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The Economist: Why dropping race-based policies good for Malaysia

 | May 19, 2017

The Economist notes, in an editorial, that the pro-Bumiputera affirmative action policy, created to alleviate racial tensions, has actually entrenched it.

MalaysianKUALA LUMPUR: While Malaysia’s affirmative action policy of helping the Bumiputeras has had some benefits, it has also caused much damage, says an editorial in The Economist.

The most negative result is that the policy, which was intended to quell ethnic tensions following the May 13, 1969, racial riots, has actually entrenched them.

Also, the policy has created a culture of entitlement and dependency among the Malays and caused non-Malays to abandon national schools in favour of vernacular schools. It has also added to the brain drain, says The Economist.

It says, since 1971, the government has been giving preferential treatment in everything from education to investing to Bumiputeras who form about two-thirds of the population but who are poorer than their ethnic-Chinese and Indian compatriots.

On the face of things, it says, this system of affirmative action has been a success as the gap in income between Malays, the biggest Bumiputera group, and Chinese- and Indian-Malaysians has narrowed dramatically.

Also, it notes, there has been no repeat of the bloody race riots of 1969, which had prompted the then government to adopt this affirmative action policy. The economy, too, has grown healthily.

It is this that has made some others, such as South African politicians, cite it as a model, says the editorial, adding that more recently, Indonesian activists have been talking about instituting something similar there.

“Malaysia, meanwhile, keeps renewing the policy, which was originally supposed to end in 1991.”

Just last month, it says, Prime Minister Najib Razak launched “the latest iteration: the catchily named Bumiputera Economic Transformation Roadmap (BETR) 2.0”, which, among other things, will steer a greater share of government contracts to Bumiputera businesses.

“Yet the results of Malaysia’s affirmative-action schemes are not quite what they seem. Malays in neighbouring Singapore, which abjures racial preferences, have seen their incomes grow just as fast as those of Malays in Malaysia.”

However, it is quick to add, this is largely because the Singaporean economy has grown faster than Malaysia’s, “which may in turn be a product of its more efficient and less meddling bureaucracy”. Singapore, too, has been free from race riots since 1969.

“If the benefits of cosseting Bumiputeras are not as clear as they first appear, the costs, alas, are all too obvious. As schools, universities and the bureaucracy have become less meritocratic, Chinese and Indians have abandoned them, studying in private institutions and working in the private sector instead. Many have left the country altogether, in a brain drain that saps economic growth.

“Steering so many benefits to Malays – developers are even obliged to give them discounts on new houses – has created a culture of entitlement and dependency. Malays have stopped thinking of affirmative action as a temporary device to diminish inequality. As descendants of Malaysia’s first settlers, they now consider it a right.

“The result is that a system intended to quell ethnic tensions has entrenched them.”

The Economist says many poorer Malays vote reflexively for Umno fearing that another party might take away their privileges.

“With these votes in the bag, Umno’s leaders can get away with jaw-dropping abuses, such as the continuing scandal at 1MDB, a development agency that mislaid several billion dollars, much of which ended up in officials’ pockets, according to American investigators. Minorities, in turn, overwhelmingly support parties that advocate less discrimination against them.”

Saying the ambition to improve the lot of Malaysia’s neediest citizens is a worthy one, The Economist opines that defining them by race is a mistake.

“It allows a disproportionate amount of the benefits of affirmative action to accrue to well-off Malays, who can afford to buy the shares set aside for them at IPOs, for example, or to bid for the government contracts Mr Najib is reserving for them.

“It would be much more efficient, and less poisonous to race relations, to provide benefits based on income. Most recipients would still be Malays. And defusing the issue should pave the way for more nuanced and constructive politics. Perhaps that is why Umno has resisted the idea for so long,” adds the editorial.



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