This document provides a historical overview of the origins and development of affirmative action policy in Malaya and Malaysia. It discusses:
1) How British colonial policies led to large-scale Chinese immigration, altering the demographic landscape and causing anxieties among Malays about being dispossessed. This led the British to create Malay reservations to protect Malay land.
2) How the proposed Malayan Union scheme after WWII eliminated Malay rights and privileges, leading to its rejection and replacement with the Federation of Malaya.
3) How affirmative action policies saw limited implementation between 1957-1969 independence, due to a pact between UMNO and MCA prioritizing other issues over rectifying economic imbalances. This dissatisfied Malay
1. KajianMalay,sia,Vol. XXI,No,s.I&2,2003
ORIGINS AND DEVELOPMENT OF THE AFFIRMATIVE
POLICY IN MALAYA AND MALAYSIA: A HISTORICAL
OVERVIEW
Ariffin Omar
Schoolof Humanities
UniversitiSainsMalaysia
Penans
It is oftenbelievedthatthebumiputerapolicy is inextricablyintertwined
with the emergenceof the United Malays National Organization
OMNO)', a powerfulMalay politicalparty which havedominatedthe
governmentsince the inception of the Federationof Malaya and
subsequentlythe Federationof Malaysia. While it is truc that the
bumiputerapolicy floweredwith thc New EconomicPolicy (NEP),the
seedsof policiesof safeguardingand favoringthe nativeshad in-fact
beensownduringcolonialtimes.
COLONIAL ORIGINS
As a resultof largescaleChineseimmigrationinto the Malay statesin
the latter half of the 19'1'century and thc early dccadesof the 20'r'
century,the entire demographiclandscapeof the Malay Peninsula
changeddramatically.What was oncea Malay countrybecamca plural
societyin whichtheMalayshadcomecloseto becominga dispossessed
minority.
The reasonis that British colonialpolicieslcd to large scaleChinese
immigration into thc Malay statesand this altered drarnatically the
demographicpatterof thesestates.While townsand urbanareasbecame
predominantlyChinesein charactcr,Chinesesettlersalsomovedout into
the rural Malay heartlandto becomefanners and agriculturists.More
'
UlrrINOwasestablishedin 1946to opposcthe MalayanUnion scherncwhich
aimedat uniting the Malay statesundcrthe rule of a British govelxor aswell
as giving citizenshipto non-Malays on vcry liberal tcrms. Thc Malayan
Union wasalsodesignedto do away with Malay privilcges and createa ncr'r'
Malayannationality.
t 3
2. Ariffin Omar
oftenthannot Chinesesettlershad alienatedMalay landsillegally. Since
Britishpolicy ensuredthat alienswere entitledto hold land,this created
seriousanxietiesamongthe Malays that they would be driven off and
dispossessedof their landsasChinesesettlerscontinuedto makeinroads
into Malay areas.The ultimate nightmarewas that of Malays in their
own stateshavingbeing dispossessedwould end up working as tenants
of westem,Chineseand Indian landlordson land that was once theirs.
Thus Malay representationsto the Colonial authoritiesled to action to
safeguardMalay land held under customarytenureto prevent it from
falling into the handsof non-Malays,and thus Malay reservationswere
createdwherebysuchland could only be alienatedto Malays andcannot
betransfemedout of Malay hands.
But non-Malayswere allowed to hold land acquiredbeforethe various
laws were passedand they could also transfertheir holdings to other
non-Malays.But, pitfalls remained becauseeven though the original
legislationmadeit impossiblefor Malaysto transferreservationland to
non-Malays,thelaw did not preventa Malayto pledgehis landto a non-
Malay andthis loopholewas ruthlesslyexploitedby Chineseand Indian
moneylendersand speculatorswho acquiredcontrol of the land with the
Malay as the mere nominal owner. Only in 1933 was the Malay
Reservation Enactment of the Federation of Malay States (FMS)
amendedto forbid chargeor leaseto non-Malays.For manynon-Malays
in parlicular the Chinese, enactmentslike the Malay Reservation
Enactmentwere perceivedas discriminatoryand a clear indicationof a
policyof "Malayafor theMalays".
