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Malaysian Prime Minister Najib Tun Razak apparently has decided that taking the wraps off his long-awaited New Economic Model, as he calls it, is politically too dangerous for now. A reported March introduction has now been pushed back to June — and he may not even introduce it himself.

Najib appears to be caught in a trap of his own, with a widening gap between what he would like to do as an economist and what a major chunk of his United Malays National Organization constituency wants. What they want is not to forward but to repeal the limited reforms he has already put in place, and they are increasingly angry about it. That is playing havoc with his so-called 1Malaysia campaign, designed to bring the country’s fractious ethnic groups together and rebuild the flailing national ruling coalition.

In order to modernize, Malaysia needs to do away with a wide variety of subsidies and perks to ethnic Malays that are enshrined in the New Economic Policy, an affirmative action plan for ethnic Malays put in place in 1971 in the wake of disastrous 1969 ethnic riots. The NEP supposedly ended in 1991 and a new National Development Policy was put in its place. It was largely the NEP under a different name. The NDP initials never took off. It is still called the NEP.

Among other things, the NEP was designed to give ethnic Malays 30 percent ownership of private companies, which led to what has been called an “Ali Baba” system, in which “Alis” — ethnic Malays, or bumiputeras — became the figurehead owners or chief executives of companies actually run and owned through by “Babas” — the nickname for Straits-born Chinese. The Ali Baba title, of course, brings to most people’s minds the title of the tale “Ali Baba and the 40 Thieves.”

Non-Malays are largely shut out of the university system and overseas scholarships. Malays are given ownership of government-linked public company shares and housing. As a result, the NEP is held responsible for creating a rentier system in which some — particularly top officials of UMNO — became rich overnight by skimming the share ownership while the average Malay in the village got very little. The education system has suffered because bumiputeras are largely passed through the system with very low standards.

The country has also been afflicted by both a problem with capital flight and a brain drain, with Najib acknowledging that anywhere from 300,000 to 500,000 professionals are working abroad, about 40 percent of them in Singapore, which actively recruits ethnic Chinese students in Malaysia.

Both Mahathir and Badawi talked incessantly about the need to create a high-growth economy built on technology and industrialization, Mahathir by establishing the so-called multimedia super corridor and the national car, the Proton, as well as a long series of other projects, many of which were largely unsuccessful. Badawi sought to attract investment in high-tech industries including pharmaceuticals and medical technology as well as bioscience. But many economists argue that without removing the impediments of the NEP, Najib will be as unsuccessful as his predecessors.

Najib first talked about a new economic plan a year ago, but its introduction was pushed back several times. Even as late as Feb. 8, he told reporters that his administration was open to suggestions for what would go into the policy.

Najib has repeatedly said the country is confronted by a new reality, given the stagnating economy, which shrank by 3.3 percent in 2009 and faces relatively anemic 3.7 percent growth in 2010 and 5.0 percent in 2011. Last year, he removed a requirement mandating ethnic Malay participation in 27 economic sub-sectors as well as removing a requirement that 30 percent of shares in IPOs go to ethnic Malays.

That has played a major role in stoking ethnic Malay anger, although some observers say the leaders of the Malay Consultative Council are actually UMNO wheelhorses who fear the loss of their perks instead of the wider community.

One of the leaders of the Malay rights groups is an NGO called Perkasa, which is headed by an independent member of parliament named Ibrahim Ali, a long time Mahathir ally and former UMNO stalwart. It has been holding strident rallies across the country, demanding close adherence to the Malays-first policy. Some pessimists say Perkasa members are trying to provoke the Chinese into a confrontation with the Malays that will result in the imposition of the country’s draconian Internal Security Act.

But a political analyst said “Perkasa’s appeal is not broadly based. They may shout the loudest but it will take more than that to replace the UMNO.”

 

Asia Sentinel