The NEP – The Good and the Bad

What is the NEP?

In a simple definition, the New Economic Policies is Malaysia’s socioeconomic affirmative action plan. The goal of the NEP was to eradicate public poverty and restructure the economy so that we could eliminate the identification of economic function with ethnicity. The idea was based on a theory referred to as “expanding pie theory”, where as the economic pie grows, the Bumiputera community will increase their share of the national wealth without taking from the share of other racial communities.

What was the distribution of the economic wealth at that point?

At that point of time in the 1970s, the Bumiputera had 2.4% of the national wealth whereas non-Bumiputera Malaysians had 33% and the foreigners had 63%.

What was the target for the NEP?

The target was set in 1971 that the ratio of economic share should be 30%-40%-30% for the Bumiputera, non-Bumiputera and foreigners respectively. It was the late Tun Ismail, the one Taman Tun Dr Ismail was named after, who came up with this target.

Tell us more about the background of the NEP.

A lot of people do not know that there actually is a historical context to the NEP. Starting from the colonial days before Merdeka, the Malays had already been given special privileges in education and civil service. At the same time the NEP had to be created because the way the British ran the economy caused economic imbalances between the ethnic communities, mostly because we lived and worked in different locations and did different jobs.

Why was the NEP so important?

I see it as important because the needy must be helped. It is like playing golf; a person who is a beginner at golf must be given a handicap. If people think there is no chance for them to win or achieve anything, they would not even try. So it was good for the government to provide a helping hand. That is why affirmative action is a very important program for any country. Ours was called NEP 1970 - 1990.

Socio-economically, nobody should be left behind. I see this as very important, because if there is a segment of community who is left behind economically, there will be unrest. It is important for every society to have affirmative action plans, but it must be planned carefully. In many ways, the NEP was successful because through it we bred a very big chunk of middle class Bumiputeras who are now be able to fend for themselves..

What were the good things that came from the NEP?

There have been many. I will try to outline five or six here:

1) We reduced absolute poverty. Some data say absolute poverty was reduced from more than 50% to 6.8% and some say it was reduced from 70% to 5%. That’s a big reduction of absolute poverty.

2) We removed unrest caused by economic uncertainty and regulated a peaceful tenure in society;

3) We created a large section of middle class Bumiputeras, thus changing our society; and

4) We restructured the economy.

5) After the NEP, businesses are no longer exclusive to the membership of their own ethnic group. In fact, many people do not realize this but prior to the NEP, businesses not only employed people from their own ethnic group, they also limited employment to those within their clan, for example the Hokkiens employed the Hokkiens, the Cantonese employed the Cantonese, even among the Gujeratis and others. If you go to Penang, where I’m from, you will find there are Hokkien foundations, for example. We tend to see the NEP from an inter-racial angle, rather than intra-race. But it’s very interesting, since the NEP there has been a shift. Companies now employ people from almost every background.

6) Of course I see the best point about the NEP is that millions of families were saved from the clutches of poverty and that is something that we all need to celebrate.

What were the failures of the NEP?

One of the biggest failures of the NEP was many non-Bumiputeras who deserved to benefit from the NEP but we missed them out. For example, let’s talk about the Indian poor, especially those who were uprooted from the estates. This is one community which deserved to be helped but the NEP missed them out. We should have helped them too. If we had, things like HINDRAF wouldn’t have happened for example. In such an affirmative action plan, we cannot allow any group of people to be missed out.

At the same time, there has been some abuse which we do not want. We must make sure the rich who are able to fend for themselves should not be able to take a ride on the NEP. I think that’s the part many Malaysians are very angry about.

How did this abuse to happen?

I see the reason why this happened is because we did not make it clear enough. At the point when we design a plan, we must state what we want, and we must also state what we do not want. For example, you say you want to eradicate poverty, at the same time you must say you don’t want rich people to get it. We have to make it very clear.

And we had to define it clearly enough to make sure that it shouldn’t turn into a permanent crutch. Its like playing golf -- as we get better our handicap becomes lesser and lesser. We need to make sure that the newer economic models proposed do not repeat the same mistake of breeding a group of people who always have a subsidy mentality.

Why were some segments of Malaysians neglected?

The main group that was neglected was the poor Indians. I see that this happened because the data for the Indian poor were not really captured carefully because most Malaysians who are not Indian do not understand the Indians. I’m lucky, having grew up in Penang I know Indians are not one single community. There are Indians who are very, very rich and many who are very, very poor. The data used for the NEP did not capture that. So because we did not capture that, when it came to the NEP, a big chunk of poor people, especially the poor Indians, were neglected.

What were some other shortcomings of the NEP?

The third thing that I see we need to worry about is that our children in school are too young to understand the socioeconomic big picture, why we needed to do something like the NEP. So as they enter school, immediately they feel, “hey, there’s a difference between these two groups of people”… they may not understand. We need to really deal with that. We need to make it clear, especially to the younger generation, that we are not setting precedence for a country that differentiates between two groups.

One more area that I see the NEP seems to have missed is the public sector, the civil service. We did not go through the same vigorous restructuring. I think we need to ensure that our public sector is better represented by all the ethnic groups in this country. In our national schools students should be able to look at their teachers and see good people teaching them from various races. Our civil service should be seen as reflective of the colorful Malaysian people.

