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RMK 9 Is An Extension Of The New Economic Policy (NEP) Which Will Not Only Fail To Make Malaysia Competitive And A Global Champion But Result In Rising Social Inequities, Unfair Income Distribution And Rampant Corruption.


Speech at DAP Forum on 9th Malaysia Plan
by Lim Guan Eng

(Selangor Chinese Assembly Hall, Tuesday): The 9th Malaysian Plan (RMK9) is an extension of the NEP which will not only fail to make Malaysia more competitive and become a global champion but result in rising social inequities, unfair distribution of income and rampant corruption. The National Mission with 5 main thrusts is full of self-contradictions and double-standards that confuses policy with targets or mixes up means with ends.

For instance the first thrust of moving the economy up the value chain is intended to harness our human resources and potential to make Malaysia competitive. However this goal of human capital formation is contradicted by the reaffirmation of imposing quotas in education, government contracts and employment sector. The situation is worse than expected when approvals are never given for companies with bumi equity below 70% or even 60%. Furthermore, R&D as a % of GDP is still low at 0.9% as compared to developed country’s level of at least 2.5%.


The second thrust is to raise the capacity for knowledge and innovation and nurture “first class mentality”. Prime Minister Datuk Seri Abdullah Ahmad Badawi does not want first class infrastructure but third-class mentality but refuses to adopt merit as the standard criteria for selection. The interest in the first woman Vice-Chancellor for University Malaya ignores the fact that there are many qualified non-Malays who have been overlooked. DAP finds it difficult to believe that there are no qualified non-Malays to be a Vice-Chancellor of any Malaysian public universities or be Auditor-General or Accountant-General.


How can Malaysians attain first class mentality if the government is still gripped by racial considerations? Canada appointed a first ethnic Chinese, Adrienne Louise Clarkson who is a Hakka born in Hong Kong (Chinese: 伍冰枝), as the 26th Governor General from October 7, 1999 to September 27, 2005. Judge Anand Satyanand of Indian and Fiji-Indian background will be the first New Zealand Governor-General of Asian ethnicity in August this year. A Chinese and Indian can be appointed as head of state for Canada and New Zealand despite the fact that they do not comprise one third of the population. And yet no Chinese and Indian can be appointed as a Governor of a state in Malaysia.


Further such racial factors are compounded by religious ones. For the first time ever in any 5-year Malaysian socio-economic plan, Islam hadhari is the guiding developmental framework. How can be observed the precepts of  Rukunegara of achieving a greater unity of all her peoples and ensuring a liberal approach when Islam and an Islamic state appears to be the final objective?


The third thrust is to address persistent socio-economic inequalities constructively and productively or achieving growth with distribution. The reason for such gap between rich and poor is the NEP. NEP’s greatest weakness was breeding rampant corruption and abuses of power. The country could lose US$4 billion in foreign exchange trading in 1993, Perwaja’s RM 10 billion losses, Bank Bumiputra twin RM 3.5 billion scandals as well as wholesale distribution of APs and tens of millions of shares to cronies, children and relatives of BN leaders and Ministers.


How many poor and ordinary Malays who are not related or cronies of UMNO own shares or APs? Such huge financial malpractices would have made Malaysia bankrupt, if the fortuitous discovery of mineral resources like oil and gas sustained the country’s finances.Malaysia has the worst income inequality in South-East Asia. The UNHDP Report 2004 shows the richest 10% in Malaysia controls 38.4% of our economic income as compared to our poorest 10% controlling only 1.7%.


Intra-ethnic income inequalities within bumiputera is worse than within, Chinese & Indians as shown by the gini coefficient worsening across all ethnic groups.

  • Bumiputera: 0.433 to 0.452

  • Chinese: 0.434 to 0.446

  • Indians: 0.413 to 0.425

Why is there no real strategy to address the growing intra-ethnic income inequality which validates that the NEP benefits the few who are rich at the expense of the majority who remain poor.


The fourth thrust is to improve the standard and sustainability of quality of life, such as provision of basic amenities of water, electricity and standard of living. This is the responsibility of the government paid by taxpayers’ money and provision of these services should not be privatized. DAP expresses concern that the proposed water privatization bills to be approved in 2 months time would result in not only higher water bills but all consumers being forced to pay sewerage charges to avoid disconnection of water supply. Clearly the public is being forced to pay what is basically cheap to allow some private companies to reap huge profits.


The fifth thrust is to strengthen the institutional and implementation capacity in government departments. To prove that the government is serious, the Prime Minister just has to implement the Independent Police Complaints and Misconduct Commission (IPCMC). To strengthen institutional capacity, the government has to be fair by ensuring that the Malaysian Civil service is not dominated by one race.


As of June 2005, there were 899,250 public servants, of whom 77.04 per cent or 692,736 were Malays.  The rest were: 84,295 Chinese (9.37 per cent), 46,054 Indians (5.12 per cent), 69,828 other Bumiputeras (7.77 per cent) and 6,337 of other races (0.70 per cent). Before the launch of the New Economic Policy in 1971, the racial breakdown of the Malaysian civil service comprised 60.8 per cent Malay, 20.2 per cent Chinese, 17.4 per cent Indian and 1.6 per cent others.


