Local bond markets, financial development and the new politics of debt in Malaysia

This doctoral thesis investigates the transition from a bank-based to a capital marketbased financial system that has taken place in Malaysia over the last two decades. In so doing, it more closely traces Malaysian financial policymaking processes, specifically efforts to develop domestic bond markets since the mid-1980s. Based on recent insights from the constructivist political economy literature and drawing on a wide range of Malaysian policy documents as well as elite interviews, it argues that the shift which has taken place can only be understood against the backdrop of the changing ideational underpinnings of financial policymaking. Neoliberal economic reforms that were implemented in the 1980s served as a powerful rationale for pro-capital market reforms. However, this thesis detects a qualitative change within the market paradigm after the Asian financial crisis of 1997-8, away from simply rolling out markets towards institutionbuilding. This led to increased efforts to develop local bond markets. Furthermore, this thesis suggests that the expansion of bond finance in Malaysia has entailed larger socio-economic changes which can be subsumed under the notion of financialisation. A number of examples are presented in the thesis. More specifically, the increasing salience of bond finance has given rise to a new politics of debt, as debt has become successively privatised and individualised. However, progressive financial disintermediation in Malaysia has also changed the underlying dynamics of Malaysian capitalism more generally in favour of a greater market orientation. Contrary to existing accounts on the role of bond finance, it is argued that policy autonomy is not so much directly constrained by market forces, as by the pervasive hold that specific forms of (financial) market knowledge have taken in the state apparatus. However, the rise of Islamic finance in Malaysia will be discussed to illustrate that a small developing country can retain some epistemic autonomy