The New Economic Policy (NEP) (Malay: Dasar Ekonomi Baru (DEB)) was a social re-engineering and affirmative action program formulated by the National Operations Council (NOC) in the aftermath of the 13 May Incident in Malaysia.
The policy sought to achieve its objectives through rapid expansion of the economy over time and set its target of substantially reducing the incidence of absolute poverty by 1990.
The policy opined that the core problem that stood in the way of national unity was the division of racial groups by economic function; particularly the association of Malay and other indigenous races with subsistence agriculture.
The overarching principle of the policy was the creation of "a socio-economic environment in which individual Malaysians find self-fulfilment within a system which provides for proportional participation, management and control in the economic life of the nation".
This discovery led to disputes among the Malay Rulers, Chinese miners, affluent chieftains and villagers, resulting in formal British colonial rule in 1874.
In Malaya, Henry Nicholas Ridley, Director of Singapore and Penang Botanical Gardens, introduced rubber plantations in the early 1890s when he convinced the Kinderly Brothers of Inch Kenneth Estate in Selangor and a Chinese tapioca planter, Tan Chay Yan in Malacca to adopt rubber plantations as a commercial enterprise.
Before independence in 1957, Malaya's economy was recovering from the destruction brought about by World War II, entailing huge reconstruction costs to the British colonisers.
However, the British agricultural policy during that period discouraged the participation of indigenous communities in the export crop economy, despite interest in smallholding rubber plantations.
The racial riots of 1969 occurred against the backdrop of high poverty rates among the indigenous population and was compounded by communal political tension.
The socio-political justification for NEP was: National Unity is unattainable without greater equity and balance among Malaysia's social and ethnic groups in their participation in the development of the country and in the sharing of the benefits from modernization and economic growth.
These investors could be selected by the company being listed on the stock exchange, or the Ministry of International Trade and Industry, which would normally recommend such state-owned trust agencies as Permodalan Nasional or the Armed Forces pension fund.
The Gini index declined from 51.3 in 1970 to 44.6 in 1997, and 1987 figures indicated the mean income of the Malays had improved relative to both the Chinese and Indian communities.
[8][10] The Chinese community in Malaysia accepted the NEP as a necessary evil to avoid Indonesian-style aggression,[citation needed] which the ruling party consistently instigate and deemed appropriate as their threat based policy.
However, much of it remained in effect through other governmental policies; the New Straits Times reported that this was because as of 2007, "the government believes the aim of having 30 per cent Bumiputera equity has yet to be achieved".
[12] In recent years, the NEP has come under attack as being an inefficient system that promotes a laid-back attitude among the Bumiputra ; it is racial-based and not deprivation based.
[citation needed] NEP critics have argued that setting a target of 30% of Bumiputra trained and certified to run companies would represent a better equality in terms of opportunity.
Criticisms also arose from the fact that there was no planned assistance for Malaysian Chinese and Indian communities to achieve their 40% goal during the actual implementation of the NEP.
[citation needed] The manufacturing sector is exempted from the Foreign Investment Committee (FIC) Guidelines, the 30 per cent Bumiputera equity and restrictions in market entry have been removed for all sub-sectors.
Most Bumiputra opt to enter a one-year matriculation programme, which is considered by some to be less intensive than the two-year Sijil Tinggi Persekolahan Malaysia (STPM) or Malaysian High Certificate of Education, which is equivalent to the British A-levels.
The Malaysian High Certificate of Education (STPM) is open to all races, but the Matriculation programme has a 10% quota for non-Bumiputra (meaning that 90% of students admitted must be Bumiputra).
For example, Badruddin Amiruldin, who was elected as UMNO's Deputy Permanent chairman, waved a book about the 13 May incident at the assembly during his speech while declaring, "No other race has the right to question our privileges, our religion and our leader", continuing that any such action would be akin to "stirring up a hornet's nest".
The following day, Dr. Pirdaus Ismail, a UMNO Youth Executive Committee member, stated, "Badruddin did not pose the question to all Chinese in the country.
In 2005, Khairy Jamaluddin, the UMNO deputy youth chief was debated by then MCA (the major Chinese component party of the ruling Barisan Nasional) vice-president Chua Jui Meng on a nationally televised debate – both leaders agreed to Chua's proposal to set up a national committee to review the NEP.
[20] In 2006, a major dispute arose when the Asian Strategic and Leadership Institute (ASLI) issued a report calculating Bumiputra-held equity at 45% – a stark difference from the official figure of 18.9%.
One strongly disputed issue was ASLI's decision to consider government-linked companies as Bumiputra-owned, inflating the calculated figure of Bumiputra equity.
Others have argued that the debate over inter-ethnic disparities has obscured intra-ethnic inequities, citing the increased Gini coefficient for Bumiputra (from 0.433 in 1999 to 0.452 in 2004), Chinese (0.434 to 0.446) and Indians (0.413 to 0.425).
[23] UMNO critics contend that the official figure does not take into account the huge volume of shares, amounting to 7.9 percent in 1999, that is held by nominee companies.
Independent studies have revealed that politicians and political parties, including UMNO, have resorted to using nominee companies to conceal their ownership of corporate equity from public scrutiny.
[25] Many non-Malays (Chinese and Indians) have left Malaysia for other developed countries that do not practice policies that favor one race over the others in political, economical, and social contexts.
This is believed to have led to the shortage of skilled workers, that directly caused the inability of Malaysia to pursue rapid economic development during the early 1960s until 1990s, during which the East Asian Tigers have done so.