As the government slowly does away with the remnants of the New Economic Policy, it must be remembered that the policy has contributed immensely to the upgrading of the economic standing of the people, both Bumiputeras and non-Bumiputeras alike. So why question its wisdom?

THE NEW ECONOMIC POLICY (NEP) WAS implemented in 1971 as a direct response to the race riots that took place on May 13, 1969. When its 30-year implementation period came to an end in 2000, it was replaced by the National Development Policy and later the Vision Development Policy.

The latter, which, in theory, is still in force, carries on the key elements of the NEP, namely, the eradication of poverty irrespective of race and the 30% Bumiputera ownership of the corporate sector.

Over the years, even when the original policy was in force, the share ownership rules and regulations had been amended several times, mainly to encourage and expedite investment, both foreign and local.

In other words, the government has always been pragmatic in enforcing the policy. Thus, despite the protests and criticism from both at home and abroad, the policy has not hampered development.

So, when the government of Prime Minister Datuk Seri Mohd Najib Abdul Razak started to do away with the remnants of the policy on the pretext of liberalisation and meritocracy, questions have been raised about its necessity and wisdom.

The government argued that the abolishment of the NEP rules was necessary to attract foreign direct investment and comply with the timetable of the Asean Free Trade Area (Afta), but gave the undertaking that the interest of the Bumiputeras and the poor would be guaranteed.

The concern is not altogether misplaced. Despite failure to achieve its stated objectives fully, the NEP and its predecessors have succeeded in expanding and modernising the Malaysian economy.

The implementation of the NEP programmes and projects led to the rapid expansion of the economy. Gross Domestic Product grew from RM12 billion in 1970 to RM12o billion in 1995 and RM357.9 billion in 2007, making the Malaysian economy the 29th largest in the world.

Above all, it did not hinder the progress of the nonBumiputeras nor did it discourage foreign investments as some quarters feared.

Poverty, which stood at 64.8% in 1970, was reducedto just over 5% at the turn of the century. The United Nations Development Programme (UNDP) praised Malaysia for its success in poverty reduction.

Questions, however, remain as to the true situation because the income level set by the government to determine poverty is thought to be unrealistically low, especially now when prices of most goods and services have increased drastically.

The interracial gaps remain wide as the nonBumiputera income, especially that of the Chinese, have risen faster than that of the largely rural Bumiputeras.

However, as a direct consequence of the 1997/98 regional financial crisis, the per capita income declined and the gaps between the Bumiputeras and the non-Bumiputeras widened. To make matters worse, the intra-ethnic gap also widened.

Despite the healthy post-crisis growth, the Bumiputeras have been unable to catch up. Many fledgling Bumiputera companies have either been reacquired by the government or have fallen into the hands of non-Bumiputeras.

The Bumiputeras have also been unable to take full advantage of the better-paying jobs in the burgeoning services and information and communications technology (ICT) sector.

The 2004 report of the United Nations Human Development Programme (UNHDP) found that the top io % of Malaysians controlled 38.4% of economic income as opposed to only 1.7% held by the poorest io%.

It's a fact that the Chinese have benefited the most from the economic activities generated by the NEP. The Indians have not done too badly although a significant percentage have been left far behind.

The objective of social engineering and restructuring via wealth creation and distribution has not succeeded for the Bumiputeras but the nonBumiputeras have exceeded the targets set for them.

According to official figures, in 2006 the Bumiputeras controlled only 15.8% or RM88.4 billion of the shares of companies traded on Bursa Malaysia as opposed to 42.8% or RM251.1 billion by the non-Bumiputeras and 40% or RM234.7 billion held by foreigners.

The NEP envisaged that by 2000, Bumiputera individuals and trust agencies would control 30% of corporate wealth, the non-Bumiputeras 40% and foreigners 30%.

Had it not been for the Bumiputera trust agencies, the Bumiputera corporate holding would have been lower. The mistake was partly due to the Bumiputeras themselves. Many disposed off their shares for short-term capital gain although many went on to use the proceeds to set up their own businesses.