The variousenactmentspassedto createMalay Reservationsmeantthat
non-Malayscould still acquireland outsidethesereservations.'British
colonial rule was only interestedin ensuringthat the Malays were not
dispossessedof their land.In no uncertaintermsit wasstatedthat:
We do not holdthattheprotectionof a backwardpeasantryis the
soleor the chiefobjectof thepolicy of reservation.Thepolicy is
territorial,andwhatcverthecompetitivecapacityof theMalaymay
behccannot,asa race,competewith thefar morepopulouspeoples
of otherraccswho are attractedto Malaya.It is a questionof
t TheEconomic Developmentof Malaya, Report of a Mission organized by the
InternationalBank for Reconstructionand Development,GovemmentPress,
Singapore,1955,p.227.
1 4
3. Origin.sandDevelopment
numbers.If thefutureof theMalayis to be assured,hemusthave
roomfor expansion,andthatrequireslandtobereserved.3
Thusthe British tacitly admittedthat the Malay must be protectedfrom
beingdispossessedoftheir lands.
By the 1930s,the Chinesehad effectivelyoutnumberedthe Malays in
theFMS while in the United Federationof MalaysiaStates(UFMS), the
non-Malay population was significant enough to cause concem.
Accordingto the 1931census,38percentof the chinesein the Straits
Settlementsand 3l percentin the Malay stateswere local bom and they
were no longer willing to be treatedas aliens and as such demanded
citizenshiprights and otherprivilegeswhich went with residence.They
alsodemandedan end to the specialtreatmentaccordedto the Malays.
Althoughthe notionsof state,nation and nationalitywere yet to emerge
amongthe politically unsophisticatedMalays, the growing uneasewith
chinesedemandsfor political rights in order to protecttheir economic
interestsin the Malays statesled to a lively debatebetweenthe Malays
whoviewedtheMalay statesasTqnahMel'ayuandthe chinesewho saw
the Malay statesas British Malaya. However, this fledgling debate
betweennative and immigrants rights came to an abrupt end with the
adventof the JapaneseOccupationwith began in l94l and ended in
1945.
MalayanUnion to PersatuanTanah Melayu
Theissueof nativeand immigrant rights was rekindledwith the defeat
of theJapaneseand the return of the British after the pacific war. The
MalayanUnion schemewhich was draftedin Britain during the war by
the colonial office was introducedwithin six months after the British
reoccupationof Malaya.Sir Harold MacMichaelwho wasgiven the task
of negotiatingwith the rulersarrivedin Malaya in October 1945andby
December1945he had obtainedthe consentof the Malay rulers to the
MalayanUnionproposals.
'
RupertEmerson,Malaysia, A Study in Direct and InrJirectRule, lJnjversity of
MalayaPress,Kuala Lumpur, 1966(reprint),p. 513,quoting from the Straits
SettlementslegislativeCouncilProceedings,lgthOctober1932.
l 5
4. Arilfin Ornar
ThisMalayanUnionwas not a federationbut a tightly knit unionof all
theMalaystatesandtheBritishsettlementsof PulauPinangandMelaka
excluding Singaporewhich would still remain a crown colony.
Importantsymbols to the Malays such as Islam, the Malay language
would bc plt asidewhile the Malay monarchieswould be politically
irrelevantand rcclucedto mere figureheads.State governmentswould
ceaseto existandin its placea centralizedgovemmentheadby a British
govcrnorwould be installed.Islamwould not havean official status.A
Fan-Malayaneducationdepaftmentwould be setup and Englishwould
be the comfflonlanguageto fosterfor all. But the greatestblow was the
new citizenshippropoials that would make non-Malayseligible for
MalayanUnion citiiensnip if they had becn bom in Malaya or had
residedthcre fbr ten out of the fifteen years' K' J' Ratnam,a noted
politicalscientiststatedthaton thisbasis,83 percentof the Chineseand
i5 p"r."nt of the lndians in the.Malay stateswould be eligible for
citizenshipundervery liberallaws.'
To addinsultto injury the MalayanUnion would openthe civil service
in the Malay statesio non-Malaysand changewhat was previously
Britishpolicyto makethecivil Servicea preserveof theMalaysandthe
english.5Thus at one strokewhat werc onceMalay stateshad changed
to becomea Malayanentity.The Malayswho werethenativesof these
stateshad becnreducedto a merecommunityresidingand sharingthe
landwith othercommunitiesin a statethat was oncetheirs.Whatever
rightsand privilegesoncenegotiatedbetweenthe Malay rulersandthe
Britishin thc pasthadnow beennr'rllified.
