Malaysia cautiously challenges longtime affirmative action policies

In a delicate balancing act, Malaysian Prime Minister Najib Razak unveiled in a widely anticipated economic strategy Tuesday proposals to boost growth but also dilute affirmative action privileges for ethnic Malays, his political base.

The new plan is designed to lift an export-led economy that suffers capital outflow and has lost its shine compared with rising Asian manufacturers like Vietnam. But it faces stiff resistance from within the ranks of Mr. Najib’s own party and is unlikely to immediately win back the ethnic Chinese and Indian minorities who abandoned the government at the last election.

Speaking at an investment conference in Kuala Lumpur, Najib said Malaysia’s affirmative action program, called the New Economic Policy (NEP) and introduced after race riots in 1969 to redress social imbalances, had become a brake on economic growth. He said public spending on poverty should be needs-based, rather than ethnically oriented, and took aim at income gaps between ethnic groups.

“We can no longer tolerate practices that support the behavior of rent-seeking and patronage, which have long tarnished the altruistic aims” of the NEP, he said, in a surprisingly direct dig at his own ruling party, the United Malays National Organization (UMNO).

Treading lightly

The announcement had been publicized in advance and follows months of politicking by Malay groups seeking to retain their privileges, which apply to public education, housing, and government contracts. Former Prime Minister Mahathir Mohamad, who helped force out Najib’s predecessor last year, warned Saturday of racial tensions if the NEP is junked.

This pressure appears to have tied Najib’s hands. He offered few details Tuesday of how his new strategy would affect the web of privileges for Malays, except to stress inclusiveness and the need to make the economy more competitive.

“His speech had a bit of everything for everyone. But the devil is always in the details,” says James Chin, a political scientist at Monash University’s campus in Kuala Lumpur.

Patches of support

Malaysia’s opposition, led by Anwar Ibrahim, a former deputy prime minister, has campaigned to abolish the NEP. At the last election in 2008, UMNO officials accused him of selling out the majority Malays to the Chinese and Indians, who make up about one-third of the population. The election was the worst-ever result for the UMNO-led coalition, though it retained its majority in Parliament and has clawed back lost ground.

Since taking office last April, Najib has said that drastic steps were needed if Malaysia wants to become a fully developed economy by 2020. But he has also emphasized the need to manage ethnic relations.

In one apparent concession to non-Malays, a senior adviser to Najib told reporters Tuesday that a longstanding 30 percent target for ethnic-Malay ownership of of corporate assets would be dropped. The target is controversial among minorities.

In his speech Najib also pledged to overhaul how government contracts are awarded, a bone of contention among non-Malays who are excluded from the process.

Critics say UMNO insiders game the current system and inflate the cost to taxpayers of public works.

Among those critics are ordinary Malays who see these contracts as a gravy train for UMNO, says Ibrahim Suffian, who runs the Merdeka Center, an independent polling agency in Kuala Lumpur.

Recent surveys have shown that a majority of Malays also support the idea of ending ethnic-based welfare spending. For these voters, particularly young professionals, Najib’s speech may get a lukewarm reception because it didn’t go far enough, he says.

“It’s all really small steps, not the radical changes that people had been led to believe.”