In Pursuit of Equality: Affirmative Action and Malaysia’s New Economic Policy

Written for the subject Law, Justice, and Social Change.

The campaign for equality between Malays and non-Malays has been, for over fifty years, a campaign marred with significant controversy and muddled policy ideation and execution. This essay will set forth the argument that the efficacy of affirmative action policies is contingent on a critical and consistent awareness of their own limitations. This will be exemplified through an examination of Malaysia’s pro-Bumiputera policies, with a particular focus on the New Economic Policy (NEP, 1971-1990).[1] Bumiputera is a term used to describe an ethnic group of Malays who are largely native to the Malay Peninsula and Archipelago.[2] Affirmative action typically provides preferential treatment in education, employment, and business to increase the economic participation of a disadvantaged group. A distinct feature of Malaysia’s affirmative action is that Bumiputera are a disadvantaged majority, hence more economically advanced Chinese and Indian ethnic minorities have felt particularly victimised by this policy regime. In this way, the campaign for equality has been (and continues to be) a highly inflammatory, racially charged issue in Malaysia. This essay will first examine the colonial history of racial inequality in Malaysia. This will contextualise an exposition of frameworks for understanding what forms of justice and equality are relevant. It is through these frameworks that the NEP will be critically evaluated. I will provide the possibility presented by the NEP, as well as three of its primary limitations. This includes an over-reliance on quotas, lack of focus on intra-ethnic inequality, and the opposition to ethnic integration. It is from this evaluation that my overall argument will be substantiated.

The ongoing campaign for racial equality in Malaysia operates against a backdrop of significant racial stratification, a colonial legacy of British hegemony from the late 18th to mid-20th centuries. Under colonial rule, land and economic policies heavily restricted native Malays from participating in the growth and development of Malaysia’s economy beyond subsistence farming.[3] As Malaysia’s economy expanded, rubber and tin exports became the largest contributors to GDP, both industries heavily dependent on Chinese and Indian migrant labour. This resulted in severe ethnic labour stratification, leaving Malays to dominate rural areas and first- and second-generation migrants to take over urban centres. In 1957 with the withdrawal of the British, the “special position” of native Malays as Bumiputera was constitutionalised, setting the precedent for future affirmative action.[4] The catalytical moment for the pro-Bumiputera campaign were the violent riots of May 13, 1969. Intense pressure drove the government to develop a more potent policy response to rebuilding the economic systems which had thus far marginalised Bumiputera. This policy response was the NEP.

This appreciation of Malaysia’s history of racial tension and inequality is necessary to examine precisely the nature of the injustice against Bumiputera. The slew of colonial structures superimposed onto Malaysian society created a complex social and legal environment which predominantly subjugated Malays. Therefore, the injustice is largely systemic in nature. In this way, a ‘structural approach’ to injustice is necessary; “a search for explanations rather than… attribution of blame”.[5]  Hence, the campaign for equality in Malaysia has largely pursued redistributive justice through the more equal allocation of economic resources between Bumiputera and non-Bumiputera.  

It is then necessary to explore specifically what kind of redistribution, and therefore equality, is being understood and pursued. A traditional tenet of liberal democracy is the notion of ‘equality before the law’ – a “blindness to differences” which supposedly positions the law as an incorruptible actor.[6] Paradoxically, ‘colour-blindness’ becomes more an obstacle than a tool to achieving justice in polyethnic countries.[7] This kind of “sameness approach” risks conflating legal equality with social equality: even if legal structures affected and treated Bumiputera and non-Malays equally, it is not enough for equality to actually realise.[8] Furthermore, it fails to take in to account the starting position of native Malays as socially and economically inferior. Hence, affirmative action takes a “disadvantage approach” to equality.[9] This considers how existing inequalities and differences can be ameliorated through policies which target marginalised groups. Furthermore, the equality understood by the pro-Bumiputera campaign is as equality to non-Malays, such that “Malays and other indigenous people will become full partners in all aspects”.[10]

The introduction of the NEP in 1970 marked the start of a policy regime which transformed Malaysia. Its binary cognition of the pursuit of equality for Bumiputera has penetrated effectively all subsequent discourse. The NEP is distinct for its two-prong policy goals: (1) “eradicate poverty, by raising income levels and increasing employment opportunities for all Malaysians, irrespective of race”, and (2) the “restructuring of Malaysian society to correct economic imbalance, so as to reduce and eventually eliminate the identification of race with economic function”.[11] The policy also highlighted that these prongs were intended to be “inter-dependent and mutually reinforcing”, implying an understanding that each would be pursued with distinct policy instruments.[12] It is the second prong of this twofold approach which primarily addresses interethnic inequality for Bumiputera. Furthermore, references to “restructuring” indicate a consciousness of the systemic nature of Malaysian racial inequality aforementioned.