Thus,it wasnot surprisingthatMalay oppositionto the MalayanUnion
schcmewastotalfbr thiswould haveled to thedestructionof theMalay
charactcristicsof theMalay statesaswell asthedemiseof Malay culture
andpossiblytheircthnicidcntitybecausetheywouldbe in no positionto
compete*ith th. otherraccsin thc Malaypeninsular.Sinceotherworks
have dealt with thc Malayan Union episodein greatdetail, it is not
necessaryto go into dctailshereexceptthat it is sufficeto saythatthe
British abandoneclthe schemeand replacedit with the Persekutuan
Ratnam.K. J., Communalismand the Political Proces,sin Malal'a, Ktala
Lumpur,Universityof MalayaPress,1965(reprinted1967)p'75'
rbid.
1 6
5. OriginsandDevelopment
TanahMelayu.6This PersekutuqnTanahMelayu supposedlyreinstated
Malay rightsandprivilegesbut it also gavecitizenshiprights and along
with it, politicalrightsto thenon-Malays.
Theperiodfrom 1948till 1957whenMalayaobtainedits independence
wasa periodof uneasyquiet. It was only with the endingof British rule
that serioussocial, political and economic problem surfacedas both
Malays and non-Malays expect their aspirations to be met by an
independentgovemmentthat derivesits right to rule from the people's
mandate. The Reid Constitutional proposals provided for the
continuationof the specialrights and privilegesfor the Malays in four
areas:Malay land reservation;the reservingof a quota of licensesfor
certainbusinesses;the operationof a quotain the MalayanCivil Service
wherebyappointmentwould be in the ratio of one non-Malay to every
four Malays;andspecialquotasfor scholarshipsand educationalgrants.
However,the Reid Report proposedthat the special position of the
Malays should be reviewed after fifteen years with a view to their
evenfualwithdrawal.This suggestionwas opposedby UMNO and was
consequentlyleft out of the Constitution.Thus the MalayanConstitutlon
setno timelimit for Malayrightsandprivileges.'
Therefore,in four majorareasin the 'specialposition'provisionsfound
in the Constitution viz the Public Service, licences and permits,
scholarshipand land all these came into existenceduring British
colonial rule. But with the exception of land holdings, effective
implementationof the other provisions were questionableand British
attemptsto uplift the economicand socialpositionof the Malays were a
dismalfailure. It was thus left to the independentgovernmentof the
Among the works that dealt with the Malayan Union scheme,the following
canbereferredto, Jamesde V. Allen, TheMalavan Union,New Haven,Yale
University, 1967; Mohamed Noordin Sopiee, From Malayan Union to
SingaporeSeparation:Political Unification in the Malaysia region' I 945-65.
Kuala Lumpur, Penerbit Universiti Malaya, 1974; Anthony J. Stockwell,
British policy and Malay politics during the Malayan Union Experiment'
1942-1948,Monographno. 8, Kuala Lumpur, MBRAS, l94l; Ariffin Omar,
BangsaMelayu: Malay Conceptsof Demo<:racyand CommuniN, 1945 1950,
KualaLumpur,Oxford UniversityPress,1993.
R. S.Milne andD. K. Mauzy,Politics and Governmentin Malaysla,Federal
Publications,Singapore,1978,p. 40.
t'7
6. Arif/inOmar
PersekutuanTanahMelavu to rectify the glaring discrepanciesbetween
theMalaysandthenon-Malays.
