the Third
Malaysia Plan (19761980) would be supplemented by a further M$1
billion under the fourth plan to the middle of the 1980s. Additionally,
PNB was able to borrow interest-free and non-collateral loans from
the government.89
The launch of ASN would have a profound influence upon the fate
of GCL. The PNB release of unit shares finally went public on 20
April 1981 and there was an unexpectedly enthusiastic response: by
the beginning of 1982,841,000 bumiputera individuals had invested
M$200 million in ASN units, and the trust announced a bonus issue
of one unit for 10 plus a 10% dividend; the equity owned by bumiputera
individuals dramatically rose by M$375 to M$1,504 million in the
course of 1981 alone.90 PNB’s database soon became outmoded as a
89 ‘A dividend for the people’, 23 January 1981; Khalid interview, 2November
2007; Saruwatari, ‘Localisation’, p. 375.
90 ‘Permodalan’s surge’ in FEER,7May 1982; Rajah Rasiah and Ishak Shari,
‘Market’, p. 73.
result, and the investment agency’s executives were forced to turn
to Bank Negara for its computing needs. PNB was thus faced with a
desperate requirement to swiftly find new investment opportunities to
increase its portfolios and so obtain sufficient yields for the numerous
ASN subscribers.91
Behind this was the powerful and determined personality of Ismail
Ali, who as governor of Bank Negara had chaired the working party
which in 1977 recommended the establishment of PNB. Despite their
differences of opinion on the relative roles of other PNB directors in
the Dawn Raid project, both Desa Pachi and Khalid Ibrahim do agree
that Ismail Ali was central to all decision making.92 As the FEER
had been made aware in October 1980, Ismail Ali was a hands-on
chairman at PNB with staff ‘talk[ing] of his constant questioning of
all aspects of the operation and his full time commitment to his new
In 1981, Ismail Ali was in his sixties. His early career in the 1940s
and 1950s had been in the colonial civil service, rising to become
the controller of the trade division of the Ministry of Commerce
and Industry between 1955 and 1957. John Gullick—who had
known Ismail during Gullick’s term in the Department of Economic
Affairs between 1950 and 1955—has described Ismail as ‘a strong
personality’ and ‘perhaps the ablest Malaysian technocrat of the post-
Merdeka generation’. Gullick counted Ismail as a ‘friend’ but during
‘our occasional disagreements it was evident even then that he had
great determination’.94 According to Whitehall reports, Ismail had
developed something of an ‘anti-British chip on his shoulder’ under
colonial tutelage. In the early 1950s, Ismail had been rescued from
his isolation as head of the economic affairs outpost in Penang, and
seconded to the Canadian government and then the World Bank,
by Oscar Spencer, the Malayan government’s maverick economic
advisor, who himself became increasingly alienated from his more
conservative expatriate colleagues in the Malayan Civil Service. On
Ismail’s appointment as governor of Bank Negara in 1960 he certainly
did not enjoy the confidence of Anglo-Malayan financial circles. The
UK Commonwealth Relations Office regarded Ismail’s accession as
91 Khalid interview, 2November 2007; ‘When the big boys came home’, 3
September 2007.
92 Desa Pachi interview, 12 September 2007; ‘When the big boys came home’, 3
September 2007.
93 ‘Localisation without fuss’ in FEER,3October 1980.
94 Gullick note, 26 April 2007.
detrimental to British interests and would have much preferred H. S.
Lee, the Malayan Chinese business and political leader and former
finance minister, to have been appointed governor as a boost to the
confidence of expatriate investors.95
Indeed, as an UMNO member in the run-up to the 1955 elections
for internal self-government—in which the UMNO-MCA-Malayan
Indian Congress (MIC) Alliance won 51 out of the 52 seats—Ismail
had informed the Tunku that he was ‘horrified’ by Colonel Lee’s
commitment on behalf of the Alliance to laissez-faire capitalism ‘to
gain the support of the rubber and tin barons in Malaya’ rather than
the kampung Malays ‘whose support will sweep us into power’. Out-and-
out nationalisation of Malaya’s main industries was impracticable as
bureaucratically inefficient and ‘administratively very expensive’. But
if private enterprise was to be allowed free reign this could be ‘worse
than the law of the jungle’, ‘damaging to the interest of the nation as
a whole’, and would be to the ‘disadvantage of the ordinary man in
the village, Malay, Chinese or Indian’. At the same time, Ismail Ali
wished to see the Alliance take ‘immediate measures’ to ‘correct’ the
economic imbalance between the Malay and non-Malay communities,
which he regarded as ‘a source of danger towards the well-being of
the people as a whole and towards the rapid development of the
peoples of Malaya as a Nation’.96 Although no socialist, Ismail Ali’s
ideas chimed with a general concern within the Malayan intelligentsia
at merdeka with ongoing control of the ‘commanding heights’ of the
post-colonial economy by British interests, and the subsequent drain
of profits from Malaya/Malaysia, hampering both the development
of secondary industry and a more equitable distribution of income
(epitomized by the publication of James Puthucheary’s Ownership and
Control in the Malayan Economy [1960]).97
95 TNA, DO 35/9863, Minute by Humphrey for Smith, 25 April 1960; on Spencer
see note by J. M. Gullick in Gullick to White, 21 January 2008; John Gullick, ‘Prelude
to Merdeka: Public administration in Malaya, 194557’ in South East Asia Research,
5,2(1997), p. 163 and Nicholas J. White, ‘Spencer, Oscar (19131993)’ in Oxford
Dictionary of National Biography, online edn (Oxford: Oxford University Press, May
96 ISEAS Library, Singapore, Tan Cheng Lock papers, TCL XIV/98a, UMNO/MCA
Alliance Headquarters, 1March 1955, copy of letter to the Tunku from Ismail
Mohamed Ali, 5February 1955; TCL XIV/98b, ‘Comments by Ismail Mohamed
Ali on the Memorandum on Finance and Economic Policies’, 4April 1955.
