11 July, 2007

The New Economic Policy stays says Pak Lah

Malaysia is willing to review policies or regulations deemed to be hindering the distribution of equity in the most sustainable, competitive and meaningful way.

Prime Minister Datuk Seri Abdullah Ahmad Badawi, however, said Malaysian maintained its position that the New Economic Policy (NEP) was not a cost to doing business.

“Perhaps the most difficult question we must address is to improve equity without sacrificing competitiveness. Many have come to regard Malaysia’s affirmative action policies, widely described as the NEP, as a cost to doing business.

“But many fail to appreciate the spirit behind the policy, and this is crucial in understanding Malaysia,” he said yesterday.

Abdullah said the objective to dissociate race from occupation or social standing was crucial in ensuring long-term unity for the country – given its legacy and racial structure.

“Racial-based riots raged in neighbouring countries while Malaysia was spared the experience. The expansion of an educated and multi-ethnic middle class, thanks to affirmative action policies, has mitigated the risk of mass unrest.

“But great disparities in income and social mobility still exist between ethnic groups. Whereas this may just be another issue in other countries, ethnic-based disparity strikes at the heart of national unity for Malaysia,” said Abdullah in his keynote address at a high-level dialogue with foreign investors and international business leaders.

The Prime Minister spoke at the two-day “Business Roundtable with the Government of Malaysia.” This dialogue allowed the business leaders to engage policy makers on the on-going reform process and to discuss key economic issues.

“In this 50th year of our independence, we see an improving economy and the fruits of our structural changes. The renewed interest in Malaysia is the product of this 50-year legacy as well as recent national efforts at refining our approaches,” he said.

On crime, Abdullah acknowledged it was a concern lately despite a reduction in the crime rate in several major cities.

Abdullah said he was aware the occurrence of violent crimes had increased people’s fears about personal safety.

“Although the numbers tell a story of improvement, there is still a need to address perceptions and fears. In response to the situation in Johor, for instance, the police have beefed up personnel and patrols and increased visibility, particularly in crime-prone areas.

“The Government has approved additional equipment and patrol cars. The request for salary increase has also been met. These decisive measures are being taken to clamp down on crime and I am sure we will see results,” he said.

As for eradicating corruption, Abdullah said the Government had reduced much red tape to cut corruption.

Measures implemented included scaling down the rules on foreign ownership for targeted sectors and areas in the Iskandar Development Region; reducing the number of approvals required from the local councils as well as reviewing price controls and entry conditions for the steel industry.

“A special public-private taskforce is currently looking into all licences and permits with the aim to reduce and streamline. These measures have been received very positively by the market and the Government is committed to continuing the effort.

On the way forward, Abdullah said emphasis would be on becoming an economy propelled by skilled human capital and innovation.

“More collaboration will be struck between the private sector and academia to ensure we produce qualifications relevant to industry.

“I also see a need for Malaysia to refine its stand on foreign talent. The entry of skilled workers should not be overly restrictive,” he added.

(Taken from The Star)

Malaysia spent hundreds of millions of dollars sending the country's native population — or "sons of the soil" ( Bumiputras)— to leading universities in the United States, Britain and Australia.
In the span of a generation, the program created a native urban middle class and helped avoid the outbreaks of ethnic violence that marred Malaysia's early years of independence in the 1960s.
But as the country prepares to mark 50th independence, and three decades under what is called the New Economic Policy, the program's failures are becoming increasingly apparent. Affirmative action, critics say, has morphed into cronyism. The government transferred wealth to a small pool of politically well-connected businessmen.
Nurtured by the government for years, these hand-picked captains of industry are today deep in debt and running unprofitable businesses that rely on government largesse. The country's native leaders are faced with the decision of whether to bail them out or let them sink — and thus liquidate the very symbols of native enterprise.
The problem is that the whole policy has been abused by politicians for vested interests.

There was no transparency in the way contracts were awarded.