THE PERIOD OF LULL 1957-1969
From l95l till theriots of May 1969,no significantprogresswas made
towardsredressingthe economicimbalancebetweenthe Malaysandthe
non-Malays.The govemmentof Tunku Abdul Rahmancarriedon as if
Malayawas still a British colony. Part of the reasonwhy therewas no
detemined affirmative action taken to rectify the economicimbalance
betweenthe Malays and the non-Malays,in particularthe Chinese,was
becauseof a 'bargain' betweenthe UMNO and the MalaysianChinese
Association (MCA) leaders whereby as a quid pro quo the MCA
concededthat the 'specialrights' of the Malays shouldbe protectedand
in returnUMNO concededthatthe Chineseandothernon-Malayswould
begranted'easier'citizenshiprightsbasedon the principle of.iussoli as
well as allowing the Chinese a free hand to pursue their business
interests.8This
'pact' in many ways obstructedany seriousattemptto
correctthe social and economicimbalancebetweenthe various ethnic
communitieswithin the Malayan Federation.In addition, the Malayan
Emergencywhich beganin 1948and endedofficially in 1960did not
give much opportunity for this new state to embark on a positive
affirmativepolicy towardstheindigenousinhabitants.Malay nationalists
were not contentwith the so called
'pact' betweenthe UMNO and the
MCA which was seenasstaticanddetrimentalto Malay interests.It was
arguedby Malay nationaliststhat
'pact' benefitedthe non-Malayswho
would acquirecitizenshiprights as well as otherbusinessautomatically
through the passageof time while the same time frame could never
guaranteethat the Malays would achieveeconomicprogresslet alone
paritywith thenon-Malays.Attemptsby theMalay elite to takemeasure
to acceleratethe economicprogressof the Malaysdid not achievemuch
success.Indeed these Malay elite took over from the British the
administrativestructuresand organizationsthat were setup to tacklethe
oroblemof Malav economicbackwardness.
8
Tunku Abdul Rahman Putra Al-Haj, Looking Back; Monday Musings and
Memories,PustakaAntara,Kuala Lumput, 1911, pp' 59, 178.
t 8
7. Or igins and DeveloPment
For example,theRural IndustrialDevelopmentAuthority (RIDA) which
waslaunchedby Sir Henry Gurney,the British High commissionerwas
takenover.RIDA was establishedwith the aim to assistrural small and
mediumMalay entrepreneursto obtain capital and skill either for the
purposeto start or expandtheir own small and medium businessesor
pariicipatein the businessof buying and trading shares.eIn addition to
RIDA, theFederalLand DevelopmentAuthority (FELDA) was setup at
thebeginningof theFirstFive Year MalayaPlan(1956-1960)mainlyto
help poor and landlessMalays. Thus, we noted that affirmative action
*ur u.ry limited anddid not departfrom the rural groovecreatedby the
British so that the well entrenchedChineseand British commercialand
economicinterestswere not endangered.However,the aspirationof the
Malayswent much more beyondbeingbetter farmersand peasantsand
theseaspirationshadto be met by the Malay nationalists'
In 1959,Dato' (laterTun) Abdul RazakHussein,the then Deputy Prime
Minister set up the Ministry of Rural and National Development.A
massiverural developmentprogram was rnitiatedcountrywidewith the
aim to provide infrastructurefacilities to the rural Malays. However,
theseruial developmentprogramswere nothing more than an election
ploy to win votes for uMNo against Parti Islam Se Tanah Melayu
(peS). Thus, a programmefor rural developmentdid not alter in any
iignificantway the socio-economicconditionsof the rural Malays. The
detailsof the distributionof householdby incomeshow the Malays at a
markeddisadvantagewhen comparedto the Chineseevenwith the rural
developmentprojects.
The 1960ssaw a rise of a nascentMalay entrepreneurialclass,petty
tradersandthosewho ownedsmall andmedium industries.The massive
rural developmentprojects which consistedof infrastructureprojects
such a bridges, roads, pipe water, community halls and electricity;
agricultural projects as animal husbandry; the provision of new
e[uipmentandtraining for fishermen,supply of boatsand engineshad
ronl. impact. Even more significant was the establishment of
cooperativesand other commercialinstitutionsas well as the provision
of iredit on very easy terms. Undoubtedly this did help the rural
peasantryto a limited extent. But dissatisfactionremainedbecausein
n
The FiennesReportgives an evaluationof RIDA's activitiesbetween 1953
and1955.It is notedthatthe emphasiswas on Malay rural economy'
l 9
8. ArilJinOmar
comparisonwith the non-Malaysin particularthe Chinese,the Malays
hadimproved marginally and were still at the peripheryof mainstream
economicdevelopment.While token rural developmentmay help the
rural Malays,urbanMalays demandedmuch more suchas involvement
in transportation,mining, contracting,etc.Pressureon thegovemmentto
look into the interestof this nascentmiddle-classMalays was apparent
in the first Bumiputera Economic congress (Kongres Ekonomi
Bumiputera)which was held in June 1965. Detailed strategiesand
economic programmes were planned. Three years later another
Bumiputera-Economic congress was held in 1968 to evaluate the
achievementsof programmes implemented since 1965. These
Congresses,did createa mindsetamongthenascentmiddleclassMalays
of the need to assertthemselvesmore forcefully into the economic
sphereevenat the costof challengingwhat wasviewed asa Chineseand
foreignpreserve.Thus this meantin effect the unravellingof the
'pact'
betweenthe Malays and the Chineseagreedto during the pre-merdeka
period.
