PART I: The unheard story behind the New Economic Policy

About Politics, Society, Business, ALL ARTICLES | October 10, 2006

You have been directly affected by Malaysia’s New Economic Policy. How so?

In this six-part special series, theCICAK invites Transparency International Malaysia President TAN SRI RAMON V. NAVARATNAM to give us the lowdown on the NEP. Where did the NEP gone wrong?

You will learn about the impact of the NEP on national unity; the non-Bumiputera view versus the Bumiputera view; and the so-called “national” agenda…

Every two days, theCICAK will publish one of six parts of a story about our Malaysia - a story you don’t hear every day.

The Social Contract

During a luncheon meeting on 20 June 2005, Dato’ Dr. Maximus Ongkili clarified that the so-called “social contract,�? as understood in 1957 between both Malay and non-Malay leaders, had to be better explained. This social contract had enabled all ethnic groups to be united to fight for independence from the British in 1957 and had helped to also defeat militant communism (1948-1960).

Under the contract, about one million Chinese were given citizenship. In return the Malays asked for and were given their special position in the country. Thus protection was given to Islam, Malay was accepted as the national language and “special privileges�? were provided to the Malays for 15 years.

The special privileges for the Malays referred generally to preferential treatment in education, recruitment into the public service and business opportunities.

Although these special privileges were intended for only 15 years, they were nevertheless extended further, and they still underline national policies even today – with greater force than before! These continuous special privileges have now become the main source of contention and dissatisfaction among most non-Malays and even a significant number of Malays who feel they have not benefited much from them.

There are also many Malays who have struggled hard to achieve distinction in many fields. They therefore feel embarrassed over being thought of having benefited from these special privileges that they may not have received in the first place.

The New Economic Policy which resulted from the unfortunate 13 May racial riots in 1969 further entrenched the special privileges for another 20 years until 1990. Today, these special privileges still exist, raising questions of fairness, equality and national unity.

The NEP aimed to achieve the following:

1. To alleviate if not eradicate poverty – regardless of race; and
2. To remove the identification of race with occupation or function.

This is a fine policy which I helped to draft as part of the team of the Economic Planning Unit (EPU) and Treasury officials who examined all kinds of proposals together with the Harvard Advisory Group in the EPU soon after the 1969 racial riots. I therefore fully supported the policy and continue to believe in it.

However, it is not the policy which is at fault but the implementation of the NEP that has gone awry!

Where has the NEP gone wrong?

Much progress has been achieved in reducing poverty, but less success has been attained in restructuring the economy. Thus the well-deserving poor Indians and Chinese feel they have been largely neglected in the government’s anti-poverty programmes.

With regards to the second goal (i.e. the removal of the identity of race with function), the government’s implementation programme has gone adrift on equity ownership. However, there have been great gains made in the large number of Bumiputera professionals and technical staff members.

There is a deep-seated resentment felt by poor bright Chinese, Indian, and other non-Malay students such as the Kadazans and Dayaks, who have been unfairly denied admission to local universities and scholarships to study at home and abroad. Many Malay students who have not performed as well academically and who possess much higher family incomes have been given preferential government scholarships from public taxes.

The 30 percent equity reserved for Bumiputeras in the public listing of private companies have often been given to well-connected Bumiputeras who have sold the shares off almost immediately for easy profits. It is no wonder, therefore, that the 30 percent target for equity in the corporate sector is said to have fallen short after 35 years of the NEP. The government estimates it is only about 19 percent, although other studies indicate otherwise.

Hence, new ways and means must be found to ensure the 30-percent corporate restructuring target is achieved in a manner that will reduce, if not eradicate, the abuses in the system.

One way would be to stop the present practice of allocating large number of shares to selected political appointees who go for the quick buck in the name of protecting Bumiputera interests. The 30 percent equity reserved for Bumiputeras could be placed entirely in trust with well-established Bumiputera institutions such as PNB and Tabung Haji. Then more small-time Bumiputras and the rakyat would also benefit from the restructuring of the corporate sector, instead of primarily enriching the rich and the powerful Bumiputeras.

These difficult questions remain with us: What can be done to right the wrongs in the implementation of the NEP? How difficult will it be to get back to the basics for the proper implementation of the NEP so as to benefit all Malaysian ethnic groups and strengthen national unity, as indeed was its original intention?