Even at this low level of achievement, the contribution of the NEP cannot be dismissed outright. When the policy commenced in 1971, the corporate wealth of the Bumiputeras was estimated at only 2%.

Thus, what is so wrong if the government chooses to continue to pursue the objectives of the policy?

Ironically, in recent years, a growing number of Malays, their political parties and associations are not only reluctant to defend the policy, but have also been unwilling to acknowledge that they have benefited from it.

Even if there are aspects of the policy that are objectionable or are no longer applicable, its overall objectives and philosophy are still valid. Poverty is rearing its ugly head once again and the income gap among the races has widened.

The recent liberalisation of the Bumiputera equity participation in initial public offerings (IPOs) by public-listed companies will reduce further Bumiputera ownership unless Bumiputera trust agencies like Permodalan Nasional Bhd (PNB) and official funds like the newly created Ekuiti Nasional Bhd (Ekuinas) participate aggressively in these new share issues.

In fact, with or without the liberalisation move, the trust agencies, official funds and the government-linked companies (GLCs) should aggressively increase their stakes in non-Bumiputera blue-chip companies, given their current attractive prices on the national bourse.

At this juncture and in line with the transparency mantra, it is useful to demand the government to publicly account for the billions that have been poured into the Khazanah Nasional Bhd-owned ValueCap.

The notion that the non-Bumiputeras rejected the Barisan Nasional (BN) in last year's general election because of the NEP is absurd.

The rejection by the Bumiputeras and nonBumiputeras alike of the BN had little or nothing to do with the NEP. The NEP was not an issue.

Had the NEP been an issue, they would have rejected the BN a long time ago. Instead, as recently as 2004, the non-Bumiputeras had stood solidly behind the BN.

If any, the NEP was just a ruse. They rejected the BN because of its poor image. The previous BN administration was seen as weak and reneged on its lofty pledges to promote openness, freedom,transparency and accountability.

Apart from registering their protest, the nonBumiputera voters are aware that by punishing the BN in last year's general election, they could make new demands in the run-up to the next one, which has to be held by 2013.

Here lies Umno's and BN's dilemma. In making concessions to the non-Bumiputeras, they know they have to be mindful not to offend the Bumiputera voters, in particular the Malays, and at the same time, make sure that the non-Bumiputera voters reciprocate.

It would be a disaster for Umno and the BN if the nonBumiputera voters grab the cake and eat it at the same time. The Malay voters would not take kindly to Umno and the BN rewarding the non-Bumiputeras who voted for the Opposition in the last general election. The results of by-elections held since then suggest that they continue to throw their lot behind the Opposition.

In recent years, the defence of the NEP has become more difficult when an increasing number of successful Bumiputeras are rejecting it.

Adding on to that is the fact that the same groups are blindly talking about the virtues of globalisation and meritocracy while at the same time demanding that they be protected from the global economic meltdown, which was the product of unbridled market freedom.

Those Bumiputeras who are agreeing blindly with the meritocracy mantra seem to have forgotten that many of them became successful because of race-biased residential schools, the Mara junior colleges, the government scholarships and education loans.

Where would most of them be without these special assistance and programmes?

1111970, only 6.8% of accountants, 4.3% of architects, 3.7% of doctors and 7.3% of engineers were Bumiputeras. But 40% of veterinarians were Bumiputeras because the Bumiputeras then, as they are now, were widely engaged in agriculture and livestock rearing.

By last year, the percentage of Bumiputera accountants had risen to 24.5%, architects 38.2%, doctors 52.9% and engineers 52.4%.

Could the Bumiputera professionals and businessmen be where they are today had they depended solely on the meager incomes of their fishermen and rice-grower parents?

While it may be true that they are successful and are no longer in need of economic crutches, there are many more Bumiputeras — the Malays, Ibans, Kadazans and the Orang Ash — who are still living in poverty and are in need of the NEP-type of assistance.

It must continue to be recognised that for every big house owned by a Bumiputera doctor or engineer, his non-Bumiputera compatriot owns several.

