Economist: NEP has outlived its relevance, Malaysia must end it to progress

Prof Woo Wing Thye delivers his public lecture on the Malaysian economy in Bangsar, September, 2015. — Picture by Yusof Mat Isa
Prof Woo Wing Thye delivers his public lecture on the Malaysian economy in Bangsar, September, 2015. — Picture by Yusof Mat Isa

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KUALA LUMPUR, Sept 13 — Malaysia was only meant to use the New Economic Policy (NEP) for two decades as an emergency measure and now has to shift to helping the poorest citizens regardless their ethnicity, economist Prof Datuk Dr Woo Wing Thye has said.

Woo said the government has to put an end to “divisive” race-based economic policies in order for Malaysia to progress economically.

“I think Malaysia should switch straight to an income-based social policy, basically you want to help the poorest group of people, so the emphasis now on the bottom 40 per cent, that should be the centre of the focus, not race; whoever is in the bottom 40 per cent, gets preferential treatment,” the Jeffrey Cheah Institute on Southeast Asia president told Malay Mail Online yesterday after delivering a public lecture here.

Woo likened the NEP, which was introduced in 1971, to an “emergency room procedure”, and that the quota system then was an effective way of producing the largest quantity in the shortest time.

He said that both the country’s late prime minister Tun Abdul Razak Hussein and deputy Tun Dr Ismail Abdul Rahman had viewed the NEP as dangerous if extended beyond a 20-year period ending in 1990.

“Do you know why? Because they recognised it is emergency room medicine, so it can be used in the short-run, but in the long run, it’ll divide the country,” the professor of economics at the US’ University of California, Davis said.

But Woo noted that the NEP had re-emerged in the New Economic Model (NEM) under the Najib administration, calling it “old wine in a new bottle” with no difference between the two policies.

Failure to introduce economic policies based on income level will weaken the country’s economy, Woo cautioned, citing brain drain and capital flight.

Earlier in his public lecture at the “Malaysiaku: Rice Festival” titled “Changing the course of the Malaysian economy and the ringgit”, Woo outlined five measures to end Malaysia’s stagnation in economic growth.

These measures are putting in need-based policies and merit-based practices to replace race-based policies, unleashing tertiary education, freeing the markets to improve national competitiveness and to upgrade administrative performance.

The NEP was originally planned to eradicate poverty among Malaysians and narrow the economic gap between the Malays and the ethnic Chinese, by redistributing wealth to promote a 30 per cent economic ownership by the Bumiputera.

Although technically expiring in 1990, many of the NEP’s race-based policies continue to be enforced and even expanded, resulting in simmering discontent among the non-Bumiputera communities, who complain that it deprives them of equal treatment and opportunities.

A year after coming into power in 2009, Prime Minister Datuk Seri Najib Razak launched the NEM on March 30, 2010, with an eye on doubling the nation’s per capita income by the year 2020 to an estimated US$15,000 (RM49,500).

The three underlying themes of the NEM were “high income, sustainability and inclusiveness”, as the prime minister stressed on the need to reduce fiscal disparity between the rich and poor without relying on affirmative action policies like those in the NEP.

But critics were quick to argue that Najib’s NEM was merely a watered-down version of the NEP.

On September 14, 2013, Najib announced the new Bumiputera Agenda that will offer the country’s largest community access to over RM30 billion in aid and contracts — an apparent continuation of the very system of NEP-like affirmative action that he had pledged to do away with under the NEM.

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