Second Malaysia Plan - Background

Background

Although the Malays have nearly always comprised a majority of the Malaysian population, their economic power has rarely been commensurate. In 1970, the Bumiputra controlled only 1.9% of the Malaysian economy, while the non-Malays (mostly Chinese) held 37.4%, with the rest in foreign hands. Due to this wide disparity, Article 153 of the Constitution requires the government to set quotas for the dispensation of scholarships, employment in the civil service, etc. targeted at improving the economic status of the Malays.

However, the First Malaysia Plan—whose approach had been dependent on the Malays "availing themselves of these facilities and services and putting them to good use"—failed in addressing the economic imbalance. Its policies also resulted in discontent among the non-Malays, who mostly supported the opposition parties that favoured reducing or eliminating affirmative action for the Bumiputra in the 1969 general election. A victory parade held on May 12 by supporters of the opposition led to a retaliatory rally on May 13 by the United Malays National Organisation (UMNO), a major party in the governing Alliance coalition. However, the rally soon turned into a riot which lasted two days. Officially, around 200 people died—although others have given much larger estimates—with thousands left homeless, the majority of them Chinese. A state of emergency was declared, and Parliament was suspended. The National Operations Council (NOC) governed until 1971, when Parliament reconvened.

The Second Malayan Five Year Plan (1961 – 1965) was an economic development plan launched by the government of Malaya, and continued by the government of Malaysia (a new nation comprising Malaya, Singapore, Sabah and Sarawak). This plan followed the First Malayan Five Year Plan, which ran from 1956 to 1960. The Second Malayan Five Year Plan increased expenditure for the development of agriculture and rural areas. Funding was markedly increased for land development schemes, physical infrastructure, and social services. The Plan's stated objective was "to provide facilities and opportunities for the rural population to improve its level of economic and social wellbeing." Some have attributed the greater expenditure of the Plan to the governing Alliance political coalition's political woes; the coalition had only narrowly won the 1959 general elections due to discontent among the rural Malay electorate over the lack of economic progress.

While it held the reins of power, the NOC set out the NEP, with the ultimate aim of eradicating poverty and eliminating "the identification of race with economic function" through a "rapidly expanding economy"; the NEP aimed for a Bumiputra share of 30% of the economy within 20 years. The Outline Perspective Plan was also approved, with similar goals to the NEP. Both the NEP and the Outline Perspective Plan were set to expire in 1990, and the Second Malaysia Plan was passed by Parliament to implement the goals of these policies.