The New Economic Policy After 50 Years By Ks Jomo

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 I was sent the following from Jomo's mailing list (thank you). As usual my comments are in blue.
    
The New Economic Policy after 50 Years  By KS Jomo
 
https://www.ksjomo.org/post/comment-on-social-justice-and-affirmative-action-in-malaysia-the-new-economic-policy-after-50-year
The 1971 NEP was widely accepted as needed for ‘national unity’ after May 1969. But that approach now blocks Tun Razak’s more progressive and inclusive 1971 approach ensuring social security for all.

Jan 12, 2023
   
Comment on “Social Justice and Affirmative Action in Malaysia: The New Economic Policy after 50 Years”. Kwame Sundaram Jomo, Asian Economic Policy Review, Volume 18, Issue 1, January 2023, pp 120-121. https://doi.org/10.1111/aepr.12411. First published: 26 September 2022.

Any meaningful assessment of Malaysia's New Economic Policy (NEP) (Lee, 2022) should be historical. One question which arises here is how one does historical political economy. After all, there are many different schools of political economy, even if few have addressed “affirmative action.”

A key question is how one treats normative issues that inevitably come up. How one understands notions such as “social justice” has long been contested. These are often understood and invoked very differently. And how is a term such as “affirmative action”, which arose in response to US civil rights struggles in the middle of the 20th century, to be understood in other contexts?

When first announced to the Malaysian nation in mid-1971, the NEP was presented as being needed for building “national unity” following the divisive events of May 1969. The NEP has often been presented officially and by others as responding to “race riots” following the young nation's third general elections in which the incumbent multi-ethnic Alliance coalition lost its electoral majority. This perspective implies inter-ethnic economic disparities were responsible for “May 1969”.


Anand's (1982) Theil decomposition suggests that less than a tenth of overall income inequality in 1970 (before the NEP) could not be explained by various non-ethnic factors such as education. (OSTB: Brother Jomo, I think we need simpler English here. So you are saying that "90% of income inequality in 1970 can be explained by ethnic factors" ??)
Anand concludes that, at most, only a corresponding share of income inequality can be attributed to ethnicity. (OSTB : The 90%?)
His analysis implies there is limited scope for reducing overall income inequality by reducing inter-ethnic disparities. The NEP's primarily ethnic focus for over half a century is hence unlikely to significantly lower economic inequality in Malaysia. Unsurprisingly, despite over half a century of the NEP, total income inequality remains high, even if underestimated.
Equating “social justice” with efforts to reduce inter-ethnic disparities is problematic. Supported by and responsive to the newly emerging Malay “middle class”, the new Malaysian regime defined “restructuring society” as one of the two NEP targets. This has been mainly understood as “positive discrimination”, or affirmative action, along ethnic lines, to eliminate the identification of “race” with “economic function”.

Defining social justice in terms of achieving affirmative action policy is problematic. Such a definition also effectively rejects other possible interpretations of “social justice”, for example, in terms of “abolishing class exploitation”, or achieving low income or wealth inequality, or reducing disparities among different regions.

Sabah and Sarawak state rights within the Malaysian federation did not preoccupy Prime Minister Razak during 1969–1971. However, this omission in the NEP's ostensible social justice agenda is probably not acceptable to East Malaysians who believe they have not gotten a fair deal from the demographic majority in Peninsular Malaysia. Others might insist that overcoming gender and other inequalities is fundamental to any social justice agenda.

How do we compare other affirmative action policies, such as contemporary Black Economic Empowerment (BEE) in South Africa? What about pro-Afrikaner apartheid policies which also claimed to catch up with the previously dominant “Anglo-white” minority? What are the implications of such policies when introduced and implemented by demographically and politically dominant cultural majorities, as in South Africa, Malaysia, and, arguably, Hindutva India?

And how do we analyze similar policies in different contexts? For example, BEE in South Africa is generally acknowledged as being inspired by Malaysia's NEP. Ironically, BEE has since been re-imported into Malaysia as “Bumiputera economic empowerment”, even using the same BEE acronym.

And how does a society decide on what is a legitimate and acceptable social justice agenda? Who decides and how? Invoking notions of “equality” and “fairness” hardly resolves the difficult issues to be resolved. Affirmative action seems to suggest the acceptability of otherwise unequal societies in which aggrieved groups are proportionately represented.

It also begs the question of affirmative action for other aggrieved groups which are minorities or not politically dominant. What does social justice in India imply, especially for its scheduled castes and tribes? Or for US ethnic minorities, including the descendants of Native Americans or African American slaves? And when does addressing a grievance support “social justice”? After all, apartheid was seen as a means for Afrikaner “ethno-populists” to achieve parity with Anglo-South Africans.

After eloquently exposing the policy cul de sac the NEP is in, it is curious that Lee still insists “Malaysia needs a systematic and comprehensive reset of the NEP's (restructuring) prong”. This precludes a broader, more progressive approach to accelerate development more equitably. After all, in 1971, Razak already envisaged a Malaysian nation with comprehensive and universal social security.

References

Anand S. (1982). Inequality and Poverty in Malaysia: Measurement and Decomposition. Oxford: Oxford University Press.

Lee H.A. (2023). Social justice and affirmative action in Malaysia: the new economic policy after 50 years. Asian Economic Policy Review, 18(1), 97– 119.

https://www.ksjomo.org/post/comment-on-social-justice-and-affirmative-action-in-malaysia-the-new-economic-policy-after-50-year
 
My Comments :
Unlike Jomo I am not a full blown economist ('full blown' implies 'fully developed'. Literally it means 'fully inflated') For my "liberal arts" degree in the US (management and engineering) I read some economics as well (including political economics). Enough to give me a grasp of what is going on. I have also read some since then.  
Hence I approach all my thoughts on the NEP based entirely on economic principles. ABSOLUTELY NO RACIAL IDEAS AT ALL. WHY? Because you cannot look for the recipe for Japanese sushi in Shakespeare's Romeo and Juliet. It is just not there. The two (economics and income disparity / wealth disparity) are completely unrelated. 

