NEW ECONOMIC POLICY
• The NEP was launched by the Malaysian
government in 1971 under the Prime
Minister Tun Abdul Razak. The NEP ended
in 1990, and was succeeded by the
National Development Policy in 1991.
• The approach used was growth with
equity and active government
participation in the economy.
• the government participation is important
to ensure equitable growth because
different ethnic group were at different
levels of economic achievement at the end
of the 1st Malaysia Plan.
• The shortcoming of the system were
blamed for the racial riots in 1969.
OBJECTIVES OF NEP
• The overriding objective of the NEP was national
unity and to foster nation-building.
• After the may 13 tragedy, the policy makers in
Malaysia were of the view that national unity
can achieved under two-pronged strategies:-
restructure the society
Period Malays Chinese Indians Rural
1957-1958 55.7 12.1 19.8 44.2 16.8
1967-1968 50.2 12.3 25.6 42.4 17.6
1970 49.3 13.9 20.2 41.7 15.2
Table shows the households with incomes less than RM120/month (%)
*Source: Fong Cha ONN, 1990
Most rural households are Malays involved in
agriculture with relatively backward methods used
in farming resulting in unproductive yields
Strategy for poverty
1. The absorption of the poor rural households
into the modern sector through non-
2. The raising of the productivity of farmers
mainly through new land
development, provision of irrigation facilities
and replanting of rubber with higher yielding
3. The provision of basic services such as
education, health and utilities e.g. electricity
and water supply.
Strategy for restructuring
1. Employment by sectors should commensurate
more to the racial composition of the
population i.e. about
2. Bumiputera should own and manage at least
30% of the equity of the corporate sector, other
Malaysians 40%, while foreigners 30% (30:40:30)
3. The need to create Bumiputera Commercial
and Industrial Community (BCIC). The Malaysian
Policy planners viewed the shortage of
Bumiputera entrepreneurs as a major block in
achieving a fairer distribution of income.
• To ensure success on the restructuring of
society, many new measures had been
introduced e.g. many enterprises were set up
through statutory bodies like
MARA, FELDA, FAMA, MARDI to facilitate the
entry of Malays into modern urban sectors
• Besides the existing government agencies, new
RISDA, MAJUTERNAK, MAJUIKAN, were built to
raise income and productivity of the bumiputera.
ACHIEVEMENTS OF NEP
Increase in GDP i.e. high economic growth.
In 1970s, the average annual growth rate was
8.3%, which continued well into 80s and 90s. The
rapid growth rate was accompanied by relatively
low and stable prices as well as low and declining
The manufacturing sector has been expanding
rapidly since 1970
Fairer distribution of income.
Increased employment opportunities.
The rapid growth resulted in a doubling of
employment from about 3.4 million in 1970 to
6.7 million in 1990.
Improvement in the participation of
Bumiputera in the modern sectors since 1970.
there was a large reduction of Malays involved in
the agriculture sector and those who
stayed, most adopted modern farming.
FACTORS RESTRICT THE
ACHIEVEMENT OF NEP GOALS
The recession of the 80s.
Projects undertaken by the private sector was
badly affected as they were unable to secure
domestic or foreign loans.
The banking sector faced problems of unpaid
• The Bumiputera were relatively inexperienced in
their business ventures and many went
• Attitude of the Malays towards the policy and
• Attitude of the non Malays toward the policy
• The approach adopted was Balanced Development
• It is important in order to establish a more united
and just society.
• NDP aimed at making Malaysia a fully developed
nation by the year 2020
• National unity remains the ultimate goal of socio-
STRATEGY OF NDP
The NDP maintains the elements of the NEP
i.e the two pronged strategy
However four new dimensions were added to the
basic strategies in order to eradicate poverty faster
and accelerate the process of restructuring
The four new dimensions
• Shift the focus of anti-poverty strategy (NEP)
towards eradication of hard core poverty while
at the same time reducing the relative poverty.
• Focus on employment and rapid development of
an active BCIC as a more effective strategy to
increase meaningful participation of Bumiputera
in the modern sectors of the economy.
• Rely more on the private sector to be involved in
the restructuring of society
• Focus on human resource development as a
fundemental requirement to achieve the
objectives of the growth and distribution
The development thrusts for the NDP
encompassed the following critical aspects:
1. Growth and equity
2. Balancedd development
3. Reducing and eliminating the social and
4. Strengthening national integration
5. Development a progressive society
6. Human resourse development
7. Science and technology
8. Protection of environment and ecology
The GDP grew from RM79.1 billion in 1990 to
RM209.3 billion in 2000
Reduction of poverty
the overall incidence of poverty had reduced
from 17.1% in 1990 to 7.5% in 1999
Fairer distribution of income
the percentage of Bumiputera involved in the
secondary sector increased to 18.7% in 2000
while in tertiary sector was increased to 49.0%
Improved quality of life.
the quality of living of Malaysian had improved
compared to the situation in 1990.
• Text book of “The Malaysian Economy: Past and
Present” by Habibah Lehar