Malay backwardnessin educationwas an acuteembarrassmentto the
political elite that hadpromisedprogressto the Malay masses.A careful
perusal of the enrolment of Malays from the primary to the post-
secondarylevel of educationrevealedall too clearly the need to take
effectiveremedialmeasuresto stemthe declineof Malays in education.
In terms of enrolment in tertiary education, it required serious
government intervention to ensure that the Malays had a fait
iepresentationin tertiary educationin Malaysia. It was only after the
riots of 1969, that the governmenttook stepsto ensurethat Malays
would be given the necessarysupportto pursuetheir educationat the
tertiarylevelascanbe seenin the increasein Malay enrolment'
20
11. OriginsandDevelopment
Undoubtedlythe riots of 13May 1969were a watershedin termsof the
affirmative policies initiated by the government. The vehicle to
implementthe affirmativeactionto uplift the Malays was the NEP. The
NEP hadtwo major goals.The first goal was the eradicationof poverty
irrespectiveof raceand the secondgoal had four objectiveswhich was
restructuring employment pattems, restructuring ownership in the
corporatesector, creating a bumiputera commercial and industrial
communityand finally establishinggrowth centersin rural areas. The
mainideawhich ranasa threadthroughthe four objectiveswasto lift up
the economicsituationof the bumiputeras(especiallythe Malays) who
were economicallyfar behind the Chineseand other ethnic groups in
Malaysia.The rationaleof restructuringemploymentpatternswas "to
ensurethat employment in the various sectorsof the economy and
employmentby occupationallevelswould reflectthe racial composition
of the country"lO. The core of the policy was to ensurepreferential
employmentof bumiputerasin the professionaland industrial sectors
andto breakthe colonialmould of confining the Malaysto rice farming,
fishingandotherlow incomejobs.
TheNEP waspublishedin the form of the SecondMalaysiaPlan, 197l-
1975.The implementationof the NEP could be divided into several
phases.The first phaseof the NEP was the vital period of its inception
i.e. l97l 1973.This periodwas one of the preparationduringwhich the
main architectof the NEP, Tun Abdul Razak and his suppofterswere
layingthegroundworkfor an affirmativepolicy of rapid Malayizationas
well as fending off oppositionfrom detractors(including the Tengku)
who had misgivingsabout the whole policy. The secondphaseof the
NEP couldbe characterizedas the rapid emergenceof Malay economic
nationalismin the wake of Malay political domination and this took
place between 1973 1975. During this second phase important
individualssuch as Dr. Mahathir Mohamad and Tengku Razaleigh
Hamzahas well as other key supportersof the NEP acquiredpolitical
poweroverthegovernmentand UMNO andimplementedvigorouslythe
policies of the NEP. Malay economic nationalism was clearly
manifestedin the PetroleumDevelopmentAct (PDA) of 1974 and the
IndustrialCoordinationAct (ICA) of 1975.The third phaseof the NEP
wouldcoverthe period from 1976-1984during the premiershipof Tun
to
Govemmentof Malaysia, 7973, Mid-Term Review of the Second Malaysia
Plan, 1971-1975,KualaLumpur,GovernmentPress,p. 9.
')2'
12. Arffin Omar
Husseinonn (January1976-July1981)which sawthe establishmentof
the NEP's equity redistribution systemsand finally the period from
1984-1990which saw readjustmentsand change of the NEP under
Dr. Mahathir Mohamad who assumedthe office of Prime Minister in
July1981.
The first phase under Tun Razak saw the government's direct
involvementin economicactivities especiallydramaticwas the switch
from involvcmentin agriculturalandruraldevelopment(asseenin the
1960s)into the commercial and industrial sectorsof the Malaysian
economy. Tun Razak focussed on the emergence of bumiputera
enterprisesand entrepreneurs.A mechanism for the emergenceof
individual Malay shareholdersas a means to restructure equity
ownershipin favor of Malay bumiputeraswas put into operationvia the
pDA l gi4 andthe ICA in 1975". The IndustrialAct was meantto
strengthengovernmentcontrol over foreign and chinese capital while
the PetroleumDevelopment Act was meant to establishgovernment
controlover oil resources.
