The New Malay Dilemma

THIS STORY HAS BEEN UPDATED: Malaysian Prime Minister Najib Tun Razak on March 11 told reporters that he will go ahead with the release of his new economic plan in two stages and dismissed speculation printed in local media that it had been postponed. The first will be released on March 30 during an investment conference, the second to coincide with the release of the 10th Malaysia Plan.

Najib appears to be confronted with a widening gap between what he would like to do as an economist and what a major chunk of his United Malays National Organization constituency wants. What they want is not only to not go forward but to repeal the limited reforms he has already put in place, and they are increasingly angry about it. That is playing havoc with his so-called 1Malaysia campaign, designed to bring the country's fractious ethnic groups together and rebuild the flailing national ruling coalition.

One pessimistic aide to a prominent UMNO politician told Asia Sentinel it is even possible that UMNO could be superseded by a growing organization of 80-odd Malay superiority non-governmental organizations cobbled together in recent weeks under the title Malay Consultative Council, which is seeking to push the government to maintain so-called ketuanan Melayu, or Malays first, a slogan embraced by former Prime Minister Mahathir Mohamad, who remains active at age 84 and despite his endorsement of Najib is a growing thorn in the prime minister's side, as he was with his predecessor, Abdullah Ahmad Badawi, whom he helped to drive from power.

Mahathir appears to be shifting to the right to make an alliance with the righists, according to longtime political observers in Kuala Lumpur.

In order to modernize, Malaysia, a country of 28 million people, needs to do away with a wide variety of subsidies and perks to ethnic Malays that are enshrined in the New Economic Policy, an affirmative action plan for ethnic Malays that was put in place in 1971 in the wake of disastrous 1969 ethnic riots that took the lives of hundreds of people on both side of the racial divide. The NEP supposedly ended in 1991 and a new National Development Policy was put in its place. It was largely the NEP under a different name. The NDP initials never took off. It is still called the NEP.

Among other things, the NEP was designed to give ethnic Malays 30 percent ownership of private companies, which led to what has been called an "Ali Baba" system, in which "Alis" – ethnic Malays, or bumiputeras – became the figurehead owners or chief executives of companies actually run and owned through by "babas" – the nickname for Straits-born Chinese. The Ali Baba title, of course, brings to most people's minds the title of the tale "Ali Baba and the 40 Thieves."

Non-Malays are largely shut out of the university system and overseas scholarships. Malays are given ownership of government-linked public company shares and housing. As a result, the NEP is held responsible for creating a rentier system in which some – particularly top officials of UMNO --became rich overnight by skimming the share ownership while the average Malay in the kampung, or rural village, got very little. The education system has suffered because bumiputeras are largely passed through the system with very low standards.

The country has also been afflicted by both a problem with capital flight and a brain drain as reported by Asia Sentinel, with Najib acknowledging that anywhere from 300,000 to 500,000 professionals are working abroad, about 40 percent of them in Singapore, which actively recruits ethnic Chinese students in Malaysia. Others put the figure far higher.

Both Mahathir and Badawi talked incessantly about the need to create a high-growth economy built on technology and industrialization, Mahathir by establishing the so-called multimedia super corridor and the national car, the Proton, as well as a long series of other projects, many of which were largely unsuccessful. Badawi sought to attract investment in high-tech industries including pharmaceuticals and medical technology as well as bioscience. But many economists argue that without removing the impediments of the NEP, Najib will be as unsuccessful as his predecessors.

Najib first talked about a new economic plan a year ago, but its introduction has been pushed back several times. Even as late as Feb. 8, during a two-day conference in Kuala Lumpur, Najib told reporters that his administration is open to suggestions for what would go into the policy. Principal elements are expected to be the removal of subsidies and further liberalization of the economy that appear certain to bite into Malay privilege. Many of Najib's cabinet want nothing to do with the plan, concerned that the voter rebellion that began in disastrous March 2008 elections will grow.

The Malay NGOs are streaming into a perceived political vacuum for Malay ultranationalists, according to a source in Kuala Lumpur. No one really knows at this point how strong they are despite the noise they are making. There has been no independent polling. They are feeling marginalized by Najib's centrist politics and would like to take the country back to the days of absolute UMNO rule, the course say. So they remain frustrated and angry.

Any time word gets around that the fundamentals of the NEP are being tampered with, UMNO politicians rush to the microphones to say it isn't true. Mukhriz Mahathir, the former premier's son and a deputy International Trade and Industry Minister in Najib's government, for instance, was the latest to insist to reporters that the new policy "is in line with previous policies particularly the New Economic Policy."

Najib has repeatedly said the country is confronted by a new reality, given the stagnating economy, which shrank by 3.3 percent in 2009 and faces relatively anemic 3.7 percent growth in 2010 and 5.0 percent in 2011. Last year, he removed a requirement mandating ethnic Malay participation in 27 economic sub-sectors as well as removing a requirement that 30 percent of shares in IPOs go to ethnic Malays.

That has played a major role in stoking ethnic Malay anger, although some observers say the leaders of the Malay Consultative Council are actually UMNO wheelhorses who fear the loss of their perks instead of the wider community.

One of the leaders of the Malay rights groups is an NGO called Perkasa, which is headed by an independent member of parliament named Ibrahim Ali, a long time Mahathir ally and former UMNO stalwart. It has been holding strident rallies across the country, demanding close adherence to the Malays-first policy. Some pessimists say Perkasa members are trying to provoke the Chinese into a confrontation with the Malays that will result in the imposition of the country's draconian Internal Security Act ISA. One Malay businessman told Asia Sentinel that "UMNO leaders who are not particularly sympathetic to its aims are climbing onto the speakers' platforms to endorse them because they're afraid not to."

Others say they aren't particularly concerned and that the Malay Consultative Council and its member organizations more resemble the Tea Party movement in the United States, which is loud, angry and vocal but which almost certainly will remain a splinter group.

Asked about the concern that the Malay Consultative Council would grow big enough to replace UMNO, and particularly Perkasa, a political analyst said that "Perkasa's appeal is not broadly based. They may shout the loudest but it will take more than that to replace UMNO. UMNO needs other component parties in Barisan to sell their multiracial appeal. I doubt the component parties in Barisan can work with Perkasa as closely as UMNO."