World on Fire - Brownstein, Michael [143]
17 Along with foreign investors, Malaysia’s entrepreneurial Chinese minority controlled all of the country’s most lucrative, large-scale commercial enterprises, both agricultural and nonagricultural.18
To redress these extreme ethnic wealth imbalances, the Malaysian government adopted sweeping ethnic quotas on corporate equity ownership, university admissions, government licensing, and commercial employment. It also initiated large-scale purchases of corporate assets on behalf of the Malay majority. After 1976, under what was effectively compulsory corporate restructuring, many Malaysian Chinese companies were required to set aside 30 percent of their equity for Malay interests—typically with no choice about the identity of their new Malay “business partners.” More recently, privatized entities, and companies seeking to list on the Kuala Lumpur Stock Exchange, were required to have a bumiputra shareholding of at least 30 percent.
19
In many respects the results of the NEP have been impressive. While the NEP has not lifted the great majority of Malays (particularly in the rural areas) out of poverty, it has helped to create a substantial Malay middle class. Between 1970 and 1992 the percentage of Malays occupying the country’s most lucrative professional positions went from 6 percent to 32 percent. The proportion of bumiputra doctors rose from 4 percent to 28 percent; dentists from 3 percent to 24 percent; architects from 4 percent to 24 percent; and engineers from 7 percent to 35 percent. In the corporate sector the bumiputra ownership share of corporate stock at par values jumped from 1.5 percent in 1969 to 15.6 percent in 1982 to 20.6 percent in 1995. There is no possibility that free markets could have produced such results.
20
By creating a small but visible Malay economic elite and by bringing Malay participation into important economic sectors—for example, the construction, rubber, tin, shipping, and communications sectors (all formerly dominated by foreign investors or Chinese and Indian Malaysians)—the NEP has helped promote a sense among the bumiputra that a market economy can benefit indigenous Malays, and not merely foreign investors and entrepreneurial “outsiders.” According to Prime Minister Mahathir, who frankly concedes that the NEP has tended to favor elite, well-connected Malays, the NEP serves an important symbolic function:
[I]f these few Malays are not enriched the poor Malays will not gain either. It is the Chinese who will continue to live in huge houses and regard the Malays as only fit to drive their cars. With the existence of the few rich Malays at least the poor can say their fate is not entirely to serve rich non-Malays. From the point of view of racial ego, and this ego is still strong, the unseemly existence of Malay tycoons is essential.
21
Today, in addition to a number of Malay tycoons, some of Malaysia’s best doctors and attorneys are Malay—a fact acknowledged even among the Chinese, who just thirty years ago made no secret of their contempt for Malays.
22
Neighboring Indonesia provides a useful counterpoint. The massive capital flight and ethnic violence suffered after 1998 by Indonesia contrasts sharply with the situation in Malaysia, where the Asian financial crisis produced no anti-Chinese backlash or rioting, no ethnic confiscations, and very little capital flight. While the comparison between Malaysia and Indonesia has its limits,* there is a strong consensus that Malaysia’s systematic market interventions over the last thirty years have helped improve the country’s ethnic relations.
23
At the same time, the accomplishments of the NEP should not be overstated. It is unclear how well the NEP would have fared in the absence of the extraordinarily dynamic growth rates of the 1970s and 1980s. More critically, the NEP has failed to achieve some of its most ambitious objectives. Despite inflated official claims, for example, the NEP has not succeeded in “eradicating poverty,”