New Economic Policy of Malaysia

This is summary of a journal from GSTF International Journal on Media & Communications by Khairiah Salwa Mokhtar and its group for the topic of the new economic policy in Malaysia. This journal is written to observe the Malaysia economic policy efficiency and its advantage and drawback of its implementation. It was based from two perspectives that are economic and political effect. All information was collected from vast amount of references from multiple sources. The journal is the product of the analysis of that many references to show the reader the significances of the new economic policy in economic and political sides.

The peace and harmony in Malaysia for their multi-racial society has been the reason for the Chinese and Indian immigrant to come to Malaysia before the Malaysia independence in 1957. This immigrant comes to Malaysia to find wealth and status as they see the opportunity from the peace in Malaysia. The economic structure at that time then divided into three parts where the first part is business activities, agriculture activities and estate activities. The Chinese immigrants favor the business activities and Indian immigrant will involve in estate activities and the rest are done by the indigenous peoples. After the Malaysia independence, the Chinese who has gain nationality held the most wealth than indigenous races which than create a tension between this ethnic. This resulting a racial riot in Mei 1969 which later known as “Tragedi 13 Mei”. This riot is the starting for the development of the New Economic Policy as the solution to stop another riot to occur in the future. The New economic Policy then implemented in 1970 which has two main objectives that are eradicating poverty in the country and reconstruct the Malaysia economic structure.

The New Economic Policy was initiated by the Malaysia’s second Prime Minister, Tun Abdul Razak and then continued by the next prime minister for 20 years. The first objective of this New Economic Policy is achieved by providing many job opportunities and upgrading all public facility such as schools. The second objectives are divided to four sub-objectives which are employment pattern, ownership in corporate sector, the creation of indigenous commercial and industrial community and the establishment of growth centers in the rural areas. The second objective is to reveal other job opportunity other than agriculture activities to indigenous peoples. This ensures the involvement of multiple races to multiple job opportunities. Besides that, this New Economic Policy also provided an education budget for indigenous people to increase their interests in the industries and business areas. For example, the New Economic Policy reserved 30% share in the modern economy sector to indigenous peoples and various quota systems were introduced to help this peoples.

The effects of the implementation of this New Economic Policy involve many aspects such as politic an economy. One of the impact is the New Economic Policy is use a tool to attract votes from peoples. Besides that, the New Economic Policy acts as a medium to politician to have involvement in development projects. This will effects the country or states development according to the politician ambitions and can make a worse turn if it for the politician selfish ambitions. The government also plan to hand over the shares in enterprises created by them to capable Malays, the elites and educated ones to utilized 30% share provided by the New Economic Policy. As we can see, the New Economic Policy can turn to favors the elites rather than all the citizens as everything involve the political power and influence. Money politic which politician use as a method to buy votes is the main cause that government money not channels to the people who should get it. The politician who becomes indebted to their sponsors or supporters will give more benefits to them. At the same time, the elites who have connection to the politician can acquire business contracts easily. This shows that the elites have more benefits than normal population. Although this the bad effect of money politics but it still a good side. The elites and politician either they are Chinese, Malay, Indian or other races will need to cooperate together to acquire benefits for each other. This good side successfully decreases the tension between races in Malaysia in economic field. Other contribution of this New Economic Policy is Malaysia’s privatization program. This program is to reduce the size of public sector and directly reducing the administrative burden beside promote private sector. This program is based on the privatization policy created by Margaret Thatcher, United Kingdom to solve the global economic recession in the 1980. Although this program has successfully made Malaysia go through the global economic regression but it also have been abused by some people. The businessman who has connection with politician can get the business contract without any competitions. This also causes political power to be centralized in the hand of certain political party who win during the country elections. This privatization program turns up that it has good and bad sides. The good sides are the government generates RM 1.18 billion and government debt transferred to the private sector plus Malaysia save more than RM 8.2 billion expends on infrastructural development. Next is the emergence of Malay Middle Class in Malaysia hierarchy system. This middle class mostly has been exposed to tertiary education which makes them more open minded and not chain to ethic oriented. The birth of this middle class causes the introduction of ethnic quota system in 1979 at public higher education institutions. The increased of Bumiputra enrollment to public universities by 65.3% in 1988 compared in 1970 show how much the higher education has been taken priority. Besides that, the increased of these educated resources is then supported by the government by forcing the private sector employers to employ these peoples. As a result, more and more job opportunity was opened to this people making the economic grow higher. This Malay middle class also the reason the Malaysia political economy undergoes much reconstruction. This Malay middle class has the knowledge and exposure to the political and economic areas making them the best observer for Malaysia democracy.

