Criticism of 30-Year-Old Affirmative-Action Policy Grows in Malaysia

Thomas Fuller International Herald Tribune Friday, January 5, 2001

KUALA LUMPUR For the past three decades the Malaysian government has presided over a massive experiment in social engineering, an affirmative-action program designed to lift out of poverty the children of millions of rice farmers and rubber tappers, molding them into a white-collar elite.

Malaysia spent hundreds of millions of dollars sending the country's native population - or "sons of the soil" - to leading universities in the United States, Britain and Australia.

In the span of a generation, the program created a native urban middle class and helped avoid the outbreaks of ethnic violence that marred Malaysia's early years of independence in the 1960s.

But as the country prepares to mark three decades under what is called the New Economic Policy, the program's failures are becoming increasingly apparent. Affirmative action, critics say, has morphed into cronyism. The government transferred wealth to a small pool of politically well-connected businessmen.

"It was the deliberate creation of an oligarchy," said Shahrir Samad, a member of the governing party's top decision-making body who has become an outspoken critic of the native leadership. "There was this idea that the economic success of the country depended on entrepreneurial giants." Malays, who make up about half of the population, are the country's largest native ethnic group.

Nurtured by the government for years, these hand-picked captains of industry are today deep in debt and running unprofitable businesses that rely on government largesse. The country's native leaders are faced with the decision of whether to bail them out or let them sink - and thus liquidate the very symbols of native enterprise.

"The entrepreneurs were supposed to handle the creation of Malay wealth," Mr. Shahrir said. "In fact, it's been a subversion of Malay wealth."

The most recent example of large scale corporate failure came two weeks ago when a native businessman, Tajudin Ramli, was bailed out by the government.

Mr. Tajudin, an accountant and the son of a farmer, was entrusted with the management of Malaysia Airlines in 1994. Malaysia's political leadership spoke glowingly of how a man from such humble beginnings could rise to become the chairman of an important regional airline.

But Mr. Tajudin, who is a protege of the country's current finance minister, Daim Zainuddin, had no previous experience running an airline, and analysts say he ran it into the ground. Today, Malaysia Airlines faces its fourth straight year of losses and is deep in debt.

"The problem is that the whole policy has been abused by politicians for vested interests," said Terrence Gomez, a professor at the University of Malaya who has written extensively on program. "There was no transparency in the way contracts were awarded."

Compared with similar social programs around the world, Malaysia's New Economic Policy is unusual because it is affirmative action for the majority. The program, which today colors nearly every facet of Malaysian life, was spurred by a startling economic reality: In 1970, Malaysia's natives owned just 2.4 percent of the country's wealth.

The goal of the policy was not only to put natives on a more nearly equal footing with immigrant populations, mostly ethnic Chinese, but to reverse social imbalances that had set in during centuries under colonial rule, starting with the Portuguese and Dutch and ending with the Japanese and British.

The country's natives were given preferential treatment for government contracts, cheap loans and discounted blocs of stock in big companies. The civil service became their exclusive domain.

On paper the program has been successful in transferring wealth: Collectively, sons of the soil control an estimated 30 percent of the country's total wealth. Official figures are expected later this year.

But critics say this wealth is poorly distributed and, worse, is concentrated among a class of failed entrepreneurs who are slowing the country's economic growth.

For years, criticizing the affirmative action program was taboo - and punishable under laws designed to make the program stick. But an increasing number of prominent academics and politicians, some within the government, are calling for an overhaul of the system.

The best-selling book at the country's top university is a scathing indictment of the policy's shortcomings written by a Malay doctor who emigrated to California. "The Malay Dilemma Revisited," by Bakri Musa, argues that the program has created a "subsidy mentality," where sons of the soil have come to expect free education abroad, a slot in the civil service and heavily subsidized housing and car loans.

Public universities, which are required to reserve at least 60 percent of their openings for natives, produce substandard graduates, Mr. Bakri argues, while the quotas cause anger and resentment among minority "immigrant" races.

Mr. Bakri quotes a former education minister, Najib Razak, as saying that if students were admitted to public universities on merit alone, natives would make up just 5 percent of undergraduate student bodies - a fact, he asserts, that shows major deficiencies in the country's secondary school system. But the failures of the New Economic Policy are more broad than just underperforming students and resentment over quotas.

Rather than breaking down racial barriers, the policy has reinforced them.

Today, as 30 years ago, the political system is based almost entirely on race. Each major ethnic group - Malays, Chinese and Indians - has separate political parties. "Many will agree that we seem to be more polarized now than ever in our history," said Lim Kok Wing, a columnist for the Sun newspaper.

"Our children do not know how to mix with other races, do not understand other faiths and prefer to mix only with their own kind."

The policy has also revealed the obvious flaws of classifying an entire society by race.

It is a system where a first-generation Indonesian immigrant, who is likely to be Muslim and physically resemble native Malays, can qualify as a "son of the soil" within several years of arriving in Malaysia. But a fifth-generation Chinese or Indian Malaysian is still classified as an immigrant.

Malaysia's complex multiracial society is a legacy of British policies to attract Chinese and Indians as workers in the tin mines and rubber plantations of colonial Malaya. Ethnic Chinese today make up about a quarter of the population, while ethnic Indians make up 10 percent.

Over the years, many of these immigrant communities have maintained separate schools and clubs. Chinese Malaysians, for instance, are likely to speak to each other in Cantonese, Mandarin or English, rather than the national language, Malay.

Taken as a group, the ethnic Chinese have fared the best in economic terms. In 1970, they controlled 27.2 percent of Malaysia's wealth. Today, despite three decades of government favoritism toward native businesses, the Chinese have increased their share in the economy to about 40 percent. That increase came mostly at the expense of foreigners, mainly British plantation and mining companies, who owned a startling 63.4 percent of total wealth in 1970 and today own about 25 percent of total wealth.

The economic imbalances between natives and the ethnic Chinese engendered ethnic tensions in the 1960s and ultimately helped fuel a riot in 1969 that left more than 100 people dead. It was an event that scarred the national consciousness and was the major catalyst for the creation of the New Economic Policy.

Even critics of the program are quick to point out that one obvious success has been the absence of serious ethnic clashes in the past three decades.

One government adviser measures the program's success in this way: "In 1969, a bumiputra could burn a car or a shop, secure in the knowledge that it was Chinese-owned." Bumiputra is the Malay word for son of the soil. "Today, there's a good chance that a big car or house is owned by a bumiputra."

But among poorer minorities, especially Indians, the New Economic Policy has been a bitter experience. Impoverished from the early days of independence in 1957, Indians are still among Malaysia's poorest and worst educated.

Overall Indian wealth stood at 1.1 percent of Malaysia's total in 1970. Three decades later, Indians own about 1.5 percent, widely disproportionate to their 10 percent of the population.

Despite the high incidence of poverty among Indians, their plight has been largely neglected by the government for the past 30 years.

"You are constantly being told that you're a second-class citizen," said K.S. Maniam, one of Malaysia's best-known contemporary novelists.

"You live in your own pocket of culture, your own pocket of solitude. And if that pocket has less and less culture, it's just solitude."

Among Malaysia's liberal thinkers, there are increasing calls to revise the New Economic Policy, basing it more on poverty alleviation than on ethnicity.