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- For the Soviet New Economic Policy, see New Economic Policy.
The Malaysian New Economic Policy (NEP or DEB for Dasar Ekonomi Baru in Malay) was an ambitious, though controversial, socio-economic restructuring affirmative action program launched by the Malaysian government in 1971 under then Prime Minister Tun Abdul Razak. The term of the NEP ended in 1990, and it was succeeded by the National Development Policy in 1991. Although the NEP was hailed in some quarters as having reduced the socioeconomic disparity between the Chinese minority and Malay majority, others accused it of having reduced non-Malays to the status of second-class citizens.
The NEP's success — or lack of it — is a subject of heated debate; although the NEP targeted a 30% share of the economy for the Bumiputra (indigenous people, mostly the Malays), such a figure has never been reached according to official government statistics. Although the policy ended in 1990, Malaysians often refer to it in the present tense, as much of the tangible economic benefits it offers the Bumiputra have never been completely ended. In 2005, some politicians from the United Malays National Organisation (UMNO) — the leading political party of the governing Barisan Nasional coalition — called for the restoration of the NEP as the New National Agenda (NNA).
History
During British colonial rule, the Malays were given certain privileges, such as quotas for public scholarships and employment in the civil service. When the Federation of Malaya (West Malaysia) declared independence in 1957, its Constitution contained a provision — Article 153 — that provided special rights for the Malays. However, the Reid Commission, which had drafted the Constitution, insisted that "in due course the present preferences should be reduced and should ultimately cease." When Malaya merged with Singapore, Sabah, and Sarawak in 1963 to form the Federation of Malaysia, the new Constitution retained Article 153, which was now expanded to cover all Bumiputra, or indigenous people, which included indigenous tribes of East Malaysia (Sabah and Sarawak). However, due to a dispute over Malay special rights and increasingly strained relations between the federal and state governments, Singapore separated from the Federation in 1965. Ooi, Jeff (2005). "Social Contract: 'Utusan got the context wrong'". Retrieved 11 November 2005.
The Reid Commission had specified the intent of Article 153 to be addressing the imbalance between the Chinese and Malays in terms of economic equity. However, the Bumiputra share of the economy did not substantially increase during this period; as late as 1970, it was estimated they held only 2.4% of the economy, with much of the rest in Chinese and foreign hands. Ho, Andy (Aug. 6, 2005). "Reviving NEP, Umno's race card, again?". Straits Times. Friction between the Malay and Chinese communities grew, reaching its peak in 1969, when opposition parties opposed to Malay special rights made large gains in the general election. The opposition parties — namely the Democratic Action Party (DAP) and Parti Gerakan Rakyat Malaysia (Gerakan) — held a victory march in the capital city of Kuala Lumpur to celebrate their wins. UMNO retaliated with its own march on May 13 as a show of support for the government and to "teach the Chinese a lesson" for challenging Malay supremacy in the government. The march soon degenerated into a full-fledged riot, and eventually left at least 178 dead (although some have estimated the real number to be in the proximity of 1,000). Means, Gordon P. (1991). Malaysian Politics: The Second Generation, pp. 7, 8. Oxford University Press. ISBN 0-19-588988-6.
The government declared a state of national emergency, and Parliament was suspended. The government formed a National Operations Council (NOC), led by Tun Abdul Razak. Although Tunku Abdul Rahman was still nominally Prime Minister, he had limited input in the NOC's deliberations. Among the NOC's first decisions was the implementation of the NEP, with the goal of "eventually eradicat* poverty...irrespective of race" through a "rapidly expanding economy" which would reduce the non-Malay share of the economy in relative terms, while increasing it in absolute terms. The net "losses" of the non-Malays would go to the Malays, who held only 1.5% of the economy at the time of the May 13 riots. In 1971, Parliament reconvened, and Tun Abdul Razak officially succeeded the Tunku as Prime Minister. That same year, Tun Razak also announced the NEP, and some controversial amendments to the Sedition Act that prohibited discussion of repealing certain articles of the Constitution, including Article 153 — even in the Houses of Parliament. The amendments eventually passed, and remain in effect as of 2006. Means, pp. 8, 14, 15, 23–27.
