Last updated Thursday, October 02, 2014 08:25pm

SEPT 20 — Institut Rakyat is concerned that Prime Minister Najib Razak’s September 14 announcement of a Bumiputera Economic Empowerment agenda (BEE) neglects poor and rural bumiputeras, including ethnic Malays, and will add to inter-ethnic resentment.

We should ask three questions of the BEE agenda:

1. Will it actually help reduce economic inequality?

2. Will it improve inter-ethnic relations?

3. Where will it leave Malaysia in terms of social inequality and national cohesion?

The Barisan Nasional formula of consociational inter-ethnic accommodation died with the 2013 election. The BN is now principally a coalition dominated by a rural Malay-backed Umno and supported by minority bumiputera-backed East Malaysian parties. There may be a temptation for Umno/BN’s leadership to think that it can be a government for bumiputeras rather than a government for all Malaysians.

Institut Rakyat believes that Najib is using the BEE to defend his presidency at the Umno General Assembly because he failed to deliver most of his KPIs during GE 2013: he lost more seats to Pakatan Rakyat and he failed to win back Selangor. He has also lost BN the popular vote for the first time.

The very title of his initiative — Pemerkasaan Ekonomi Bumiputera — may be a wink and nudge to Perkasa and the right-wing that has become so vocal under Najib’s presidency. Early on in his administration the right forced him to abandon reform of the New Economic Policy’s (NEP) successor policies, such as the New Economic Model (NEM). The result is last week’s New New Economic Policy which PERKASA has already endorsed.

Najib has also proposed a Bumiputera Economic Council chaired by himself, the deputy prime minister and other ministers. It remains to be seen whether this Council will be used by Najib to pander to various factions within Umno to restructure political control of the Malaysian economy as has happened before under Mahathir.

As prime minister, Najib is supposed to serve all Malaysians, irrespective of background, ethnicity, belief, or political preference. Instead, with the bumiputera-only BEE he has made a policy move that is less progressive than the NEP.

NEP

Launched in 1971, the NEP was designed to reduce communal tension by eliminating poverty regardless of ethnicity, and reduce wealth and income inequalities between ethnic groups.

The primary target of the NEP was structural reform. It aimed to transform the colonial economy established by the British that chained the economic function of Asians to their ethnic classification whilst reserving economic privileges for the colonialists under a “divide and rule” strategy.

For such affirmative action measures to be effective they need to be of limited duration in order to avoid entrenching a new scheme of ethnic or racial privileges. Such entrenched privileges can form the basis for fresh inter-ethnic resentment.

Additionally, there is the issue of access and distribution, whether those targeted by affirmative action policies are actually the primary beneficiaries.

The early focus of the NEP on providing poor children with quality education succeeded in creating a Malay middle-class and greater parity in educational and occupational attainment across all ethnicities in the Peninsula.

According to research being prepared for the United Nation’s forthcoming Human Development Report for Malaysia, which focuses on inclusive growth, minority (i.e. non-Malay) bumiputeras lag behind the rest of Malaysia in almost all areas of overall educational attainment and basic amenities. These marginalised citizens are found mainly in Sabah, Sarawak, and the Orang Asli villages of the Peninsula, though it also includes poor Malays.

Minority bumiputeras as a group lag behind ethnic Malay, Chinese and Indian Malaysians in education, employment and quality of life.

The second phase of the NEP was focused on creating a Bumiputera Commercial and Industrial Community by transferring ownership and control of public enterprises to private entrepreneurs. The answer offered by Dr Mahathir Mohamad to the inequality challenge was to create an equal number of Malay and Chinese millionaires. The end result was the formation of an upper crust of politically well-connected businessmen, which combined with the comparative neglect of rural development, ended up contributing to intra-ethnic inequality amongst bumiputeras.

Widespread national inequality

Malaysia today is one of the most unequal societies in Southeast Asia. The Gini coefficient is a measure of income inequality where 1 represents absolute inequality and 0 is absolute equality. According to the Household Income and Basic Amenities Survey Report 2012, Malaysia’s overall Gini coefficient is 0.431. Inequality within ethnic groups is at similar levels:

Bumiputera (0.421), Chinese (0.422), and Indian (0.443). The bottom 40 per cent of Malaysian households had a mean income of only RM1,847 per month in 2012.

