A rare glimpse into NEP’s origins

PKR president Anwar Ibrahim is a brave man. On July 12, he said that the New Economic Policy (NEP) must go, adding that it was not sustainable in the long run.

“After 60 years of independence, we recognise clearly the provisions of the constitution, of Malay privileges, Islam as the religion of the federation, the status of the national language and the sovereignty of the (Malay) rulers. But we know that the country must progress as a big family.”

The prime minister-in-waiting added that if affirmative action is still needed, then it must be needs-based, not race-based.

While many Malaysians, including some Malays with a long-term view, will cheer the sentiment, those who continue to push for the Malay agenda, especially those who think that the Bumiputeras should be given help indefinitely because this is “our land”, will be upset, even angry. It will frighten many Malay politicians, including some in Anwar’s party.

But the feeling that the NEP has outlived its purpose has been increasingly vocalised in recent years, and not just by the non-Malays. However, most of them stop short of calling for it to be scrapped, preferring instead the safer word “review”.

In fact, former prime minister Najib Razak’s New Economic Model sought to restructure the affirmative action policy to make it more needs-based but nothing concrete came of it.

And Dr Mahathir Mohamad recently articulated the need for a new “shared prosperity” economic model.

NEP was intended to be in place only until 1990 but has continued in one guise or another till today and no Malay leader has had the guts to drop it.

It had two prongs: eradicate poverty irrespective of race, and restructure society by eliminating the identification of race with economic function.

NEP’s overarching aim was achieving national unity. On paper it sounds good, but in implementation it created a few very wealthy Malays and led to corruption and cronyism. And instead of fostering unity, it has driven Malaysians further apart.

NEP, formulated in the aftermath of the May 13, 1969 tragedy that saw more than 140 Malaysians killed, was driven by Malay economic nationalism. It was also fuelled by fear that the Malays would lose their power to the Chinese unless something drastic was done.

Then-prime minister Abdul Razak Hussein, who took control of the National Operations Council, set about to repair the rupture. One of the main tools was NEP.

He instructed top officials of the Economic Planning Unit, the Treasury, Bank Negara, the statistics department and the newly established Department of National Unity (DNU) to crunch the data and work out the details.

A core group, called the inter-agency economic planning group, was established for this purpose. The discussions in the core group were led by EPU’s Thong Yaw Hong.

Members included Cosmos Robless and Sulaiman Abdullah of EPU, chief statistician Ramesh Chander, Treasury deputy secretary-general Malek Merican, head of the economic division at the Treasury Ramon Navaratnam, Bank Negara representative Lin See Yan, economist Rais Saniman, and Just Faaland of the Harvard University Advisory Group which was then attached to EPU.

The policies came from Razak and his people, especially Ghazali Shafie who was then special functions minister and head of DNU.

Just like the present, there were two groups in Umno then: one wanted to be inclusive and go slowly but surely with the Malay agenda. Another group wanted to push everything fast to ensure Malays were dominant.

Among those considered ultras then was a young doctor by the name of Mahathir Mohamad.

But the whole NEP affair was hush-hush in the beginning. In fact, I had heard that even then-finance minister Tan Siew Sin was not aware that a group of civil servants was working on such a plan.

This was confirmed to me by Navaratnam.

“The NEP discussions started soon after the May 13 riots. I was away doing my masters in Harvard at that time and therefore did not go through the trauma that others involved in the NEP process did. The relatives or friends of some of them were affected by the riots.

“When I returned, the riots were over and I went back to the economic division of the Treasury. I was the Treasury representative in the inter-agency group. We did the calculations and projections but the policy guidelines came from Razak, Ghazali and others. Ghazali was hawkish about the policy.”

Navaratnam said officials from various ministries and agencies were often called to give their input at the core group meetings which were held at least once a week.

However, Navaratnam felt something was not right in the direction the discussions were heading. He felt the proposals were not fully taking into account the multiracial composition of the nation

“I was uneasy as I felt they were overdoing it. I developed asthma because of the pressure. There was so much information and no one I could talk to, and no direction as to what I should do.

“So I approached my boss, finance minister Tan Siew Sin. I told him what was going on, hoping to get his support for a more balanced and equitable approach to the planning and implementation.

“The minister was not aware that NEP was being formulated, and he phoned Tun Razak in front of me to ask what was going on and to say that as finance minister he should know and that he should be kept informed.

“Razak told him that this was only at a technical level and that he would tell him everything later. Siew Sin told me to keep him informed and I did. I think he was able to be a countervailing force and steer it well in the Cabinet. As a result, the mood at our discussions somewhat improved and the outcomes became more balanced. It was then that phrases such as eradication of poverty ‘regardless of race’ came in.”

Navaratnam, who retired from the government service as transport ministry secretary-general and who is now with think tank Asian Strategy and Leadership Institute (Asli) is not against helping the Malays. He is clear about the fact that Razak’s intention was noble and NEP’s goals, as finally formulated, were good.

“However, over the years, the implementation was distorted and abused. They started reserving contracts, licences, permits etc for the Malays, but which Malays? There were limited contracts, limited permits. That is where cronyism and corruption came in.”

He said politicians and implementers began playing the race card and things got worse.

“The implementers concentrated too much on the second prong of NEP which aimed at removing the identity of race with occupation. For many reasons, it was more attractive to many planners and implementers and they gave equity ownership higher priority than raising the incomes of the lower 40% income group.

“The very poor Malays did not benefit as much as they should. For example, scholarships went to the children of civil servants and those in the corporate sector. The spirit of the original NEP faded. If it had been needs-based, more poor Malays would have benefitted.

“Also, the policy would have received more non-Malay support if they had faithfully carried out the plan of eradicating poverty regardless of race as stated in NEP. We can see what happened as a result.

“One example is where very poor non-Malay students have been deprived of government scholarships, sometimes in sharp contrast to Malay students who did not score as well. Resentment has built up and instead of promoting unity, it has caused greater polarisation.”

That’s true. The improper implementation of NEP has been one major reason for the widening chasm between Malaysians.

Politicians who get upset with any call to do away with NEP or its clones should understand that while it has created a few wealthy Malays and a Malay middle class, the Malay poor remain largely untouched by it. They should also realise that it has done much damage to Malaysian unity.

It is certainly time for a new formula where all Malaysian citizens who need help get help. Since the Malays are in the majority and since there are more Malay poor than non-Malay poor, the really poor Malays stand to benefit from such a policy – provided it is not abused like the NEP and is properly implemented.

A Kathirasen is executive editor at FMT.

The views expressed are those of the author and do not necessarily reflect those of FMT.