Some 35 years after the NEP, the already under-represented Chinese percentage in the Malaysian civil service had fallen further from 20.2 per cent to 9.37 per cent, while Indians who were somewhat over-represented with 17.4 per cent before the NEP are now under-represented with 5.12 per cent. The government must be serious in finding out why the Chinese and Indians have become so under-represented in the civil service 35 years after the New Economic Policy, with the Chinese falling by 10.8 percentage points and the Indian by 12.3 percentage points from 1971 to 2006.


MCA, SUPP and Gerakan Must Explain Their Support For The 9th Malaysian Plan Reduction In The Ownership Capital Of The Chinese Community From 39% To 27% By 2020 Resulting In A Capital Transfer Of Hundreds Of Billions Of Ringgit.

The 9th Malaysian Plan (RMK9) may result in the ownership capital of the Chinese community to drop from 39% to 27 % by 2020 resulting in a capital transfer of hundreds of billions of ringgit. This follows the RMK9’s stated objective of increasing the ownership capital of bumiputeras to 30% and reserving 3% for the Indian community. No mention was made of the desired portion for foreigners, nominee companies and the Chinese community.


Presently, the par value of shares in 2004 is RM 530 billion is as follows:

·        Bumis 18.9%

·        Chinese 39%

·        Indians 1.2%

·        Others 0.4%

·        Nominee companies 8%; and

·        Foreigners 32.5%


Assuming that nominee companies and foreigners maintain their 40% share, then for bumis to attain 30% and the 3% for Indians, then the Chinese portion will have to drop from the present 39% to 27%by 2020. This transfer of wealth will have great implications for the Chinese community and I am surprised that the Chinese Chamber of Commerce have not highlighted this diminution of wealth.


Apart from MCA, Gerakan and SUPP, which Chinese associations are willing to support such a dilution of ownership capital of the Chinese community. MCA, Gerakan and SUPP must also explain why they supported this reduction in ownership share capital to 27%, especially mechanism will be applied by the government to increase the bumi share to 30% and reduce the share of the Chinese community from 39% to 27%.


MCA, Gerakan and SUPP have to pay the highest political cost if they fail to explain their support of such measures in the NEP. For those members of Chinese business organizations and associations that supported the 9th Malaysian Plan, they should understand why they lack credible support from the Chinese community.


In actual fact, the NEP has succeeded in increasing the bumi ownership capital to 30% in 1990 if the bumis did not dispose off their shares. The NEP’s stated goal of eradication of poverty and economic restructuring so as to eliminate the identification of ethnicity with economic function. However its discriminatory quotas in business licenses and permits, housing, ownership of public company stock, government contracts, university places and government scholarships, has not only failed to achieve these twin objectives but deeply divided Malaysians between bumis and non-bumis.



So Long As Malays Can Sell Their Shares To Realise Short-term Profits, Malay Equity Ownership Would Never Reach 30% Even If NEP Was Extended For Another 100 Years

So long as Malays can sell their shares to realize short-term profits, Malay equity ownership would never reach 30% even if the NEP was extended for another 100 years. If the Malays had held on and not sold the shares, the Malay equity would have reached 30% by its stated period of 1990. Such sales for short-term gains are not done by the poor Malay masses but by the few rich Malays.


By 1990 Malay equity then was 19.3% but this did not include shares held by nominee companies of 8.5%. As nominee companies mainly held shares on behalf of Malays 5%, the Malay equity portion was actually 27.8%. However this 27.8% did not include shares sold. An estimated  half of the Malay preferential shares given were sold for profit gains.


Documented verification is provided by an academic working paper titled, “Privatisation of Ports: A Malaysian Case Study” by Associate Professor Malcolm Tull and Dr James Revely of Murdoch University in January 2001. This Australian study showed that almost 41% of the shares in privatized companies held by the rich Malays were sold.


Applying this rough ratio would mean that the 19.3% of Malay shares in 1990 only represented 60% of the shares given by the government. In other words Malays  had sold 12.9% equity stake.  If Malays had held on to every share given, they would have a total 32.2% equity stake. Adding on to the nominee companies’ stake of 8.5%, in 1990 Malay equity stake would have exceeded 40%.


Clearly the Chinese community’s contributions to nation-building and national development are not appreciated. Former Prime Minister Tun Dr Mahathir said recently that most of the tax revenue collected were from the Chinese community which were then channeled for development projects that benefited the country, particularly the Malays. Mahathir even said that Malaysia would not enjoy the prosperity it achieved now were it not for the contributions of the Chinese community.


Is this the reward for all the hard work, sacrifices and contributions that the Chinese community had to support an extension of a failed NEP which reduces their wealth, and benefits only those cronies who are corrupt? MCA, SUPP and Gerakan must bear full responsibility and pay the highest price for such a grave historical error in supporting the National Mission and Islam Hadhari in the RMK9.


The National Mission is supposed to pursue programmes that enhance the naton’s capability to compete globally, to strengthen national unity and to bring about a better distribution of income and wealth and higher quality of life among the people. By failing to focus on national unity, democracy, political equality, socio-economic justice and a meritocracy, the National Mission will fail in achieving the 2020 Vision of turning Malaysian into a developed nation.


National unity should be based not on race or religion but on a common identity centered on democracy, freedom, justice, integrity and human dignity. Such a shared destiny ensuring political equality and socio-economic justice can create loyalty to each other. However we must strive for economic prosperity through excellence and merit. Only hard work will be rewarded there is no other guarantee of success and giving us a chance of becoming a developed nation by 2020.


* Lim Guan Eng,  DAP Secretary General

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