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FT AWSJ: M'sia New Socioeconomic Plan- Race Centric Not Merit Centric
By Cris Prystay
5/4/2001 6:25 pm Thu
The Asian Wall Street Journal
Malaysia's New Socioeconomic Plan
By CRIS PRYSTAY
Staff Reporter of THE WALL STREET JOURNAL
KUALA LUMPUR, Malaysia -- The Malaysian government signaled that it
will continue to play a dominant role in guiding the country's
economy, with the twin goals of promoting the interests of the ethnic
Malay majority and achieving high-speed growth.
On Tuesday, Prime Minister Mahathir Mohamed unveiled Malaysia's third
long-term socioeconomic plan, which forecasts average annual growth of
7.5% through 2010 and a doubling of per capita income to $6,213 by
that date. Under the plan -- dubbed the New Vision Policy -- the
government said it will promote the creation of an information
technology-led "knowledge" economy, strengthen capital markets and the
banking sector, and devise new affirmative action programs to increase
the economic clout of ethnic Malays.
The New Vision Policy is the latest incarnation of the government's
New Economic Policy, which was begun in 1971 after Malaysia was rocked
by ethnic riots in 1969. With programs that offered Malays favored
access to education, employment, credit facilities and stock
purchases, the NEP aimed to boost the stake held by Bumiputeras -- or
"sons of the soil" -- in the corporate sector from 2.4% in 1971 to 30%
by 1990. Malays make up just under 60% of the Malaysia's 22 million
people, while ethnic Chinese account for about 25% and ethnic Indians
The NEP lifted Malays' equity in local businesses to 19.3% by 1990.
But the NEP's successor for the period 1990-2000, known as the
National Development Policy, made little headway in reaching the 30%
Malay-ownership goal. Bumiputeras' share of total equity in the
corporate sector declined to 19.1% by 1999, according to figures cited
in the new plan. According to the plan, the share of corporate equity
held by ethnic Chinese fell to 37.9% in 1999 from 45.5% in 1990, while
foreign ownership rose to 32.7% from 25.4%. To help Malays reach the
30% ownership target by 2010, the government said it will continue its
privatization program which favors selling state companies or giving
other concessions to concerns owned by ethnic Malays. Kuala Lumpur
also plans to increase the capacity of higher-education institutions
and to expand national trust-fund schemes set up to distribute wealth
While the pro-Malay policies have contributed to a relatively high
degree of ethnic and social stability in Malaysia, opposition party
critics say the effort has fallen short of spreading the wealth evenly
to the Malay community. Instead, the critics claim it has concentrated
the benefits in the hands of a few well-connected businesspeople and
political figures. "It's aggravated a greater intra-inequality among
the Malays, and in the process has not contributed to either national
unity or integration," said Lim Kit Siang, chairman of the opposition
Democratic Action Party.
Others say the policy has fostered a sense of complacency in many
young Malays, who have grown up expecting a guaranteed place in
Malaysian universities and a job as their due. Presenting the new plan
to parliament, Dr. Mahathir conceded that the Malay community needs to
foster a sharper entrepreneurial instinct. "The government can only go
so far in setting the necessary conditions and the enabling
environment for the restructuring of society to take place," Dr.
Mahathir said. "In the final analysis, it is the Bumiputera community
that will have to intensify efforts for the realization and
accomplishment of these targets. In the face of challenges ahead, the
Bumiputera must be prepared to change their mindset, and even value
Under the new policy, the government will also try to increase Indian
equity ownership in the economy to 3% by 2010, marking the first time
Kuala Lumpur has targeted the Malaysian Indian community for economic
help. "In the past, the division has always been between Bumiputera
and non-Bumiputera. This is a recognition that there's been some
degree of neglect" of the Indian community, said Abdul Razak Baginda,
executive director of the Malaysian Strategic Research Center, a
Emotions have recently run high among ethnic Indians after clashes
last month between Indians and Malays in an impoverished neighborhood
in Kuala Lumpur left six dead. A group of non-governmental
organizations later filed a report to the Malaysian Human Rights
Commission alleging that mostly ethnic Malay police didn't act quickly
or forcefully enough to protect Indians in the slum area. For many
Indians, the incident underscored the degree to which their community
has been neglected in Malaysia's past social and economic policy
"This [new policy] is positive because it's a recognition that they
should be a focus," Mr. Baginda said.
