The grossly misunderstood New Economic Policy

Raja Petra Kamarudin

They say there is no future in the past. Tongue-in-cheek, this would be true. But then those who forget history are doomed to repeat its mistakes. Take Hitler as an example. If he had studied Napoleon, he would never have engaged Russia on the one front while he still had the Allied Forces on the other. That was the beginning of the end for Nazi Germany. Take Saddam as another example. If he had studied how the Allied Forces tricked Hitler into believing when and where the invasion of Normandy was going to take place, then Iraq would not have been as easily fooled as Hitler was.

In case you do not know what I am talking about, CNN showed extensive footage of the Allied Forces training on how to launch a sea attack on Kuwait (I am referring to the first invasion of Iraq launched by Bush Senior). The whole of Iraq watched the CNN news and the Iraqi forces assemble on the beach waiting for the US-led forces to arrive. Instead, the Allied Forces parachuted inland, behind the Iraqi army camping on Kuwait’s beaches. Saddam’s army was cut in half and that was the end of the Iraqi occupation of Kuwait.


Malaysian kids today do not understand history. Their history of Malaysia starts from the time Dr Mahathir Mohamad became the Prime Minister of this country. That is why many of the younger generation are ignorant about why Malaysia, today, is what it is. They shout rhetoric, make demands and complain without understanding the underlying factors or the history behind everything. What they say is idealism at best and unrealistic at worst.

Malays certainly know about the New Economic Policy (NEP). But how many know the history behind it? And how many realise that the NEP is dead, a lost cause?

Let me take you back 100 years, to 1905, so that you can better understand what I am driving at.

The British colonial government of Malaya realised that one day they would have to grant this country independence. It would be a matter of time. So they embarked on a plan to educate the children of the elite and exactly 100 years ago, on 2 January 1905, the Malay College Kuala Kangsar (MCKK) was born; then called the Malay Residential School.

MCKK was initiated with visionary foresight, one that could produce “…a vigorous and intelligent race of young men who will be in touch with modern progress but not out of touch with old traditions…” said R.J. Wilkinson, then Inspector of Schools of the Federated Malay States in 1903, whose efforts paved the College’s birth.

MCKK was the first residential school in Malaya and its syllabus would contain the essence of modern education with knowledge of Islam and Malay culture. No doubt the British hidden agenda was to give the Malays a ‘western’ education. But Islamic values and Malay culture were not excluded in this education.

My father, Raja Kamarudin bin Raja Sir Tun Uda, was amongst the first group of Malayans who touched down on British shores soon after the end of the Second World War. Amongst them were many illustrious sons of the Malays who went on to become leaders in government and industry; Prime Ministers, Deputy Prime Ministers, Chief Ministers and Cabinet Ministers included.

Soon after Merdeka (independence), the government organised the First Bumiputra Economic Congress to identify the problems faced by the Malays and to come out with solutions on how to improve their lot. My father was a participant in that Congress. Amongst some of the many resolutions that emerged from the Congress was to set up financial and educational institutions to assist those Malays who may want to venture into business or receive a better education. This saw the birth of MIDF (which my father was a director of), Bank Pembangunan, Bank Bumiputra, and so on; plus of course MARA which then was called RIDA.

But these financial institutions were not exclusive to the Malays. The Chinese, in fact, benefited more from them primarily because the Chinese businesses were larger so they qualified for tens or hundreds of millions in loans while the Malays only qualified for small loans of RM25,000 or RM50,000.

This is evident if you were to read the Annual Reports of Bank Bumiputra in the days when Kamarul Ariffin, Nawawi Mat Awin or Tan Sri Basir headed the bank. You will see that the main focus of Bank Bumiputra as stated in the Annual Reports was corporate loans, which means the Chinese tycoons rather than the small-time Malay petty traders were the darlings of the bank. No doubt thousands of Malays managed to get loans from the bank compared to a handful of Chinese. But this is a classic case of 10% of the people getting 90% of the benefit and 90% of them getting the balance 10%

The founding fathers certainly had the welfare of the downtrodden Malays in mind when they proposed the setting up of these financial institutions such as Bank Bumiputra. But along the way profit became the bank’s prime motivating factor and the interests of the Malays soon became secondary. The initial motives may have been noble, but if those who come along later deviate from the original objective, even the best of intentions will not bear the desired results.

The Chinese saw this problem. So, in the 1960s, people like Siew Nim Chee, the economic advisor to Lim Goh Thong of Genting Highlands fame, plus other Chinese corporate leaders, approached the MCA leader and Finance Minister then, Tun Tan Siew Sin, to propose that the Chinese come out with an economic plan to assist the Malays. They were not trying to be charitable. They were just worried that if the Malays remained backward and something was not done about it, the situation could explode. And, over the many years leading to Merdeka in 1957, there had been various incidences of racial skirmishes in some parts of the country.

But Siew Sin pooh-poohed the whole idea and refused to listen. The country would pay a heavy price for this later when race riots did erupt on 13 May 1969 just as the Chinese corporate bosses had feared. Of course there is another story behind the infamous May 13, but today we are not focusing on this issue.