97 Collin Abraham (former Associate Professor of Sociology, Universiti Sains
Malaysia and author of various books on Malaysian history and politics) thus joined
in the Ijok debate by claiming that it was the former left-wing Singapore activist,
In the short term, Ismail lost the argument to Lee. The Alliance
did introduce systematic five-year planning after 1956, and also
established the Federal Land Development Agency (FELDA) which
aimed to build up a large sector of small-scale Malay agriculturalists
alongside the British plantations. But,
Government effort to promote Malay participation in commerce and industry
was limited to an indirect nurturing type of policy that worked to improve
education, gave preferential license allocations to Malays, and was supported
by M[alayan] I[industrial] D[evelopment] F[inance] set up in 1960. This
approach meant a continuation of the colonial laissez-faire system where
British and Chinese capital retained their control over the commercial and
industrial sectors.98
Even so, a more interventionist and nationalistic phase in Malaysian
central banking was initiated by Ismail Ali as early as 1963 with
increasing restrictions on the liquidity of the British exchange banks,
the loss of expatriate influence on the Malaysian currency board
and plans for a comprehensive exchange-control system to prevent
capital flight. Moreover, state government accounts were increasingly
transferred from the British banks—HSBC and Chartered—to
Malaysian-owned ones, and in 1965 legislation was introduced
which prevented foreign banks from opening additional branches in
Malaysia.99 In a note prepared for the UK Foreign and Commonwealth
Office (FCO) by the British High Commission in Kuala Lumpur
in 1975, Ismail was described as occupying an ‘important role in
current Malaysian economic and financial set-up’. He was ‘a strong
nationalist’ and ‘often regarded as anti-British by British bankers and
businessmen’ in Malaysia; ‘he is certainly out to rid the country of
expatriate officials and businessmen as soon as practicable’.100
Puthucheary, who in exile in Malaysia had convinced UMNO leaders that the takeover
of the British agency houses was possible and would ensure a fair and equitable
distribution of these assets. Where the government deviated from Puthucheary’s
advice, however, was that the Malaysian Indian rubber tappers did not receive
compensation for their ‘near slavery’ and denial of a ‘monthly living wage’ during
the initial take-off of the rubber industry in the early twentieth century. ‘“Dawn
Raid”: Who were the beneficiaries’ in Malaysiakini,27 April 2007. A discussion of
Puthucheary’s influence on the NEP can also be found in K. S. Jomo, ‘Afterword’ in
J. J. Puthucheary, Ownership and Control in the Malayan Economy,2nd reprint (Kuala
Lumpur: INSAN, 2004), pp. 1968.
98 Saruwatari, ‘Localisation’, p. 372.
99 White, Post-colonial Malaysia, pp. 701,823. For more on Ismail Ali’s role at Bank
Negara during the 1960s and 1970s, see Catherine R. Schenk, ‘Malaysia and the end
of the Bretton Woods system, 196572: Disentangling from sterling’ in Journal of
Imperial & Commonwealth History,36,2(2008), pp. 197220.
100 Enclosure in TNA, FCO 15/2075.
Indeed, by the mid-1970s, British business leaders in Kuala Lumpur
were recognising Ismail’s pivotal role in the implementation of the
NEP. Henry Barlow had experienced this at the sharp end through
the successful transfer of tax residence to Malaysia from Britain of the
Highlands & Lowlands Para Rubber Co. Ltd., the rubber and oil palm
pearl of the Barlow group and one of three largest rubber companies
operating in Malaysia. This localisation had gone ahead notwithstand-
ing the intransigent attitude of the majority of the board concerned
dominated by Henry Barlow’s father, Tom. As Henry Barlow reported
to the FCO, it was through his chairmanship of the Capital Issues
Committee (CIC) and membership of the Foreign Investment
Committee (FIC) that Ismail Ali dominated two government agencies,
which were not statutory but effectively functioned as part of the
Prime Minister’s Department, approving new share issues/transfers
and the expansion of foreign-owned companies, and which were highly
influential in determining Malaysianisation agreements.101
Ismail Ali had been trying to encourage overseas firms to comply
voluntarily with NEP requirements. But through the central bank
governor’s position on FIC and CIC, Khalid believes that Ismail
became increasingly frustrated by the ‘delaying game’ of GCL, H&C
et al., which aimed to retain a majority stake on behalf of the parent
company’s shareholders in London.102 Certainly, at a meeting with
UK companies in March 1975, the British High Commissioner in
Kuala Lumpur reported on how Ismail had ‘dominated’ proceedings
(notwithstanding the presence of Raja Mohar, the chair of the FIC)
and had ‘said in forceful—indeed somewhat offensive language’ that
‘each and every expatriate company’ was required to conform to the
NEP formula whereby the non-Malaysian stake should be reduced to
30%.103 Liberated from the Malaysian Civil Service, and international
banking niceties, following his retirement from Bank Negara in 1980,
Ismail Ali could finally ‘get tough’ and unleash the more radical notions
of his youth: in Khalid’s words ‘enough was enough’.104
In late 1980, therefore, Ismail, who was increasingly disaffected
by agency-house ‘excuses’, accepted Khalid’s suggestion that GCL
be acquired by PNB to expedite the increase of bumiputera equity
101 TNA, FCO 15/2075, notes prepared by Mr. Henry Barlow and given to
Mr. Squire at a meeting on 2June 1975.
