New Economic Policy New Economic Policy

image Prior to 1970, Malaysia's development policy was primarily aimed at promoting growth with a strong emphasis on the export market. Although the economy grew very rapidly during this period at an annual average of 6.0 per cent, there was insufficient emphasis on distributional aspects, resulting in socio-economic imbalances among the ethnic groups with negative social consequences in the form of a racial riot in 1969.

The launching of the New Economic Policy (NEP) in 1971 was a watershed in the Malaysian economic policy history. The NEP underscored the importance of achieving socio-economic goals alongside pursuing economic growth objectives as a way of creating harmony and unity in a nation with many ethnic and religious groups. The overriding goal was national unity. To achieve this goal, two major strategies were adopted:

  • To reduce and eradicate absolute poverty irrespective of race through raising income levels and increasing employment opportunities for all Malaysians; and
  • To restructure society to correct economic imbalances so as to reduce and eventually eliminate the identification of race with economic function.

An equally critical aspect of the NEP was that it was premised upon a rapidly growing economy. Growth was a necessary condition so as to provide increased economic opportunities for the poor and other disadvantaged groups to enable them to move out of poverty and to participate in the mainstream economic activities. In addition, it ensured that distribution did not take place from the reallocation of existing wealth but from expanding and new sources of wealth. The implementation of the strategies to eradicate poverty and restructure the society resulted in a significant improvement by 1990. The poverty rate declined from 49.3 per cent in 1970 to 16.5 per cent in 1990 and reduced further to 1.7 per cent in 2012.

In terms of corporate equity restructuring, 63.3 per cent of corporate equity in Malaysia was owned by foreigners in 1970, while the Bumiputeras owned 2.4 per cent. The NEP set a restructuring target of 30 : 40 : 30, where by 1990, the holdings of the Bumiputeras should reach 30 per cent, other Malaysians 40 per cent and the foreigners 30 per cent, in the context of an expanding economy. In 1990, the Bumiputera share of equity amounted to 19.3 per cent of total corporate equity share and the holdings of other Malaysians reached 46.8 per cent and 33.9 per cent for foreign and nominee holdings. Although the Bumiputeras have not achieved the 30 percent equity ownership target by 1990, the progress made by them has been substantial compared to the position in 1970. By 2010, the total value of corporate equity has expanded rapidly and increased the absolute holdings value of all groups.

[ Top ]

Pages: 1  2