In 1970, the country launched the NEP which the political leaders under Tun Razak’s NOC agreed would run for twenty years. In fact, the Chinese and Indians were even happier than the Malays that finally Malaysia was going to have a proper policy on how to assist the Malays. They knew that a bunch of discontented Malays would not auger well for the non-Malays.

The NEP was not just about company shares, import permits and quotas, as it is being made out to appear. It was also about bridging the gap between the haves and the have-nots, and in this case there are as many Chinese and Indian have-nots as there are Malays. Therefore, the NEP was for ALL races, not just the Malays. And, this, everyone just cannot seem to understand.

Some bright spark suggested that there should be a target as well. Let it run for 20 years by all means, but then set a target of 30% of the economic pie. The Malays must become beneficiaries of 30% of the country’s corporate wealth within 20 years.

But someone failed to realise that the economy does not stand still. If it did stand still while waiting for the Malays to catch up, well and fine. But as the Malays moved forward, so did the economy. And the economy grew faster than the Malays could catch up. Every time the Malays took one step forward, the economy took two steps. So the Malays appeared to move farther and farther behind though they were actually moving forward.

By the end of the NEP in 1990, the Malays achieved only 3% of the 30% target. The government of course, fearing that the Malays would rise in anger and another May 13 erupt, lied to the country and said that the Malays had achieved 20%. But that 20% included 17% that was owned by the trust agencies, Bank Bumiputera, MARA, Petronas, Pernas, SEDC, etc., which are not owned by the Malays but belongs to the nation. So in reality the Malays, as individuals, own only 3% of this nation’s wealth.

And, this, Tun Ghaffar Baba, the Deputy Prime Minister then, reluctantly admitted, but only after being whacked hard for lying.

But 3% of what? At the start of the NEP it was only 1%. By 1990 it was 3%, a three-fold increase. But it was 3% of a giant pie against only 1% of a miniscule one. Therefore it was not a three-fold increase but more like thirty-fold. This means the Malays DID achieve 30%, but 30% of the original pie of 1970 and not 30% of the pie that had grown by 1990.

And this is the danger when percentages instead of absolute figures are used.

Let me use this example to explain what I mean. If one Malay was unemployed last year and this year it is two, those who use percentages would report that the unemployment rate has increased by 100%. This certainly sounds alarming. But if the report says only two people, or one extra person, is unemployed, this would be very tolerable.

And the next point: who the hell set the target at 30% anyway? Why 30%? Why not 60% since Malays comprise 60% of this country’s population? Or maybe 15% instead! No one seems to know why. It is just that 30% sounded like a nice figure. So, today, the Malays are demanding the 30% that was promised them. And that fact that every day of their life since 1970 the Umno politicians keep repeating over and over again, “30%, 30%, 30%”, the Malays take this as something written in stone.

But it is not written in stone. It is not even law. It is merely an aspiration (hasrat). And aspirations could be met or they might not be met. It does not matter.

The fault lies with the politicians. They brainwashed the Malays into believing that 30% of this country’s wealth belongs to them. So now they want it. But the politicians used this 30% as a fear tactic, telling the Malays if they do not continue keeping Umno in power they will not get this 30%. Only Umno can guarantee the Malays this 30%.

Well, Umno is in power isn’t it? But the Malays have still not received their promised 30%. So now they are demanding it. But the economy is not growing as fast as in the 1970s and 1980s. The pie is not increasing in size. Where would this 30% come from? Well, then it would have to come from the Chinese. The government would have to rob Peter to pay Paul.

But the NEP has achieved many other things as well. Malays are more educated now than in the 50s and 60s. The gap between the haves and the have-nots has been reduced to some extent though there is still some ways to go. People forget that the NEP is not just about 30% and they overlook the fact that those other objectives in the NEP have fared better. And one thing never mentioned; the NEP is for all races and not only the Malays.

Today, the Malays should no longer talk about the ‘promised’ 30%, or even the NEP for that matter, which ended in 1990 anyway. It is impossible to keep chasing the 30% target. It is now 35 years since the NEP was launched and the 20% (or 3% if we take out the trust agencies’ share) has stagnated since the mid-1980s. That is 20 years of stagnation and if in 20 years we can’t move it then assume it can never be moved.

There is a bigger problem ahead of us which the Malays should focus on. And no NEP in the world can help the Malays ride out this impending problem. And this problem is Globalisation. It no longer matters whether the Malays have a NEP or not. Globalisation is more powerful and destructive. And Globalisation, just like the Tsunami that recently hit Asia, does not differentiate between Malays and non-Malays. It will just sweep everything aside and the NEP is so puny it too will be submerged together with the Malays.

The NEP is a political tool of Umno. It is meant as the stick and carrot. The stick to threaten the Malays they would see the end of it if Umno is no longer in power. And the carrot to reward those Malays and Umno people who support the ruling party.

The Malays are better off and would become a stronger and more successful race if we had no such policy. But, sad to say, the 35 years old NEP has domesticated the Malays so much that they no longer know how to eat unless the food is thrown to them.