Goals
The NEP had the stated goal of poverty eradication and economic restructuring so as to eliminate the identification of ethnicity with economic function. The initial target was to move the ratio of economic ownership in Malaysia from a 2.4:33:63 ratio of Bumiputra, Other Malaysian, Foreigner ownership to a 30:40:30 ration.
This was to be done by redistributing the wealth to increase the ownership of enterprise by Bumiputras from the then 2.4% to 30% of the share of national wealth.
Alongside this redistribution of wealth was the goal of increased economic growth, which was mainly in the form of ISI. This economic growth would allow the non-Bumiputra share of the economy to decrease, while permitting the growth of non-Bumiputra business interests in absolute terms. In some quarters, this was referred to as "expanding pie theory"; the Bumiputra share of the pie would increase, without reducing the size of the non-Bumiputra slices of the pie. This theory was first enunciated in the Second Malaysia Plan. Long, Atan & Ali, S. Husin (ed., 1984). "Persekolahan untuk Perpaduan atau Perpecahan?", p. 281. Ethnicity, Class and Development Malaysia. Persatuan Sains Sosial Malaysia. No ISBN available.
In 1975 the government created incentives to expand large-scale manufacturing industries and energy-intensive industries. Industries were targeted and policies were built around them. The Heavy Industries Corporation of Malaysia (HICOM) was formed in order to assist in the manufacture of pig-iron, aluminium die casting, pulp and paper, steel, cement, motorcycle and heavy engineering. At the same time, export incentives were initiated.
The aims of the NEP were defined in terms of goals which referred to Bumiputras collectively. For example, a goal of 30% of the national wealth held by Bumiputra was not indicative that the median 60% of Bumiputras held 28% of the national wealth, but it could also be achieved by just one bumiputra holding 29% of the national wealth and all the rest holding 1% collectively. No assistance for Malaysian Chinese and Indian communities to achieve the 40% goal was ever planned or provided in the actual implementation of the NEP.
Implementation
The abstract policies and goals of the NEP were implemented by the Second, Third, Fourth and Fifth Malaysia Plans.
Results
As a result of NEP, the wealth in the hands of the bumiputras went from 4% in 1970 to about 20% in 1997. The disparity of wealth in Malaysia no longer disadvantaged the Bumiputra collectively.
| NEP Benchmarks | 1970 | 1990 | 2004 |
|---|---|---|---|
| Bumiputra equity | 2.4% (RM477m) | 19.3% (RM20.9b) | 18.7% (RM73.2b) |
| Overall poverty | 52% | 17.1% | 5% |
| Rural poverty | 59% | 21.8% | 11% |
| Household income | RM660 | RM1,254 | RM2,996 |
Wealth distribution under the NEP remains unequal: in 1997, 70.2 percent of households in the bottom 40 percent income group were Bumiputra, while 62.7 percent of households in the top 20 percent income bracket were non-Bumiputra. In addition, due to the dramatic government intervention, the NEP increased the national debt and economic inefficiencies, causing worry among private sector investors.
The Malaysian Chinese mostly accepted the NEP as a necessary evil for cessation to Malay aggression. Occasional anti-Chinese rioting in Indonesia often drew stark contrast to their situation in Malaysia. Furthermore, the Chinese community generally moved away from the public sector and set up businesses in the private sector where the actual impact of the NEP was one of convenience rather than actual paradigm shift.
Over time, the share of the national wealth owned by the non-Bumiputra races has increased beyond the 40% mark in spite of the policies implemented under the NEP. However, this represents an aggregation of the non-Bumiputra population and certain segments of the population live in direst poverty, particularly much of the Malaysian Indian and Orang Asli populations. Collectively the Indian and Orang Asli form the lowest strata of the population in terms of economic ownership. It needs to be noted here that the Orang Asli of Peninsular Malaysia are not considered Bumiputra under the Federal Constitution despite having arrived before the Malays (see Bumiputra for further information).
