A Report Card on the NEP

I came across this report entitled

Economic Governance and Poverty Reduction in Malaysia (dated May 2002)

by
Three Professors of the Manchester Business School and the Institute for Development Policy and Management, University of Manchester, UK and
a Senior Project Coordinator in Economics at the National Institute of Public Administration (INTAN), Kuala Lumpur.

It provides a 34-page report on how effective Malaysia has been in reducing poverty over the past 30 years with the NEP.

The main areas of poverty described in the report are
Kelantan
Terrengganu
Kedah
Perlis
Sabah
Sarawak,
especially in the rural areas and among the Orang Asli.

Poverty has declined from 49.3% in 1970 to 5.5% in 2000 in the population of Malaysia.
While these numbers are impressive, income inequality appears to have worsened during the 90s and worst among the Malays.

Perhaps this is related to crony capitalism where mega-projects or APs are given to a few connected individuals and these lucky ones earn mega-bucks while those further down the food chain struggle to survive or even go bankrupt.

From the report
“From only a 2.4 percent ownership of share capital in 1970 it was hoped
that by 1990, 30 percent of the share capital in Malaysian hands, would be under
Bumiputera control. In the event, however, only 19.3 percent was, of which about 73 percent was owned by individuals and the rest by the trust agencies (calculated from data in Table 9).”

It is a pity that no research has been carried out on how many individuals own those 73% of the shares. It would probably follow Pareto’s principle that 20% people own 80% of the shares.

Perhaps the low value given for the shares owned by the trust agencies could be attributed to share buy-backs from individuals who had to be bailed out. The MAS buy-back was one such scheme. So the rich remain rich while the poor have support their wealthy life-styles. After all, the NEP was never about an official commitment to reducing income inequality.

The rest of the report describes how the NDP that started after the NEP officially ended carries on the same policies and also with not much effect.

It also mentions that “the Malaysian Parliament has only one committee to monitor the activities of the executive. While its remit is concerned with budgetary allocations, it has no powers to question members of the executive, nor is it even allowed to access all of the relevant data”.

With so little power, Parliament becomes merely a rubber-stamp and an expensive one at that.

The report also suggests that there is a serious weakness in the entire government machinery that is supposed to undertake development programs both in terms of planning and implementation.

One problem when wealth is officially created for individuals and agencies is that the recipient becomes addicted to a higher level of lifestyle and there is a conspicuous consumption of resources. Instead of a car, a helicopter is necessary and this is not reflected in the equity percentages. As a writer mentioned in Malaysiakini, the ownership percentage can easily be adjusted if all the non-Bumis were to sell most of their shares in Bursa Malaysia.

Another writer describes how the NEP enriches mainly those with the proper connections and hardly any poor Malays.

This report provides a third-party assessment and evaluation of how we have progressed since 1970. It offers a good analysis of what has been achieved and suggests many areas for improvement.

I wonder how many in the present Cabinet are aware of its existence or read it.



photo: http://www4.nas.edu/NAS/nasgraph1.nsf/Catalog/rural.jpg/%24file/rural.jpg