Note: This article is from chapter 6 of the book - The Middle Path: An Alternative To The Partisan Madness
What is the NEP?
In a simple definition, the New Economic Policy is
Malaysia’s socioeconomic affirmative action
plan. It was implemented in 1971 in the aftermath of the 1969 racial
riots, and the period set for the implementation of NEP was 1971-1990.
The overriding objective of the NEP was stated as
national Unity. The goal of the NEP was two pronged – one, eradicate poverty;
and two, restructure society to eliminate the identification of race with economic
function through rapid expansion of the economy over time. However, it was
clearly stated that this restructuring of
the racial composition of employment and ownership of wealth was to be
done without denying opportunities to
others. The strategy was to accelerate economic growth, but at the same
time, redirect the benefits more to the disadvantaged.
What is the background of the NEP?
The
NEP has historical basis. Even from the colonial days before Merdeka, the Malays had been given certain privileges by the British, especially quotas for
public scholarship and civil service employment.
The period of British rule left behind some remnant
effects on our society and economy. The economic system and the geographical
location of where we lived and worked were divided along racial lines. The
Malays were largely concentrated in the traditional agricultural sector where
per capita income was the lowest and poverty was the highest. The Chinese were
concentrated in mining, manufacturing and construction where per capita income
was recorded as much higher. The Indians
were largely labourers in estates and mining.
The
NEP was announced in June 1970 in the aftermath
of the racial riots in 1969. Whatever is said about the immediate causes
of the riots, the root cause for the unrest was
socioeconomical imbalance. It was clear that the problem of poverty and
the economic differences along racial lines were detrimental to social
stability and national Unity and had to be addressed immediately. The NEP was
formulated as a concerted effort to reduce
poverty and restructure the economy.
What was the poverty level and distribution
of economic wealth at that point?
At that point of time in 1970, the recorded number
of
households living
in poverty was 49.3%. The top 5% richest households were obtaining 30% of the
total income. Of those living below the poverty line, 64.8% were from the
Bumiputera population, 39.2% of the Indians and 26.0% of the Chinese.
In terms of wealth distribution, it
is recorded that the Bumiputera had 2.4% of equity capital, Indians held 1.1%,
the Chinese accounted for 27.2%, those categorised as Others had 6.0% and
foreigners held 63.3%.
What
was the target of the NEP?
The
target of the NEP was to reduce overall poverty to 16.7% by 1990. In terms of
restructuring the economy, the target was to increase Bumiputera share of
corporate capital from 2.4% to 30%, the
share of the Chinese, Indians and others to increase from 34.3% to 40%,
while that of foreigners would be reduced
from 63.3% to 30% -- a 30-40-30 ratio of distribution
among Bumiputera, other
Malaysians and foreigners.
Why was the NEP so important?
Affirmative action plans like the NEP are important
because the disadvantaged in society must be helped. When one segment of the
society is disadvantaged, to have an equal playing field in our economic system
will not be fair. To use a simple analogy, it is like playing golf – a beginner
must be given a handicap or he/she will stand no chance - it will be an unfair
game skewed towards the experienced player. Socio-economically, nobody should be left behind. This is imperative
because history has shown that once there is a segment of society left behind
economically, there are greater chances of social unrest.
It is important for every society to have
affirmative action plans, but it must be planned very carefully. Ours
was called the New Economic Policy (1971-1990). The NEP was successful in many
ways.
What were the good things that came from the
NEP?
There have been many. I will outline seven here:
1) The NEP managed to reduce poverty.
According
to official data, percentage of households living below poverty line across all
ethnic groups has been reduced from 49.3% in 1970 to 15% in 1990, and in 2009
overall poverty had been reduced to 3.8%.
2) The NEP managed to restructure the
economy.
Post-NEP, the wealth ownership of the Bumiputera
had increased from 2.4% to 19.3%,
the share of the Chinese, Indians and other Malaysians was 46.8%,
surpassing the target; while the share of foreign ownership was reduced to
33.9%. By 2008, Bumiputera share had increased slightly to 21.9%,
non-Bumiputera share was reduced to 36.7% and the share of foreigners, 41.4%.
