MALAYSIA performed by the government in a school or training institution, or employment as an approved apprentice. Effectively enforced laws prohibit children from working more than 6 hours per day, more than 6 days per week, or at night. e. Acceptable Conditions of Work The Employment Act of 1955 sets working conditions. There is a maximum workweek of 44 hours, 8 hours per day over five and a half days. Minimum standards of occupational health and safety are set by law and enforced by the Ministry of Labor. Other laws provide for retirement programs and disability and workman's compensation benefits. No national minimum wage legislation exists, but certain classes of workers are covered by minimum wage laws. Working conditions for contract workers often are significantly below those of direct hire plantation workers. In addition many immigrant workers, particularly illegal ones, may not have access to Malaysia's system of labor adjudication. The government has investigated the problem and has taken a number of steps to eliminate the abuse of contract labor. f. Rights in Sectors with U.S. Investment The largest U.S. investment in Malaysia is in the petroleum sector. Exxon has two subsidiaries operating in Malaysia. Esso Production Malaysia Incorporated (EPMI), which is 100 percent owned by Exxon, handles offshore oil and gas production. Esso Malaysia, which is 65 percent owned by Exxon and 35 percent by a range of Malaysian individuals and institutions, refines and markets oil products in Malaysia. Eligible employees at both companies are represented by the National Union of Petroleum and Chemical Industry Workers (NUPCIW), which has negotiated collective agreements with management. Some EPMI employees have broken away from the NUPCIW and formed a separate in-house union. Pay and benefits at both companies are well above the Malaysian norm. The second largest concentration of American investment in Malaysia is in the electrical machinery sector, especially the manufacture of electronic components, such as semiconductor chips and various discrete devices. Electronic components are Malaysia's largest single manufactured export. Wages and benefits are among the best in Malaysian manufacturing. Fifteen American electronic components manufacturers operate 19 plants in Malaysia, employing more than 37,000 Malaysian workers. None of the American-owned electronics plants is unionized. There is no legal prohibition against organizing unions in the electronics industry and workers at some non-American companies (mainly outside of the components industry) are represented either by the Electrical Industry Workers Union (EIWU), other unions, or in-house unions. Malaysian trade union law limits a union to organizing workers in a single industry or in related industries. The Director General of Trade Unions has in the past interpreted this law to preclude the EIWU from organizing electronic component workers. In September 1988 the Minister of Labor announced that the government would permit electronic component workers to unionize. The National Electronics Industry Workers Union MALAYSIA (NEW) was formed, but has been denied registration as a trade union on the grounds that it is seeking to represent workers in both the electronics and electrical industries. The union has denied that it represents workers in the electrical industry, but its appeal to the Minister of Labor has been rejected. The previous Minister of Labor had stated in the past that only in-house unions would be permitted in the electronics industry, but it is unclear what the legal basis for such a restriction would be. Source: U.S. Department of Commerce, Survey of Current Business August 1990, Vol. 70, No. 8, Table 13 * Section 8 is an abridged version of Section 6 of the Malaysia country report included in the Department of State's Country Reports on Human Rights Practices for 1990, submitted to the Congress January 31, 1991. For a comprehensive discussion of worker rights, please refer to that report. NEW ZEALAND 1. General Policy Framework Historically, the engine for growth in New Zealand was pastoral agriculture, particularly the export of mutton, wool and dairy products to the United Kingdom. British entry into the European Economic Community in 1973 sharply changed the external situation for New Zealand. The farming industry had to diversify both its range of products and its export markets. In the late 1970s and 1980s, the government sought to assist this process through extensive support. While incomes and output were maintained, the fiscal costs became excessive and the sector became divorced from market signals. Manufacturing in New Zealand developed first in the processing of the primary products of the rural sector. After World War II, the government sought to promote a more broadly based manufacturing sector through import substitution policies. Initially, good performance in agriculture created strong domestic demand which permitted this policy to function. However, by the mid-1970s, balance of payments problems led the government to turn to export incentive schemes to boost manufacturing. In the early 1980s the government sought to offset