To be continued in Part Two…
–

Tan Sri Navaratnam was directly involved in the formulation of many major public policies during his distinguished career in the civil service, from the New Economic Policy in 1970 to the preparation of annual budgets and economic plans. He retired from the government in 1989.

Since then he has continued to serve in the National Economic Consultative Council and the National Economic Action Council working groups, as well as other non-governmental agencies like Transparency International Malaysia, of which he is president.

The articles he shares with theCICAK are from his latest book, Quo Vadis: Where to, Malaysia?. The book addresses these hard issues and provides solutions for the challenging management of our nation. Click here to learn more about him, and Where to, Malaysia?

He is on the judging panel for theCICAK’s “Write It!” Competition 2006.

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14 Comments so far. Post your own comment

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I agree with the statement that the poor bright Chinese and other non-Malay were given unfair treatment… I feel really upset seeing Malay student who performed just okay but accepted to ipta… it’s a good thing but it make me angry as they just playing around and take things for granted (not all)… i know that not all Chinese are rich enough to study in ipts and go oversea… i hope something can be done about this

Comment published by Leen on 10 October 2006.
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I am in favour of reforming the NEP. Why more people don’t say this, I don’t know.
Its not an all or nothing game, we can have the NEP and still improve the lives of the poor and eliminate the income gap between the races. We have to remove middle income bumiputras and bumiputra firms from the program, ensuring that only the poor derive benefits from the NEP.
On the 30 per cent equity stake of Bumis in listed companies, this hardly seems to benefit the poor. The only people who can benefit are the Bumis rich and educated enough to run their own businesses and live without the crutches of the NEP in the first place.
Why do we even need this clause?
This does nothing to alleviate poverty and has everything to do with promoting the narrow interests of the rich and powerful Bumi, who ironically enough, are not the poor majority who are meant to benefit from the NEP.
On education, it seems a misnomer in the first place that “Education” would come under the New Economic Policy. Now again, reserving places for Bumiputras in universities blindly seems grossly counter-productive. The primary beneficiaries of this policy are those who cannot be admitted based on merit. This is inherently dangerous for the future of human talent in Malaysia. Isn’t it more advisable to practice meritocracy with regards to admission and scholarships with special consideration and assistance for Bumi students with family incomes below RM1500. If you’re a rich but dense student, chances are you’ll be able to afford an education abroad anyway, better to keep the bright (rich or poor, bumi or otherwise) in Malaysia by admitting ALL of them into our local unis. As a secondary issue, I’m sure many Bumi parents worry that our children who are of average intelligence won’t be able to obtain a university education. The solution to that should be more universities or polytechnics, not admission of the average at the expense of the bright.

I offer the view that the NEP is inviolable because the rich Bumiputras want it since they get undeserved benefits and the poor Bumis want it even more because it helps them to survive. It is high time the poor, silent majority demand reform of this policy that has been appropriated by the rich for their own ends.

Now that i’ve got that off my chest, everyone’s welcome to reply and share your thoughts.

Comment published by idealist on 11 October 2006.
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i have never seen the social contract? can i read it? where can i find it?

if it is a gentlemen’s agreement between a few old “communal leaders” and no one can show me the legal document - the contract itself, and the signers, then why should i be bound by it?

anyway wikipedia (whether you can believe it or not is another issue) says that among other things, a contract must have ingredients:
- Form - In some cases, certain formalities (that is, writing) must be observed.
- Capacity - The parties must be legally capable of entering into a contract.
- Consent - The agreement must have been entered into freely. Consent may be vitiated by duress or undue influence.
- Legality - The purpose of the agreement must not be illegal or contrary to public policy.

By any account, ingredients 1-3 are not there.
1. where is the document?
2. when the “agreement was made”, exist not have i
3. how can i agree to it when i don’t know what it is and i wasn’t there to agree to it.

so, as far as i am concerned, the govt and communal “leaders” should stop referring to it, until this “contract” is codified as one.

Comment published by 20 something on 11 October 2006.
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good thoughts, idealist.

