Towards A Competitive Malaysia #106
Chapter 15: Examining Past Policies
Enhancing the NEP
Before embarking on expanding or even continuing with such preferential programs, we must first rectify their glaring weaknesses.
One quick and simple remedy would be to restrict these privileges and benefits only to needy Malays. Institute a means test. Most Malaysians now file for income taxes; that would be one easy way to determine need. If they are too poor to file any, that is a reliable indicator of need. Another would be to have explicit criteria; thus if you have received your degree with the help of government grants, that would preclude you from partaking in other privileges. The government has already expended considerable resources on you, now it is time to give others a chance and for you to return the favor, or at least not hog the public trough further.
I would get rid of those programs that are not performing or have become too corrupted. My choice would be to axe the BCCI program and sell all the GLCs. Selling the GLCs would save precious funds and earn the government plenty of money. Ridding the BCCI program would reduce the size of the bureaucracy, and with it, corruption. Divert those resources to a trust fund dedicated toward improving life in the kampongs and inner cities by building much-needed infrastructures like roads, utilities, cheap housing, and better schools. In the long run, those would help Malays more than by artificially creating Malay millionaires.
The government must realize that many of its policies and programs are perversely encouraging Malays to be non-competitive. In the language of the social sciences, the government is behaving as the “enabler,” encouraging Malays to be dependent on social crutches and rent-seeking behaviors. “Enabler” is the term used with the battered-wife syndrome to describe the spouse whose very behavior encourages her husband to be abusive, her bruises and protestations notwithstanding. Until there is a realization of this stark reality that UMNO is the enabler, all the brave talk about “glokal” (those with global standing) and “towering” Malays will remain just that—all talk.
One sobering statistic is that by late 1980s Malay participation in the corporate sector was estimated to be nearing 20 percent. Twenty years later the figure had not improved; worse it had actually declined. That is reason enough to jettison the program.
Similarly, the awarding of bids and tenders to Malay contractors has now degenerated into a massive patronage racket instead of a system for nurturing Malay contractors. Besides unnecessarily inflating the costs of public projects often by two- to three-fold increases, such practices encourage the development of Malay “pseudo entrepreneurs.”
There are other more dangerous consequences. As these “contractors” parceled out their work, they have no interest in ensuring the quality of their work. Hence we have school laboratories and assembly halls crashing down. Thus far, these mishaps have occurred when the schools are empty, but it would only be a matter of time when such failures would occur when the classrooms would be full.
One way to improve the system would be to open government tenders to all bidders. Then preferentially award only a limited number to Malay contractors who are within a narrow range from the lowest bidder, but reveal the spread publicly. Thus the public would be apprised of the extra costs and there would be pressure on those contractors to be efficient and to lower their costs on later projects. It would be one way to prevent outrageously bloated costs.
Another barrier to abuse would be to limit Bumiputra contractors to only three such preferential contracts. Beyond that, he (and his company) would no longer qualify for favored treatment. To make sure he does not change his company name in order to qualify for renewed preferential treatment, the winning bidders must be identified by their company name as well as the names of its principals.
Similarly with the scheme of having companies reserve a percentage of their shares for Bumiputras. Again this has been grossly abused. It is now nothing more than a get-rich-quick scheme for the politically connected, and thus a major source of corruption and influence peddling. One remedy would be that if such shares were sold early (under five years), the shareholders would have to donate a percentage of the gains to a trust fund for Bumiputra education. Alternatively, leave the allocating to the issuing brokerage house and get the government out of that business. Those Bumiputras who have the extra cash to invest in the stock market must be sufficiently well to do and sophisticated; they do not need any help from the government.
Some have suggested that the NEP be replaced with a non race-based anti-poverty program. I am not enamored with that idea. I am for limiting and ultimately eliminating the entire NEP, not for expanding it. If the NEP and its successor programs have not proven their efficacy in helping poor Malays, what assurance do we have that they would help poor non-Malays? Expanding the NEP as it is would surely mean even greater leakages and ever more expensive price tag.
The NEP needs a major overhaul. Before that could be done, we must critically evaluate its successes and failures. Meaning, there must be a commitment to learning from the experiences of the past 36 years. Unfortunately the current mindset is such that any critical examination of the NEP would be construed as being anti-national. Consequently, Malaysian policy makers and academics have shunned their collective responsibility of analyzing the policies. The only critical analyses have come from foreign scholars. For the most part they have been laudatory, but we must remember that there is a time lag in their assessments. The current corruption and prostitution of the NEP would not be apparent to foreigner until a decade hence, and by then it would be too late.
Malaysian authorities must be more forthcoming and open if they hope to learn from their past experiences. Thus far the spectacular debacles of the NEP, as with the collapse of Bank Bumiputra, have yet to be analyzed. Until there is a willingness to learn from the past, rest assured those mistakes will be repeated, and on an even grander scale.
