Malaysian New Economic Policy - Criticism

Criticism

In recent years, the NEP has come under attack as being an inefficient system that promotes a laid-back attitude among the Bumiputras; it is racial-based and not deprivation based. Several policies of the NEP which give economic advantage to the rich Bumiputras, such as Bumiputra quotas in ownership of public company stock, and housing being sold exclusively to Bumiputras, are viewed as discriminatory.

Many of the NEP policies strive for equality of results rather than equality of opportunity, with NEP proponents justifying the concentration on results rather than opportunity as by pointing out that measuring equality of opportunity is difficult or impossible. When the NEP was implemented, for example, it was announced that one of its goals was to have 30% of all equity in Bumiputra hands.

NEP critics have argued that setting a target of 30% of Bumiputras trained and certified to run companies would represent a better equality in terms of opportunity. Still others suggest this target may not work as training and certification does not necessarily guarantee equality of opportunity. Tun Abdul Razak's predecessor as Prime Minister, Tunku Abdul Rahman, also opposed the 30% target, writing in the 1980s that "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 setbacks".

The NEP is also criticised for not dealing directly with issues of wealth distribution and economic inequality; that it no longer helps the poor but is instead an institutionalized system of handouts for the largest ethnic community in Malaysia as the NEP does not discriminate based on economic class. Bumiputras of high and low economic standing are entitled to the same benefits. The statistical problems of categorising wealthy and disadvantaged Bumiputras in one group also meant that the NEP's goal of having 30% of the national wealth held by Bumiputras was not indicative of a median 60% of Bumiputras holding 28% of the national wealth, but could theoretically translate into one Bumiputra holding 29% of the national wealth, with the remaining Bumiputras sharing 1%. Some have alleged that because of this imbalance, some Malays remain economically marginalised. Criticisms also arose from the fact that there was no planned assistance for Malaysian Chinese and Indian communities to achieve their 40% goal during the actual implementation of the NEP.

The manufacturing sector is exempted from the Foreign Investment Committee (FIC) Guidelines, the 30 per cent Bumiputera equity and restrictions in market entry have been removed for all sub-sectors.(pdf)