The NEP: The Good and the Bad – Revisited 

The real concern about the NEP today is that many Malaysians use the NEP as a simple justification for various issues, and because of that we have lost self-confidence. It is not uncommon, for example, to hear parents say that their children are not doing well because of the NEP; this is especially true among non-beneficiaries of it. At the same time, many Bumiputeras believe falsely that without the NEP they cannot stand on their own, and in this way they too have lost self-confidence.
Anas Zubedy 

Note: This article is from chapter 6 of the book –  The Middle Path: An Alternative To The Partisan Madness
What is the NEP?
In a simple definition, the New Economic Policy is Malaysia’s socioeconomic affirmative action plan. It wasimplemented in 1971 in the aftermath of the 1969 racial riots, and the period set for the implementation of NEP was 1971-1990.
The overriding objective of the NEP was stated as national Unity. The goal of the NEP was two pronged – one, eradicate poverty; and two, restructure society to eliminate the identification of race with economic function through rapid expansion of the economy over time. However, it was clearly stated that this restructuring of the racial composition of employment and ownership of wealth was to be done withoutdenying opportunities to others. The strategy was to accelerate economic growth, but at the same time, redirect the benefits more to the disadvantaged.
What is the background of the NEP?
The NEP has historical basis. Even from the colonial days before Merdeka, the Malays had been given certain privileges by the British, especially quotas for public scholarship and civil service employment.
The period of British rule left behind some remnant effects on our society and economy. The economic system and the geographical location of where we lived and worked were divided along racial lines. The Malays were largely concentrated in the traditional agricultural sector where per capita income was the lowest and poverty was the highest. The Chinese were concentrated in mining, manufacturing and construction where per capita income was recorded as much higher. The Indians were largely labourers in estates and mining.
The NEP was announced in June 1970 in the aftermath of the racial riots in 1969. Whatever is said about the immediate causes of the riots, the root cause for the unrest was socioeconomical imbalance. It was clear that the problem of poverty and the economic differences along racial lines were detrimental to social stability and national Unity and had to be addressed immediately. The NEP was formulated as aconcerted effort to reduce poverty and restructure the economy.
What was the poverty level and distribution of economic wealth at that point?
At that point of time in 1970, the recorded number of
households living in poverty was 49.3%. The top 5% richest households were obtaining 30% of the total income. Of those living below the poverty line, 64.8% were from the Bumiputera population, 39.2% of the Indians and 26.0% of the Chinese.
In terms of wealth distribution, it is recorded that the Bumiputera had 2.4% of equity capital, Indians held 1.1%, the Chinese accounted for 27.2%, those categorised as Others had 6.0% and foreigners held 63.3%.
What was the target of the NEP?
The target of the NEP was to reduce overall poverty to 16.7% by 1990. In terms of restructuring the economy, the target was to increase Bumiputera share of corporate capital from 2.4% to 30%, the share of the Chinese, Indians and others to increase from 34.3% to 40%, while that of foreigners would be reduced from 63.3% to 30% — a 30-40-30 ratio of distribution
among Bumiputera, other Malaysians and foreigners.
Why was the NEP so important?
Affirmative action plans like the NEP are important because the disadvantaged in society must be helped. When one segment of the society is disadvantaged, to have an equal playing field in our economic system will not be fair. To use a simple analogy, it is like playing golf – a beginner must be given a handicap or he/she will stand no chance – it will be an unfair game skewed towards the experienced player. Socio-economically, nobody should be left behind. This is imperative because history has shown that once there is a segment of society left behind economically, there are greater chances of social unrest.
It is important for every society to have affirmative action plans, but it must be planned very carefully. Ours was called the New Economic Policy (1971-1990). The NEP was successful in many ways.
What were the good things that came from the NEP?
There have been many. I will outline seven here:
1) The NEP managed to reduce poverty.
According to official data, percentage of households living below poverty line across all ethnic groups has been reduced from 49.3% in 1970 to 15% in 1990, and in 2009 overall poverty had been reduced to 3.8%.
2) The NEP managed to restructure the economy.
Post-NEP, the wealth ownership of the Bumiputera had increased from 2.4% to 19.3%, the share of the Chinese, Indians and other Malaysians was 46.8%, surpassing the target; while the share of foreign ownership was reduced to 33.9%. By 2008, Bumiputera share had increased slightly to 21.9%, non-Bumiputera share was reduced to 36.7% and the share of foreigners, 41.4%. While recorded numbers vary from one report to another, it generally shows that the NEP has achieved a much more equitable and sustainable distribution compared to the 2.4 – 34.3 – 63.3% ratio pre-NEP.
At the same time, after the NEP in 1990, the number of Bumiputera employed in the industrial sector like mining, manufacturing, construction and utilities also had arose significantly. Bumiputera representation also increased in professional and technical categories and at the administrative and managerial levels.