Write to Cris Prystay at email@example.com
The Financial Times, UK
Policy to help Malays extended
By Sheila McNulty in Singapore
Malaysia has extended by another 10 years its affirmative action plan
to bring the ethnic Malay majority parity with the minority Chinese
Mahathir Mohamad, the prime minister, on Tuesday announced continued
commitment to the 2001-2010 New Vision Policy. It sets a target of
Malay control over 30 per cent of the corporate sector - a goal
Malaysia has been trying to reach since it first imposed in 1971 a
quota system favouring Malays in schools, work and share
That system was the cornerstone of the New Economic Policy, the
original affirmative action policy that followed violent race riots in
1969. When it was enacted the Malay stake in the corporate sector was
2.4 per cent. It rose to 19.3 per cent in 1990, but at the end of 1999
the Malay share of the corporate wealth was 19.1 per cent.
"We have still some way to go in achieving effective Malay
participation and creating self-reliant and sustainable Malay
entrepreneurs," Dr Mahathir said in the report.
The prime minister has warned the Malays repeatedly during his 20-year
rule not to get complacent, insisting the policy will one day have to
be dismantled. But analysts did not expect him to do so now, given how
the ruling party has been losing the all-important Malay ground to the
But some Malaysians recently have questioned whether the policy should
be based on economic need instead of race, to help poor Indians and
Chinese as well.
They expect this would lead to a more unified nation, instead of one
where people identify foremost with their ethnic group. This, in turn,
would help prevent racial violence, which, though it has been rare,
left six people dead last month just outside Kuala Lumpur, the
A new perspective on Malaysia's future
KUALA LUMPUR - Malaysia must remain competitive by developing into a
knowledge-based economy (K-economy), given the current global
developments in Information Communication Technology, according to a
new plan unveiled on Tuesday.
Malaysia needs to undertake productivity improvements in traditional
industries and enhance its technological and knowledge capabilities in
order to maintain its competitive edge, according to the "Third
Outline Perspective Plan" (OPP3) prepared by the Economic Planning
Unit of the Prime Minister's Department.
The report, tabled by Prime Minister Mahathir Mohamad at the Lower
House of Parliament, said it was also imperative for local industries
to move along the value chain into related upstream and downstream
activities. These changes are necessary so that the manufacturing and
services sectors can lead economic growth during the OPP3 period.
"Malaysia has yet to match the competency of the more advanced
economies such as South Korea, Japan and Taiwan," said the report.
Malaysia ranked 17th in the K-economy Development Index (KDI), which
compares Malaysia with 21 other countries, which are mainly developed,
in terms of their readiness. With regard to the readiness for the
K-economy, Malaysia is better prepared with respect to its
telecommunications infrastructure and literacy level but has to
intensify efforts to improve its research and development (R&D)
capability, computer usage, Internet connectivity and higher education
The proportion of R&D expenditure to GDP in Malaysia is low compared
with some countries that have successfully built indigenous capability
to innovate, produce new technology as well as design new products. It
added that science and technology and R&D efforts were partly
constrained by the lack of critical mass of scientists and engineers.
In human resources development, the percentage of those in labor force
with tertiary education is still small at 13.9 percent. The enrollment
at the tertiary level of the 17-23 years age group increased to 25
percent but it is still lower compared with many of the newly
Under the OPP3 period, all Malaysian primary school teachers will be
qualified graduates and some will hold Master's degrees and child
psychology qualifications. In line with the shift towards the
knowledge-based economy, the move is to ensure that teachers possess a
high level of competence in teaching as primary schooling provides the
foundation for student's learning ability and absorption of knowledge.