102 ‘When the big boys came home’, 3September 2007; Khalid interview, 2
November 2007.
103 TNA, FCO 15/2075, Sir Eric Norris to Wilford, FCO, 4March 1975.
104 ‘When the big boys came home’, 3September 2007; Khalid interview, 2
November 2007.
ownership. About a year before the acquisition, therefore, Khalid
and his colleagues undertook two analyses of ‘whether or not it was
worthwhile to take over Guthrie and at what price’, and on ‘the tactical’
means of pursuing what became the Dawn Raid.105
It would also seem that Ismail Ali and PNB had been involved in
an earlier attempt to ‘bring back’ Guthrie. Prior to the Dawn Raid,
PNB held a 25% stake in GCL—these shares, it will be recalled,
had been sold to PNB by Sime Darby in December 1980, following
the latter’s failed attempt to take over Guthrie during 1979. This
aborted bid appears to have been supported by both Bank Negara
and Ismail Ali. Indeed, it was regularly alleged that Sime Darby
was highly influenced by the central bank.106 Gent and Gullick are
probably justified, therefore, in supposing that the Sime Darby bid
was a front for PNB.107 Desa Pachi, PNB’s first chief executive, recalls
that Ismail had asked him to work closely with Sime Darby to take over
Sime Darby was certainly very close to, and almost a component of,
the Malaysian state. During 1975 and 1976, PERNAS accumulated
a9% stake in Sime Darby, whose shares were more widely dispersed
than Guthrie’s and in which there was no majority British holding.
Rather than purchasing further shares in a dawn raid style manoeuvre,
PERNAS combined with OCBC (which also held a 9% stake in the
British-managed transnational) to oppose the re-election of four of
the six British executive directors. The former Malaysian finance
minister, Tan Siew Sin (whose family had long been associated with
both Sime Darby and OCBC), became chairman in November 1976.
Three years later, Sime Darby’s domicile was moved to Kuala Lumpur,
and, with 9of the 13 directors of Asian ethnicity, PERNAS was in
de facto control of Sime Darby.109 At the end of 1980, PNB was happy
105 ‘When the big boys came home’, 3September 2007.
106 See, for example, ‘A new chapter for Sime’ in FEER,19 December 1980. Bank
Negara had representation on the Sime Darby board from 1974. Drabble and Drake,
‘Agency Houses’, p. 324.
107 Gent described the failed takeover of Guthrie by Sime Darby as ‘no less a
nationalistic coup’ than the successful swoop of September 1981. Gent to Shakila
Yacob, 13 April 2007; Gent to White, 11 November 2007; Gullick note, 26 April
108 Desa Pachi interview, 12 September 2007.
109 van Helten and Jones, ‘British business’, pp. 1856; Saruwatari, ‘Localisation’,
pp. 378,381; Drabble and Drake, ‘Agency Houses’, pp. 3245; Grace Loh, Goh
Chor Boon and Tan Teng Lang, Building Bridges, Carving Niches: An Enduring Legacy
(Singapore: Oxford University Press, 2000), pp. 1424.
to buy the Guthrie shares from Sime Darby at £7.25 rather than
the market price of £6.88, hence the bumiputera investment agency
effectively compensated and subsidized Sime Darby to the tune of
£2.9million. This transaction came within a few months of Ismail
Ali’s appointment to the Sime Darby board, following his retirement
as Bank Negara governor. At Sime Darby, Ismail joined a bevy of
former colleagues who had worked with him at Bank Negara, as well
as his old sparring partner at the Treasury, Tan Siew Sin. Ismail Ali
eventually succeeded Tan as chairman of Sime Darby in 1987. In
this, Ismail Ali was increasingly representing the single most powerful
interest in Sime Darby, PNB, which had succeeded to PERNAS’s 20%
stake in Sime Darby.110
Clearly, Ismail and Khalid had learned much from Sime Darby’s
bungled attempt to take over GCL. Because too many individuals had
been privy to the 1979 Sime Darby takeover attempt, PNB’s strategy
by 1981 was to secure ‘in one “surprise” transaction’ at least 40%
equity of the firm. In accordance with the City of London’s takeover
code, there was no requirement for a formal bid if a company was
to acquire 5% equity in a firm. Rowe and Pitman, therefore, was
instructed by PNB to purchase about 1.6million ordinary shares.
PNB then purchased just under 3.8million shares, making a total
ownership of 13,155,500 shares and representing 42% of Guthrie
share capital. Subsequently, in accordance with Rule 34 of the City
code on mergers and takeovers, PNB made an offer to acquire the
rest of the shares.111 According to Khalid, the precise details of this
manoeuvre were known only to the chairman and the investment
manager at PNB in Kuala Lumpur and to Evelyn de Rothschild and
a junior executive at Rothschilds in London, Jock Green-Armitage.
PNB’s managing director, Desa Pachi, was apparently excluded on
the ‘China Wall’ principle whereby top directors were not privy to
the precise details of takeover deals (as was established practice at
The active participation of Rothschilds re-emphasizes the centrality
of Ismail Ali in the Dawn Raid project. Rothschilds had played an
important part in the disposal of Sime Darby’s GCL shares to PNB,
110 ‘Localisation without fuss’ and ‘A respite, note a reprieve’ in FEER,3October
and 19 December 1980.