Compared with similar social programs around the world, Malaysia's New Economic Policy is unusual because it is affirmative action for the majority. The program, which today colors nearly every facet of Malaysian life, was spurred by a startling economic reality: In 1970, Malaysia's natives owned just 2.4 percent of the country's wealth.
The goal of the policy was not only to put natives on a more nearly equal footing with immigrant populations, mostly ethnic Chinese, but to reverse social imbalances that had set in during centuries under colonial rule, starting with the Portuguese and Dutch and ending with the Japanese and British.
The country's natives were given preferential treatment for government contracts, cheap loans and discounted blocs of stock in big companies. The civil service became their exclusive domain.
On paper the program has been successful in transferring wealth: Collectively, sons of the soil control an estimated 30 percent of the country's total wealth. Official figures are expected later this year.
But critics say this wealth is poorly distributed and, worse, is concentrated among a class of failed entrepreneurs who are slowing the country's economic growth.
For years, criticizing the affirmative action program was taboo — and punishable under laws designed to make the program stick. But an increasing number of prominent academics and politicians, some within the government, are calling for an overhaul of the system.
Public universities, which are required to reserve at least 60 percent of their openings for natives, produce substandard graduates,
Najib Razak, once said that if students were admitted to public universities on merit alone, natives would make up just 5 percent of undergraduate student bodies — a fact, he asserts, that shows major deficiencies in the country's secondary school system. But the failures of the New Economic Policy are more broad than just underperforming students and resentment over quotas.
Rather than breaking down racial barriers, the policy has reinforced them.
Today, more than 30 years on, the political system is based almost entirely on race. Each major ethnic group — Malays, Chinese and Indians — has separate political parties.

The policy has also revealed the obvious flaws of classifying an entire society by race.
It is a system where a first-generation Indonesian immigrant, who is likely to be Muslim and physically resemble native Malays, can qualify as a "son of the soil" within several years of arriving in Malaysia. But a fifth-generation Chinese or Indian Malaysian is still classified as an immigrant.
Malaysia's complex multiracial society is a legacy of British policies to attract Chinese and Indians as workers in the tin mines and rubber plantations of colonial Malaya. Ethnic Chinese today make up about a quarter of the population, while ethnic Indians make up 10 percent.
Over the years, many of these immigrant communities have maintained separate schools and clubs. Chinese Malaysians, for instance, are likely to speak to each other in Cantonese, Mandarin or English, rather than the national language, Malay.
The economic imbalances between natives and the ethnic Chinese engendered ethnic tensions in the 1960s and ultimately helped fuel a riot in 1969 that left more than 100 people dead. It was an event that scarred the national consciousness and was the major catalyst for the creation of the New Economic Policy.
Even critics of the program are quick to point out that one obvious success has been the absence of serious ethnic clashes in the past three decades.
One government adviser measures the program's success in this way: "In 1969, a bumiputra could burn a car or a shop, secure in the knowledge that it was Chinese-owned."

But among poorer minorities, especially Indians, the New Economic Policy has been a bitter experience. Impoverished from the early days of independence in 1957, Indians are still among Malaysia's poorest and worst-educated.
Overall Indian wealth stood at 1.1 percent of Malaysia's total in 1970. Three decades later, Indians own about 1.5 percent, widely disproportionate to their 10 percent of the population.
Despite the high incidence of poverty among Indians, their plight has been largely neglected by the government for the past 30 years.
"You are constantly being told that you're a second-class citizen," said K.S. Maniam, one of Malaysia's best-known contemporary novelists.
"You live in your own pocket of culture, your own pocket of solitude. And if that pocket has less and less culture, it's just solitude."
Among Malaysia's liberal thinkers, there are increasing calls to revise the New Economic Policy, basing it more on poverty alleviation than on ethnicity.
But political analysts say radical changes to the New Economic Policy are highly unlikely in the short term, mainly because of the very nature of the program: It would mean taking benefits away from the majority of voters.
For the past three decades the Malaysian government has presided over a massive experiment in social engineering, an affirmative-action program designed to lift out of poverty the children of millions of rice farmers and rubber tappers, molding them into a white-collar elite.(source)

Between 1996 and April this year, 106,000 Malaysians have given up their citizenship. Of these, 79,199 are Malays; 25,107 Chinese, 1,347 Indians and 350 other races.

It has been the popular assumption that the non-Malays are the ones leaving Malaysia for greener pastures and the Malays have no reason to leave because comfort zone is here.
Are more Malays leaving the country (and not because of marriage)? Someone should conduct a survey.
- Rocky

Read also The New Economic Policy & Thierrt Rommel's Comment: How Malaysia benefited from the NEP

The NEP package had seven main thrusts, as conceived by the founders of the NEP:

Maximum economic growth (around six to seven per cent annually);

• Economic restructuring to reduce economic imbalances in terms of: Income (reduce the disparity ratio between the Bumiputeras’ income and the non-Bumiputeras’ income); wealth (30 per cent public quoted share holdings) and creation of the Malay commercial and industrial class; employment (to reflect the multiracial composition of the population at all levels in firms, etc);

• Reduce poverty irrespective of race (hard-core poverty, rural poverty, urban poverty, poverty in the Malay-dominated states of Peninsular Malaysia, extreme poverty among the Bumiputera community in Sabah and Sarawak);

• Full employment of the labour force (absorbing surplus labour, particularly from the rural sector);

• Interventionist/proactive go- vernment (federal, state, local);

• Monitoring of the implementation of the NEP; and,

• Social policy for conflict avoidance.



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