The Dawn of a New Malaysian Malaysia?

Gerald Giam

In the wake of the political tsunami of the recent Malaysian elections which saw the opposition alliance breaking the ruling coalition’s two-thirds majority in Parliament, it has become apparent that the Opposition is serious about reforming the country’s race-based affirmative action policies.

The alliance of opposition parties, Parti Keadilan Rakyat (PKR), Democratic Action Party (DAP), Parti Islam SeMalaysia (PAS), and their de facto leader Anwar Ibrahim, have stated that they will dismantle the New Economic Policy (NEP) in the states they now control — Penang, Selangor, Perak, Kelantan and Kedah.

The New Economic Policy

The NEP, often referred to as the “Bumiputera policy”, is a race-based affirmative action policy introduced in 1971 to boost the economic standing of ethnic Malays. In Malaysia, Bumiputeras refer mainly to Malay/Muslims, and also the Orang Asli (Malaysia‘s aborigines) and tribal peoples in Sabah and Sarawak.

The NEP requires that publicly-listed companies must set aside 30 per cent of equity for Bumiputeras; discounts must be provided for car and real estate purchases; a set number of lots must be set aside for Bumiputeras in housing projects; companies submitting bids for government projects be Bumiputera-owned; and Approved Permits (APs) for importing automobiles must be preferentially given to Bumiputeras.

Proposed reforms to the NEP

Tan Sri Abdul Khalid Ibrahim (PKR), the new Menteri Besar (Chief Minister) of Selangor, once called the NEP “a creature that is going to destroy future generations of Malays”. He said the NEP has become a tool for securing income for those who do not work, but rely on their good connections with the government. He was probably referring to the frequent accusation that the NEP only benefits a small elite of wealthy Malays who are well-connected with the leaders in the United Malays National Organisation (UMNO), the main component party in the ruling Barisan Nasional (BN) coalition. This argument has been expounded upon by Datuk Seri Anwar Ibrahim in PKR’s Malaysian Economic Agenda and what he calls “NEPotism”.

One of Tan Sri Abdul Khalid’s first statements after being chosen to become Selangor’s Menteri Besar was to pledge to dismantle the NEP in his state. A similar pledge was made by Mr Lim Guan Eng (DAP), the new Chief Minister of Penang. Even the Islamic party, PAS, which controls Kelantan and Kedah, has endorsed the Opposition’s NEP reform plan, saying it fosters cronyism and corruption and has neglected impoverished Malays in rural areas.

The Penang State Government has decided that for a start, all state government procurement will be done using open tenders, with tender documents and award details uploaded to a web portal to ensure openness and transparency.

Unsurprisingly, the ruling party has reacted with fear tactics, trying to rouse primordial communal sentiments to disrupt the NEP reforms. Prime Minister Abdullah Ahmad Badawi warned the Penang Chief Minister, “Do not marginalise the Malays. I want to ask Lim Guan Eng what are his plans for the Malays in Penang.” He also warned of “dire consequences” if the reforms targeted Malay rights. A few days ago, several UMNO members led an illegal demonstration of over 1,000 people in Penang to protest against the Penang Chief Minister’s plans. The pro-government Malay daily Utusan Malaysia has also been publishing letters lashing out at Opposition plans to clamp down on political patronage.

Mr Lim’s reply was simply, “I said we will have an open-tender system. What’s the problem with that? Unless Abdullah doesn’t like open tenders but corruption, cronyism and inefficiency. I don’t understand what has it (abolishing the NEP) got to do with marginalising the Malay or the Indian community. I think he is not right, (he’s) going on the wrong facts and trying to provoke (racial) sentiment.”

The Opposition will find it an uphill battle to reform a system that has become so entrenched over the past 37 years. Chinese, Indians and other minorities have long complained about the NEP but have so far not been able to do much to change it. It was only when Malay opposition leaders like Datuk Seri Anwar and Tan Sri Abdul Khalid stepped forward to denounce it, did the movement manage to gain traction among the Malay majority, as reflected by the swing of so many Malay votes to the Opposition.

A new dawn for Malaysian society and economy

If the Opposition does manage to implement NEP reforms in a decisive, yet sensitive and equitable manner, it could usher in a new dawn for Malaysian society and its economy. It could even change the tone of relations with neighbouring Singapore.

It is fortunate that NEP reforms are being spearheaded in three of the most prosperous states in Malaysia — Selangor, Penang and Perak. The reforms could greatly boost investor confidence, as they will no longer need to be burdened by the 30 per cent “tax” on their businesses. This could lead to larger investments in these states and boost their economy. The fact that the BN government had earlier decided to suspend the NEP in Johor’s Iskandar Development Region (IDR) is proof that even the BN is persuaded that the discriminatory nature of the NEP dents investor confidence and hinders economic growth.

However, it is important for the Opposition to live up to its pledge to not just dismantle the NEP, but come up with alternative policies to uplift all poor Malaysians, especially low-income Malays. It would be tragic if poor Malays get persuaded by the BN’s rhetoric that dismantling the NEP will be detrimental to them. Malaysia‘s prosperity needs to be shared equitably. If the Opposition fails to do that, it could invite a sharp rise in racial tensions and potentially even racial unrest.

Relations with Singapore

One of the main reasons why Singapore got expelled from Malaysia in 1965 is because the UMNO leadership could not put up with a blunt-talking Lee Kuan Yew calling for a “Malaysian Malaysia” — that is, a Malaysia for all citizens, not just the Malays. The UMNO “ultras” (extremists) saw it as a direct challenge to their racialist belief in Ketuanan Melayu (Malay supremacy).

Relations with Singapore have taken that tone ever since. Every time a comparison is made between the economic development of Singapore and Malaysia, inevitably the conclusion among Singaporeans is that NEP has been the main reason for the disparity. UMNO leaders obviously bristle at such suggestions.

A new Malaysia could pave the way for better relations with Singapore. Economic co-operation with Singapore like in the IDR could be extended to other parts of Malaysia, particularly with economically prosperous states like Penang and Selangor.

Many Singapore leaders past and present, including opposition MP Chiam See Tong, have argued for an economic union with Malaysia. Indeed, the benefits of an economic hinterland were one of the main reasons why Lee Kuan Yew fought for merger with Malaya in 1963. With a more meritocratic system in place in Malaysia, an economic union of sorts could be on its way to becoming reality. This would be beneficial to both Singapore and Malaysia.


Despite the unexpectedly positive result for the Opposition in Malaysia‘s General Elections, it is important to put it in perspective that the BN still won a solid majority in Parliament and they still control the Federal Government and eight state governments. The road towards NEP reform will be long and difficult. I wish our neighbours the best in their quest for a more equitable and prosperous society.


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