Criticisms
Background
NEP was first conceived around the mid-point of the Cold War, where the global importance of technological innovation was not at the forefront of perceived economic survival of a country. Malaysia being a member of ZOPFAN(Zone of Peace, Freedom, and Neutrality, originated in a 1970 proposal by Malaysia for neutralizing Southeast Asia) had been keen to sooth internal perception of inequality so that the country could concentrate on being neutral and participate in nation building.Sometimes, criticism has been taken without considering the global situation at the time of the NEP's conception and implementation. Thought not unfairly so, some of the criticisms are as follows:
General
In recent years, the NEP has come under attack as being an inefficient system that promotes a laid-back attitude among the Bumiputras. Several implemented policies of the NEP which give economic advantage to the Bumiputras are viewed as heavily discriminatory, such as quotas in ownership of public company stock, housing sold exclusively to Bumiputras, etc.Many of the policies strive for equality of results than equality of opportunity. Others however argue that it is necessary to concentrate on equality of results because determining equality of opportunity is difficult or impossible. For example, when the NEP was implemented, it was announced that one of its goals was to have 30% of all equity in Bumiputra hands. Some have argued that a target of having 30% of Bumiputras trained and certified to run companies would represent a better equality in terms of opportunity. However others suggest this may not work as training and certification does not guarantee equality of opportunity when there are a lot of other factors at work. Tun Abdul Razak's predecessor as Prime Minister, Tunku Abdul Rahman, also opposed the 30% target, writing in the 1980s that "*n attempt was made to fill the target without thought for the ability and the capability of attaining it. ... Some became rich overnight while others became despicable Ali Babas and the country suffered economic set-backs". Putra, Tunku Abdul Rahman (1986). Political Awakening, p. 98. Pelanduk Publications. ISBN 967-978-136-4.
Although there are issues of wealth distribution and economic inequality, the NEP does not actually have any measures in place which address these. One of the NEP's criticisms is that it no longer helps the poor but instead is an institutionalized system of handouts for the largest ethnic community in Malaysia. The Bumiputra system does not discriminate based on economic class; both well-off and poor Bumiputras are entitled to the same benefits. As such, even well-off Bumiputra who could sacrifice their right to an opportunity in favour of another Bumiputra, rarely, if ever, do so.
Also, while the NEP may assure that the bumiputras collectively own a certain percentage of the national wealth, it does not ensure that the median economic situation of the Bumiputra is improved in any meaningful sense.
Education
Education policy parts of NEP is one of key controversial points.Bumiputras were also accorded hard quotas for admission to public universities until 2002, however government removed the hard quotas in 2003. These quotas were fixed quotas and in fact in the later years gave the Bumiputra a significantly lower percentage of places then represented by their percentage of the population as they were based on the population figures of the 1970s. However, they were still considered by many, especially non-Bumiputra to unfairly reward the Bumiputra as their performance at pre-University level was considered significantly lower.
The removal of hard quotas has done little to remedy the perceptions of Bumiputra bias in the public tertiary education system, as most Bumiputras usually opt to enter a one year matriculation programme, considered by some to be less intensive than the two year Sijil Tinggi Pelajaran Malaysia (short: STPM, Malaysian High Certificate of Education, equivalent to the British A-levels). Although the 'grade' standards required for admission are the same for both programmes, there is no moderation to ensure the difficulty of achieving a grade standard is the same between both programmes. Malaysian High Certificate of Education is open to all races, but the Matriculation programme has a 10% quoto for non-bumiputras. In practice significantly more Bumiputra enter the matriculation program, even after normalizing for ethnic demographics.
These differences predate the removal of hard quotas. The difference in academic routes in fact begins in secondary school. Many Bumiputra enter public boarding secondary schools (sekolah asrama) whereas most non-Bumiputra remain in normal public secondary schools. The exams taken are the same until form 5 but then most Bumiputra go on to matriculation, whereas non-Bumiputra do STPM. However, even Bumiputra who remain in 'normal' secondary schools usually do matriculation instead of STPM. The lack of public transparency in grading of the papers contributed to this criticism.