Najib’s BEE focuses solely on bumiputeras when in fact economic inequality is a Malaysiawide cross-communal phenomenon. The BEE also fails to distinguish between the different kinds of problems faced by rural and urban bumiputeras as well as the particular challenges faced by poor and middle-class bumiputeras.

This underscores the problem of trying to resolve economic inequalities via ethnic categories.

Membership of a race or ethnic group will include both rich and poor, but if the core concern is poverty and economic disparity Institut Rakyat believes that affirmative action policies should target deserving people based on their income class rather than ethnicity.

Large swathes of ethnic bumiputeras, including Malays, will be unable to take advantage of Najib’s policy package because they lack the basic economic strength to do so. This is less a failure of ethnic affirmative action than it is a failure due to decades of uneven regional development, in particular the neglect of rural Malaysia.

How will bumiputeras in areas — especially in East Malaysia and rural Peninsula Malaysia — without roads, schools, hospitals, adequate opportunities for further education, running water and electricity take advantage of jobs in GLCs, oil and gas contracts, vendor programmes, share issuances, corporate equity, loans, or afford ‘affordable’ homes?

This underlines an ironic dimension of the BEE. Najib pitched it as a reward for support during the 2013 general elections where BN was returned to power largely by rural voters and East Malaysia.

Najib’s BEE proposals instead cater more to an urban, lower- to middle-income demographic who have some basic educational, financial, and infrastructural capacity to engage in the schemes. Najib’s “I help you, you help me” patron-client approach is clearly pitched with the Umno general assembly in mind.

Avoiding inter-ethnic resentment

Yet, is a more progressive approach possible?

Race-based economic policies are divisive because they generate resentment from those who are left out. Every Malaysian has the capacity to contribute to our national prosperity. Every Malaysian can gain from the deeper empowerment of all other Malaysians to contribute. It is the responsibility of a just government to ensure that the distribution of gains is equitable through needs-based policies.

Policies that target the economically needy based on their economic situation rather than their ethnic membership would be the more progressive alternative.

Umno/BN have proven time and again that they are unable to fully adopt such an approach because they are hampered by their commitment to race politics. However, there is nothing to stop them from introduce a needs-based criterion into an ethnic-based policy.

Missing the Malaysian agenda

Malaysia Day should have presented Najib with an opportunity to forge greater national cohesion, to redress the inequalities between the three entities that make up Malaysia: the Peninsula, Sabah and Sarawak.

East Malaysia is smarting with resentment from lopsided implementation of the Malaysia Agreement and the 18/20 point memorandums signed at the founding of our nation 50 years ago. There is also unhappiness over the fact that petroleum royalties that could be used for development purposes are only 5 per cent when there have been demands for a rise to 20 per cent.

On the issue of rural well-being, Najib should also have to answer why SUHAKAM’s report on its National Inquiry into Orang Asli/Asal land rights was suppressed at election time, and what action will be taken to address its recommendations. Land rights, and disputes over land, cut to the heart of the minority bumiputera rural economy. The BEE completely neglects this important issue. Their economic situation may only worsen as the prices of basic commodities rise with the government’s step towards fiscal austerity.

Umno/BN has tried hard to perpetuate anxieties amongst ethnic Malays regarding the security of their privileges, status, and religion. The election results show that it has not been universally successful in this effort as the Malay vote is split. However, there are those who still believe the story that the threat to their current and future position comes from other ethnic groups.

Umno and other race-based parties want to foster such views because it allows them to maintain their role as ‘protectors’ of various ethnic groups, just as the British appointed British Protectors of Chinese and Indians and Resident-Advisors for the Malay courts. But for a protector to remain useful his charges must remain vulnerable, and the BEE seems set to sustain this vulnerability in the rural sector.

The situation of the colonial economy where a caste-like system forced members of ethnic groups to specialise in particular occupations, has instead been transformed into a system of unequal ethnic privileges that ironically neglects the challenge of bumiputera poverty. This is holding Malaysia back because we should be looking at how to bridge gaps between rich and poor, between East and West Malaysia, rather than ignoring or reinforcing them.

The choice is not between ethnic affirmative action and unfettered meritocracy, but between an imprecise and divisive ethnic affirmative action approach and needs-based affirmative action that puts class before ethnicity.

* This statement was co-authored by Azrul Azwar, Executive Director of Institut Rakyat, and Yin Shao Loong, Research Director of Institut Rakyat.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malay Mail Online.