The NEP must be credited for its efficacy of its aggressive and comprehensive approach. The recognition of special measures and a “differences approach” presented a key opportunity for the reconciliation of inter-ethnic tensions and broader inequality. In 1970, 67.8% of Malays were employed in the agricultural sector, compared to 31.4% of Chinese and 48.6% of Indians. By 1995, only 22.2% of Malays were employed in agriculture, with 24.9% employed in manufacturing and 24% in services (incl. government services). Hence, the upskilling of Malay workers has resulted in the significant growth of a Malay middle class, also seen in the urban migration of Bumiputera. [13] This upskilling was primarily achieved through a strong push for Malay participation in tertiary education. In 1971, it was mandated that all public universities reserve 55% of positions for Bumiputera. Furthermore, a separate 1-year matriculation program was developed in the 1980s, with only 10% of places allowed for non-Bumiputera, most of whom have to take the 2-year Sijil Tinggi Persekolahan Malaysia (STPM).[14] The effects of these policies are clear in the drastic increase in public university enrolment for Bumiputera. In 1970, Malays constituted 54.1% of tertiary enrolment. By 1980, Malay students comprised 72.8% of total enrolment in public universities.[15] Therefore, a relatively aggressive policy stance towards affirmative action allowed the NEP to stimulate a significant degree of real change across the 20 years it was in place.

However, the NEP’s hamartia lies in its lack of self-awareness of its own limitations. What the policy had in breadth it lacked in depth, and there was an inadequate consideration of a number of flaws which were ultimately to the detriment of the pursuit of equality. The first of these limitations is that the NEP has excessively relied on quotas to determine its success. In this way, the success of the policy is predicated on achieving equality of outcomes, not equality of opportunity. This is evident in the policy’s execution, which includes the aforementioned tertiary education quotas, as well as a 30% Bumiputera equity target and preferential employment in government institutions. To achieve these targets, barriers to education and employment were lowered significantly.

Whilst effective in creating an initial boost in Bumiputera economic participation, lowered barriers to entry meant a portion of this increase was superficial. This is because participation was erroneously conflated with competitive participation. Though Bumiputera were receiving more degrees and getting higher-skilled jobs, actual capability development, resourcefulness, knowledge expansion, and resilience had not been promoted. In 1990, Bumiputera owned 19.3% of total corporate equity, up from 2.4% at the introduction of the NEP.[16] This seemed to indicate significant improvement towards the 30% equity ownership target. However, the inclusion of system abuses, like the widespread Ali-baba business practice, casts doubt on the validity of these measures. In an Ali-baba arrangement, a Malay company fronts for a foreign company to procure a government grant for the foreign company. An estimated £2.1 billion is lost annually by the government on Ali-baba deals and other system abuses.[17] Furthermore, many argue that the prolonged emphasis on lowering barriers to entry has caused a culture of dependency. For example, weakness in the Malay business community was exposed by the 1997 Asian financial crisis, at which time numerous prominent Malay businesses had to be bailed out by the Mahathir government.[18] These two examples reveal the hypocrisy of the NEP: even though Bumiputera economic participation appeared more equitable by the NEP’s targets, upon closer examination, this participation is not always meaningfully improved. Therefore, the NEP’s extended reliance on outcomes as a measure of equality meant the pursuit of real opportunities for socioeconomic equality were partially obscured.