Comment published by woodwaters on 11 October 2006.
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20 something:

The term ’social contract’ as employed in this context has, in fact, not very much to do with the sort of traditional paper-document form you seem to be citing. It alludes to Rousseau’s 1762 tract, “The Social Contract” (you might wikipedia that and find out more if you wish) — a societal agreement legitimated solely by its function of preserving the ‘general interest’. In colonial Malaya the ‘general interest’ was, I suppose, independece; the “contract” was simply the so-called historic bargain between what would become the Alliance party in the period after Independence. It was the mediation between UMNO’s desire for political primacy and the Chinese/Indian desire for citizenship (which, I might add, was at the time much more than Chinese immigrants in other Southeast Asian countries could have hoped for). It was, in short, a compromise, and at the time it was only ever intended to accommodate the very disparate needs of a freshly independent country consisting of at least three very disparate communities.

Where the problem lies is when this “contract”, after May ‘69, became elevated to something like prescription, or dogma. the NEP as it’s applied today would be a good example; that is to say, a policy that has ceased to seek equality of opportunity and demands equality of result, which is by no means the same thing. It is this problem (I hope) that Tan Sri Navaratnam intends to tackle.

Comment published by rAchel on 11 October 2006.
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I know of Rousseau’s social contract.

1. Just because Rousseau wrote it, that doesn’t validate the idea. “It” isn’t automatically always valid when you label it “social contract”, until it can be explained why a “social contract” should be entered i.e. state of law vs state of nature.

2. The contract is implicit, but it has to be codified in one form or another. Each time I hear the phrase “social contract”, the words “submission” comes to my mind. Am I having the wrong fear because the SC implies something else?

3. Going back to the WP article, read the section “criticism”.

Coincidentally, my phrase of the week is “manufactured consent”.

Comment published by 20 something on 11 October 2006.
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Oh dear. If you read a bit more into the history of MCA and UMNO’s heated negotiations, you might be less inclined to call it “submission”.

I brought in Rousseau as a clarification that the social contract need not be written down in the way you’re suggesting. The issue is really quite simple: Malaysia’s social contract is a historic settlement of intercommunal relations; a sort of general agreement to not kill each other over our racial differences in order that we might coexist. In your earlier comment you said, “how can i agree to it when i don’t know what it is and i wasn’t there to agree to it” — a common argument against social contract theory, and perfectly valid. And the common response might be that by accepting coexistence with other races in Malaysia, and not e.g. heading out tomorrow with a parang and slaughtering every non-[insert-your-race] in sight, you’ve already signed the contract. By calling yourself a Malaysian, by accepting your jus soli citizenship, you’ve already signed the contract. Tell me — does this state of nature today really need codification?

Again, as I said, what’s problematic is the specific terms of the social contract. The (codified!) terms of the initial contract, the historical exchange, was: special privileges for the Malays, citizenship for the other races. This sentence — seems short, doesn’t it? — spans about fifteen years of bargaining, anguish, compromise. But at root, what the contract aimed to do was find a way for the Malays, who since Parameswara onwards had no homeland but Malaysia, to coexist with the immigrant races, who had other homelands and indeed remained loyal to these other homelands until well into the 20th century. In this light, citizenship — and indeed citizenship without demanding significant amounts of ethnic and religious assimilation, as in Thailand — was an enormous compromise. Because of this incredible contract, every other plan from then on (and the NEP is one of them) has coexistence not just as an aim, but as a *premise*. It’s what modern Malaysia’s founded upon.

You might proceed now to dutifully argue all four of the excellent criticisms of social contract theory you read in wikipedia, but since we’re waiting for five more installments of the Tan Sri’s essay, you might want to save your breath :~) At any rate, my point still stands: it isn’t the theory or the premises that are on the stand here — it’s implementation. And I think that if you think about it for a while, you’ll probably agree that given the choice between tearing up the “social contract” altogether — which would in Malaysia be tantamount to tearing up the whole notion of intercommunal coexistence — or accepting its terms and working within them, it’s got to be the latter.

Comment published by rAchel on 12 October 2006.
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i agree with rAchel’s argument, 20 something. You need not dispute the necessity of a social contract. Every country has one, just the terms differ. In homogenous societies like Japan, their system has less to do with inter-racial harmony but its still about how to live in harmony with your fellow Japanese in a civillized way with basic rights for all.

You’re better off pondering what you can do to change the terms of this contract. Thats the beauty of a social contract. Even after you’ve “submitted” by default, you can always change the terms of it afterwards later in life.
The only contract of its kind in the world!

Comment published by idealist on 12 October 2006.
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How is it that after almost 50 years of independence, the NEP still exists along racial lines? Why is it that aid and funds be allocated according to one’s skin colour?

