By Peter Drysdale | East Asia Forum
Malaysia’s recently presented New Economic Model is, on paper, a hugely ambitious strategy for changing the country’s economic and social direction and, hopefully, its economic and political fortunes.
The government of Prime Minister Najib seems inclined to embrace its principles and try to forge a new direction in Malaysian economic and social policy. In the 1980s Malaysia was among the brightest stars in the Southeast Asian economy, with growth around 8 per cent a year and a huge transformation away from its comfortable plantation and minerals past towards a new industrial future, driven by foreign investment and rapidly growing exports of consumer electronics to regional and global markets. Mahathir reigned supreme, dispensing patronage and securing UMNO’s political base under the camouflage of the long-established New Economic Policy, put in place after the racial disturbances of the late 1960s to lift up the bumiputera Malay population and in the process embedding race-based politics into the fabric of political culture.
After the Asian Financial Crisis Malaysia has faced a far less certain future, not only because of the political dark-side that it exposed under Mahathir, but also because of the way that cosy politics had come to sap the vibrancy out of the economy and good economic policy. Economic performance has gradually stagnated, Global Financial Crisis aside. A race-base political culture has become less and less tenable: it’s not only Anwar Ibrahim that challenges with an alternative political model; the government itself is grappling within itself and against the ghosts of its past for a new way, ditching the old New Economic Policy. Malaysia is on the cusp of a profound turning point in its national development.
As Shankaran Nambiar explains in this week’s lead the New Economic Model, were it implemented, would seek to sweep aside many of the shackles that have held Malaysia back, economically and politically. It would tackle the failure of economic policy to provide a foundation for lifting Malaysia out of its lower middle-income malaise. It would also, necessarily, tackle the related problem of Malaysia’s suppression of civil and political freedoms. The most important problem, he argues, centres on ‘the institutional framework in Malaysia. The way people interact, their expectations, and the norms and conventions that govern these interactions must change. The norms, habits and conventions in society must support efficiency and competitiveness, and not give way to lassitude and indifference…There is evidence that civil liberties and a more liberal political and social fabric helps promote economic development. Institutional reform of this nature involves guaranteeing: freedom of speech; freedom of assembly and demonstration: equal opportunity; freedom from excessive governmental intervention; respect for minorities; and a fair, independent judiciary.’
It’s a brave call but if heeded there is promise of realising the Malaysian dreams of once again being the strong country of Southeast Asia and a future among the industrial democracies of the OECD.
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What’s behind Malaysia’s New Economic Model
June 27th, 2010
By Shankaran Nambiar, MIER
Malaysia’s New Economic Model (NEM) is a framework that promises to bring the country out of its middle-income status, and push it into the realm of a high-income economy. The NEM proposes to do this through eight Strategic Research Initiatives (SRIs). These SRIs include re-energising the private sector, developing a quality workforce, and creating a competitive domestic environment. Growth is also considered, both in terms of enhancing the sources of growth and ensuring the sustainability of growth. Other initiatives target the public sector, affirmative action and building Malaysia’s knowledge-base and infrastructure.
Given the multiplicity of the SRIs, if one were asked to select the key factors, what would they be? These key factors must be foundational in driving the economy to higher growth, and have a sufficiently far-reaching effect to influence other factors contributing to the rapid shift of the economy.
The three most important issues for the NEM, I would suggest, are: education, entrepreneurial skills and institutional reform.
Education is a pervasive factor that lies at the source of many problems that plague the Malaysian economy. This is also an issue that stifles the growth of investment.
For its success, the NEM depends on technology upgrading, the creation of a knowledge-economy and the development of a highly skilled workforce. It also hopes to move up the value-chain by emphasising technology-intensive methods of production and by relying on innovation and research and development (R&D). All of this depends on a sound system of education.
When it comes to the question of reforming education in Malaysia, tertiary education receives the bulk of the focus. Indeed, innovation and R&D require good universities. Moreover, if the private sector is to be energised, benefiting from high quality human capital, and drawing upon R&D, universities must be the root source.
But, universities only have about three years to work on students who have been formed by their primary and secondary education over a period of 13 years. If intellectual curiosity and creativity have not been instilled during this period, the chances of acquiring them in university are bleak.
There are more basic problems that need to be sorted out. Students need to learn to effectively read and write in English. Teachers, it has been commented, need to be taught to teach English correctly and with confidence. Presently, the focus is on safeguarding ethnic interests and the government is preoccupied with the difficult task of balancing the demands of different ethnicities, leaving little time to worry about fundamental issues.
The second crucial issue pertains to entrepreneurial skills. This is the concern of SRI1, which at its core has the re-energisation of the private sector as its goal. The growth of small and medium enterprises will not flourish in the absence of entrepreneurship.
