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KL’s race-based policies create inequality, envy, says economist

KUALA LUMPUR — Malaysia’s affirmative action policies in the past 40 years have created a culture of dependency, corruption and racial envy, a prominent Malaysian economist said yesterday.

The benefits of Malaysia’s New Economic Policy have been felt mostly in its first 20 years only, said Dr Kamal Salih. PHOTO: REUTERS

The benefits of Malaysia’s New Economic Policy have been felt mostly in its first 20 years only, said Dr Kamal Salih. PHOTO: REUTERS

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KUALA LUMPUR — Malaysia’s affirmative action policies in the past 40 years have created a culture of dependency, corruption and racial envy, a prominent Malaysian economist said yesterday.

Dr Kamal Salih, an adjunct professor of Economics and Development Studies at Universiti Malaya (UM), said the benefits of development policies did not truly extend beyond the first 20 years of the New Economic Policy’s (NEP) implementation.

“The problem over the decades involved has not been with the intent nor the content of the NEP and its successors, but the manner of their implementation, which have produced new inequalities, poverty and vulnerabilities in the development process,” he said at the launch of the Malaysia Human Development Report.

“While no further progress has been made in reducing inequality in income distribution over the past decade, the NEP had resulted instead in creating a culture of dependency, corruption and racial envy.”

Successive policies after the NEP, such as the National Development Policy (NDP) and National Vision Policy (NVP), also had the same consequences, as inequality in wealth distribution was not addressed, he said.

Dr Kamal was the lead author of the report, which revealed that the formation of the middle class was fastest during the implementation of the NEP in the 20-year period involved.

But the size of the middle class has remained relatively small for Malaysia, around 20 per cent compared with 50 to 55 per cent in a similar developed country.

The middle class, he said, was defined by the World Bank as households positioned 20 per cent above and below the median income.

Dr Kamal added that NEP-based ethnic classification was becoming less relevant when tackling equity, noting that inequality in Malaysia went beyond race.

The policies were aimed at bringing Malays to be on a par economically with other ethnic groups. But the study showed that inequality had also grown within ethnic groups. Wealth gaps between ethnic groups as a whole did close, but resulted in the creation of a class divide.

“While the bottom 50 per cent has wages making up 97 per cent of their purchasing power, the upper part of the middle class would exhibit a similar pattern to the upper 50 per cent with contribution from wealth effects approaching 11 per cent and increasing as they climb the income ladder,” he said.

“In other words, on the basis of household fiscal capability, Malaysia essentially exhibits a two-class social stratification.”

He added that the New Economic Model’s (NEM) emphasis on the bottom 40 per cent overlooked vertical and horizontal equity in development, such as institutional issues, corruption and rent-seeking behaviour.

“In my view, a piecemeal and project-oriented approach will not do the job; only a comprehensive reform of policies and institutions will set the course of the country’s development in its proper path onwards to economic growth and social justice,” he said. THE MALAYSIAN INSIDER

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