While recorded numbers vary from one report to another, it generally shows that
the NEP has achieved a much more equitable and sustainable distribution
compared to the 2.4 - 34.3 - 63.3% ratio pre-NEP.
At
the same time, after the NEP in 1990, the number of Bumiputera employed in the
industrial sector like mining, manufacturing,
construction and utilities also had arose significantly. Bumiputera
representation also increased in professional
and technical categories and at the administrative and managerial
levels.
3) We have managed to create a large segment
of middle class Bumiputeras.
Today, the Bumiputera make up a significant percentage of management and professionals.
The NEP has played a huge part to make this happen.
4) We recovered from social unrest caused by poverty and economic imbalances
The NEP has been instrumental in regulating a
peaceful tenure in society.
5) It has played a big part in national
Unity.
With
increased movement of different ethnic groups into various sectors during the NEP, businesses are no longer exclusive to
the membership of certain ethnic groups as they were prone to before. It has
allowed Malaysians of all races to enter all areas of professions and
intermingle both economically and socially. In fact it is the workplace that is
our actual 1Malaysia, the platform for us to work together in Unity.
6)In fact, there is now more intermingling
even within race groups.
Prior
to the NEP, businesses not only employed people from their own ethnic group,
they also limited employment to those within their clan. The Hokkiens would
employ mainly only the Hokkiens, the Cantonese employed the Cantonese; the Gujeratis employed the Gujeratis. Signs of
intra-race delineation can still be seen through the Hokkien, Cantonese or other foundations that were established
historically and exist until today. We tend to see the NEP from an
inter-racial angle, but before NEP, intra-race disparity was also an issue.
7)The most important positive outcome of the
NEP is that communities were saved from poverty.
The real mean income of the bottom 40% of those in
Peninsular Malaysia increased from $76 in 1970 to $421 in 1990. Figures from
Sabah showed an increase from $68 to $390 and in Sarawak, mean income rose from
$74 to $436.Those who suffer from hardcore poverty, who get less than
half of the income on the poverty line, was reduced to 4% of total households
in 1990. In 2008 the recorded percentage of hardcore poor was 1.8%.
That millions of families were alleviated from
the clutches of poverty – this is something that we should all be proud
of; be deeply grateful for and celebrate.
What were the failures of the NEP?
One
of the biggest failures of the NEP is that it failed to help many non-Bumiputeras who deserved to benefit from affirmative
action. The Indian poor, especially from the rural estate communities, are one
of the main groups that are still in poverty until today. The data of results
from the NEP showed that the share of wealth
of non-Bumiputeras increased to 46.8% in 1990; however of this 46.8%,
44.9% of the share belonged to the Chinese, only 1% to the Indians and 0.7% to
Others.
We
need to urgently address the poverty problems of the Indian poor community. We cannot let there be a segment still
living in poverty in our society. The HINDRAF movement and the 2007 HINDRAF rally are signs of discontent and unrest that is caused by economic imbalance. With
an affirmative action plan such as NEP, no community should have been
left out.
At
the same time, there has been some abuse of the NEP. There are some undeserving
individuals who have enough capacity to fend for themselves but have been given
a free ride on the NEP. I see this as the reason why many Malaysians are not
happy with the NEP.
How did this abuse happen?
Firstly,
we did not make things crystal clear from the very beginning. At the design
stage of a public policy, we must state what we want and what we do not want. This must be clear. If our goal is to
eradicate poverty, we must also state clearly that it is only for the poor and
must not cover the rich. Failing to do so, it will be subject to abuse.
Secondly, we also need to define clearly that an
affirmative action policy like the NEP
cannot be made a permanent crutch. As the situation among the people
gets better, we need to gradually withdraw aid, phase by phase. In this way, we
help the poor out of poverty but do not create a society that is dependent on
assistance.