What went wrong with the planning of the NEP?

We should not have had it as a twenty year plan. When you set such a big goal to implement such changes for people, it takes a long process. When you try to do something like that in a short time, you tend to cut corners. I see that as one of the main roots f the problems of the NEP - that it was done in too much of a hurry to increase the share of wealth for the Bumiputera that we might have taken a short cut in doing it.

The good and bad considered, did the NEP achieve its purpose?

I see many good benefits stemming from the NEP. Let’s talk from a very micro level. By targeting the majority of rakyat, the Bumiputera which is 65% of the population, the NEP covered a large chunk of our citizens. So it is not an elitist program, it’s not helping a small group of people who are already rich. We actually targeted a large chunk of Malaysians both from the Peninsular and Sabah and Sarawak - because of that the impact is very wide ranging.

The country as a whole benefited because we made sure that millions of people got out from poverty and millions of people can fend from themselves, millions of people got a chance to an education, things like that. One of the biggest benefits is that we have lived peacefully since its implementation. Our per capital income has grown manifold, seven to eight times since 1970.

Should affirmative action plans continue?

I see it as important that every society must have affirmative action plans. But we need to learn from our experience and take corrective measures. Whatever happened to the NEP that was problematic, we need to really correct it. We need to make careful research, to identify segments of poor Malaysians who need to be helped, regardless of race. We must plan it carefully to make sure that anyone in need must not be left behind.

What are some corrective measures we could take based on our experience with NEP?

Our population is getting more and more urbanized and we need to study a little bit more about the urban poor. We have done quite well in dealing with the rural poor. Now we need to focus on the urban poor. The configuration of what needs to be done will be different again.

In urban communities it is no longer one ethnic group, it’s a multi-ethnic group - we have Malays, Chinese, Indians, Kadazans and so many others. All are moving towards urban populations and we need to deal if that. If we don’t, urban social problems will continue to rise. Housing and other issues are really important. If we pack too many people in small areas, they go crazy.

What’s the status of NEP now, after its targeted end at 1990?

One of the most important things that I see we need to understand is that from 1970 - 1990 we had a focus. The focus is we had this thing called the NEP, we had a target set at 30 -40-30 distribution of wealth, and the entire nation had an agreement – the idea was proposed, and all agreed to it. But after 1990, we are still not clear where we are going. Actually the NEP ended in 1990, and now we have NDP, NNP and our Prime Minister has announced the New Economic Model.

But what is happening now is that we have a nation in transition. We have one side of the country who says affirmative action should stop - another side says, no, it should not stop. One side has data which says we have achieved the target, and another side has data which says that we have not achieved the target.

How should we deal with this situation?

I see a real need for us to sit down again and re-write another affirmative action plan. Now, we have to realize that whatever we agree on may not be perfect, something we agree on for the next thirty years might not happen as ideally as we imagine it. Malaysia is now in transition, politically and socio-economically. I don’t know whether others would feel that way, but I see that as the issue - we don’t know what is going to happen next… what are we going to do? So let’s sit down, re-write a plan, and agree - now this is what I want, this is what you want, let’s agree to work something out.

We need to agree on some goals. It may not be the most fantastic, well-written idea, but we need to have something to agree upon so that we can say, let’s move on.

In your opinion, what is the single greatest impact in NEP and how has it affected Malaysians as a whole?

I see that we have created a society which, to a large extent, is based on the NEP. So we are all products of NEP, whether we have received the help of the NEP or not. We all need to really spend time thinking about what we have right now and where we are going to go next.

If we have not yet done it, we must accept what has happened in the past; and to accept it doesn’t mean we have to agree with it. Accepting it means saying, ‘alright, this is where we are, there are good points and bad points in the NEP. But what’s important is let’s talk about where we are going next.’

What should Malaysians do to understand affirmative action plans like the NEP better?

I see the need for Malaysians to read more. We should read good, academic books on the NEP. Do not just read those with a political angle to it, or just blogs and comments, we should all go and find real information. You can even ‘google’ it; there should be pages with information on the NEP.

Get books without a political twist, written by non-politicians. Look at the real numbers, then you can see the real reason and bigger picture behind the NEP. For example many people would be surprised to learn that in 1970, the Bumiputeras had only 2.4% of the nation’s wealth.

On the personal side, those who can afford it might want to implement your own affirmative action plans. Perhaps you can help your family members, your brother, your cousin, your colleague, your neighbor. Sponsor the education of those who need it; for example, if you have a neighbor or someone working in your office - maybe the cleaner, or maybe your maid – you can sponsor their children’s education. That’s NEP at the ground level. When you do that you, your family and your children, will really understand how affirmative action plan works.

What about the two sides of those who oppose and those who support NEP?

I see the need for Malaysians to learn to look at things in a balance. We cannot say it is totally wrong, and we cannot say its totally good. Nothing is perfect, nothing is completely imperfect. We need to always look at what are the good points of the program and what are the areas that need to be improved. We can do a SWOT analysis – realize the strong points and demand improvements in areas that are not good enough. We need to look at NEP from a totally balanced angle and plan from there.

What are some of the questions we need to think about to move on?

What do we do next? How are we going to help the poor in this country? How are we going to restructure society to become a more peaceful or prosperous society?