Neo-Liberalism and Legal Traditions in Malaysia, Indonesia, and China

Definitions

This review of the related literature focuses on broad definitions of the law as historically legislated and then as practiced in three countries: Malaysia, Indonesia, and China. Common law, civil law, and socialist law will be defined separately and then as each applies to the country that has used that system as its legal foundation. The effect that neo-liberalism had after the Asian financial crisis on these three nations will then be examined. Finally, this review will determine whether there has been a change post-crisis in merger and acquisition or public finance law.

It is necessary to begin by defining the terms that will occur throughout this review. The three systems of law to be initially discussed are common law, civil law, and socialist law. Many dispute whether socialist law even exists,¹ but since Marxism is applied to the court system and it has long been understood that communist-based countries such as China have molded civil law according to political principles, socialist law will be considered a separate entity from civil law for the purposes of this review. Another concept applied to the three countries post-crisis is neo-liberalism — a system that is more political and anthropological than legal — which has shaped policy in these countries since the Asian financial collapse in the late 1990s and early part of the current century.² Other concepts will be defined as they appear in the text.

The two primary law systems in the world are common law and civil law. At various times, many countries have adapted one or the other of these systems to their own purposes and established new branches, such as socialist law. Common law is also called precedent law³ and is determined in the courts rather than by the legislature or an executive. While this system works for certain parts of the world and was specifically the focus of the Malaysian legal system,⁴ civil law is the predominant practice worldwide.⁵ Civil law is a system of coded laws formed by a legislative or executive branch of government. A special form of civil law, as discussed above, is socialist law — a system common in socialist states that differs from civil law in that it has specific courts which oversee state-owned, or collective, enterprises.⁶

Neo-liberalism is a term that has come into increasing use over the past decade⁷ because "it can refer to a type of economic policy, to an overarching economic or even cultural structure, or, closer to the ground, to particular attitudes or inclinations towards entrepreneurship, competition, responsibility, and self-improvement."⁸ Taking the term literally, it essentially means new radicalism.⁹ However, the term is "much more complicated than that" (ibid. Mirowski). Possibly the best explanation comes from a definition drawn from the Mont Pelerin Society, which states:

"Neo-liberalism is perhaps most tellingly viewed as a sort of caricature of liberalism, where liberal concerns for individual liberty, political equality and human rights have been warped into a purely economic ideology whose concern lies with the establishment of free markets and in keeping state intervention in such markets at bay."¹⁰

Thus, although this system has been applied to international law, neo-liberalism did not come into existence as a legal system. It is political and intellectual thought that has worked its way into the legal systems of many countries around the world.

Current Approaches

This neo-liberalist approach to the world of legal systems has helped redefine commercial law as it has been known in the past.¹¹ Commercial law now has to take social responsibility and transnational interests into consideration.¹² This means that the courts and the governments of one nation affect the commerce carried on in another,¹³ which is one of the central arguments of this review.

Specific Systems of Law Pre-Collapse

Malaysia, Indonesia, and China were devastated — as were many of the so-called Asian Tiger economies — during the Asian economic collapse.¹⁴ Many of these countries came to understand that archaic legal systems and thought processes were a primary reason they were forced to endure this period. This section recounts the systems of thought that were partially responsible.

Malaysia, like many states that adopted common law, was colonized by the British in the eighteenth century.¹⁵ The system is familiar to many in America and Britain in that it is essentially the same legal system seen in those countries. Malaysia has a central federal court system and legislature, along with different state and local governments. The legislative body makes the law and the courts enforce it.¹⁶ The exception to the British system is that Malaysia is a Muslim country and therefore recognizes sharia law as supreme — a principle spelled out in the country's constitution.¹⁷

Indonesia, which was colonized by the Dutch, is a civil law nation. This codified law is enacted through a constitution, presidential decrees in various forms, and legislative regulations.¹⁸ This system of laws proved inadequate after the banking collapse destroyed more than half of the banks that existed at the time.¹⁹ It took government intervention in the form of new regulations to correct former mistakes.

China has one of the oldest law systems in existence,²⁰ but it has changed over the centuries alongside the advancement of its government through many stages. Chinese law today is essentially civil law influenced both by traditions handed down from Confucius and by the law written after 1949, when the People's Republic began.²¹ This body of law has been modified to accommodate the changing economic landscape in China and around the world. Because of the Asian economic collapse, reforms were required that brought the legal system into the twenty-first century by western standards.²²

These three systems of law were adequate when these countries were small economies that did little business on an international scale, but since the crisis in Asia at the turn of the century it became apparent that changes were needed.²³ Research shows that by adopting the neo-liberalist norms that had permeated the legal systems of the rest of the world,²⁴ these three countries emerged stronger and more economically capable than ever before.^{25, 26, 27}