| NEP(New Economic Policy) – What is it? |
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| Written by zen | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Saturday, 31 May 2008 11:29 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The New Economic Policy (NEP), which in Malay is Dasar Ekonomi Baru is a set of policies which are widely regarded as both ambitious and controversial. The policies, aimed at restructuring the socio-economic landscape. The program was launched in 1971 by the Malaysian Government which was then led by Tun Abdul Razak and was in operation until 1990 of which it was then replaced by the National Development Policy. As the NEP is often regarded as a controversial program, its result had successfully reduced the inequality between the Malay majority and other races but some has claimed that the NEP have somewhat reduced the status of the non-malays to second class citizens having strengthen the Ketuanan Melayu. This is often met with much criticism especially when seen as part of the Malay Agenda where the Malays are granted special rights while the non-malays were granted citizenship. The NEP, is to target a 30% share for the Bumiputra, but has yet to achieve that target when it ended in 1990. Having done so, in 2005, some politicians voiced their concern to restore the NEP under the New National Agenda. How it started. Before independence, the British gave certain privileges to the Malays over the non-malays. This would come in forms of employment in the civil departments and public scholarships. When independence was achieved 1957, the Federation of Malaya's constitution had a provision that provided the Malays with special rights. This was contained in Article 153. In the Reid Commission who drafted the constitution it wrote "in due course the present preferences should be reduced and should ultimately cease." In 1963, with the merging of Singapore, Sabah and Sarawak, the constitution retained Article 153, but was altered to re-define the Bumiputra word which included the various indigenous tribes in East Malaysia. However, the dispute over the special rights would eventually see Singapore separating from the Federation 2 years later. According to the Reid Commission, Article 153 was intended to solve the imbalance in terms of economic equity between the Chinese and the Malays. However even after independence, there was no increase in the Bumiputra share of the economy even until 1970 when the bumiputras were recorded to hold 2.4% of the economy. The Chinese or the foreign people held the rest and this hostility sort of increased until eventually sparked off the 1969 May 13 riots. The May 13 riots were contributed largely due to the general elections. After the riots, a state of national emergency was declared and Tun Abdul Razak subsequently formed the National Operations Council. Aiming with a goal to "eventually eradicat[ing] poverty...irrespective of race" the NEP was implemented. This would be the NOC's first actions. The NEP would reduce the share of the economy held by the non-malays which would go t the Malays who at that time only had 1.5% of the economy. Tun Abdul Razak became the Prime Minister when Parliament was re-established following the emergency state in 1971 where he would officially announce the NEP and the Sedition Act which pretty much restricted the discussion of some repealing articles of the Constitution (which included the 153). The Sedition Act continued to be in effect way up to present time. What did the NEP want to achieve? Its main goal was to eradicate poverty and restructure economy as well as to eliminate the identification of ethnicity with economic function. The first target is first to balance the ratio of the economic ownership. From 2.4:33:63 (Bumiputra, other Malaysians, foreigners) to 30:40:30. This means that to achieve the 30% ownership, there would be a need to significantly increase the ownership of Bumiputra enterprises. Under the Second Malaysian Plan, the ‘expanding pie theory' was more or less applied. This would mean that while the Bumiputra shares increase, the non-bumiputra shares would not decrease. This would be done so somewhere in 1975 when the government provided incentives and new policies to further expand large-scale manufacturing industries and energy-intensive industries. There were various requirements in the NEP which seek to achieve the 30% bumiputra equity target. One of the mostly heard off would be the 30% share set aside in Initial Public Offerings allocated to Bumiputra investors. The investors are chosen usually by the company themselves or in some cases the Ministry of International Trade and Industry would recommend some state owned trust agencies. As the shares are Initial offerings, the prices are very much lower than the market rate when it goes public. This system has been widely talked about ever since then especially in issue like if any of the 30% shareholders decide to divest their shares, the public company would need to issue new shares to continuously balance the 30% proportion. Some statistics. In the span of 27 years, the Bumiputra's wealth increased from 4% (1970) to 20% (1997). The country's wealth grew from RM1142 per capita GNP to RM12102 in the same years. Absolute poverty dropped from 50% to 6.8%. The participation of bumiputras in the private sectors too increased significantly. In the years of 1970-1990 there were an increase of 7-14 Bumiputra accountants while engineers increased from 7 to 35%, doctors from 4 to 28% and architects from 4 to 24%. From the share market, bumiputra share ownership rose from 28.6% in 1990 and 36.7% six years later. The NEP officially ended in 1990 although there were a lot of remnants still remains. It was to be replaced with the National Development Plan (NDP) which would run from 1990 to 2000 which would subsequently be replaced with the National Vision Plan (NVP). This can be seen in around public policies and some practices. A local media reported in 2007 that "the government believes the aim of having 30 per cent Bumiputera equity has yet to be achieved". It was also reported that in 2006, the NEP might be reinstated and re-activated under the Ninth Malaysian Plan, which was due, to a large extend from Umno. The NEP has often been criticized and attacked as many believe that it provides a form of cushion that resulted in a more laid-back environment with the Bumiputras. As there are certain policies in the NEP which provide the advantage like company shares, property and ownership to the Bumiputras, if taken advantage seemed to be pretty much easy. Some critics have debated that there should be instead a 30% opportunity of business ownership or property purchase, the 30% should be a target where Bumiputras be trained and certified to run companies. This way it will be more effective in the balance playing field. But the former Prime Minister Tunku Abdul Rahman sort of rejected the 30% target totally. He said that "[a]n attempt was made to fill the target without thought for the ability and the capability of attaining it. ... Some became rich overnight while others became despicable Ali Babas and the country suffered economic set-backs". Another criticism that that NEP received was not being able to deal with the wealth distribution and economic inequality issues. The NEP's relevance has been in question as it no longer helps the poor but was more or less functioning as a system of handouts for the Bumiputras. As much as it sought to bring up the percentage of ownership for the Bumiputras, it did not have a proper mechanism within the NEP which equally divide the wealth in the 30%. Criticisms in the Education sector In the education sector, the NEP received one of the most critical remarks. Up until 2002, there were quotas for the admission of Bumiputras into the public universities. As the calculation method of the quota was done based on the figures in 1970, it became irrelevant in the recent years. Therefore the quotas were reduced until in 2003 when it was fully removed. The removal of the quotas though did not produce any significant results as prior to 2003 the matriculation programs were already in effect. Matriculation programs, which are typically 1 year course that are an option if one decide to skip the Sijil Tinggi Pelajaran Malaysia (STPM) which is often considered harder and more intensive. Matriculation programs comes with a 10% for non-bumiputra graduates who often are less than interested to apply for the course. The matriculation courses have in its own nature come under debate for many years. Prior to the programs, bumiputra students who studied at the public boarding schools would go on to do matriculation courses while non-bumiputra students who go to the public high schools would opt for the STPM. Furthermore, boarding schools were sort of admitted by only bumiputra students and non-bumiputra students would find it difficult to accommodate themselves in the schools. There has been a wide regard for the fact that the NEP has largely been the reason of brain drain and to some marginalization and racial polarization.
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