This journal conclude that Malaysia New Economic Policy has successfully achieved its objectives and improving Malaysia economic structure which then decrease the poverty rate in Malaysia during its implementation. This also includes the emergence of new middle class in social hierarchy who then help reorganize the political structure that favors more to the people than the elites.

The book by Just Faaland and friends explains that the problems which the reason New Economic Policy developed are unbalance in economy between the ethnic, Malay poverty rates that too high and problems in the perspective. The first problem revolve around the modern sector where too many wealth collected compared to traditional sector which most Malay race in it. Statistic shows that Malay race is the most poor compared to other races based on data from 1967 in 5 different sectors that are modern rural sector, traditional rural sector, modern city sector, traditional city sector and government. Besides that, the ownership, management and technical staff in manufacturing industries were mostly owned by Chinese rather than Malay races. Next is the Malay Poverty rate at that time because of imbalance in incomes, employment and property ownership. The main reason for this to happens because Malay involve in most unproductive sector in economy as they mostly involve in agriculture or traditional sector making the distribution of area that contain high poverty rate at rural area. There also a group that really poor and do not receive any initiative from traditional economic policy. Their sales revenue is control by the third person making the price become uncertain for every time they sold their products. This people always the last get the aid from the government because their residence is too far or no proper road to their home. Unable to get electricity, clean water supply and clinic making them to be expose to anemia and other nutrition problems. Other than these problems, this people feel shy to tell their problem to proper agencies as they lack of knowledge as most of them cannot be able read or write. This book also explains that every policies, programs and projects in New Economic Policy must generates enough job opportunities to reduce the unemployment level, increase income and productivity involves for low productivity jobs at rural and city area by increasing access to expertise, lands, modal and other helps that reduce unemployment level, increase the chances for people who involve in agriculture sector to be involve in more productive sectors, reduce the unfair income distribution between the races, modernized the rural lifestyle and improve the poor people life by providing electricity, clean water supply, transportation and clinic, encourage the commercial community and industry among the Malay and other indigenous races to make this people to have at least holds 30% of economy holding at the future.

The mid-term reviews for Rancangan Malaysia Ke-empat (1981-1985), show the analysis and solution that government does to fight global economy recession and high inflation rate. In this year, this prolonged recession had affected the investment in private sectors and the foreign trades making the Malaysia economic growth unstable. The government also has to face the lack of budgets and resources and the increase in country debts. To solve these problems, many new policies and strategies has been created likes “Dasar pandang Ke Timur”, “Dasar Pensyarikatan Malaysia”, “Dasar Penswastaan”, “Strategi Perindustrian Memandang Ke Luar” and “Penstrukturan Semula Pertanian”. All this policies and strategies have strengthened the economy and make Malaysia to be able to compete with other countries in international markets. The poverty eradication plan has been put to pause because of this economy recession and low commodity prices. This incident has causes an increase in poverty rate from 29.0% to 30.3% from 1980 to 1983. The mid-term reviews for Rancangan Malaysia Kelima (1986-1990) is the last time for the revaluation of the New Economic Policy as the 20 years span has come near. From this reviews, the New Economic Policy has not meet the expected achievement in all fields that has been promise by the government during 1970 when the New Economy Policy was launched. The government reasons that they need to be flexible to the impact brought by the disturbance and difficulty from around the world and responds with the most effectives steps or plans either in terms of fiscal or monetary to boost the current economy condition cause by the global economy recession. The reconstruction was not really a success nears 1990 as it needs new approaches and strategies towards the involvement from the indigenous races in all economy activities. With the inequalities between the states, the growth for every state can be increase through a better collaboration between the rural and the city area.

The evaluation of the New Economy Policy concludes that it is a success in many aspects and roughly achieved the hoped objectives. There are too many things to be done before the ultimate objective can be realized. The main element to achieve the balance racial economic is to restructure