The New Economic Model (NEM) has the potential of carrying Malaysia into the next phase of its political development if it succeeds.
CONVENTIONAL wisdom has it that economic imperatives drive political choices. They do but, equally, economic choices are made with political ends in view.
Malaysia is a good example of the real nature of political economy. Politics provides the context in which Malaysian Prime Minister Datuk Seri Najib Tun Razak has marked the end of his first year in office by launching the New Economic Model (NEM). It has the potential of carrying Malaysia into the next phase of its political development if it succeeds – and if Malaysians give it a chance to succeed.
The NEM could fail if its detractors manage to portray it as being anti-Malay. The challenge for Najib is to go on the political offensive and demonstrate that while the NEM is pro-minorities, it is pro-Malay as well. This political stance is rather novel in Malaysia, where people have grown accustomed to the view that what is good for Chinese and Indians is bad for Malays.
The middle ground is waiting to hear the Prime Minister. It is there that he will win or lose the opportunity to create a new Malaysia.
To begin with, he could reiterate the dire need for Malaysia to make changes to its economic planning.
Now, the economic reasons that Najib gave for the NEM are interesting, but they are hardly radical. Many countries take the opportunity of an economic setback to go for “do or die” policies that push them up the evolutionary ladder.
Singapore is a good example. Economic shocks have repeatedly provided the impetus for structural reforms that, although painful in the short term, have created economic space in the medium term.
Beyond the NEP
What is refreshingly new about the NEM is that its economic goals, while admirable in themselves, are subordinated to a yet greater political good: the fulfilment of the dream that Najib calls “1Malaysia”.
This dream is based on Malaysia’s racial communities developing respect for one another and learning to trust one another more. It is the formula for “unity in diversity” that marks all multiracial societies, but 1Malaysia is the Prime Minister’s attempt to restore normality to race relations that have deteriorated over recent years.
The NEM gives substance to 1Malaysia.
This is where the NEM becomes politically charged. Since the race riots of 1969, Malaysia’s political economy has been underpinned by the New Economic Policy (NEP).
An intensely political policy, the NEP was an affirmative-action programme that sought to promote racial harmony by empowering the economically-deprived bumiputra population. It was aimed at addressing the structural inequalities that kept Malays and others poor.
Unfortunately, what was meant to raise the living standards of poor Malays, who featured heavily in the composition of the poor in general, became a by-word for racial cronyism, the disadvantaging of Chinese and Indians, and a channel for the dispensation of state patronage to rich Malays at the expense not only of poor Chinese and Indians but of poor Malays as well. Truly did the NEP form the first three letters of the word “nepotism”.
The NEP became a lightning rod for racial discontent among the minorities. In time, it attracted the wrath of the progressive Malay middle class as well. The Barisan Nasional (BN) ruling coalition’s disastrous showing in the 2008 general election revealed just how badly the NEP had retarded the political economy of Malaysia.
The NEM is Najib’s answer to the NEP. It seeks to address the policy’s excesses and failures without dismantling it totally. The Malaysian premier sounded almost socialist when he said that he would not tolerate the rent-seeking and patronage that had woven their insidious way into the NEP. Instead, the NEM would be characterised by transparency and efficiency.
Bid to eradicate poverty
What is radically new in the NEM is that it seeks to eradicate poverty irrespective of race.
Keeping in view that economic disparities are a primary source of ethnic conflict, the NEM’s stated goal is to balance the special position of the bumiputra – something that it pointedly retains – and the legitimate interests of other communities.
Interestingly, by focusing on the bottom 40% of the income strata, the NEM will still benefit Malays, who will form the bulk of the beneficiaries because they constitute the largest component of the disadvantaged.
However, it stands to benefit other races as well in ways that have not occurred before.
Not unexpectedly, the NEM has drawn fire from two extremes of the political spectrum.
On the left are liberals for whom nothing less than a total dismantling of the NEP will do. These know-all commentators behave as if a 40-year-old policy that provides the cornerstone of the credibility of the United Malay National Organisation (Umno) for the Malay masses can be wished away.
They might as well call for the disbanding of all racially based political parties in Malaysia. That would be a step forward for Malaysian multiracialism, no doubt, but it is not going to happen.
The right is represented by the Malay rights group Perkasa. It has criticised the NEM for its lack of a Malay agenda and argued that if strategic areas are developed under the open tender system, Malays will not be able to compete.
Theoretically, the Malay right could derail the NEM. Malaysia’s political economy is structured so racially that it is like a fortress with a moat. Defending a fortress entrenched in habit and expectation is normally an easier prospect than storming it.
However, Najib has behind him the support of a veritable army of Malays, Chinese, Indians and others who belong neither to the dreaming left nor to the ethnic right. They constitute the middle ground of Malaysian politics.
Unlike in 1969, that ground is a broad one today because of greater access to education, growing political participation, and the loosening of feudal shackles that come with living in cities governed more by technology than by nature.
If he can draw upon this middle ground’s thirst for change, the moat can be drained and the fortress of entrenched privileges attacked.
There is an urgent need for Umno to show that it not only defends the Malay agenda – which it has always done – but that it has the ability to deliver results that cannot be produced by right-wing Malay groups, no matter how vociferous they are.
Najib’s soft approach to Perkasa’s extremism sends the wrong signal.
On the home front, though, things look a lot better.
The Malaysian leader is a careful fighter who does not go into battle before he has surveyed the terrain. He would have done his calculations, beginning with the need to convince Umno insiders that BN cannot hope to win back the support of millions of Malaysians, which it lost in 2008, unless the party is prepared to break decisively with the past.
He needs to go to work hard in convincing his Umno colleagues that he will not brook any dissent over what is his first trademark policy – and that it is in their personal interest to stand by him. Personal interests are a great source of motivation in politics.
Then he will have to take his message to the masses and stake his credibility on pushing the NEM through in the face of opposition, infiltration and subversion.
Those who wish Malaysia well should give him the benefit of the doubt. This is a moment in Malaysian history when the NEP’s citadel of nepotism might finally fall to the realisation that the NEM is a war to stave off the nemesis of the Malaysian political economy.
This article was first published in the Business Times, April 20, 2010. The writer heads Pereira International, a Singapore-based consulting company. He can be reached at email@example.com
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