This situation today is what I call institutionalised racism and I have long held that as long as these ‘official’ racial differences be removed, true national unity regardless of race will not exist in coming generations. But I digress.

I believe Marx got it right when he wrote to the effect that ‘one will not give out his possessions lightly without a fight’. If that is the case, then much reform, debate, protests and maybe even demonstrations will have to come about before Malays finally relinquish those ’special privileges’. But will the non-Bumi community ever rise to that challenge? Further, (and here I push the limits) what ‘69 brought about in the NEP, will it take another incident like that to take it away?

Seems to me like it just might.

Comment published by jonathan lim on 12 October 2006.
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Correction: … I have long held that as long as these ‘official’ racial differences NOT be removed …

Comment published by jonathan lim on 12 October 2006.
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Oh yes, many thanks to woodwaters. If possible do leave me with your thoughts on the issue too. Praise i’ll shamelessly accept but criticism will help me learn.

Comment published by idealist on 12 October 2006.
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i agree with you on most points, rachel. the “social contract” if it is as what you have described puts us in a better position than the “state of nature”, then it is good.

but this “social contract” of Malaysia, that is constantly chanted, is a one-off thing. It was for the people of Malaya of Merdeka day (and Sabah/Sarawak/Singapore in 1963) to accept or not.

and after that, we are exempt from it, because if it means citizenship, language, special position of natives etc. then it is indeed already codified by the Malaysian constitution.

but the social contract of 1957 does not bind me. the malaysian constitution overwrites it. as i was never presented with the choice to accept it, it does not bind me. but the malaysian constitution does, because it automatically applies to me as one of those things of “citizenship”. and there is an escape clause for this in the constitution, which is for me to change nationality.

it is like the declaration of independence. you only do it once. you remember it every year or every day, but the significance of it is that once it has been declared, another set of rules apply. the “social contract” is just process to take us from one set of laws (colonial) to another (independence). it was an “interim” solution.

what i fear is that the media and barisan nasional is using this nebulous idea of Social Contract to scare the bejesus out of us. Everytime something is questioned, they invoke “remember May 13″ or “social contract”. it has become a dirty word.

so yes, i believe that this “social contract” we all talk about sooo much has to be deconstructed and reexamined. i don’t think every country has one. unless you redefine it to mean “societal expectations” or “for the good of the country” or “for king and country” or “liberte, egalite, faternite” and the likes and whatever - but that doesn’t mean anything. it’s just like saying every country has a flag. so what?

maybe if at all, i would call the process of democratically electing governments as what makes a social contract. the responsibility of the people to pay taxes and serve the (god forbid) draft in return of the state in providing services etc. an agreement between the people and the state. this, unlike Malaysia’s “social contract”, is something that is a (possibly) everlasting agreement, that is renewable, has a clearly defined process and outcomes and is enforcable.

so with regards to this whole argument of what ought to be in Malaysia’s social contract, issues of race, religion and language ought to have long been settled, enshrined in the constitution and put into effect by the government and accepted by the people.

the more we constantly debate about race, religion and language and synonimizing it with the “social contract”, the more it will actually become the Social Contract of 21st Century Malaysia. by talking like this, we are using the language of the oppressors.

we let the oppressors abuse this language and this term to force us into submission.

with regards to implementation, that’s why i am suggesting that we go back to the “truer” meaning of social contract. rights and responsibilities of the people and government: what can we do to get the govt to honour and enforce the Constitution? as you said, it is the implementation that is in the dock.

and this doesn’t mean tearing up the “1957 social contract”. because as i have said, i have never seen it whatmore signed it. i don’t need to be reminded of it.

Comment published by 20 something on 12 October 2006.
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I see where you’re going with this 20 something. All we need now is for you to formulate an action plan, give us some rhetoric and suggest to us how we can get the govt to honour and enforce our Constitution, as you say. Do that and your argument would have come full circle.
Might i suggest the preferred method of bloggers and politicians at http://www.thecicak.com/?p=141 scroll to the bottom of the article for the political weapon of choice.

Comment published by idealist on 13 October 2006.
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idealist, I don’t think you do.

just because i don’t see things the way you or others do, or share the same beliefs, you don’t have to condescendingly suggest that i adopt a certain plan of action to validate my ideas in my own struggle to make malaysia better.

Comment published by 20 something on 14 October 2006.
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