The New Economic Polic

In the news these days is Malaysia’s New Economic Policy, the name for a political project that set to (1) reduce poverty across Malaysia and (2) eliminate the identification of race with economic status in Malaysia.  Originally, the NEP was supposed to run from 1971 to 1990.  Technically, the program did lapse in 1990, only to be replaced by the National Development Policy and then PM Mahathir Mohamad’s Vision 2020, which sought to make Malaysia a fully developed country by 2020.  But everybody knows that the spirit of the NEP lives on, if not in name, then in the myriad laws and institutions still on the books that stem from the NEP period.  Indeed, the very way that government and society works reflects the NEP.  It is telling that politicians still say NEP when they mean NDP, as the NEP has fundamentally transformed the country.

If you are a regular reader of our blog, you’ll be familiar with the main aspects of the NEP.  Bumiputras (basically, non-Indian and non-Chinese Malaysians) get favorable treatment in most matters that have any economic or political connection.  The government invests heavily in rural development schemes that overwhelmingly benefit Malays.  Malays can invest in special government-run unit trusts that always give high dividends.  When the government privatizes public services via the stock market, it reserves discounted shares for Malays.  It’s easier to get into the universities here if you are a Malay, it’s easier to get a government scholarship if you are a Malay, it is far easier to move up the ladder in the public service if you are a Malay; the list is endless.

So why is the NEP still in the news today?  Well, simply, its project has not worked.  The targets for bumiputra participation in the economy through equity ownership have not been met, even 15 years after the project was supposed to be finished.  There is a well-known, and oft-lamented, "subsidy mentality" among some Malays.  Rather than eliminating the identification of race with economic function, the NEP seems to have strengthened it.  In all, we have all of the problems that you’d expect to find with a coarse tool like race-based affirmative action.  The demands from some sections of the ruling party, though, are for more "positive discrimination", and a strengthening or re-establishment of the NEP.

JM and I, living in KL with its large population of Chinese and Indian Malaysians, have seen first hand evidence that, contrary to the government’s claims, poor non-Malays do indeed lose out under this system.  We also see the Melayu Baru–New Malays–who have grown rich on government favoritism, and yet still get first crack at discounted shares because they are Malays.  We think it’s time for Malaysia to scrap the NEP and "positive discrimination" based on race.  The government could still help poor Malays and intervene in the economy while doing so without the blatant racial favoritism that it shows.  (Let’s bracket the question of whether or not government intervention to ensure equality of opportunity is a good idea for now.)  A non-racial policy would still overwhelmingly benefit Malays, but it would also pick up the large poor Indian Malaysian community, the true losers under the NEP, and the non-negligible numbers of Chinese Malaysians.  We also believe, by the way, that affirmative action in the US should be based on income, not race or ethnicity.

Just FYI: If we were Malaysians, what we just said would be seditious.  We are not kidding, even in the slightest, and the government’s record of arresting people for criticizing the NEP is proof.  It is a violation of the Sedition Act of 1972 to criticize or even question the rights and privileges of Malays.  By extension, that includes the NEP.