111 Khalid, ‘Investments and growth’.
112 Khalid interview, 2November 2007; ‘When the big boys came home’, 3
September 2007.
since the financiers had been appointed London merchant bank to
Sime Darby after the sacking of Kleinwort Benson in the wake of
the failed bid for GCL. Another factor in the change of merchant
bank, however, was that Rothschilds was financial advisor to Bank
Negara and that the London finance house and Ismail’s central bank
were ‘so close that they have a chat on the telephone every day’.113
Moreover, Evelyn de Rothschild, who had succeeded his cousin Victor
Rothschild as chair of N. M. Rothschild & Sons in 1976, had developed
a close working relationship with Ismail Ali in the setting up of a
merchant bank in Kuala Lumpur, Bumiputera Merchant Bankers, in
which Rothschilds was prepared to allow the Malaysian government a
majority shareholding. As such, the City financier gained a reputation
as one of the few British business leaders willing to acquiesce with NEP
requirements.114 Jock Green-Armitage, meanwhile, had previously
worked with Kleinwort Benson at the time of Sime Darby’s attempt
to take control of GCL. Immediately after the Dawn Raid, Ismail
was made chairman of Guthrie with Green-Armitage as managing
director charged with the specific task of dissecting the Malaysian
interests from the remainder of the Guthrie group.115
Linkages between Malaysian parastatals and the City of London had
been built up over a long period. Tengku Razaleigh had organized the
first Bumiputera Economic Congress in 1965 which, inter alia, led to
the formation of the Malay-owned Bank Bumiputera (which by 1981
was nearly 70% owned by PNB) and where the idea of an ASN-style
unit trust scheme was first mooted. At the same time, Razaleigh was
secretly despatched to London to study financial markets and meet
bankers, experience and connections which would prove invaluable
in relation to the imposition of the NEP during the 1970s and
1980s.116 Indeed, it was Rothschilds which advised PERNAS—headed
by Razaleigh—in both the parastatal’s successful tussle for board
control of Sime Darby and its takeover of the London Tin Corporation
(LTC) during 1976.117 Khalid, paradoxically, had worked in Barings
London office before landing the job of investment manager at PNB
113 ‘New chapter for Sime’, 19 December 1980; see also ‘When the big boys came
home’, 3September 2007.
114 Interview with Sir Evelyn de Rothschild, Chelsea, London, 29 November 2007.
115 Gent to White, 11 November 2007; Barlow interview, 17 November 2007.
116 Ranjit Gill, Razaleigh: An Unending Quest (Petaling Jaya: Pelanduk Publications,
1986), pp. 589.
117 P. Gunasegaran, ‘Bid that was a well-kept secret’ in National Echo,9September
1981. It was Rothpura Nominees, a subsidiary of Bumiputera Merchant Bankers,
in late 1979 (Barings it will be recalled were GCL’s financial advisors
and held some Guthrie stock before the Dawn Raid). This ‘insider’
knowledge was again invaluable in September 1981.
Indeed, this familiarity with City regulations and accepted practices
was a key consideration because Tun Ismail had long been at
pains to maintain foreign investor confidence during the imposition
of the NEP. Although there was a general belief among Malay
economic nationalists that the country’s natural resources should be
Malaysianised in favour of the bumiputera, this did not mean that the
government in Kuala Lumpur was averse to the continued operations
of multinational enterprises. In particular, foreign investment, with
resultant technology transfer, was actively sought out in the export-
orientated manufacturing sector in a number of Korean- and
Taiwanese-style Free Trade Zones. This might be put at risk if
controversial expropriations of established British enterprises were
to eventuate. As Henry Barlow appreciated in 1975,
Tan Sri Ismail is an extremely tough negotiator, and a nationalist. At the same
time, he is a very competent international banker, scrupulously honest, and
prima facie cannot at this stage afford to forfeit international investment
confidence (much as he would like to see the country go it alone, if he
considered it remotely possible).118
Hence, Ismail had been determined during Razaleigh’s attempts to
take over the LTC that cash bids in the market should be offered to
minority shareholders in UK-based companies, as demanded under
the Takeover Code, as opposed to spectacular forced expropriations
which might be favoured by senior Malay politicians anxious to win
nationalist kudos with the Malay electorate (without considering the
negative impact upon foreign investor confidence).119
which proposed the Asian directors to replace the British executives on the Sime
Darby board in 1976. Drabble and Drake, ‘Agency Houses’, p. 324, n. 87.
118 TNA, FCO 15/2075, Barlow notes, 2June 1975.
119 Ibid; see also Gullick note, 26 April 2007. In 1975, Pernas had attempted
to take control of LTC after purchasing the majority stake held by Haw Paw, a
Singapore firm owned by the British financier Jim Slater. However, a financial scandal
concerning Slater and Haw Paw foiled this. Instead, a more orthodox takeover tactic
was employed in 1976 whereby PERNAS combined with Chartered Consolidated, the
UK subsidiary of the South African Anglo-American Corporation (which had acquired
a major interest in the Malaysian tin-mining industry in 1965), to launch a successful
bid for LTC’s shares on the LSE. Subsequently, Chartered’s and LTC’s interests
were merged to form the Malaysia Mining Corporation, over 70% of which was
owned by PERNAS. van Helten and Jones, ‘British business’, pp. 1845; Saruwatari,
‘Localisation’, pp. 3789.