The ICA coveredall manufacturingenterprisesabovea certain size in
termsof fixed assetsand numberof employeesirrespectiveof whether
or not they are entitled to investmentincentives.It also ensuredthat
manufactuiing licensing was directly linked with an entetprise's
observanceof the goalsof theNEP. Ethniccompositionof employment
aswell as promotion of bumiputera companiesas distributorswas also
covered under the ICA. Tun Razak wanted to create a viable and
economicallyactiveMalay middleclass.However,hewasalsoawareof
the fears of the Chinesecommunity concemingthe NEP and attempts
weremadeto tamperthe draconianimpactof the ICA betweenthe years
l97l till 1974.t2Nonetheless,RazakhadensuredthatUMNO would call
l l
It must also be noted that the policy of Malay participation in equity
ownershipwas enhancedthrough the establishmentof the PNB and the
ASNB in 1978.
originally, the lcA requirednon-Malaymanufacturingfirms with morethan
S10b.000in shareholders'funds and employing more than twentyfivc
workersto divestat least30 percentof their equity to Malay interests.They
alsohaveto incorporateinto their workforce a numberof Malay employees
to reflectthe Malay proportionin the country'spopulation.This would mean
that at least 50 percent of the workforce must be Malays. However'
apprehensionby both chinese and foreign investorscausedthe govemment
A A
L.+
t l
13. OriginsandDevelopment
theshotsin the government.In a speechat the26tbGeneralAssemblyof
UMNO held on 21 22 June 1975, Tun Razak had envisionedthe
emergenceof a Malay middle classin a restructuredMalaysiansociety
by 1990.To achievehis aim, UMNO wasintegratedinto the government
to overseeeconomicand social policies that will benefit the Malays.
With this in mind, UMNO establishedseven bureaus which were
Bureausof Politics, Finance,Education,Labor and Labor Union,
Religion,Culture,SocialandWelfare,andEconomics.A11thesebureaus
were involved in the implementationof the NEP. But the economic
bureauplayeda vital role in overseeingthe implementationof theNEP.
However,it is only after 1975 with the emergenceof Dr. Mahathir
MohamadandTengkuRazaleighHamzahthatthe implementationof the
NEP gatheredsteam.As headof the UMNO economicbureauTengku
Razaleighreorganizedthe bureauand stressedfour main objectivesin
implementingthe NEP. Thesewereresearchon thenationaleconomyas
awhole,an in-depthstudyof the economicpositionof the Malays in the
nationaleconomicdevelopment,analyzing the implementationstrategies
of Malaysiandevelopmentplans from the viewpoint of Malay cultural
valuesandfinally to scrutinizeeconomicissuesfor the UMNO General
Assembly.
With the deathof Tun Razak in 1976,the implementationof the NEP
restedon the shouldersof Dr. Mahathir and Tengku Razaleigh. Even
beforethe deathof Tun Razak, the percentageof bumiputera capital
accumulationwas rising. However, this increasewas through public
enterprisessuchasPernas,Majlis AmanahRakyat (MARA) and Urban
DevelopmentAuthority (UDA) which accumulated the capital as
bumiputera trust agencies on behalf of bumiputera individuals.
However,capitalheld by public enterpriseson behalf of bumiputeras
wasno indicationof economicprogressof the Malays and thereforethe
UMNO Economic Bureau raised the issue of transferring equity
ownershipto bumiputeraindividuals.This suggestionwas conveyedin a
seminarheld on 8-9 May 1976commemoratingthe 30'nanniversaryof
the foundingof UMNO. Basedon this suggestionstepswere taken to
establishagenciesto promote individual bumiputeraequity ownership.
to modify the ICA so that its implementationwould be unifonn. It should
alsobenotedthatunfavorableeconomicconditionswhich aff-ectedMalaysia
in 1975alsoledto modificationsof thc lCA.
