THE Bumiputera congress that was held last weekend saw the Pakatan Harapan government affirming its support for the continuation of the affirmative action policy that was first put together under the New Economic Policy (NEP). The NEP is at its core about giving preferential treatment to Bumiputeras. This is most apparent in the business and education sectors.
It is common knowledge that the NEP was formulated to advance the socioeconomic status of Bumiputeras, and narrow the income gap between the Bumiputera and Chinese communities. Nevertheless, in spite of decades of state-led economic development initiatives, Bumiputeras remain among the poorest groups in the country.
The mean household income as depicted by a 2016 survey, for example, had shown that the Chinese household received the highest average income per month at around RM8,750 followed by the Indian household at RM7,150, and the Bumiputera household income came in third at RM4,951.
While the NEP can be lauded for eradicating hardcore poverty among the Bumiputeras and creating a sizeable Malay-middle class, its attempt to create a Bumiputera commercial and industrial community (BCIC) has not been successful.
The inability to create a vibrant BCIC by the government has led to numerous self-introspection by leaders and intellectuals in the community, and many prognoses had been offered as to why Bumiputeras cannot succeed in the commercial and industrial arena.
Prime Minister Tun Dr Mahathir Mohamad, for example, had published numerous books on the problems faced by the Malays, and in The Malay Dilemma, he had come to the conclusion the Malays needed government assistance in order to compete with other races. On the other hand, the detractors of the pro-Bumiputera policy had argued for a “need-based” policy whereby assistance is given to the needy irrespective of ethnicity.
While the proponents and detractors of the pro-Bumiputera policy have valid arguments, one can still ask whether or not the government should continue to devote considerable resources to create the BCIC. Under the previous government, state intervention on behalf of the Malays was deemed necessary because it was widely believed that the Malays could not compete successfully with established Chinese and foreign businesses.
As early as the First Malaysia Plan (1966–1970), the state had set aside funds for development projects specifically for the Malays. The agencies that benefited from this were Majlis Amanah Rakyat (Mara) and Bank Bumiputera, as they were originally established to foster Malay entrepreneurship through the provision of commercial loans and projects.
Nevertheless, Malay participation in commercial activities in the 1960s were limited to small rural industries such as batik. In an attempt by the emerging Bumiputera businessmen to pressure the state, two Bumiputera economic congresses were held in 1965 and 1968, where demands were made to increase the role of the state in strengthening Malay capital through Mara and Bank Bumiputera.
The state, however, was only able to give preferential treatment to Malay businesses in mining, timber and transportation because it could regulate these sectors. All state governments were told to set up their own State Economic Development Corporations (SEDCs) that became involved in myriad business activities in collaboration with either foreign or local Chinese businessmen. It was envisioned that these state corporations would go into lucrative businesses such as timber, mining and rubber plantations.
Of all the state enterprises, Perbadanan Nasional Bhd (Pernas), which was set up in late 1969, became a major player in such sectors as insurance, construction, engineering, trading, real estate, mining, and securities. Another state enterprise, Permodalan Nasional Bhd (PNB), was established in 1978 to encourage direct participation by individual Malays. By the early 1980s, PNB had taken over Pernas’ leading role in the economy, and by the end of 1985, it had emerged as Malaysia’s largest conglomerate.
Despite PNB’s success, many enterprises that were set up by the SEDCs suffered major losses. Altogether, despite the preference given to Malay businesses, the policies of the 1960s were deemed unsuccessful because under the leadership of the first premier Tunku Abdul Rahman, the government remained committed to its laissez-faire policy. As such, economic policies under Tunku only served to widen disparities, which infuriated the emerging Malay businessmen. This anger manifested itself within Umno and was expressed in communalist terms.
With the advent of the NEP in 1971, the state essentially abandoned its laissez-faire policy in favour of a more interventionist stance. The same goal of creating a Malay commercial and industrial community was pursued but with greater rigour.
One such move was to achieve a 30 per cent equity in businesses for Malays by 1990. The government itself spearheaded this initiative by setting up implementing agencies to provide financial and technical assistance. In contrast to the pre-NEP era, the implementation of the NEP saw the government playing an active role in the economy.
More than 94 agencies and 1,137 government-funded companies were set up during the NEP era to intensify Bumiputera participation. These initiatives included a significant strategy to increase Malay and other indigenous ownership of capital assets, more specifically, equity in enterprises of the modern sectors of the economy to be held in trust by state bodies.
Despite the considerable amount of resources devoted towards this end, a vibrant and independent BCIC is illusory. One of the unintended outcomes of the Bumiputera policy is the creation of stable oligopoly of Bumiputera entrepreneurs linked to powerful politicians.
The current administration needs to rethink how the empowerment of Bumiputera entrepreneurs can be brought about without jeopardising their competitiveness.
This calls for a complete overhaul of the Bumiputera policy. Encouraging competition is a good place to start.
The writer is director of Centre for Policy Research and International Studies at Universiti Sains Malaysia