Ideas@TheCentre
Moving Malaysia on from affirmative action policies
Malaysia has the most extensive racial affirmative action regime of any country in Asia. Since 1971, laws regulating almost all aspects of economic, social and cultural life have been implemented to benefit the indigenous Malays or ‘Bumiputras,’ who currently comprise around 65% of the population. But for the first time in Malaysian history, the country has a leader in Prime Minister Najib Razak who is willing to criticise important aspects of these four-decade-old policies – and link them to many of the country’s structural problems.
The first problem created by extensive state-led interventionist policies is that they are invariably expensive. That the Malaysian government has been in deficit every year since 1971 (except for a brief period from 1993–98) is troubling. The numbers look even worse considering that around 40% of the government’s revenues come from the state-owned energy giant Petronas.
Second, all healthy economies are based on the emergence of a strong, independent entrepreneurial corporate class operating in a competitive and open environment. Although it is an overreach to characterise all Bumiputra entrepreneurs as ‘rent-seekers,’ there is no doubt that economic protection in the name of affirmative-action has led to unproductive and wasteful habits that thrive in a racially protected environment. Much of Najib’s tough-talk in his New Economic Model is to make Malaysia once again a preferred destination for foreign capital. Worryingly, even domestic entrepreneurs are voting with their capital: public investment exceeds private investment in the economy.
Third, just as companies seek to retain their best talent, Malaysia has a reputation for pushing away its best Chinese and Indian citizens. More than 250,000 people left Malaysia between March 2008 and August 2009 (not including students studying abroad). There are no figures on the racial mix of those leaving, but anecdotal evidence suggests that there is a high proportion of ethnic Chinese and Indians in this group. Even Najib has admitted that it is a priority to make the country more attractive to encourage the tens of thousands of skilled (non-Malay) diaspora to return.
So far, there is still little evidence of genuine reform. But at least an honest conversation about the costs of race-based affirmative action is finally beginning in Malaysia.
Dr John Lee is a Foreign Policy Research Fellow at The Centre for Independent Studies. His paper Malaysian Dilemma: The Enduring Cancer of Affirmative Action was released by the CIS this week. Click here to watch a YouTube video of John Lee discussing his report.