Next: Chapter 16: Critique of Current Strategies
Enhancing the NEP
Before embarking on expanding or even continuing with such preferential programs, we must first rectify their glaring weaknesses.
One quick and simple remedy would be to restrict these privileges and benefits only to needy Malays. Institute a means test. Most Malaysians now file for income taxes; that would be one easy way to determine need. If they are too poor to file any, that is a reliable indicator of need. Another would be to have explicit criteria; thus if you have received your degree with the help of government grants, that would preclude you from partaking in other privileges. The government has already expended considerable resources on you, now it is time to give others a chance and for you to return the favor, or at least not hog the public trough further.
I would get rid of those programs that are not performing or have become too corrupted. My choice would be to axe the BCCI program and sell all the GLCs. Selling the GLCs would save precious funds and earn the government plenty of money. Ridding the BCCI program would reduce the size of the bureaucracy, and with it, corruption. Divert those resources to a trust fund dedicated toward improving life in the kampongs and inner cities by building much-needed infrastructures like roads, utilities, cheap housing, and better schools. In the long run, those would help Malays more than by artificially creating Malay millionaires.
The government must realize that many of its policies and programs are perversely encouraging Malays to be non-competitive. In the language of the social sciences, the government is behaving as the “enabler,” encouraging Malays to be dependent on social crutches and rent-seeking behaviors. “Enabler” is the term used with the battered-wife syndrome to describe the spouse whose very behavior encourages her husband to be abusive, her bruises and protestations notwithstanding. Until there is a realization of this stark reality that UMNO is the enabler, all the brave talk about “glokal” (those with global standing) and “towering” Malays will remain just that—all talk.
One sobering statistic is that by late 1980s Malay participation in the corporate sector was estimated to be nearing 20 percent. Twenty years later the figure had not improved; worse it had actually declined. That is reason enough to jettison the program.
Similarly, the awarding of bids and tenders to Malay contractors has now degenerated into a massive patronage racket instead of a system for nurturing Malay contractors. Besides unnecessarily inflating the costs of public projects often by two- to three-fold increases, such practices encourage the development of Malay “pseudo entrepreneurs.”
There are other more dangerous consequences. As these “contractors” parceled out their work, they have no interest in ensuring the quality of their work. Hence we have school laboratories and assembly halls crashing down. Thus far, these mishaps have occurred when the schools are empty, but it would only be a matter of time when such failures would occur when the classrooms would be full.
One way to improve the system would be to open government tenders to all bidders. Then preferentially award only a limited number to Malay contractors who are within a narrow range from the lowest bidder, but reveal the spread publicly. Thus the public would be apprised of the extra costs and there would be pressure on those contractors to be efficient and to lower their costs on later projects. It would be one way to prevent outrageously bloated costs.
Another barrier to abuse would be to limit Bumiputra contractors to only three such preferential contracts. Beyond that, he (and his company) would no longer qualify for favored treatment. To make sure he does not change his company name in order to qualify for renewed preferential treatment, the winning bidders must be identified by their company name as well as the names of its principals.
Similarly with the scheme of having companies reserve a percentage of their shares for Bumiputras. Again this has been grossly abused. It is now nothing more than a get-rich-quick scheme for the politically connected, and thus a major source of corruption and influence peddling. One remedy would be that if such shares were sold early (under five years), the shareholders would have to donate a percentage of the gains to a trust fund for Bumiputra education. Alternatively, leave the allocating to the issuing brokerage house and get the government out of that business. Those Bumiputras who have the extra cash to invest in the stock market must be sufficiently well to do and sophisticated; they do not need any help from the government.
Some have suggested that the NEP be replaced with a non race-based anti-poverty program. I am not enamored with that idea. I am for limiting and ultimately eliminating the entire NEP, not for expanding it. If the NEP and its successor programs have not proven their efficacy in helping poor Malays, what assurance do we have that they would help poor non-Malays? Expanding the NEP as it is would surely mean even greater leakages and ever more expensive price tag.
The NEP needs a major overhaul. Before that could be done, we must critically evaluate its successes and failures. Meaning, there must be a commitment to learning from the experiences of the past 36 years. Unfortunately the current mindset is such that any critical examination of the NEP would be construed as being anti-national. Consequently, Malaysian policy makers and academics have shunned their collective responsibility of analyzing the policies. The only critical analyses have come from foreign scholars. For the most part they have been laudatory, but we must remember that there is a time lag in their assessments. The current corruption and prostitution of the NEP would not be apparent to foreigner until a decade hence, and by then it would be too late.
Malaysian authorities must be more forthcoming and open if they hope to learn from their past experiences. Thus far the spectacular debacles of the NEP, as with the collapse of Bank Bumiputra, have yet to be analyzed. Until there is a willingness to learn from the past, rest assured those mistakes will be repeated, and on an even grander scale.
Next: Chapter 16: Critique of Current Strategies
posted by M. Bakri Musa | 4:43 PM
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