Furthermore, the NEP’s single-minded conception of equality as inter-ethnic equality was also fundamentally flawed due to a failure to consider intra-ethnic inequality. Crucially, pro-Bumiputera affirmative action was entirely ethnic-based, meaning benefits were applied indiscriminately across all Malays, regardless of individual merit or need. Whilst this approach may have been effective in the initial stages of the policy (when inter-ethnic inequality was most severe), the inability of quotas and race-specific programs to discriminate within Bumiputera eventually became a serious limitation of the NEP. As the Malay middle class grew, increasing class differentiation meant pro-Bumiputera policies began to disproportionately benefit more advantaged Bumiputera. Non-Malay Bumiputera, who live predominantly in the Sabah and Sarawak areas of East Malaysia, have been particularly disenfranchised by the lack of needs-based criteria, despite comprising 10% of the Malaysian population. In 2004, 43.2% of Peninsular Bumiputra (incl. Kuala Lumpur) fell below the poverty line, compared to 69.2% of East Malaysian Bumiputra.[19] This indicates significant disparities between more urban Bumiputera who are more able to take advantage of affirmative policies, and rural Bumiputera who face higher barriers. Therefore, the NEP failed to take a cross-sectional approach to pursuing justice and equality for Bumiputera, resulting in substantial intra-ethnic inequality.

Finally, the NEP’s divisive policy strategies were largely counterproductive in achieving equality. Here, I emphasise the distinction between economic equality, legal equality, and social equality. It can be argued that the NEP was somewhat successful in improving inter-ethnic economic equality and legal equality. However, ethnic-based policies have predominantly served to reinforce racial segregation at a detriment to social equality. This is for two reasons. Firstly, at its inception, the NEP made a crucial overpromise: “the Government will ensure that no particular group will experience any loss or feel any sense of deprivation”.[20] Given the emphasis on preferential programs in the public sector, reallocation and redistribution of finite resources like education would invariably lead to the deprivation of one group in pursuit of benefit for another. Hence, ongoing controversy has led to a stark socio-ethnic divide, evidenced through political tensions between the United Malays National Organisation and opposing parties. The marginalisation felt by non-Bumiputera minorities is also evident in the “brain drain” of “top scholars, top economists, [and] top accountants” who have and continue to leave Malaysia for better rights.[21] Many feel that the continuation of preferential policies has become a misplaced kind of retributive justice for these minority groups. Secondly, the NEP has created a Bumiputera dominated public sector and non-Bumiputera dominated private sector. Relevant affirmative action included “preferential recruitment and promotion, particularly into prominent roles and decision-making positions”.[22] As of 2019, Bumiputera employees accounted for 79% of total public sector employment, despite only comprising 69% of Malaysia’s total population.[23] [24] This economic segregation seems fundamentally antithetical to the NEP’s initial goal of eliminating “the identification of race with economic function”.[25] In this way, the inability of the NEP to recognise that its prolonged implementation may come to reinforce racial divides precluded its ability to successfully pursue widespread social equality.

Ultimately, the campaign for racial equality in Malaysia, as pursued through the New Economic Policy, has been consistently controversial in its treatment of systemic inequality. Not only did the NEP fail to recognise these limitations at its inception, but it also failed to substantively address them in the next 20 years it was implemented. This is demonstrated by the three primary limitations outlined above. Though there have been future policy developments (New Development Plan, New Economic Model) which attempted to rectify these limitations, the essence of the NEP and its two-pronged approach still pervades and limits the present understanding of equality in Malaysia. As a half-Malaysian person myself, I hope future governments will eventually gain a full grasp of the rigor and policy change required to achieve racial equality.

Bibliography

Gordon, Robert W. “Undoing Historical Injustice.” In Justice and Injustice in Law and Legal Theory, edited by Austin Sarat and Thomas R. Kearns, 35–76. University of Michigan Press, 1996. http://www.jstor.org/stable/10.3998/mpub.10283.6.

“GOVT to LOOK into WAYS to TACKLE BRAIN DRAIN – PM ANWAR.” 2023. Prime Minister’s Office of Malaysia. September 23, 2023. https://www.pmo.gov.my/2023/09/govt-to-look-into-ways-to-tackle-brain-drain-pm-anwar/.

Greycar, Reg, and Jenny Morgan. 2004. “Thinking about Equality.” UNSW Law Journal 27 (3). https://www.austlii.edu.au/cgi-bin/viewdoc/au/journals/UNSWLawJl/2004/44.html.

Guan, Lee Hock. 2005. “Affirmative Action in Malaysia.” Southeast Asian Affairs, 211–28. https://www.jstor.org/stable/27913284.

