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1Malaysia, ethnicity and the economy

HOW ethnic interests are addressed in the nation’s economic and social development will be one of the major determinants of the success or failure of 1Malaysia.

It was with the advent of British colonial rule and the mass influx of Chinese and Indian migrant labour that the question of ethnicity in its present form emerged as a formidable challenge. Because colonial capitalism had become so dominant, and had, in the process, enhanced the power of both the British and their Chinese compradors, that the British introduced Malay reserves, and set aside business licenses and scholarships for the community. This was done at the urging of the Malay elite, and as a sort of sop to a people who had been marginalised in the land which carried their name and embodied their identity.

The special position at the time of Merdeka protected the poor Malay Malaysians (© pic courtesy of Farish Noor)

This was the beginning of the special position of the Malays and the other indigenous communities which is now entrenched in the Malaysian constitution. For the Malays, special position at the time of Merdeka in 1957 was the armour that protected an abysmally poor people after their rulers had conferred citizenship, on extraordinarily generous terms, upon more than a million recently domiciled Chinese and Indians. A market economy in which the Chinese were ubiquitous added significance to that armour. Just as democratic competition for votes made it inevitable that popular perceptions of who was economically strong and who was economically vulnerable would shape politics and power.

Considering all these factors, it is not surprising that ethnicity has become the DNA of the Malaysian economy and society. What has been this DNA’s impact? What are the positive and negative consequences of the emphasis upon ethnicity in the economy for Malaysian society as a whole which may provide pointers for the 1Malaysia mission?

NEP’s success

The determined drive to uplift Malay Malaysians, especially after the formulation and implementation of the New Economic Policy (NEP), has resulted in the community’s massive economic and social transformation within the short span of a single generation. This transformation has few parallels in contemporary history.

Not only has Malay Malaysian poverty been reduced to 5.1% (those living below the poverty line) today compared to 70% in 1957, but Malays have also become a significant component (40%) of the middle class. They are represented substantially in all the leading professions and are a visible presence in the upper echelons of commerce and industry.

This transformation has benefitted the nation in at least three inter-related ways. One, it has made the middle-class multi-ethnic, and consequently, has provided a secure anchor for the nation. A preponderantly non-Malay Malaysian middle-class, as was the case in the sixties and early seventies, would not have ensured that stability.

Two, it has reduced ethnic disparities, and accompanying perceptions of wealth and deprivation, which explains to an extent the relative inter-ethnic peace that we have enjoyed in the last four decades. It is one of the reasons why the 1998 financial crisis did not give rise to a communal conflagration.

Three, if there was no transformation, it is quite conceivable that the practice of democracy would have been under tremendous strain. This would have been for the simple reason that when an indigenous majority feels severely disadvantaged under a one-person-one-vote system, it would have no compunctions about jettisoning the system.


Nonetheless, the ethnic approach to the economy has its downside as well. One, it has constricted educational and economic opportunities for important sections of the non-Malay Malaysian community. In many instances, it has also constrained their social mobility.

Two, in the last two decades, a segment of the urban Malay Malaysian community has begun to realise that politically well-connected elements especially in the middle and upper strata have benefitted much more from contracts, licenses, shares and directorships disbursed in the name of helping the community. In the meantime, less-connected Malay Malaysians continue to struggle to eke out a living. Affirmative action programs in a number of other countries also suffer from this malady.

Three, in spite of the ethnic peace it has brought about, the ethnic approach has undoubtedly increased ethnic polarisation at various levels of society.

This is why in our quest for 1Malaysia, there is a critical need to ameliorate the adverse impact of the ethnic approach. Among the measures that could be considered are the following:

The equilibrium established in the constitution between “special position” and “the legitimate interests of other communities” should be faithfully observed in the promulgation of policy and its implementation.  What this means is that justice should be done to each and every ethnic group.

The concept behind the NEP’s first prong, “the eradication of poverty irrespective of ethnicity”, should be expanded to embrace the needy and the disadvantaged, whatever their cultural or religious background. In other words, need — not ethnicity — should be the guiding principle in providing assistance in areas such as education and housing.

The NEP’s second prong, “reduction in the identification of economic function with ethnicity”, should apply to both the private and public sectors, and should be implemented with due regard to ability and excellence.

There should be a concerted effort to curb corruption, abuse of power and greed at all levels of society.

Media practitioners, politicians, bureaucrats, business people, and indeed influential members of society should be encouraged to view issues of ethnicity in relation to the economy from a more holistic perspective that considers others’ interests and feelings. An all encompassing understanding of justice that goes beyond ethnic boundaries is imperative if one is to achieve the goal of 1Malaysia.

Elements from all five proposals are already part of Prime Minister Datuk Seri Najib Razak’s agenda. The challenge before us is to make de-ethnicising the economy and enhancing justice for all, the agenda of each and every Malaysian.

Dr Chandra Muzaffar
Chairperson, Board of Trustees of 1Malaysia
Professor of Global Studies, Universiti Sains Malaysia
17 December 2009

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2 Responses to “1Malaysia, ethnicity and the economy”

  1. Bewildered... says:

    NEP has also left a legacy of corrupt cronyism that has not only been institutionalised but legitimised by the ruling government. [How] to laud its success solely on the merits of a larger Malay [Malaysian] middle class with poor economic skills to compete effectively in an international arena without the patronage of the government to “save the day”? Just look at the number of bailouts the taxpayer has had to bear from failed businesses gone wrong.

    A needs-based approach would have been more effective, which would allow focused development on specific socio-economic groups. This would have allowed for a more uniform integration of the various ethnic groups and build a stronger foundation for the nation as a whole. Now we have a fractured community with disparate interest groups along racial, religious and economic lines. A needs- and location-based approach would have created a larger middle-class of Malay [Malaysians] without the feudalistic underpinnings and a stronger, more nationalistic Malaysia. A Malaysia that would have been focused on nation building versus carving up of economic gains. A Malaysia where you wouldn’t need a Malay to get a job from the government and an Indian/Chinese to do the actual work.

  2. oster says:

    As with all pronouncements that the pronouncer feels is bold in Malaysia, this one manages to be excruciatingly vague to the point of irrelevance.

    Saying this or that must be implemented in some manner is bound to produce a statement that is agreeable yet devoid of any real substance.

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