Such concerns were reflected in the financial minutiae of the GCL
takeover. The £282 million required to purchase the GCL shares
was transferred from Petroliam Nasional Berhad (PETRONAS; the
government-owned national petroleum company) and PERNAS since
such a huge sum could not be covered by PNB’s unit trust funds.
But the account into which this money was paid could not be in
the name of PETRONAS, PERNAS, PNB, the Ministry of Finance,
Bank Negara or any other government agency because this would
suggest ‘nationalisation’. Hence, a Swiss bank account was opened in
Khalid Ibrahim’s name, allowing Rothschilds to abide by established
‘gentlemanly’ City norms and assure the LSE that the Dawn Raid
did not amount to government sequestration.120 Rowe & Pitman, the
London stock broking firm, described by The Economist as ‘the dawn raid
specialists’ was also carefully selected because it had 3040 jobbers on
the floor of the LSE to telephone the prospective sellers of GCL shares
to secure their acceptance immediately after trading commenced on
the morning of 7September 1981.121
In identifying the wider Malaysian context of the Dawn Raid, it
should also be appreciated that PNB’s swoop on GCL, notwithstanding
its drama, was not an isolated case. In April 1981, PNB had acquired
over 70% of the Malaysia Mining Corporation (MMC) from the
PERNAS subsidiary, Tradewinds (M) Sendirian Berhad. Being also
an owner of nearly 35% of Malayan Tin Dredging (MTD), PNB was
instrumental in the merger of Malaysia’s two leading tin companies,
MMC and MTD, which was formally announced in October 1981
and would create the world’s largest tin-mining operation. The newly
KLSE-listed MMC would be chaired by Desa Pachi given that PNB
owned over 56% of the issued share capital.122 After the Dawn Raid,
‘like a cleansing ale after a strong shot’, PNB ‘quaffed’ 40% of Barlow
Plantations for just over M$60 million, leaving Barlow Holdings, the
British parent, with a 30% minority share in the company’s 35,000
120 Khalid interview, 2November 2007; ‘When the big boys came home’, 3
September 2007.
121 ‘Requiem for a rubber planter’, 12 September 1981; ‘When the big boys came
home’, 3September 2007. According to Bank of England officials, the dawn raid
technique had largely been developed by Rowe & Pitman during the summer of 1980.
BoE, General File No. 161890, Note by Fuggle for Dawkins, 8December 1981.
122 ‘The buyers are willing, the sellers weak’ and ‘Permodalan cheif heads MMC’
in FEER,2October and 4December 1981; Khalid, ‘Investments and growth’;
Saruwatari, ‘Localisation’, p. 380.
acres of Malaysian plantation land.123 The drama of the Dawn Raid
also brought the recalcitrant board of H&C to heel: after six years of
inconclusive and stalled discussions between H&C and the Malaysian
authorities, PNB entered the ring in mid-April 1982 and within six
weeks a deal was struck whereby H&C finally gave up its demand to
have majority control of its 167,000 acres of Malaysian rubber and
oil palm. PNB and H&C would become partners in a new Malaysian
company set up to acquire Harrisons Malaysian Estates. PNB would
control over 50% of the new Harrisons Malaysian Plantations Berhad,
with H&C permitted to retain a minority 30% shareholding.124
The Dawn Raid should also be viewed against the backdrop of Sino-
Malay rivalry for control of Malaysia’s commanding heights. GCL’s
poorly performing manufacturing, trading, chemical, consumer goods
and engineering equipment firm, Guthrie Berhad (Singapore-based
but with extensive interests in Malaysia as well as Brunei), was sold to
Multi-Purpose Holdings (MPH) for over S$100 million three months
before the swoop. Admittedly, this was Malaysianisation, but much to
the annoyance of the Malay political and bureaucratic elite, it was not
bumiputeraisation’. MPH, a public, non-listed company, acted as the
investment wing of the MCA, and was chaired by Lee Loy Seng.125
MPH was a subsidiary of the Koperatif Serbaguna (M) Bhd (KSM;
Multi-Purpose Cooperative Society), first established by the MCA in
1968 to invest in land, rubber, oil palms and manufacturing on behalf
of its members, and modelled on the MIC’s National Land Finance
123 ‘Buyers willing, sellers weak’, 2October 1981.
124 ‘Sunset on British estates’ in FEER,11 June 1982; Peter Pugh et al.,Great
Enterprise: A History of Harrisons & Crosfield (London: the firm, 1990), pp. 24953. This
course of events was far from disastrous for H&C because through money earned
from the sale of shares to PNB, the investment group was able to pay back £85 million
borrowed to finance diversification into North American and Australian chemicals.
H&C, renamed Elementis in 1997, was thus able to ‘re-invent’ itself as a speciality
chemicals group. Geoffrey Jones and Judith Wale, ‘Diversification strategies of British
trading companies: Harrisons & Crosfield, c. 1900–c. 1980’ in Business History,14,2
(April 1999), pp. 7980; Jones, Merchants to Multinationals, pp. 3212,325,335. In
contrast, GCL’s non-Malaysian business was sold off in one block, and the group’s
British identity swiftly ended. The £282 million paid for GCL was more than recouped
by the sale of the non-Malaysian interests. As Khalid commented, ‘we literally got
Guthrie for free’. Khalid interview, 2November 2007; ‘When the big boys came
home’, 3September 2007.
125 Mahathir had also been angry at the actions of Dunlop Holdings, which was
negotiating with PNB for the localisation of its plantation subsidiary, but eventually
sold the majority of its shares to the highest bidder. This proved to be a non-Malay
enterprise in the guise of MPH. ‘Tough guy takes over’, 30 October 1981; see also
Saruwatari, ‘Localisation’, pp. 37683.