The Bumiputeras must not be too pleased with the assets of PNB, the Pilgrims Fund Board, the Armed Forces Fund Board and the Federal Land Development Authority.

Today, 52 years after independence and 38 years after the launching of the NEP, prime real estates like Petaling Street, the Midvalley City and Bukit Bintang are still monopolised by the Chinese with little or no Malay and Indian participation. Even the Petronasowned Kuala Lumpur City Centre (KLCC) is devoid of meaningful Bumiputera participation.

Granted that there are still non-Bumiputeras, especially the Tamil Indians, who are poor and in need of assistance, but the number is not as large as that of the Bumiputeras.

The massive public and private sector spending during the NEP period has catapulted the nonBumiputeras and some Bumiputeras to the level that they no longer need government assistance.

The number of non-Bumiputera students going abroad has always topped that of the Bumiputeras despite the latter enjoying government assistance. Now, nonBumiputeras are beginning to dominate even local public universities and form the majority in private colleges.

When the government gave scholarships to the Bumiputeras, it was accused of giving them crutches. But when the same scholarships were given to the nonBumiputeras, the government was praised for supposedly practising meritocracy.

When Bumiputeras are successful in business, they are branded cronies. But when Chinese and Indian businessmen are given billion-ringgit contracts, lucrative IPP licences and gaming franchises, it is because they are good.

Who owns the sugar monopoly, the gaming franchises, the exclusive rights to satellite TV broadcast, Independent Power Producer permits and the billion-ringgit contracts to build schools and modular hospitals for the government?

Who was given the franchise to partner Kuala Lumpur City Hall to develop state land?

And how many of us are aware that back in 1965, the late Tun Abdul Razak Hussein had an agonizing time debating whether to allow Malayan Banking to be mired in uncertainty and risk a run or to bail it out.

He bailed it out and thus the Chinese-owned bank became a government bank, which is today controlled by PNB. Today's young Malaysians might not have heard of the late Tan Sri Khoo Teck Puat who made it big in Singapore after the bailout of his bank by the Malaysian Government.

The same applies to the university intake. When the Bumiputeras were assured entry quotas, they were accused of enjoying favouritism. But when the government allowed private universities and collegesto be set up and dominated by non-Bumiputeras, it was liberalisation and openness, but hardly a word of thank you.

Today, there are 20 public institutions of higher learning (IPTA), excluding 24 polytechnics, listed on the official website of the Ministry of Higher Education. The same website listed 450 private institutions of higher learning (IPTS). Yes 450!

The question is: Would this unfair wealth distribution and the recent slew of liberalisation measures help to bring the voters back to Umno and the BN, and contribute towards iMalaysia that is peaceful, prosperous and safe?

Nobody in his right frame of mind would deny the contributions of the non-Bumiputeras in the expansion and maturing of the economy. They contributed much to the economy because political stability and the massive public expenditure following the implementation of the NEP provided everyone with an opportunity to make money.

It was not altruism. The non-Bumiputeras and the foreigners participated in the economy because it provided good returns.

For many decades, Malaysia was among the most competitive economies in the world and still is, given the nature of its population and location.
Let's call a spade a spade. Other than in Singapore, which is a small Chinese-dominated nation, where else in the world do the Chinese not only enjoy political power but also control the economy at the same time if not in Malaysia?

Today, Malaysia is at the crossroads once again. The outcome of last year's general election and the ongoing global economic crisis are bound to have a major impact on the future of race-relations, in particular, on coalition politics.

Umno and the BN can no longer claim to offer the only viable multi-party solution to Malaysia's ethnic and regional diversity.

Despite its growing pains and internal problems, the Opposition coalition has been making the same claim with some measure of credibility.

This will only add to Umno's dilemma and what it does in the next two years or so will determine if it will remain the dominant party. Its success, in turn, will determine the fortune of the BN.

Thus, the balancing act continues and we can expect the economy, in particular the eradication of poverty and wealth distribution, to be the linchpin. Growth without fair distribution is unsustainable.