This is among several measures to be taken by the government to
produce a quality labor force, which is knowledge-rich and has
superior thinking skills, in line with the globalization and the rapid
technological advances, according to the Economic Planning Unit's
Other measures include the review of the school curriculum to
inculcate thinking skills and generate creativity and independent
learning among students, especially at the primary and secondary
"A strong basic education is the foundation for building a healthy,
skilled and agile labor force and for competing successfully in the
world market," said the report.
The report said schools would be provided with facilities to allow
them to teach more subjects using interactive multimedia technology
and Web-based teaching. Wireless mobile computing technology will be
introduced in schools in the remote and inaccessible areas so that
they can still enjoy the benefits of Information and Communication
Besides connecting the majority of schools, including those in the
rural and remote areas through Intranet and Internet by the year 2010,
a mechanism would also be set up to link schools with industries to
ensure that the school curriculum will remain relevant to the
industry. "Industries will be encouraged to accept upper secondary
school and college students to participate in attachment training and
internship during school and college holidays," it said.
The other plans include turning universities into centers for the
creation of intellectual capital and new knowledge, in addition to its
role of producing the country's future workforce.
"This will hinge on their ability to produce a pool of high caliber
researchers who are actively engaged in R&D as well as undertake
research activities that have commercial viability. In this regard, a
few of the existing public universities will be restructured to become
research universities focusing on post-graduate degree programs," it
Private institutions will also be encouraged to increase their
involvement in providing education at all levels and given incentives
to those which offer courses in technical and medical. They include
greater flexibility in hiring foreign teaching personnel and less
stringent immigration conditions. In promoting lifelong learning, the
government, according to the report, would provide affordable
accessibility to training courses and training programs through the
Internet and other ICT-related media.
The report said the future growth and development of the economy would
be driven by the knowledge-based industries in all sectors,
particularly the manufacturing and services sectors. In the
knowledge-based economy, high technology and science-based industries
as well as knowledge-intensive industries such as ICT, pharmaceutical
industries and the R&D activities will generate jobs requiring
tertiary education, especially those trained in the science and
Labor productivity growth during OPP3 is expected to increase by 4.2
percent per annum for all sectors, in line with the shift towards the
The report said Malaysia's population was projected to increase to
28.9 million in 2010 at an average growth rate of 2.2 percent per
annum. The growth rate was slower compared with the 2.5 percent per
annum achieved during OPP2 and this was attributed to the continued
decline in the overall fertility rate as more and more women pursue
higher levels of education or training. The fertility rate is the
number of children that a woman will bear during her child-bearing
The working age group of 15 to 64 years is projected to increase from
62.9 percent in 2000 to 65.7 percent in 2010. The size of the labor
force, meanwhile, is expected to increase by 3.1 percent per annum or
an additional 3.3 million during the OPP3 period, to reach 12.9
million in 2010.
"The growth of the labor force is attributed to the increase in the
size of the working-age population and in the labor force
participation rate (LFPR) from 65.5 percent in 2000 to 68.1 percent in
2010," it added.
The female labor force participation is expected to increase from 44.5
percent in 2000 to 49.0 percent in 2010, with more participation in
the professional and technical group.
According to the report, the demand for labor would increase at an
average rate of 3.1 percent annually with the expected rapid Gross
Domestic Product (GDP) growth and this would result an increase in
employment from 9.3 million in 2000 to 12.6 million in 2010.
The services sector is expected to continue to have the largest share
of total employment, where by 2010, it will increase to 51.5 percent,
accounting for 59.4 percent of total employment creation.
At the end of OPP3, the agriculture sector's share of employment is,
however, expected to constitute 9.8 percent of total employment and
the reduction is due to the introduction of high technology
cultivation methods and large-scale farming as well as increased
Accelerating the progress of less-developed states and reducing
socio-economic imbalances among regions will also be the main thrust
of the OPP3.
Mahathir said among the measures to be taken would be to promote the
concentration of economic activities by each state on the basis of
their comparative strength. Besides this, the industrial dispersal
program would be continued as well as further improving infrastructure
and the access to quality basic amenities in the less developed
states, he said.
