November 16, 2015
Lessons from NEP Architect–James Puthucheary
by Adam Reza
Writing in 1960, a key architect of the New Economic Policy (NEP), the late James J. Puthucheary, author of Ownership and Control in the Malayan Economy, made an astute observation about the troubles brewing within the seemingly idyllic setting of rural Malaya.
Ethnic Malay paddy farmers had found themselves trapped in a vicious cycle of low productivity and mounting debt. Defaults were widespread and the ensuing transfer of land to the hands of mostly ethnic Chinese creditors prompted the government to intervene.
In a bid to prevent land from changing hands through debt to non-Malays, the government introduced the Malay Reservation Ordinance. Unfortunately, this did nothing to solve the key underlying problem of low productivity. The farmers continued to default and the only difference was that the beneficiaries of the land were a small group of Malay elites.
This chapter of our economic history illustrates the perils of viewing developmental problems from a racial lens. Affirmative action done right yields positive results as our Malaysian experience shows. Done wrong, it ends up benefiting an elite few without solving the root cause of the issue.
The lessons are clear, but as is so often the case, men and indeed politicians rarely draw the right lessons from the past.In the context of today, over 40 years since the inception of NEP, it is clear to see how little we have learned.
For a start, the rhetoric has not changed. The old narrative remains ubiquitous: Chinese interests continue to dominate the economy, justifying the continuation of far-reaching affirmative action policies. It is often highlighted that inter-ethnic income gaps still exist and that the Bumiputeras are ill-equipped to compete in today’s economy.
These are valid concerns that should be looked at, but the question remains, why after over 40 years since the NEP’s implementation are Bumiputeras still ill-equipped to compete?
Now, this is not to say that NEP has been a failure. A big part of NEP’s initial success was in creating a new middle class through accelerated involvement in the great leveler of society – education, thus creating a new middle class.
Indeed, access to quality education was critical in the realisation first prong of NEP, the eradication of poverty regardless of ethnicity.This is something that is lacking today. It is no secret that education standards have declined. Rankings in our institutions of higher education are slipping, academic freedom remains illusive, and 400,000 graduates find themselves without jobs.
Like Puthucheary’s rural Malaya, the problem today is low productivity and perhaps the issue here is not so much a lack of affirmative action but more a failure to provide quality education and hence a lack of upward mobility, a situation which affects all of us regardless of our ethnicities. More needs to be done in this respect and hopefully our education blueprints will be executed well.
Second, is there any justification for continuing affirmative policy measures in business particularly for SMEs? According to Development economist Tan Sri Kamal Salih, although noble in its intentions, it is on the execution side that we have found lacking and more often than not, the beneficiaries have not been the entrepreneurs.
A study by Dr. Terence Gomez of University of Malaya finds that programmes to nurture Bumiputera entrepreneurs were hardly successful as they were based on selective patronage, in turn sealing off non-Bumiputera owned companies access to domestic and foreign markets.
Again, we are caught in a situation where the industrious and innovative are left behind and the elite few and politically well-connected are rewarded. We need to be more transparent in this respect, ensuring that those with political interests do not exploit the system.
Perhaps we could take a leaf from our successes in the start-up industry, where more of those who are innovative and industrious have been allowed to succeed regardless of ethnicity or political connections.
Now, this is not to say that positive discrimination is completely uselesss. Where it may remain relevant is in the case of recent evidence of discrimination in hiring by the private sector in a study done by Dr. Lee Hwok Aun and Dr. Muhammad Khalid.
Alternatively, we might want to consider is what the Conservative government is doing in the United Kingdom today, with name-blind job applications.
Yet at the same time, if our priorities are truly about creating a more diversified workplace, we need to address issues such as under-representation of non-Malays in the public sector where for me the need for diversity is most acute.
I would like to think that increasingly we want policy to be shaped from a more inclusive multi-cultural perspective. Suggestions that non-Malays ostensibly shun the civil service due to low pay are a complete hogwash.
Take the significant number of non-Malays in the government-led Perdana Fellows programme recently or my fellow millenials who shun the more high paying jobs to participate in initiatives like Teach for Malaysia. Clearly there is more to Gen Y than dollars and cents.
Moving forward, our future developmental solutions must continue to have the Bumiputera agenda in mind but must also be more inclusive.For starters, we need to go back to the core of what Prime Minister Dato’ Seri Najib Razak proposed in 2010: an urgent revision of the NEP, towards a national development strategy that is more transparent, merit driven, and market friendly, and towards a new needs-based affirmative action.
That is the right way and we must not lose track of the end goal that affirmative action should be temporary in the first place.
As Tun Dr Ismail once said:
“The special privilege or position accorded to the Malays under the Constitution is mainly intended to enable them – to borrow an expression from the game of golf – ‘to have a handicap’, which would place them in a position for a fair competition with better players. Therefore like a golfer, it should not be the aim of the Malays to perpetuate this handicap but to strive to improve his game, and thereby reducing, and finally removing, their handicap completely.”
As an ethnic Malay myself who believes that we can be the community of aspiration and hope, I long for this day.