The removal of quotas was largely reported to have resulted in an increase in the percentage of Bumiputra entering public universities. Although this may be related to the issues discussed above, it needs to be pointed out that the is still strong distrust of the public university entry system by non-Bumputra regardless of whether this distrust is necessary. As such, most non-Bumiputra who can afford it choose to enter private colleges or to go overseas to further their education which tend to have a more guaranteed route for success. This system has become entrenched prior to the removal of hard quotas and for many reasons including the ones mentioned above, may not change anytime soon. As such, there is a significant proportion of non-Bumiputra who do not enter into contention for admission to public universities. It needs also to be pointed out that the number of places available in public universities is far lower than necessary to fulfill the needs of the Malaysian population. As such, the standard required for entry is likely to be far higher than is necessary or ideal.
Such practises and entrenched mindset has dilutes the quality of students and scholarship of the academic institutions. Its standard practice not to reveal the numbers of academic papers published in recognised international education and scientific journals as it will cause high level administrators and politicians (as different from public servants) to loose face (in the classic Asian sense).
This part of the NEP has also contributed to noticeable brain drain of talented people in all areas. Some of these people has settled outside of Malaysia and found successes in countries like Singapore,Australia, Canada and others.
Innovation
NEP did not look for nor implement any mechanism (e.g R&D fundings, especially scientifical and development studies) to encourage, cultivate and spread technological knowhow, it was designed to soothe and address the real and perceived social inequality for the political survival of the country. Opportunity for education as a youth is different from developing mindset of continuous learning as an adult in the post Cold War world.NEP part of State funding of books (one of the repositories of knowledge and wisdom) publishing was limited to a few areas like local literature, political stories and documentateries. Whatever parts of technical distribution of knowledge was limited to technician skills to improve low-level jobs capabilities.
Changing Mindsets
Some Bumiputras have spoken of reducing or eliminating the NEP; for example, Datuk Seri Abdullah Ahmad Badawi, Prime Minister of Malaysia, in his maiden speech as United Malays National Organization (UMNO) president to the UMNO general assembly in 2004 stated "Let's not use the crutches for support all the time, the knee will become weak". Badawi went on to state that continued usage of crutches would eventually result in needing a wheelchair instead. As of October 2004, Badawi has not addressed any significant concerns about the NEP.Not all Bumiputra political leaders shared Badawi's views. For example, Badruddin Amiruldin, who was elected as UMNO's Deputy Permanent Chairman, waved a book about the 13 May incident at the assembly during his speech while declaring, "No other race has the right to question our privileges, our religion and our leader", continuing that any such action would be akin to "stirring up a hornet's nest". The following day, Dr. Pirdaus Ismail, an UMNO Youth Executive Committee member, stated, "Badruddin did not pose the question to all Chinese in the country. Those who are with us, who hold the same understanding as we do, were not our target. In defending Malay rights, we direct our voice at those who question them."
See also
Notes and references
Other references
- Bennet, Abang (Oct. 30, 2005). " UMNO: A threat to national prosperity". Malaysia Today.
- Goh, Cheng Teik (1994). Malaysia: Beyond Communal Politics. Pelanduk Publications. ISBN 967-978-475-4.
- Musa, M. Bakri (1999). The Malay Dilemma Revisited. Merantau Publishers. ISBN 1-58348-367-5.
- Ye, Lin-Sheng (2003). The Chinese Dilemma. East West Publishing. ISBN 0-9751646-1-9.
External links
- TimeAsia's A Working Racial Bias published on 20 August 1990, asking about NEP For years, the rules favored Malays. Should they continue?
- Malaysia's New Economic Policy and "National Unity" presented by Jomo K. Sundaram at UNRISD conference in Durban, South Africa, 3 - 5 September 2001.
"Malaysian New Economic Policy"