Law of Malaysia: Federal Constitution. 1957. Vol. 160. https://www.jac.gov.my/spk/images/stories/10_akta/perlembagaan_persekutuan/federal_constitution.pdf.

Lee, Hwok-Aun. 2017. “MALAYSIA’S BUMIPUTERA PREFERENTIAL REGIME and TRANSFORMATION AGENDA: MODIFIED PROGRAMMES, UNCHANGED SYSTEM.” Trends in Southeast Asia 22 (1).

———. 2021. “Malaysia’s New Economic Policy and the 30% Bumiputera Equity Target: Time for a Revisit and a Reset.” Perspective, no. 36 (March). https://www.iseas.edu.sg/wp-content/uploads/2021/03/ISEAS_Perspective_2021_36.pdf.

———. 2022. “Malaysia’s New Economic Policy: Fifty Years of Polarization and Impasse.” Southeast Asian Studies 22 (2): 299–329. https://doi.org/10.20495/seas.11.2_299.

Ministry of Foreign Affairs, Malaysia. 2010. “BRAIN GAIN MALAYSIA PROGRAMME.” High Commission of Malaysia, Wellington. 2010. https://www.kln.gov.my/web/nzl_wellington/news-from-mission/-/blogs/brain-gain-malaysia-programme.

McNamara, Luke. 2004. “Equality before the Law in Polyethnic Societies: The Construction of Normative Criminal Law Standards.” ELaw Journal: Murdoch University Electronic Journal of Law 11 (2). https://www5.austlii.edu.au/au/journals/MurdochUeJlLaw/2004/18.html.

Pak, Jennifer. 2011. “Malaysia’s ‘Ali Baba’ System Causes Ethnic Tension.” BBC, July 10, 2011. https://www.bbc.com/news/business-13746051.

Raman, Santhiram R., and Tan Yao Sua. 2010. “Ethnic Segregation in Malaysia’s Education System: Enrolment Choices, Preferential Policies and Desegregation.” Paedagogica Historica 46 (1): 117–31.

Rongen, Gerton, Zainab Ali Ahmad, Peter Lanjouw, and Kenneth Simler. 2023. “Regional and Ethnic Inequalities in Malaysian Poverty Dynamics.” The Journal of Economic Inequality 22 (1): 101–30.

Rosli, Firdaos. 2019. “The (Non) Evolution of Malaysia’s Public Sector.” Institute of Strategic and International Studies (ISIS) Malaysia. May 13, 2019. https://www.isis.org.my/2019/05/13/the-non-evolution-of-malaysias-public-sector-2/.

Second Malaysia Plan 1871-1975. 1971. https://www.pmo.gov.my/dokumenattached/RMK/RMK2.pdf.

Siddharta, Amanda. 2024. “Share of Population in Malaysia from 2019 to 2024, by Ethnicity.” Statista. August 22, 2024. https://www.statista.com/statistics/1017372/malaysia-breakdown-of-population-by-ethnicity/.

[1] I acknowledge that the NEP only represents one era of the overall pro-Bumiputera policy regime. However, this essay will focus exclusively on the NEP for the purposes of brevity and concision.

[2] Malaysian Constitution, Article 160, Section (2)

[3] Khalid, 2021

[4] Law of Malaysia: Federal Constitution, pp. 134-135

[5] Gordon, 1996, p. 38

[6] McNamara, 2004

[7] McNamara, 2004

[8] Greycar & Morgan, 2004

[9] Greycar & Morgan, 2004

[10] Second Malaysia Plan, p. 1

[11] Second Malaysia Plan, 1971, p. 1 (own italicisation)

[12] Second Malaysia Plan, 1971, p. 1

[13] Guan, 2005, pp. 213-214

[14] Raman & Sua, 2010, p. 126

[15] Guan, 2005

[16] Lee, 2021, p. 5

[17] Pak, 2011

[18] Guan, 2005, p. 220

[19] Rongen et al., 2023, pp. 106-108

[20] Second Malaysia Plan, 1971, p. 1

[21] Prime Minister’s Office of Malaysia, 2023

[22] Lee, 2017, p. 4

[23] Rosli, 2019

[24] Siddharta, 2024

[25] Second Malaysia Plan, 1971, p. 1