Wednesday, July 31, 2013

Are Bumiputra Right Ethical and/or Islamic? Part II


This is the continuation of the paper written in 2003 while I was doing my Business Ethics class at the university in a course leading to the award of the MBA. It is an academic paper backed by statistics, in the line of social justice and ethics. I chose this topic over perhaps 30 other topics as the NEP and the Malays social standing have always interest me and I would then like to know more about the arguments for and against affirmative action.

Again, as an academic paper, it will not be wise for me to take a stance, so instead I tried to look at both perspectives, argues for both perspectives before reaching a conclusion. This paper was co-written with my fellow colleague Siti Nafisah, HR GM at a leading oil and gas organization.




1.0              INTRODUCTION                                                                                      

2.0              HISTORY LEADING TO AFFIRMATIVE ACTION                           

2.1              THE AFTERMATH OF MAY 13 RIOT                                      
2.2              HOW DID THE NEP FARE?                                                         

3.0              THE ETHICS OF NEP                                                                               

3.1              DISTRIBUTIVE JUSTICE                                                           
3.1.1        STATISTIC                                                                          

3.2              COMPENSATORY JUSTICE                                                       
3.3              ARGUMENTS AGAINST NEP                                                    
3.4              IS THE NEP ISLAMIC?                                                                 

4.0       CONCLUSION                                                                                             

2.0 History Leading to Affirmative Action in Malaysia

Malaysia gained independence from the British in 1957. At the point of independence, the Malaysian societies were based on 3 major races – indigenous Malay and other native tribe population, and the immigrant population of Chinese and Indian. Social disparity had existed in pre-modern Malaysia even before the arrival of European colonial powers. However during those eras, the population was relatively homogenous and so social and economic disparities were silently condoned and accepted as a fact of life.

Large scale Chinese immigration started in the second half of the nineteenth century as the British encouraged such immigration to provide cheap labour for tin mines. By 1901, 46 percent of the population of the state of Perak constituted of Chinese.

Likewise, labourers from India were encouraged with the establishment of an Indian Immigration fund in 1907. They were given free passage and accommodation to their employment place in the then Malaya. As a result, the Indian population increased almost twenty-fold from 20,000 in 1891 to 380,000 in 1931.

The Chinese labourers concentrated on the tin mines, while the Indian immigrants were employed as rubber estate and railway workers and lived as isolated communities.

In contrast, the Malay population proportion dwindled from 90 percent at the beginning of the nineteenth century to 45% in 1931, as a plural society emerged in pre-independence Malaysia.

This period of mass immigration coincided with the period of rapid growth of the country’s economy.  The increasing number of non-Malays coupled with their increasing control of the economy, became a source of fear and jealousy to the Malays. Coupled with the resentment against the British colonialism, it became an important factor in organizing the Malays politically.

As Malaysia was gaining independence in 1957, even development amongst the major races was a ‘feature’ the plural society. The immigrants, who used to be a ‘transient’, were now permanent residents. By the late 1960s, 85 percent of the economic middle class were from the immigrants.

A growing sense of alienation and resentment led to the racial riots which started in Kuala Lumpur on the evening of May, 13, 1969, or the May 13 Incident as it has since come to be known, and is one of the most controversial political events in Malaysia's history.

Racial hatred between Chinese and Malays that peaked May 13, 1969 started the bloodiest riot ever seen in the streets of Kuala Lumpur. Over two hundred were killed, and over 450 seriously injured, shattering the `image' of racial harmony in Malaysia for years to come.

The May 13 Incident was a result of the increasing economic wealth among Chinese-Malaysians, while the indigenous Malays were left out in the economic wilderness.

The Aftermath of the May 13 Riot

It was obvious that the social and economic imbalances in the Malaysian society  were developing along racial line, culminating in the May 13 riot. It has become an explosive phenomenon to discuss the economic disparities. It was against this background that the Malaysia ‘s ambitious ‘affirmative actions’ policy was formulated in 1971 under the name of the New Economic Policy (NEP).

The NEP was launched in July 1971 and it stressed the its ultimate and over-riding objective of forging national unity. It contained a two-pronged development program. The first prong aimed at reducing and to eventually eradicate poverty by raising income levels and increasing employment opportunities for all Malaysians. The second prong aimed at accelerating the process of restructuring the Malaysian society to correct the economic imbalance, so as to eliminate the identification of race with economic functions.

These two objectives can be categorized as distributive and restructuring objectives.  The distributive objective can be considered a noble aim as it was intended to eradicate poverty irrespective of race, and hence no implication of racial biases.  Poverty is obviously more widespread amongst the Malays and hence there are disproportionately more Malay poor than other races, but there are also a signification Chinese and Indians who were poor.

However, the second objective is intended to correct the imbalance amongst the races, obviously favouring the Malays and other indigenous groups (labeled as Bumiputra or son of the soil). To this end, the government set a timetable that within a period of 20 years from the inception of the NEP, as stipulated the Second Malaysia Plan
·         Malays and other indigenous people will manage and own at least 30 percent of the total commercial and industrial activities in all categories and scale of operations
·    A Malay commercial and industrial community will be created by means of deliberate training and human resource development programs
·      The employment pattern at all levels and in all sectors, particularly in the Modern Rural and Urban Sectors, must reflect the racial composition of the population
·         New industrial activities in the selected new growth areas will be established.

How did the government expect to achieve all of the above targets? The government would need to intervene and participate directly in the commercial and industrial enterprises. Agencies such as PERNAS, UDA, MARA, PNB etc were created to realize the objectives. These government agencies played the role of interventionist with the objective of improving bumiputra’s economic participation.

Another component in the NEP was a large-scale human development and training including the setting up of junior colleges throughout the countries, sending student overseas for tertiary education, instituting quotas for enrollment in local universities and granting bursaries and scholarship. NEP also tried to restructure employment at private companies by instituting racial quota. Large companies with certain capital and employment were required to restructure their ownership to ensure Bumiputra’s participation and ownership.

The targets that the government had set were formidable, to say the least. The Malays had high expectation that the NEP would improve their position, while the non-Malays, especially the Chinese were full of apprehension and would prefer to maintain their status quo.

How did the NEP fare?

While at the end of NEP in 1990, the government has not been able to achieve this target, the benefit it has provided to the country has been tremendous. Economically a good proportion Malays are no longer in the poverty line and would be able to compete with the rests in the country.

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