Mahathir said all the states in the country registered improvements in
the quality of life arising from improvements in per capita income as
well as access to better infrastructure, social services and basic
amenities. As bumiputera (ethnic Malay) companies had already made
inroads into the construction, transportation and agricultural
sectors, there was a need for them to diversify into other high
value-added activities, particularly in the manufacturing, services
and distributive trade, he said.
Mahathir said an enabling environment would be created, including the
provision of incentives and financing, to assist bumiputera
acquisition of appropriate technology as well as management expertise.
In addition, the privatization program would continue to be
implemented to create more opportunities for bumiputera entrepreneurs
at the corporate level. The programs to develop the Bumiputera
Commercial and Industrial Community (BCIC) would focus on building
more sustainable, self-reliant and world-class bumiputera
entrepreneurs capable of competing effectively both in the domestic
and international business, he said.
"There is a need for bumiputera entrepreneurs to develop positive
values and the ethics of business for them to be continuously
successful and self-reliant," he said.
The Business Times, Singapore
M'sia aims to be resilient, competitive: Dr M
By Diana Oon Abdullah in Kuala Lumpur
PRIME Minister Mahathir Mohamed yesterday spelt out Malaysia's
National Vision Policy (NVP), which aims to build a "resilient and
competitive nation" to survive increasing globalisation and the
further reduction of trade barriers in the next 10 years.
Under the NVP, the government is projecting average economic growth of
7.5 per cent over the next 10 years, compared with the 7 per cent
average achieved in 1990 to 2000. Per capita income is also expected
to rise from RM13,359 (S$6,366) to RM23,610 by 2010.
The government will place enormous emphasis on educating workers to
develop Malaysia into a knowledge-based society. It expects the number
of workers in the IT industry to almost triple over the next 10 years,
from 108,000 in 2000 to 307,000 in 2010.
Local private and public institutions will be able to supply the
needed information and communications technology (ICT) workers,
although the government is also banking on bringing back Malaysian IT
professionals working abroad.
However, a package of incentives announced in the Budget last October
met with lukewarm response from Malaysians abroad -- only 12 approvals
were reported by February this year, and some 100 inquiries received
by mid-March. Government officials have acknowledged that Malaysia is
also likely to bring in foreign IT professionals, to be handled by the
Multimedia Development Corporation that oversees the development of
the Multimedia Super Corridor.
The NVP also maintains privatisation as a method of increasing
bumiputra or indigenous Malay corporate ownership. According to the
Economic Planning Unit, bumiputra-controlled companies accounted for
61 per cent, or 109 of the 180 companies privatised up to the year
2000. Bumiputra ownership of share capital in privatised companies
stood at 28 per cent or RM8.1 billion for the period 1971-2000, while
non-bumiputras controlled 28 privatised companies and owned RM5.3
billion or 15.6 per cent of the total equity.
The government, however, continued to own RM16.5 billion, or more than
half of the shares in privatised companies. Privatised projects boost
bumiputra economic participation in that at least 30 per cent equity
in privatised projects have to be owned by a bumiputra, and at least
30 per cent of contract-works for major privatised projects need to go
to bumiputra contractors.
The government continues to support its privatisation programme
despite criticisms following several privatised projects being
reverted to the government. Waste water management company Indah Water
was bought over by the Ministry of Finance last year, and the
government is in the process of a RM6 billion buyout of the Putra and
Star light rail transit companies.
The government's attempts to push more bumiputras into high-paying
jobs made some progress in the last 10 years. By the end of last year,
63.8 per cent of those in high-paying jobs were bumiputras. Meanwhile,
bumiputra engineers made up 26.5 per cent of the profession by the end
of last year, compared with 13.1 per cent in 1991. Bumiputra
representation over the last 10 years also increased in the areas of
law, accounting and medicine. The government is expected to continue
to push bumiputras into tertiary and higher education so that their
representation in all professions will reflect the population
distribution, which is projected to be 68.3 per cent by 2010, up from
66.1 per cent now.