Malaysia economic plan: Old wine,
new bottle By Anil Netto
PENANG, Malaysia - This country's Ninth
Economic Plan would have been another ho-hum
affair if not for one key ingredient that raised
eyebrows. In Malaysia's race-fixated society, it
inevitably centered on another extension of
ethnic-based affirmative-action policies that
favor the ethnic Malays and other indigenous
Malaysians, known collectively as the
bumiputeras.
Affirmative action was
first incorporated into economic policy in 1971,
when the New Economy Policy (NEP) was introduced
in the wake of anti-Chinese race riots. To ease
racial tensions and
promote national unity, the
policy had two main aims: to alleviate poverty and
to restructure society so that occupations were
not defined by race. Among the targets to be
achieved - which has since become a
larger-than-life obsession - was for
bumiputeras to own 30% of all corporate
equity by 1990.
The NEP was supposed to
expire in 1990 but it was extended under a new
guise because, according to official figures, the
bumiputeras, who now make up some 60% of
the population, had not yet reached the 30%
target. Under the Seventh Malaysia Plan, the NEP
was refashioned as the National Development Policy
(NDP) and extended a further 10 years until the
year 2000.
In 2004, official figures
showed that bumiputera equity ownership,
including through government trust agencies and
government-linked firms, had hardly budged at
18.7% in recent years. So it was extended yet
again. The Ninth Plan's decision to extend the
period of affirmative action further, until 2020,
was in a sense a fulfillment of calls made last
year at the assembly of the United Malays National
Organization (UMNO), the dominant party in the
ruling coalition. Key UMNO leaders had called for
a "New National Agenda" to advance the "unfinished
Malay agenda" for a further 15 years.
Still, there is some contention over
whether the 18.7% achieved so far is an accurate
reflection of actual bumiputera wealth.
Some have pointed out that the figures are
calculated based on the par value of shares and
not the market value. A 1990 study carried out by
political economist Edmund Terence Gomez into
corporate equity owned by politicians and
political parties, including UMNO, revealed that
many use nominee companies, which now own 8% of
total equity, to conceal their ownership from
public scrutiny.
The 30% target might have
been met if shares awarded to bumiputeras
during initial public offerings (IPOs) and then
quickly sold for a profit were taken into account.
Moreover, most of the top 10 firms by market
capitalization in the country are
government-linked corporations (GLCs). If the
equity these GLCs own - regarded as bumiputera
private-sector investments - and the ownership
of privatized firms are taken into account, a
different picture emerges.
Undoubtedly,
the NEP has raised the living standards of the
bumiputeras through the creation of a new
middle class and greater participation across a
wide range of occupations. But the obsession with
share capital ownership as a measure of
bumiputera participation masks a deeper
problem: the yawning wealth and income gap within
the bumiputera community itself. The
bumiputeras who take up IPO shares are
frequently the middle and upper classes.
"In truth, a tiny minority [of
bumiputeras] hold the bulk of the shares,
and they are the ones salivating at the thought of
the 30%," political analyst Philip Khoo said last
year.
The Ninth Plan's answer to
broadening the group's participation is to widen
the benchmark to include not just
bumiputera equity ownership, but also to
promote their ownership of residential and
commercial urban property, intellectual property
rights and small and medium enterprises (SMEs).
New foundations, trust funds and an SME Bank will
be established in the future to achieve this end.
In addition to racial inequality, the
urban-rural income gap has widened, with the
poverty rate in Sabah province 30 times that in
the capital, Kuala Lumpur. As one political
economist, G Lim, pointed out, "The disparity
between states has been more or less consistently
growing since 1970, while ethnic disparities have
been significantly reduced."
The poorest
rural states - Kelantan, Perlis, Sabah, Sarawak
and Terengganu - tend to be dominated by
bumiputeras. This has contributed to
Malaysia being one of the most unequal societies
in Asia.
While the government says it
wants to reduce regional imbalances, state
spending plans in the new economic program do not
seem to reflect this as a priority. Heavily
developed Kuala Lumpur alone has been allocated
RM31 billion (US$8.4 billion), while less
developed Sabah and Sarawak in North Borneo -
together covering an area much larger than
peninsular Malaysia - have been allocated only
RM29 billion.
The Ninth Plan envisages
RM200 billion of government spending over the next
five years. Another RM20 billion will be expended
through private finance initiatives (PFIs). The
plan also envisages transforming traditional
farming into large-scale commercial farming
ventures. Some RM32 billion will be spent on
highways, airports, railways and urban transport
projects, and a further RM22 billion on energy and
public-utility projects. That poses a problem of
leakages. Funds could gush out from the system, as
even industry insiders admit the construction
sector is plagued with corruption in all stages
from the awarding of contracts to collection of
payment.
In the past, there has been very
little transparency in the way contracts and
shares have been awarded. Large privatization
projects have in many cases benefited a small
group of well-connected firms - and many have
failed.
"Why has privatization [proved] to
be such a dismal failure?" asked Gomez, a
University of Malaya political economist
temporarily with the UN Research Institute for
Social Development in Geneva. "For example, the
renationalization of Proton, Malaysia Airlines
[MAS] and [sewage disposal firm] IWK indicates
that this policy needs a thorough review before
being continued to be promoted ... Why has no one
been charged for running MAS into the ground?"
The real test will be whether contracts
under the Ninth Plan will be awarded on an
open-tender basis or whether a handful of
privileged firms will once again dominate major
infrastructure and privatized projects with little
transparency or regulation.
Former deputy
premier Anwar Ibrahim is one of the few
high-profile ethnic Malays who have openly called
for the NEP to be scrapped. "We're not going to
sacrifice Malay interests, we're going to help
them as we are going to help those deserving
irrespective of race," he said in November.
Another Malaysia-based political
economist, who declined to be identified, agrees
with that assessment: "If they really wanted to
extend the NEP, then it should have been fully
non-ethnic and only favoring the genuinely poor."
Last week, Anwar pointed out that there
has not been much transparency in how the wealth
of the national oil corporation, Petronas, has
been used. Anwar, a former finance minister,
insisted that Prime Minister Abdullah Badawi
should explain what had happened to Petronas'
Legacy Fund (Tabung Warisan), which he said was
set up to provide for the day when the country
turns into a net importer of oil. "Annually, a sum
from Petronas revenue is contributed to the Tabung
Warisan. It has been 20 years, and what is the
amount?" he asked.
To its credit, the
government recognizes that Malaysia badly needs to
upgrade its human resources to meet the annual 6%
gross domestic product growth target over the next
five years. A huge chunk - RM50 billion - is to be
set aside for education and training as the Ninth
Plan recognizes the importance of enhancing the
national capacity for knowledge and innovation and
nurturing citizens with "first-class mentality".
But qualitative issues - rather than
funding - are likely to prove crucial: how to
promote critical thinking in a climate where
dissent and alternative viewpoints are not
encouraged, where meritocracy is the exception
rather than the rule, where stifling laws remain
in place, and where universities and the
government are burdened by a culture of
mediocrity. With this restrictive environment
likely to remain unchanged, the Ninth Economic
Plan, framed along ethnic lines that do little to
foster national unity, will find it difficult to
unleash the full potential of Malaysians.
Anil Netto is a freelance writer
based in Penang, Malaysia.
(Copyright
2006 Asia Times Online Ltd. All rights reserved.
Please contact us about sales, syndication and republishing
.)