25
14. ArilJinOmar
The YayasanPelaburanBumiputerawas set up in 1978 as one of the
first suchagencies.In 1979,thePermodalanNasionalBerhad(PNB) and
theAmanahSahamNasionalBerhad(ASNB) was established.Through
the establishmentof such agencies a system of equity transfer to
bumiputeraindividualwas carriedout.
when Dr. Mahathir Mohamad becamePrime Minister in 1981, he
initiateda ..Look East"policy in Decemberof the sameyear.Thoughhe
felt that the Japaneseeconomicmodel was suitablefor Malaysia,it was
obvious that he was adapting it to carry out the bumiputera atflrmative
policy. His early tenurewas markedby a recessionin 19t14that lasted
io, on" and a half years. Mahathir eased restriction on foreign
investmentto the extentthat a foreign-investedcompanywith 50 percent
of its produceexportedcould be 100 percentforeign owned. The lcA
wasalio revisedin 1985and 1987to easetheobligationscompanieshad
to fulfill to obtain manufacturinglicenses.However, the trend towards
transferring shares from public companies to individuals continued
unabatedJuring the Mahathir era which saw a greatertie up between
UMNO and individual Malay entrepreneurswho acquiredtheseshares.
Undoubtedly, the NEP did contribute to the emergenceof a Malay
middle class which did in time bring about a significant degree of
political stability within the political framework. While it cannot be
ienied that the NEp was aimed mainly at uplifting the Malays and
ensuringstability, it cannot be denied that the non-Malays were not
outrightlosersin this affirmativepolicy.
It is generallybelievedthatthe chinesecommunitylost out asa resultof
the affirmativepoliciesof the NEP. However,the reality is different.At
the inceptionof the NEP, the first Prime Minister had statedclearly that
he would nevercondonea specialrightspolicy of
"robbing Peterto pay
Paul"ll, and as suchtherewould be no outright confiscationof Chinese
entreprisesand companiesto be handedover to Malays.The Tunku had
in mind the anti-Chinesepolicies initiated by the Sukarnoregime of
lndonesiaduring which therewas wholesaleappropriationof Chinese
propertieswhich were handedover to Indonesianperibumis in the late
lqsor and 1960s.The netresultof sucha policy wastheimpoverization
of the state.Even Tun Abdul Razakwho was very sympatheticto the
'r TengkuAbdul Rahman,LookingBack,Kuala Lumpur,PustakaAntara'
1917, p.243.
26
15. OriginsandDevelopment
Malay nationalistshad statedin the official declarationof the NEP that
"the governmentwill ensurethat no particulargroup or communitywill
feelany senseof deprivationor lossor feel any senseof deprivationof
his rights,privileges,income,job or opportunity"'o.Thus, even in the
drawingup of the NEP, non-Malay participationwas evidentas can be
seenin the contributionof Tan Sri Thong Yaw Hong, a Chinesewho
headedthe Economic Planning Unit (EPU) and who was assistedby
severalotherseniorChineseeconomistsservingin thegovernment.
Thusthereweremoderatingeffectsthatwere evidentin theNEP when it
was madeclear that the "government
will spareno effort to promote
nationalunity and developa just a progressiveMalaysian societyin a
rapidlyexpandingeconornyso that no one will experienceany loss or
feel any senseof deprivationof his rights, privileges, income,job or
opportunity."''While ensuringto safeguardthe interestsof the Chinese
community,Chineseleaderswere also awareof the needfor a dynamic
affirmativepolicy to help the Malays economically and bring about
stability.Nonetheless,the Chinesecommunity had enoughpolitical and
economicacumento adjustand benefit from the NEP. While the initial
yearsof theNEP gavethe Chinesecommunity someanxiousmoments,
especiallythe years 1976 to 1985,but it was evident that the Malay
leadershipwould not go to extremes in their affirmative policies
especiallyif extrememeasureswould leadto Chinesedissatisfactionand
thedryingup of foreigninvestmentinto Malaysia.
A goodindicatorasto how the Chineseadjustedto theNEP would be to
investigateChineseprivate sectorresponses.Chineseentrepreneursand
businessmenforged businessand political ties with economicallyand
politically establishedMalays. Thus Malay bureaucrats,top military
personnelandmembersof the royal families were invited to participate
as shareholders.Through such means Chinese entrepreneursand
businesswere able to circumvent obstaclesposed by the NEP by
involvingwell connectedMalays into their businessandthusbeingable
to procure licenses,permits, contracts and other businessventures
regulatedby the state.IndeedshrewdChinesebusinessmenformedjoint
ventureswith Malays and even exploited important sourcesof Malay
t.a-
MalaysianBusiness.October16.1986.p. 15.
''
Malaysia, l9'll, Second Malaysia Plan, t97 I 1975, Kuala Lumpur,
GovernmentPress,pp. v-vr.