A more sensitive and important issue relates to the presence of entrepreneurship among bumiputera (indigenous Malay). Their lack of ownership of equity is a nagging concern that threatens ethnic stability. The New Economic Policy was put in place to address the lack of bumiputera representation in national wealth. Indeed, the NEM will not be safe unless this issue is adequately addressed. This implies the creation of a corpus of skilled bumiputera entrepreneurs, who can flourish, but without resorting to dependence on government handouts. This, truly, would be a challenge.
The third and most important problem centres on re-orienting the institutional framework in Malaysia; the way people interact, their expectations, and the norms and conventions that govern these interactions must change. The norms, habits and conventions in society must support efficiency and competitiveness, and not give way to lassitude and indifference. This ambitious goal, because it involves the fabric of society, could well take more than a decade to achieve.
Institutional reform of a more limited, but no less significant order, should also be initiated. There is some evidence that civil liberties and a more liberal political and social fabric helps promote economic development. Institutional reform of this nature involves guaranteeing: freedom of speech; freedom of assembly and demonstration: equal opportunity; freedom from excessive governmental intervention; respect for minorities; and a fair, independent judiciary.
The NEM is silent on state capture. State capture is a form of corruption that may be defined as the undue and illicit influence of the elite in a country formulating or influencing the laws, policies and regulations of the government. The zero-tolerance for corruption that the NEM propagates is only one of a longer list of concepts that good governance subsumes. It may be argued that state capture is not present. Nonetheless, a broader notion of corruption and governance is required.
Education, entrepreneurship and market-friendly institutions demand reform. These are core but extremely slippery issues that have to be caught by their horns. The NEM is right in correctly identifying them, but they have to be adequately addressed if the NEM is to be meaningfully implemented.
Shankaran Nambiar is a Senior Research Fellow and the Head of Policy Studies Division at the Malaysian Institute of Economic Research.
The views mentioned in this article are his own and do not reflect the official position of MIER.
“Zero tolerance for corruption.” The big sharks continue to swim free and circle around the bag of goodies called “public funds”. Once in a while, when the custodian looks away, or is sleeping, the sharks take a quick bite of the goodies and swims away.
As i have said before, our PeeeeeeeM can have the best economic plan in the whole world. But If you have lazy, racialistic, leechlike and pea brain dickheads like those in Perkasa, Gertak and some NGOs, it will never never ever going to work. I bet my last 1/4 cent on this.
With such a high rate of population increase and the way the current bunch of greedy, corrupted and unethical politicians running the government, many many of the youngs may perhaps grown up like those dickheads i mentioned above.
God helps Bolehland.
// when the custodian looks away, or is sleeping, the sharks take a quick bite of the goodies and swims away.//
The “custodian” takes even bigger bites of the goodies compared to the sharks. RM500 million in commission for purchasing 2 submarines!
For as long as flip-floppers are in charge couple with zero tolerance for corruption,not forgetting the ” ditak apa ” attitude and the pea size brain of these leaders,the country will go to the dogs unless the good Lord helps “Bolehland”.
To answer the title question, it simpler to ask. Have Malaysia EVER escape the trap of its own making? All the problems we have had and are having were predicted. Its no surprise. It was FORCED through, not intellectually argued through. While the initial prediction thought the problems would come up sooner and with more problems, it still nevertheless came true.s
So look back at the original predictions and what did the founder said? – That we will go to the brink or over it before there is any change.
Can Malaysia escape a trap of its own making?
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Bank of America Merril Lynch has already provided the answer (see website below).
Malaysia forecast to be ‘young and poor’ by 2030
@@http://themalaysianinsider.com/malaysia/article/malaysia-forecast-to-be-young-and-poor-by-2030
In the 1960s, Malaysia was the second wealthiest country after Japan. It is unthinkable that in the 2030s, Malaysia is being ranked, together with India and Indonesia, as a poor country! Actually Merril Lynch’s forecast does not come as a surprise. This is because no matter how rich a nation is endowed with natural resources, if its leadership indulges in corruption, extravagant spending and practices racial discrimination/protectionism, it will eventually fail.
The only hope for Malaysia to escape the trap of its own making and to overturn Merril Lynch’s forecast is to get BN ousted in the 13th GE and PR voted into Federal Government.
All these reports speak one language – that the entire political, social and economic systems – have failed.
It means we are the bottom rung. How long and difficult will be the climb? Impossible, I would say as long as UMNO holds the reins of power.
Sometimes i wonder would another researcher get up the next morning and identify three other factors that are likely to explain the success or failure of NEW and the Malaysian economy in general.
