MALAYSIA
Affirmative Reaction
Thirty-year-old quotas to help Malays may be
curbed, boding well for the Chinese population

By Bruce Gilley/KUALA LUMPUR
Issue cover-dated August 10, 2000

IN CONFERENCE ROOMS and meeting halls across Malaysia, a package of policy proposals is taking shape that, if implemented, would change the face of the country. The proposals aim to curb the affirmative action that has benefited indigenous Malays and hampered non-Malays, primarily ethnic Chinese, for nearly 30 years. They are to be considered on August 7-8 by the National Economic Consultative Council, a government-appointed body tasked with drawing up Malaysia's next 10-year development plan, due to take effect next year. The council's recommendations are usually closely reflected in government policy.

"The current policy is not doing anybody any good," says David Chua, a leader of the Chinese business community, a vice-chairman of the NECC and key proponent of the changes. "We want to see increased 

liberalization and competition in our society based on merit." The proposals are unlikely to be adopted wholesale. But they are higher on the council's agenda than ever before, and analysts agree that some of them will be approved, starting a process of chipping away at the affirmative-action programme that will finally lead to its demise. Chua says that one way to make the changes would be to maintain the NEP targets but to make them no longer legally binding. Affirmative action was launched in 1971 as the New

Economic Policy, following race riots in Kuala Lumpur. The policy's aim was to redistribute wealth from

Malaysia's non-Malays to the indigenous Malay population. Building on colonial initiatives to help rural

Malays escape poverty, it embraced everything from welfare and education to taxes and licences. At its heart is the goal that Malays should own at least 30% of the country's business capital. According to Chua, the present proposals include several options for eliminating the 30% rule: removing it entirely for all hi-tech businesses, phasing it out in all other sectors, and phasing it out in takeovers. Other suggestions include ending quotas and discounts for Malays in new housing developments and relaxing quotas for Malays in public-sector jobs and state-university admissions. While the New Economic Policy has been reviewed periodically, it has never been fundamentally changed. But the Asian economic crisis and the rise of the Internet have made it clear to many Malaysians that policies discriminating against the non-Malays are dragging down the country's bottom line. The proposals are also a political power play. Chinese parties and Chinese voters contributed more than ever to the victory of Prime Minister Mahathir Mohamad's ruling

coalition in elections last November. That has emboldened the Chinese to press for changes. Malays, who make up 55% of the population compared with the Chinese at 26%, generally oppose removal of NEP supports. Changes are opposed particularly by rural Malays--a key constituency for Mahathir to win back if his government is to survive the next elections. But a small but growing section of the Malay middle class has joined the Chinese in demanding a level playing field for all. "There is a Malay middle class that has seen very little of the trickle-down from the NEP," says Edmund Gomez, an economist at the University of Malaya. "They would be energized by a reduction of these policies." CRISIS SHOWED UP FAILURES Excluding foreign ownership, Malays now own about 30% of the capital of all limited companies, compared to 7% in 1970, official figures show. At the same time, the Chinese share has fallen to 50% from 75%.

 

But the Asian Crisis highlighted the fragility of many Malay-run companies, which fared less well than Chinese firms. "If the crisis showed us one thing it was the failure of big Malay capitalists and the ynamism of Chinese capitalists," says Gomez. "The government is being forced to look at how the NEP has stymied entrepreneurial development." The Internet and Malaysia's hi-tech vision have also prompted a rethink. The 30% rule has already beenwaived for investors in a hi-tech zone near Kuala Lumpur called the Multimedia Supercorridor. Businessmen like Chua want that waiver extended to all hi-tech companies, arguing that entrepreneurs are less likely to invest in high-risk ventures if at the outset they have to sell cheap shares to Malays who get a management say. Adding to the pressure for change are foreign investors, who slashed their planned outlays in Malaysia last year by 28% to just over 9 billion ringgit ($2.4 billion) and need to be attracted back. The 30% provision has been temporarily suspended for all foreign investors since 1997 and is already waived for those who export more than 80% of their output.

POLITICS OF EDUCATION

In education, the government allowed foreign universities to open branches in Malaysia in 1997 so that non-Malay students thwarted from entering state schools by quotas would have a chance of a higher education. Yet the foreign colleges remain profit-oriented and low in quality, according to Gomez. Taking race out of the education equation would be politically impossible, Gomez notes. But, he says, race should be made just one criterion for admissions--along with academic ability and other factors--so that state institutions can turn out the high-quality graduates that the New Economy demands.

For Malaysia's Chinese the road to equal treatment has been long and generally unsuccessful. Before the November election, an unprecedented alliance of Chinese groups presented a 17-point proposal calling for reforms in business, government and the media. While couched in nonracial terms, it was clearly aimed at ending discrimination against Chinese. Mahathir ignored the petition at the time, but has since passed it to the NECC for consideration.

Mahathir appears acutely aware of the NEP's shortcomings. He has articulated a vision of turning Malaysia into a "modern" state by 2020 with a single Malaysian "race." The suggestion has been taken by most to mean an end to affirmative action. Mahathir's allies have also publicly advocated changes. "Only the deserving, academically qualified, financially disciplined and competitive should be given contracts, licences and other economic opportunities," former deputy treasury chief Ramon Navaratnam wrote in the New Straits Times in May. "Reducing the economic gap between the races can constrain economic growth and national progress. It could mean overprotecting some races and holding back others."

Makmor Tumin, a politics lecturer at the University of Malaya, says there's still a belief among Malays that the NEP will be needed in some form for at least another 20 years "to correct the imbalances that were left over from history." But, he adds, even Malay nationalists recognize the need to increase merit in their society if Malaysia is to retain its economic edge over regional rivals. "All Malaysians have to respond to international competition no matter what their race. That means a relaxation and loosening of the NEP policies."

Artikel sumbangan Bomoh Din

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