Co-operative. MPH, however, had only finally been incorporated in
1975 after which the acquisition of plantation, manufacturing and
property interests grew apace.126 The cooperative’s ambition was to
become a Japanese-style sogo shosha (general trading company) and
it hoped to be listed on the KLSE by the end of 1981 with the
largest rights issue in Malaysian history of M$385 million. MPH could
boast 27,000 Malaysian Chinese direct shareholders and some 83,000
attached to KSM. During 1981, MPH had attempted to purchase
a controlling interest in the United Malayan Banking Corporation
(UMBC), Malaysia’s third largest bank. Finance Minister Razaleigh
defended MPH’s right to proceed with ‘a straight commercial deal’ but
bumiputera politicians, led by UMNO’s youth wing, attacked the UMBC
takeover as an onslaught on the NEP. Mahathir had to intervene,
and promise to work out an arrangement whereby the needs of NEP
restructuring and non-Malay business could be satisfied: MPH and
PERNAS would become co-shareholders, each with a 41% stake in
UMBC, while PETRONAS would ensure bumiputera domination by
holding 9%.127
Meanwhile, Lee’s own flagship company, KL-Kepong, which he had
acquired from British interests between 1969 and 1972, also owned
over 25% of Highlands and Lowlands, formerly controlled by Barlows,
and there was a distinct possibility that Barlow Holdings would fall to
KL-Kepong too.128
Hence, by 1980, non-Malay Malaysian businesses and individual
investors had actually slightly exceeded the 40% participation rate
in the corporate economy which the NEP hoped them to reach by
1990. However, Malay ownership was still lagging behind in the NEP
aspiration of reaching equity ownership of 30% by 1990. By 1980, the
Malaysian state had invested about M$2.1billion (US$954 million)
in 674 companies on behalf of the bumiputera. This represented some
8.2% of total corporate equity, while individual bumiputera ownership
was barely half that at 4.2%. A 12.4% Malay ownership of the corporate
126 TNA, FCO 24/249, Guy Duncan to Trevor Mound, 18 January 1968; Gomez,
Chinese Business, pp. 836.
127 ‘Out of the doldrums’ and ‘The doctor’s dilemma’ in FEER,26 June and 17 July
1981; Gomez, Chinese Business, p. 87. UMNO Youth had also been incensed by the
Dunlop sale to MPH before the Dawn Raid. Chew, ‘Changing directions’, p. 355.
128 ‘Out of the doldrums’, 26 June 1981; Gomez, Chinese Business, pp. 1589.
sector had admittedly leapt from the 1970 share of just 2.4% but the
proposed NEP target for 1980 was actually 16%.129
Conclusion: The Prioritisation of Causation
The prime causal factors of the Guthrie Dawn Raid which have
been examined in this article—the conservatism of British enterprise
in Malaysia, declining Anglo-Malaysian relations and the demands
of the NEP—were not necessarily mutually exclusive. As with all
complex historical phenomena, the causes of change interlocked,
intersected and interconnected.130 But certain causal factors can still
be more important than others. For Tun Dr Mahathir, interviewed in
Kuala Lumpur in July 2007, the Dawn Raid’s origins lay within the
‘unfinished business’ of decolonisation. The assault on GCL was part
of the wider objective of reversing the repatriation of profits to the
former imperial power and guaranteeing that the wealth generated
by Malaysia’s natural resources was fully enjoyed by Malaysians. The
Dawn Raid was part of the process of removing the last vestiges of
colonialism, which in Mahathir’s view had resulted in Malaysia being
exploited for the benefit of another country. This was part, therefore,
of a justified revanche given the sale of concessions at very low prices
in the late nineteenth and early twentieth centuries from bamboozled
Malay rulers at a time when corporation and export taxes did not
But this Malaysian nationalistic discourse does not explain the
specific timing of PNB’s exciting move against Guthrie in September
1981. That juncture was not significant in the context of external
factors, that is, poor Anglo-Malaysian relations, but rather in terms
of internal domestic considerations, namely, the launch of ASN to
increase individual Malay equity participation which coincided with
intensified Sino-Malay business rivalry within the NEP in which the
bumiputera were in danger of falling behind the better established
129 ‘Dividend for the people’, 23 January 1981; Chew, ‘Changing directions’,
pp. 3478.
130 A classic example here is the process of Britain’s retreat from empire generally.
See John Darwin, The End of the British Empire: The Historical Debate (Oxford: Blackwell,
1991); Nicholas J. White, Decolonisation: The British Experience Since 1945 (Harlow:
Longman, 1999).
131 Mahathir interview, 17 July 2007.
non-bumiputera. The rise of MPH, for example, brought to the fore
longer-term Malay concerns. Indeed, from the ruling party’s inception
in 1946, UMNO had been preoccupied with the possibility that
declining British influence in Southeast Asia could result in ethnic
Chinese domination of the Malayan/Malaysian economy.132 Ismail Ali
was particularly significant here because as has been demonstrated in
this article the head of PNB in 1981 had been deeply concerned since
the mid-1950s that limited state intervention in the post-colonial
economy would prejudice the bumiputera in favour of foreign and
Malay(si)an Chinese and Indian interests. Nor in this sense was the
Dawn Raid a product primarily of innate conservatism within GCL.
Guthrie’s directors were actually on far better terms with the Malay
elite, and Ismail Ali especially, compared to H&C. Paradoxically, it
was the relative liberalism and dynamism of the GCL group, and
its dispersed shareholdings, which made Guthrie an easy target in
September 1981.