Thirdly,
it was a mistake to plan the NEP only for a twenty year timeframe. It is too
ambitious to implement such a huge social engineering project in such limited
time. We cannot reverse five hundred years of colonisation within a few
decades. I will explain this later.
Why were some segments of Malaysians
neglected?
One
of the main groups which were neglected were the Indians from the estate communities.
This happened because the data for the Indian poor were not carefully and
accurately captured. The statistics from the richer Indians and the poor ones
were grouped together, creating a distorted average.
I
am fortunate because from my experiences growing up among them in Penang, I
know that the Indians are not one homogenous community. I have Indian friends
who
are very, very rich and I know many around my
neighbourhood who were very, very poor. The data used for the NEP failed to
consider the very poor Indians in rural areas, estates and the urban poor. So because we did not capture that, a
big segment of those who are poor and deserving of aid, especially the
poor Indians, were neglected (read more in Chapter 5).
What were some other shortcomings of the
NEP?
Two
other serious shortcomings.
Firstly,
our children are too young to understand the socioeconomic big picture of why
we needed to come up with something like the NEP. As they go through school,
they may feel that there are two different groups of people defined by ethnic
background. We need to really deal with this issue.
Secondly,
the public sector needs to be restructured. The civil service did not go
through the same rigorous restructuring. We
need to ensure that our public sector is better represented by all the ethnic groups in this country. For example,
in our national schools, students should be
able to look at their teachers and
see good people teaching them from various races. Our civil services
should have people from all races who are able to connect to and empathise with
the general population of Malaysians. Our civil service should be seen as
reflective of the colourful Malaysian people.
Earlier, you mentioned twenty years is too
short a time. Why?
Yes,
a twenty year plan is too short a timeframe for a major social engineering
plan. When we set such a big goal to implement so many changes, a longer
process is required. When we force the
process into such a short timeframe, people tend to cut corners.
Achieving the numbers became the goal; not really making sure there is real
social change. We forced those who are not
ready and load money onto people who may not know how to make the best
use of it; or to put it another way, we simply made millionaires out of thin air.
This is one of the main root problems with the NEP. We were in too much of a
hurry to increase the share of wealth for the Bumiputera, rather than increase
the knowledge, skills, culture and the ability to fend for one’s self.
The good and bad considered, did the NEP
achieve its purpose?
There
are many good benefits stemming from the NEP. On
a micro level, we targeted the majority of rakyat, the Bumiputera, which made up 65% of our population.
So it is not an elitist program just
for helping a small group of people who
are already rich. The NEP targeted aid for a large representation of
Malaysians both from the Peninsular and Sabah and Sarawak - the impact is very
wide ranging.
The
country as a whole benefited because we made sure that millions of people got
out of poverty. The NEP is one of the reasons why millions of people can now
fend for themselves and millions of people had a chance to get education. Our
per capita income has grown manifold, seven to eight times since 1970 and the NEP has been instrumental in bringing us
to where we are today. One of the biggest benefits is that it has helped regulate peace and harmony in our society.
Should affirmative action plans continue?
Affirmative
action plans are important for every society, but we need to learn from our
experience and take corrective measures. Whatever problems that arose with the
NEP needs to be corrected. We need to do careful research to identify the
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 is the status of NEP now, after the end
of its term in 1990?
While the official term for NEP ended in 1990, its
underlying principle has been continued in subsequent plans – the National
Development Policy, National Vision Policy, and National Mission. Now there is
the Tenth Malaysia Plan, 2011-2015. However, with the NEP, from 1970 to 1990 we
had a clear vision, focus and a target for development that was defined in certain
terms – to redistribute the share of wealth to 30-40-30 and to restructure
society to eliminate identification of race with economic function. It was
crystal clear and very precise – the nation was in agreement and heading in one
direction.
After
the NEP, however, we have been uncertain about where we are heading. We now
have a nation in transition. One segment of society thinks that affirmative
action should stop; the other side says it should be
continued. One side has data which says we have achieved the target; the other
has data which says that we have not yet achieved the target. We need to iron
out these issues with maturity, reasonably and based on facts. We need to get
to work, start setting a new target to move forward in development.