21
16. Aril/inOmar
capitalsuchasPernas,PNB andPerembaBerhad(an investmentarm of
UDA). Even UMNO corporations such as the Fleet Group and
institutionalfunds suchas tire LembagaUrusanTabungHaji' Lembaga
TabungAngkatanTenterawerealsoinvolvedwithChinesebusiness
enterprises.
Thenew classof Malay millionairessuchasTun Daim Zainuddin'Tan
Sri Azman Hashim,Tan Sri Wan Azmi Wan Sulaiman'Tan Sri Rashid
Husseinand even membersof the royalty such as Tunku Imran ibni
TuankuJaat'arof Negeri Sembilanhad their chinese businesspartners'
still there*"r. .urrulties in this periodof adjustmentandmany chinese
businessmenandenterprisesthatdidnotadapttothechangingeconomic
climatedeclinedand evenceaseto exist.But it would be unfair to state
that the NEP benefited only the Malays to the total detriment of the
chinese community. lt would be correctto statethat it inaugurateda
periodofcollaborationbetweencertainsectorsoftheChineseand
ir,1uluycommunitiesin the economicsphereand this easedconsiderably
ethnictensionsbetweenthetwo.
However, a seriousstudy of the NEP woulcl show that the Malaysian
g o v e r n m e n t h a d a l w a y s t r i e d t o b a l a n c e t h e d e m a n d s o f M a l a y
iationalists for tangibleeconomicachievementsfor the Malays and the
needtotakederegulatorymeasuresandrespecteconomicprinciples
ensuresustainedeconomic growth as only growth can fulfill Malay
demandstbreconomicprogress.TunHusseinonn'sadjustmentstoth
ICAandDr.Mahathir'spolicyadjustmentuptol936arecasestonote
Thus,two decadesof thoNEP hasseentheriseof the equityownership
of humiputeras improved to 20'3 percent according to government
statistics.Though this falls short of the 30 percentenvisaged,it is still
impressive.The result is the emergenceof a Malay middle-classand
new Malay entrepreneurs.Thus as far as the Malay Peninsula is
concerrred,theaffirmativepoliciestowardsupliftingtheMalaysledtoa
modusvivenclibetweentheMalaysandtheChineseandthis|essene
considerablysenousethnictensionsbetweenthesetwo communitiesand
broughtaboutpoliticalstability'
However,it would be unrealisticto assumethatrectifyingthe cconomic
andsocialimbalancebetweentheMalaysandtheChineseshouldb
beginning and thc end of affirmative economic and social action in
Irlilaysial While the May l3tr'riots ushcredin the bumiputerapolicy to
28
17. Or igins ctndDeveIoPmen/
help the Malays, other indigeneouscolnmunities such as the babas,
Sams-samsand the Portuguesecommunity of Melaka as well as the
orangasli and even more so the nativesof Sabahand Sarawaknced a
continuationof the affirmativc action policiesto uplift them frorn their
economicandsocialbackwardnessbecausein comparisonto the Malay
communitythey areevenfurtherbehind. Article 153of the Malaysian
Consitutionwas extendedto Sabahand Sarawakin l97l and therefbre
the nativesof Sabahand Sarawakacquiredthe samespecialstatusas
PeninsularMalays for purposesof reservationsand quotas.lndeed,
Article 153 (l) statesthat "it shall bc the responsibilityof the Yang
di-PertuanAgong to safeguardthe specialposition of the Malays and
nativesof any of the statesof Sabahand Sarawakand the legitirnatc
interestsof other communities."Thus, the key is the definition of
"Malay" or
"native." SinceI am not a lawyer, I leavc it to thc legal
mindsto grapplewith thesethorny issues.To what cxtentthe affirmative
actionpoliciesthatwerc initiatedin Malayawerc implementedwith the
samevigour anddeterminationin the statesof Sabahand Sarawakhave
yet to be investigatedin greaterdetail. Howevcr, I note that Article
l6lA (4) of theMalaysianConstitutionstatesthat"the Constitutionsof
theStatesof Sabahand Sarawakmay makc provisionscorrespondingto
Article 153". Thus, the onus of affirmativeaction in both thesetwo
importantstatesin Malaysia rests squarcly on thc shouldersof their
respectivestategovernmentsand to what extent that rcsponsibility is
effictively dischargeddepends on the political will of those who
effectivelycontrolledthestategovernment.
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