the impact of the second oil crisis through a number of "think big" investment projects in petroleum processing and petrochemicals, based on domestic gas resources. The mid-1980s fall in oil prices threatened the viability of these projects, contributing to an increase in government debt. In general, the performance of the New Zealand economy was lackluster from the mid-1950s until the mid-1980s. New Zealand fell from eighth in the world for per capita Gross Domestic Product (GDP) in 1955 to twenty-second in 1985. GDP per capita grew less than one percent per year on average for the 1965-87 period. While high employment was achieved, it was accompanied by high inflation, distortions in the allocation of resources and chronic balance of payments problems. In 1984 the newly elected Labour Party government embarked on a program of deregulation and structural change aimed at unwinding the previous policies of protectionism and excessive government intervention. After an auspicious start in 1988, the Party leadership withdrew support for the efforts of Finance Minister Roger Douglas, the main architect of reform, leading to his departure at the end of the year. While some progress continued, internal divisions in the party caused two changes of leadership and defeat by the National Party in October 1990. However, the change of direction introduced by the Labour Party is expected to continue. The Labour government reduced the fiscal deficit from 6.4 percent of GDP in 1984 to 1.2 percent in 1989, with a further reduction expected this year. However, with no change in policy the fiscal deficit will begin to grow again in 1991. The National government has pledged to balance the budget without increasing taxes. This focus on the expenditures side is appropriate since tax revenue is expected to exceed 40 percent of GDP in 1989. In the longer term, balancing the budget is not ambitious enough. Government expenditures must be reduced, particularly for social services. Reform of the extensive welfare system was largely neglected by the Labour government, and while National has promised to address this critical issue progress is likely to be slow. Debt service NEW ZEALAND also places a large claim on public resources, and significant progress here would require a fiscal surplus. The Reserve Bank of New Zealand Act of 1989 instructed the Reserve Bank to direct monetary policy towards achieving price stability. While the Act provides the Reserve Bank greater operating independence, it also requires the Reserve Bank Governor and the Ministry of Finance to agree on policy targets. The agreement reached in 1990 sets a goal of a zero to two percent annual rise in the consumer price index (CPI) by December 1992. In the third quarter of 1989 the CPI fell to five percent, but is expected to increase in 1990 due to higher oil prices. The National Party leadership generally has endorsed this objective, except it proposes that an additional year should be allowed to reach the target. The structural reforms introduced have brought strong productivity gains, but output gains have been elusive. The resultant "labor shedding" increased unemployment to 7.9 percent in August -- the highest level since the 1930s. After growing only one percent in real GDP for the fiscal year ending in March 1989, there was no growth in the year to March 1990, and less than one percent is expected for the 1991 fiscal year. Unemployment will drop only slowly in this environment, which will put pressure on the new government to abandon the fiscal and monetary discipline required for sustainable growth in the longer term. 2. Exchange Rate Policies The New Zealand dollar was floated in March 1985 as part of a broad based deregulation of financial markets. Prior to deregulation, the New Zealand dollar was devalued by 20 percent in July 1984. The Reserve Bank has not intervened in the foreign exchange market since the float. At the end of October 1990, the New Zealand dollar was valued about five percent less than at the time of the float on a trade-weighted basis. However, the New Zealand dollar appreciated by about one-third against the U.S. dollar during this period. U.S. goods and services are competitive in the New Zealand market at prevailing exchange rates. In pursuing the objective of price stability, the Reserve Bank uses the following check list of indicators: exchange rates; level and structure of interest rates; growth of money and credit; inflation expectations; and trends in the real economy. The interest rate yield gap and the trade weighted exchange rate are seen as the principal indicators, and since late 1988 the exchange rate has been given greater weight. While not attempting to run a fixed exchange rate band, the Reserve Bank does seek "comparative exchange rate stability." The key instrument for monetary control utilized by the Reserve Bank is the quantity of settlement cash balances held by banks at the Reserve Bank. This control of primary liquidity influences the exchange rate indirectly through its impact on short term interest rates. The Labour government's reform program included deregulating financial markets; floating the New Zealand |