Malaysia: The malaise of enforced inequality

[Harold Schiffman]

The malaise of enforced inequality

 Mary Kissel  March 11, 2008

"WE live side by side, not together." That's how one Malaysian last
week described to me the fallout from decades of race-based
affirmative action policies. Malaysians, she said, were fed up.

It shows. In federal and state elections here on Saturday, voters of
all ethnicities turned to Opposition parties in larger numbers than
ever before, a rebuke to Prime Minister Abdullah Badawi and his
National Front coalition's pro-Malay platform. Opposition parties won
82 of 222 seats in the national parliament, up from only 19. The
biggest gainer, the People's Justice Party, emphasised equality of
opportunity for all ethnic groups.  This represents a huge shift in
thinking for Malaysians, and a welcome and overdue one at that. While
about 60 per cent of the country is Malay, another third is comprised
by Chinese and Indians, with other ethnic groups making up the rest.
But since the introduction of the New Economic Policy in 1970s,
Malaysia hasn't been governed for the whole of its citizenry; it's
been governed mostly for Malays.

Call it affirmative action gone wild. When the NEP was launched, its
goals were twofold: to eradicate poverty "irrespective of race" and to
restructure the economy away from race-based economic roles for the
various ethnic groups. For a country escaping the legacies of colonial
British rule, recovering from violent, anti-Chinese race riots and
facing extreme poverty among Malays, those goals are easy to
understand. Social stability through Government-directed outcomes
seemed the best balm political leaders could deliver at the time.

The NEP was supposed to last only two decades. In any case, surely
Malaysia's elites didn't envision the scope of the pro-Bumiputra, or
indigenous Malay, bent that evolved. Consider just a few of the
discriminatory policies now on the books. On the corporate front,
foreign and domestic non-manufacturing firms have to take on Bumi
partners who hold at least 30 per cent of the share capital. Firms
that want to list on the Kuala Lumpur stock exchange are required to
reserve 30 per cent of their equity for Bumi shareholders. Bumis get
preferential housing loans and easier access to business licences and
Government contracts. Department stores and supermarkets have to
reserve 30 per cent of their shelf space for Bumi products -
regardless of consumer preferences.

Then there's the education system. Before the NEP, Malaysia's public
schools were mostly racially integrated. Now they're largely
segregated, as Chinese and Indian parents opt to send their children
to schools where they feel they won't be discriminated against or
exposed to Islamic teachings. More than 80 per cent of
Government-sponsored scholarships to study abroad go to Malays.
Business leaders have a hard time sourcing good local talent, across a
range of industries, largely because they're required to have 30 per
cent Bumiputras on their staff.

These policies have, if anything, become more entrenched over time.
While the original NEP called for Malays to get 30 per cent of the
country's wealth - whatever that means - subsequent economic plans
inserted vague language calling for more "wealth creation" for
Bumiputras. As for encouraging racial tolerance, that hope was put to
bed in 2006, when the party conference of the United Malays National
Organisation was broadcast live and Malay representatives said they'd
defend pro-Malay policies to "the last drop of blood". After the Prime
Minister concluded his remarks, shouts of "Long live the Malays!"
filled the chamber. Needless to say, the 2007 conference wasn't
televised.

This Bumi bonanza has slowed investment in Malaysia, and the ruling
coalition knows it, even if officials won't say so publicly. At a time
when foreign investment has poured into Vietnam, China and India,
Malaysia has seen a much smaller sliver of that pie. It's fallen from
America's 10th largest trading partner to its 16th largest in little
over a year. Malaysia has lost automobile plants to Thailand and
electronics plants to China. Motorola, a major electronics employer,
threatened to pull out of Penang late last year but decided to stay
when the Government awarded the company a major contract. (On
Saturday, voters there elected the Opposition Democratic Action
Party.) In the weekend's election, ethnic Chinese swung heavily to the
DAP. Ethnic Indians, too, plumped largely for Opposition candidates.

But the Malay swing vote - the core of the National Front coalition -
contributed to the surge. The first indication of the swing came in
the capital, where the daughter of Opposition Leader Anwar Ibrahim
beat the National Front candidate. (Anwar, a former deputy prime
minister, was barred from running.) Then Opposition parties took the
states of Kelantan and Kedah, an unprecedented victory in a rural
Malay-dominated belt.

It's never easy to shed affirmative action policies; as the US
experience shows, once preferential treatment is given to a specific
ethnic group, it's a hard habit to break. But if Saturday's Opposition
gains show anything, it's that even Malays are starting to figure out
that pro-Malay policies are hurting the country. That is, at least, a
start.

Mary Kissel is editor of The Wall Street Journal Asia's editorial page.

http://www.theaustralian.news.com.au/story/0,25197,23352075-7583,00.html
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