132 During 1946, for example, there was much concern among UMNO members
that a proposed transfer of US$50 million from Nationalist China to rehabilitate
Malayan Chinese industries following the Japanese occupation would further boost
the Chinese business grip at the expense of Malays who lacked similar funding
opportunities. ANM, UMNO papers, UMNO/SG, 82/1946, enclosure by Abdul Majid
Haji Mohamed in O/C Department of Economics UMNO, Penang to Tuan Haji Adbul
Wahab, Dato Panglima Bukit Gantang, Ipoh, 19 September 1946. Similarly, foreign
multinationals tended to be favoured by the UMNO-dominated government after
1957 in the development of import substitution industrialisation for fear of Chinese
business preponderance, and a proposed wholesale buyout of British plantations in
the later 1960s was shelved on similar grounds. See White, Post-colonial Malaysia,
pp. 167,2156.
... The government-linked corporation, Permodalan Nasional Berhad (PNB; the National Equity Corporation), closely assisted by Rothschilds and the stockbrokers, Rowe & Pitman, launched a successful 'Dawn Raid' on Guthrie on the London Stock Exchange in September 1981. Crucial to this lightning takeover was the decision of the M&G (Municipal & General) unit trust group to sell its stake in Guthrie to PNB at the very favourable offer price of £9.01 per share (Yacob and White 2010). The Guthrie plantations were subsequently split off from the rest of the business, the latter being disposed of in London during 1988. ...
John Hay was one of Britain’s leading colonial capitalists, building his career from the 1900s to the 1960s in Malaya’s plantation industry. He became the leading spokesperson for the British rubber growers, and played a major role in the formulation of international restriction schemes during the 1930s. Hay was a remarkable entrepreneurial talent, consolidating his corporate power through the premiere Malayan agency house, Guthrie & Co. This in itself challenges the notion that Britain’s myriad of ‘free-standing’ companies, which were typical of direct investment in the Empire, represented a relatively weak and unsustainable form of multinational enterprise. But Hay’s dominance of the Malayan plantation sector also questions the notion of ‘gentlemanly capitalism’ as the driving force behind the expansion and sustenance of the British imperial system. Hay’s network of colonial corporate influence did not extend into the corridors of ‘gentlemanly capitalist’ power in Whitehall and the City, where he often had frosty relations. Ultimately, it was the financial sector in London that brought about Hay’s forced resignation from Guthrie in 1963. Examining questions of class, ethnicity, personality, ideology and strategy, the article focuses on why Hay did not develop better relations with commercial, financial and official elites, issues that would also engender tensions with the post-colonial political and business leadership of Malaya/Malaysia.
In most narratives, the beginning of the oil palm industry in Southeast Asia boils down to entrepreneurial spirit, scientific research, and good fortune. The colonial context in which the industry emerged barely figures in the story. This article argues that colonial power was critical, providing access to land and labour that proved more important than plant selection, capital, or technology. The plantation model pushed the region ahead of Africa as the leading exporter of palm oil by the late 1930s, but its future was in doubt as the Depression and Second World War shattered the colonial order.
This article explores the transfer of corporate domicile of the Rhodesian Selection Trust group of ‘Free-Standing Companies’ (FSCs) from the UK to Northern Rhodesia. To explore the ‘nationality of the company’ we question how political and economic factors affected strategic decision-making. We contribute further understanding of the impact of international double taxation to the history of FSCs. The article illustrates how the ‘nationality of the firm’ became a contested zone of interaction as British imperial power waned, American capital investment became more dominant, and colonies began to assert themselves in their own ‘national’ interests. We conclude that international taxation was a decisive factor in the relocation of domicile, and was linked to changes in the organizational forms adopted by international business in this period. We use this to contribute to the historiographical debate about the decline of FSCs in the international economy, and the position of business in decolonization.
This paper proposes a classification of government expropriations of foreign property based on the types of alliances sought out by governments in their quest for support for those actions. Based on a review of historical literature and social science studies of expropriations in Sub-Saharan Africa and Latin America in the twentieth century, we define three types of alliances: with organized labor; with domestic business owners or with sections of the civil service or the ruling party. We posit that each sector allying itself with the government expects rewards from the expropriation. We maintain that the type of alliance is determined by several factors, in particular, the longevity and legitimacy of the nation-state of the expropriating country; the strength of organized labor; and the political participation and strength of the domestic business sector. Our framework complements existing studies explaining when and why expropriations take place.
Multinationals experienced significant legitimacy challenges in less-developed countries between 1945 and 1970. Corporate responses to these challenges cover three distinct periods. Unsuccessful postwar attempts focusing on colonial welfare concerns were followed by pragmatic endeavors intended to repair corporate reputations by Africanizing senior management. By the 1960s, this had become a common approach to legitimization. The challenges of Africanizing ethnocentric multinationals led to organizational changes: internationally diversified multinationals were better able to decentralize subsidiary management, while the late 1960s saw regionally focused multinationals absorbed by more diversified multinationals. Organizational survival was directly linked to legitimacy advantages derived from Africanization.
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This article uses the lens of postcolonial theory to determine the extent to which colonial features persisted in the organisational culture of the Burmah Oil Company (BOC) after decolonisation in South Asia. It does this through an examination of the evolving staffing strategies of the BOC and its South Asian (especially Indian) subsidiaries before and after 1947. Through an analysis of archival material and company literature, we demonstrate that the BOC switched from an ethnocentric to a polycentric-staffing strategy very gradually, with senior managerial positions being occupied by British managers into the 1970s, well after other British MNEs operating in India had already made this transition. We suggest that this persistence of colonial modes of organisation contributed to the BOC’s tense relations with the Indian government, and the latter’s decision to nationalise the firm.