Yes income disparity and wealth disparity create economic issues aka "economic problems" in a society but the reasons and the causes for that disparity have nothing to do with economic principles. There are other non economic issues that cause those disparities.Please bear this in mind as I will dwell a bit more into this.


There is such a thing as affirmative action but the NEP has become nothing more than a political gimmick. And as I keep repeating many times you cannot find the "principles" of the NEP in any economics textbook. The fact that they decided to call it the new "economic" policy is proof enough they were mocking 'economic theory'. it was just a political gimmick. It should be called exactly what it is - a racial policy.

I have said many times before the income and wealth disparity is not an "economic problem". The disparities between the races are due almost entirely to cultural, traditional and religious factors. Social factors. 
You can still see it now, despite the passage of 52 years of the NEP.  After 52 years we see university graduates prefer to be motorbike riding delivery boys. They dont like the discipline of a 9-5 job. They want to work when they feel like it. 
And these are still considered the "aggrieved groups" - their grievance is they do not want to follow the norms that makes the rest of the world function. Yet they expect to enjoy similar or BETTER outcomes!!  You want to work 'ikut suka hati' and then you expect to be richer than your neighbour who slogs from morning until evening?

What is 'positive discrimination'? Positive discrimination in favour of bumiputras means negative discrimination against non Malays. Its as simple as that.
Positive discrimination simply means that the Indian student with all As is not going to get his medical seat at the government university. Or that Indian doctor in the government service is going to be denied leave to go for government funded further studies. 
My suggestion is (which I like to repeat for the umpteenth time and will keep repeating it - because that is what makes ideas stick : frequency and repetition) to marry affirmative action with meritocracy and the market economy.  There must be risk and reward. There must be carrots and sticks. 
YOU CANNOT ALLOW EQUAL REWARDS WITHOUT TAKING EQUAL RISK.

Do not obstruct the Malays / bumiputras from taking risk. They have to face the risks of the marketplace.  Without taking risks the economic disparities will only last forever.
In no time the Rohingyas can displace the Chinese fish sellers at the pasar borong. In no time the Bangladeshis can displace Chinese traders in Petaling Street. In no time the Pakistanis can dominate the computer shops at Low Yat. So what is wrong with the Malays?
And whatever you do -  do not obstruct the non Malays, non bumis  from doing whatever they want to do. Let that Indian student who is qualified enter the medical faculty. Let that Indian doctor pursue her post graduate studies. 
WHY? As I said my reasoning is purely economic. Which many people do not seem to understand.
There is a GREAT BIG HOLE in the New Economic Policy. What is the GREAT BIG HOLE in the New Economic Policy? Answer : It is funded by taxpayers money. 
To make the NEP happen the government must continue to collect taxes from the public.
Even the government's oil monopoly will not be able to provide enough money to fund the NEP policies anymore. When the NEP began in 1971 the population was around TEN MILLION people. Now 52 years later the population is 34 million people. The queue for free money, free handouts and free everything is MORE THAN THREE TIMES longer.

    The population of Malaysia in 2023 is 34,308,525, a 1.09% increase from 2022.
    The population of Malaysia in 2022 was 33,938,221, a 1.09% increase from 2021.
    The population of Malaysia in 2021 was 33,573,874, a 1.13% increase from 2020.
    The population of Malaysia in 2020 was 33,199,993, a 1.21% increase from 2019.


Plus there are other great shocks coming in the oil industry. Recall in 2014 oil prices crashed  - even down to US$0.00 per barrel. It will happen again. Israel is a gas exporter now. Egypt has discovered a huge gas field. So has Turkey. Morocco has discovered a ONE BILLION BARREL offshore oilfield. There is oil and gas popping up everywhere. 
So the government needs to collect taxes to keep funding the NEP policies. Those taxes will come from the private sector. 
In his last Budget,  Tengku Zafrul's slides showed that for 2023 both Bank Negara and Khazanah will be making ZERO contributions to the government (dividends?).
And very often the other GLCs need to be bailed out. They burn taxpayers funds. They do not contribute as much to the governments coffers.
Tabung Haji was bailed out. Felda was bailed out. That oil and gas giant was bailed out. 
Plantations? Plantation agriculture makes up LESS THAN 2% OF THE GDP OF MALAYSIA. 
All the Felda plantations, all the Sime Darby oil palms contribute less than 2% to the country's GDP.  
1.6 million Malays are employed in the Civil Service. Another 1.3 million are in the GLCs. The bulk of our 14 - 15 million workforce is employed in the private sector. This is mostly the non bumiputra private sector.

What does this mean? This means the government will depend more on the "real" private sector to continue paying taxes - which can be used by the government to fund all the NEP type policies. Free money, free this, free that.  
So if the NEP policies, positive discrimination policies etc obstruct the non Malays / non bumis from pursuing their economic opportunities to the maximum, it actually means the government will be collecting less and less taxes (vis a vis 10 million, 20 million, 34 million, 50 million population). 
Do not kill the goose that lays the golden eggs.



And finally to solve these problems of income and wealth disparity affecting the Malays we need to get the inputs from the social scientists, the anthropologists, the psychologists, the human behaviour experts. The real scientists. That is where the solutions lie.  The economists and accountants cannot help you. Certainly not the monkeys jumping around in Parliament.
The views expressed are those of the writer and do not necessarily reflect those of MMKtT.By Syed Akbar Ali 

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