The NEP and Corruption: Why Malaysia is Lagging Behind

By Koon Yew Yin | 13th April 2013

My object in writing this is to support Professor Dato Dr. Woo Wing Thye’s lecture on 12th April in Syuen Hotel, Ipoh. In his lecture he listed 5 root causes for our poor performance in comparison with South Korea and Taiwan.

Prof. Woo, possibly because of the election fever, tried to be politically correct and made little mention of the New Economic Policy role in our failure to keep up with our neighbours. In fact it is not only Prof. Woo who is silent on the NEP – most analysts appear to have sidelined this policy in the election debate to date.

This is a mistake as the real policy culprit explaining our failure to devlop as quickly as our neighbours (see table attached) is the New Economic Policy (NEP) and the abuse of power in the B.N. Government’s implimentation. As a result, our neighbours are doing much better than us in spite of the fact that they all did not have the natural resources such as oil and gas.

The culture of corruption in this country is systemic and built into the policy framework of the NEP. Over the years, this ethnic-based policy has been abused to benefit only a select group of Bumiputera, although the policy was originally targeted at helping the larger community of poorer Bumiputera. Despite the government’s strong defence of the NEP and its attempt to demonise those who are critical of it, no less an authoritative source than the government appointed National Economic Advisory Council has admitted that although ethnic-based economic policies have worked by reducing poverty and addressing interethnic economic imbalances, its “implementation has also increasingly and inadvertently raised the cost of doing business due to rent-seeking, patronage and often opaque government procurement,” which “has engendered corruption.”

This analysis is the same as the one that I have been making in my public writings and speeches. In the profession where I have worked for many years, a system where contractors get jobs because of their ethnicity will invariably breed a culture of ethnic-based cronyism and inefficiency.

For example, IJM Corporation Bhd of which I was one of the founders, did most of their highway contracts as sub-contractors to some Bumiputera Concessionaires. Yet IJM could win a few highways toll concessions on open competitive tenders in India. It is ironical for IJM with a market capitalisation of more than 7 billion ringgit to work primarily as a sub- contractor in our own country.

The same applies in the procurement policies of Petronas. Because of this race based requirement, contracts and concessions were awarded to Bumiputeras who do not have the expertise to carry out and complete the projects. As a result project costs balloon due to the number of layers of sub-contractors required to complete the job.

The percentage mark-ups imposed by each layer are, in essence, a leakage in itself. This has created an underground economy of rent-seekers, which the government has finally acknowledged. However, it still refuses to discuss this matter in an open and transparent manner or seek solutions to it.

Hence, it is not surprising that the culture of corruption has become the norm rather than the exception. Malaysians are accustomed to the culture of having to pay a sum of money (or in kind) to complete a certain transaction, whether in business or in other sectors. Large-scale corruption as mentioned above is rarely caught by the authorities. The Malaysian Anti- Corruption Commission (MACC) prefers to target lower-level corruption and harass opposition members instead of going after the big fishes which enjoy immunity because of their political affiliation with the ruling elite.

It is frustrating for many Malaysians that the BN government has not learnt from the past mistakes and persist in making decisions that bleed the nation of increasingly scarce resources. Hopefully the Pakatan Rakyat will do better. For them to get the country out if its deep hole, they must recognise that the NEP is a crucial road block in our road map to development that must be redressed immediately. We cannot become a fully developed nation by even the 22nd century let alone 2020 if the NEP remains the main policy framework , corruption continues on the same scale and if corrupt leaders keep abusing their powers for self-gain.