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Despite the wealth of research in innovation adoption, most studies assume innovation adoption to be a top-down process that is conducted with the knowledge of top management and all organizational units held responsible for managing the innovation function. Little is known about innovation adoption that is conducted in antithesis to these assumptions, or stealth adoption - i.e., innovation adoption by organizational unit managers conducted without the knowledge of top management and key internal stakeholders. We identify stealth adoption of Software-as-a-Service (SaaS) as the phenomenon of interest. We examine the organizational conditions in which stealth adoption would occur. We elaborate on organizational conditions using the structural and relational embeddedness perspectives. The primary outcome of our work is a multilevel conceptual model describing the structural and relational conditions that encourage stealth adoption. We also incorporate formal control mechanisms into this conceptual model.
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This article examines the tense and complex monetary relationship between Britain, Singapore and Malaysia in the period from 1965 to 1972. It questions the assumption that Malaysia's economic significance to Britain was 'on the wane' by the 1960s. As the second largest government holder of sterling assets in the world, Malaysia should have been able to exert considerable leverage in London over the disposition of these assets. Ultimately, however, the very scale of these assets limited Malaysia's room for manoeuvre, as it could not sell off a significant proportion of them without undermining international confidence in the exchange rate of the pound and thereby precipitating the devaluation of its remaining sterling assets. The devaluation of sterling in 1967 emerges as a watershed in relations between London and Kuala Lumpur, with the Malaysians thereafter seeking to forge a more independent monetary policy. It is clear, however, that they did not actually succeed in doing so until 1972.
This paper examines the development of the machinery of central government – the federal government – in the Malay Peninsula between the return of the British administration in 1945 and independence in 1957. It focuses in particular on the ‘Malayanization’ of the administration in the years immediately preceding independence, but also considers, for example, the processes of recruitment of European officials in the immediate post-war period and the further development of the central government machinery in the years after independence. The paper draws on the personal recollections of the author, who was a senior civil servant in Malaya from 1945 to 1956, his posts including that of secretary to the ministerial committee on Malayanization in the mid-1950s.
The withdrawal of the 'buy British last' directive for Malaysian government departments on 2 April, 1983 marked the conclusion of an eighteen-month episode in the traditionally untroubled relationship between Britain and Malaysia. That Dr Mahathir felt able to go to his Cabinet on his return from London and persuade it that the essential objects of the boycott had been achieved, speaks not only of a degree of magnanimity in the Malaysian Premier's personal make-up, but also of the capacity of British government and business to examine their past performance and attitudes, and accept the need for change. Dr Mahathir has said that Britain must continue to demonstrate that the changes of attitude are genuine and permanent, but there seems little likelihood of British complacency after this trauma. The paper reviews this episode. -from Author
This monograph offers the first comprehensive history of the decolonization of the Indonesian economy, a process with a different momentum and timing from the achievement of political independence. It traces the origins of economic decolonization to the late-colonial period, covers developments during the Japanese occupation and the Indonesian Revolution as well as continued operations by Dutch enterprises in Indonesia during the 1950s. The account culminates with the takeover and nationalization of Dutch private enterprises in the late 1950s. © 2008 Koninklijk Instituut voor Taal-, Land- en Volkenkunde. All rights reserved.
One of the most interesting features of the growth of Britain's overseas commerce over the past two centuries has been the merchant firm, often the product of very small-scale beginnings but gradually developing into a worldwide network centring on London. The scope for such enterprises grew as effective naval control increased the security of the maritime trade routes and the importance of the great chartered companies declined. Much of the early growth came from the between India and China in which private merchants were permitted to engage. In the late eighteenth century, commercial firms in the City of London began to open branches in India to deal in local products such as indigo, cotton and, later, opium. By the early nineteenth century, around two dozen of these were in existence though the majority were very small and short-lived. 1 In the same period, the more substantial firms were establishing further offshoots in Canton to participate in the tea and silk trade in Europe.
This article challenges the notion that post-independent Malaya/Malaysia was a neo-colonial state under the domination of British business. The power of expatriate enterprise was fractured by rivalries between a number of competing groups and individuals. At the same time, British capital interests faced growing competition for influence from Japanese transnationals. Also lacking support from British government agencies, British directors and managers envisaged an uncertain and insecure future in the post-colonial state. Finally, British firms could not control the course of local politics.
The term ‘crony capitalism’ describes the close relationship between the state and big business in contemporary Southeast Asia. Yoshihara argued in 1988 that cronyism produced an entrepreneurially weak, ersatz capitalism. Crony capitalists were ‘private-sector businessmen who benefit[ed] enormously from close relations’ with leading officials and politicians, obtaining ‘not only protection from foreign competition, but also concessions, licences, monopoly rights, and government subsidies’. Yoshihara's thesis has been subject to some criticism, but, in summarizing that debate, Ian Brown states that ‘there are…substantial areas of the South-East Asian political-economic landscape where government and business remain bound to the protection of inefficient vested interest, to the defence of monopoly and preference, and where speculations and short-term profit-taking are rife’. Entrepreneurial weaknesses in Southeast Asia appeared fully exposed by the financial crisis of 1997, when the economies of the region could not withstand the cruel buffetings of the international economy.