Ideas@TheCentre
Affirmative action policies in Malaysia prove costly
A battle is playing out in Malaysia that could well determine the future economic and ideological shape of the country with a population of around 27 million people.
On the one side is the Malaysian Prime Minister Najib Razak who is looking to revitalise the once vibrant and admired Malaysian economy. At the heart of Najib’s New Economic Model is reform of the affirmative action policies that have been in place since 1971 to benefit the Muslim-Malay (Bumiputra) population, who make up around 55% of Malaysians.
These policies include preferential treatment for Bumiputra-owned organisations when bidding for government contracts, access to cheaper housing loans for Malays, preferential treatment for places in universities and the public sector, as well as a mandatory rule that Malays own at least 30% of the equity in medium and large businesses.
The plan was to raise the wealth and prosperity of Bumiputras in the name of social harmony. It is estimated that Malays now effectively control about 20% of the economy, up from 2.4% in 1971.
But the affirmative action policies have predictably come at a cost. ‘Racial rent seeking’ and corruption is rife; an ‘entitlement culture’ amongst many Malays is growing; foreign and domestic (especially Chinese-Malaysian) investors are voting against the system with their capital; and many of the best educated and qualified Chinese- and Indian-Malaysians have migrated to countries such as Australia.
On the other side are a number of prominent individuals, political parties; and lobby groups seeking to enlarge Bumiputra control and influence for various reasons. These include the omnipresent former Prime Minister Mahathir Mohammad, a collection of somewhat more extreme Islamic political parties, and a rising number of Malay lobby groups such as Perkasa.
Malaysian optimists point out that the majority of Malaysians – including Bumiputras – agree that the affirmative action rules need to be changed. Pessimists counter that Najib has the difficult task of taking on many of the hardcore supporters of his own UMNO Party, who remain strongly opposed to any dismantling of the affirmative action system.
Malaysians will tell you that if leaders like Najib fail, then the country’s future is bleak. As a former Malaysian, I suspect they are correct.
Dr John Lee is a Research Fellow at CIS and a Visiting Fellow at the Hudson Institute in Washington, D.C.