How should we look at the NEP?
Let’s
view it in a balance. There are good points and bad points about it. It has
contributed constructively to build up our
country, and it has also brought some negative outcomes. Whatever we
feel about it, the NEP happened and now we need to reflect on where we are as a
society in reality. Let’s look at all the
information and data objectively and identify
what are the good points to take from the NEP and what lessons we can
learn from it. When we see our past and present in a balanced, truthful
perspective, it will help us to formulate a plan to move forward.
How should we move forward?
Moving
forward, there is a need for us to clarify what affirmative action plans we have now for the poor and disadvantaged. We need to study and define current
problems, set our targets clearly and formulate a plan to achieve these
targets. We need to make it clear to the nation what goals we are agreeing on
and what strategies we are carrying out to achieve it.
Secondly,
as we look ahead we need to deal with the emerging issues of urbanisation and
the urban poor. While we made progress in uplifting the rural poor, now we need
to also start giving due consideration to the urban poor. We need to study more
about the impacts of urbanisation and the emerging challenges that come with an
increasing urban poor population. We need to have structures and processes to
deal with the situation, look into issues like housing - if too many people are
packed into small areas, it will have negative social impacts. We need to
create ways to aid the urban poor and buffer them from negative effects; or
else urban social problems will continue to rise and bring in other
implications. The configuration of what needs to be done will be different. In
urban communities it is no longer one ethnic group but a multi-ethnic group - we have Malays, Chinese,
Indians, Kadazans, Ibans, etc. and so many others.
In your opinion, what is the single greatest
impact of the NEP and how has it affected Malaysians as a whole?
To a large extent, the NEP is a defining factor in
making our country what it is today. We are all products of NEP, whether
we have benefited from it or not.
The
real concern about the NEP today is that many Malaysians use the NEP as a
simple justification for various issues, and because of that we have lost
self-confidence. It is not uncommon, for example, to hear parents say that
their children are not doing well because of the NEP; this is especially true
among non-beneficiaries of it. At the same time, many Bumiputeras believe
falsely that without the NEP they cannot stand on their own, and in this way
they too have lost self-confidence.
The
real problem now is that when we blame the NEP for why we do not do well, we
lose the most essential values. We lose the value of working hard and fighting
through problems, and the value of self-determination in spite of difficult
circumstances, which are necessary frameworks for success. This is ironic
because it is these principles that our forefathers held on to and it is their
hard work despite much more difficult and oppressive circumstances that allowed
them to achieve success. Yet today, many simply place the blame on policies and
we’re teaching our children to do the same. In this way, the NEP has created
generations that are more extrinsic, who rely on outside factors rather than
being self-dependent.Another offshoot of justifying situations externally like
this is it also causes us to lose our ability to be content with what we have.
For example, we have many Malaysians who have achieved success and are already
living in abundance, for example, yet feel unhappy because they fault the NEP
as a reason why they could not get more.
We need to be aware of this, and to spend time
reflecting on where we are now and where we are heading next. If we have yet to do so, we must accept what
has happened in the past. To accept it does not mean we have to agree
with it, but we recognise where our society is as a result of it and find a way to move forward. The NEP happened;
whether or not we benefited from it, some have been impacted positively and
some negatively. Let’s accept that, take what we can from it and move forward.
Let’s stop using race-based policies or any other policy as a blame point for
where we are or where we are not; let’s regain our self-confidence to determine our own actions and our own success. This
is what is more important.
What should Malaysians do to understand
affirmative action plans like the NEP better?
We need to start reading more. Read balanced,
informative books on the NEP, not those written by politicians with political
agenda or writers aligned with partisan politics. It is better to read books
written by serious academicians. When we
look at the real numbers, we will see the real reasons 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.
Secondly,
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 neighbour. Sponsor the education of those who need it, perhaps for the
children of your neighbour or someone working in your office, maybe the cleaner
or your maid. That is affirmative action at the ground level. When you do that, you, your family and your children will
really understand how affirmative
action plans work and why they are so important.