Godfather, mana ada custodians of public fund? The sharks swim and roam freely and eat whatever and whenever they want. If you ask me, i would attribute this factor more than education, entreprenuership and institutional reforms.
as longs as corruption on such wanton scale in ALL level remains, no new NEP, NEM or whatever alphabet soup is going to save this country…
Limkamput:
Ada custodians of public funds. They are either fat incompetents or they are in cahoots with the sharks, preferring to look the other way when the sharks take a bite at the goodies. Worse is that we actually pay for these custodians.
So long as we have misfits as Minister of Education there will be no progress in the education system in our Bolehland churning out thousands of half baked graduates flooding our employment market who cant even differentiate between child and children in the English language.The constant changes made to the education policy contributes to the present mess we faced and the rots sets in when we have educators at the top who cant even do a proper job.As for zero tolerance corruption it is a fallacy with all worms around eating into the national tabung and getting away scot-free laughing all the way to the foreign banks.So long as ministers, deputy ministers and all high ranking govt officers dont make public declaration of their assets corruptions will continue to flourish in our Bolehland .In China officers caught for corrupt practices and found guilty can be shot and this is something worth considering in our country The MACC should be an independent body answerable to the King and not to the PM.It makes a mockery of everything if they dared not even to investigate ppl of high influence and look up to the signal from the top to initiate any investigations.God save our country from all these crooks before we go bankrupt and into the league of Third World countries.
//Their lack of ownership of equity is a nagging concern that threatens ethnic stability. The New Economic Policy was put in place to address the lack of bumiputera representation in national wealth.//
Can’t we see the folly of what we have been doing since the advent of NEP? Public policies can only help to make people less poor, they can’t and should not be aiming at making people rich. Precisely we have tried to do that and that explained why so many of the assistant programmes were “captured” by the well-connected individuals in the name of NEP or even now NEM. If you want low cost housing, basic amenities and education, may be the government can help you. But if you want to be millionaires, if you want to stay in bungalows, if you want fast cars, French wines and caviar and holidays in the Alps, and second homes and apartments in Perth and elsewhere, you have to depend on your own resourcefulness, hard work and savings. I don’t know whether this makes sense to researchers and policy makers or not?
It is a baloney and a myth for the state to create millionaires of various races. Tell me what benefits have these millionaires gave to the well-being of Malaysia in general? (I know some of you would mention political stability but to me it is a bogeyman created to cow us into submission).
NAZA motor is one billionaire created by the government; in what way the group has benefited the people (be they Chinese, Malays, Indians and others) other than its cohorts? In fact to create this billionaire, the government has to suffer enormous revenue loss and the consumers lost enormous consumer surplus.
The perfect commercial crime is when the banks, the legal advisors, the valuers, the contractor, the auditors, all are in cahoots. In Bolehland, we have many perfect commercial crimes. Everyone is on the same side, against the hapless taxpayer.
Well, folks, you know, really know, what to do in the next GE?
Yes, just do it!!
Well said. UMNO claims that they have produced many professionals, doctors, engineers, lawyers and accountants. They would have produced the same number and more, and more competitive and competent too had they not stopped non-Malays from enjoying the same benefits given to Malay students, which the government chose not to do not because of the lack of resources, but because they wanted to honour the ketuanan Malayu spirit of NEP. In fact the cost of the two scorpene submarines would have produced the same crop of Malays professionals and many more non-Malays professional too without the so-called social engineering under NEP.
Yet having been inspired by the NEP approach in producing billionaire sons of former prime minister, Najib continues with the same corrupt practice while changing the word policy to model.
As long as Mahafiraun still around, malaysian won’t be able to free them self from trap. Let us pray together for the ending of ” malay dilemma ” and malaysian will begin with new chapter of sunshines malaysia.
As long as umno is still around malaysia wont be able to free themself from the trap.
The umno gobermen is not about to do anything positive. So we do it. We are after all sons and daughters of the land. Therefore we can act. And we act by getting rid of umno.
1. Abolish NEP
2. Malays must work harder
3. Become a colony of Singapore
“Can Malaysia escape a trap of its own making?”- | Peter Drysdale::East Asia Forum.
Well the answer is simple.
YES, Malaysia can indeed leave this hole in the ground that it has placed itself in. BUT only if Malaysia wants too.
From local news, it seems that the leaders of Malaysia are rather happy with this hole. Malaysia is exactly where it wants to be. We paid good money to be in this hole (to the tune of several trillion Ringgit) and spent over 40 years to get there.
Can Malaysia leave? Sure, but only if our leaders want to. And they aren’t leaving the party just quite yet.