Does Najib dare defy his base to get reform?
Malaysian Prime Minister Najib Razak delivered last week his long-promised plans to reform the country's New Economic Policy (NEP).
In terms of political theatre, it would merit a B-plus; but for economic content, it is worth only a C with lots of minuses and question marks.
Although Najib made all the right noises about what should be done, he presented a series of beautifully labelled but still empty boxes waiting to be filled with the economic details.
Even politically, there are serious doubts about whether he can deliver or whether he is a captive of powerful political bumiputra (literally sons of the soil, meaning Malays and other indigenous peoples) who have got too used to a privileged life.
His vision was certainly ambitious and sweeping and included pledges to double incomes by 2020 to US$15,000 and transform Malaysia into a developed country.
Najib promised to make it a more inclusive country, to overhaul the network of privileges and subsidies Malays have enjoyed since 1971, to improve education, to give greater incentives for private enterprise to play the leading economic role, to strengthen the government, to make the economy more competitive and to improve the revenue structure with a new value-added tax.
'In the short term there will be entrenched opposition,' Najib said. But he added: 'We cannot afford to duck these issues any longer. If we are to truly tackle inequality and become a beacon of progress in our region, we must bring a sense of urgency to reform. We must recognise that some policies, which served a purpose in a previous era, may now be impediments to success.'
The NEP was introduced by Najib's father, Malaysia's second prime minister, Abdul Razak, in 1971 to give special opportunities to the bumiputra, who lagged economically behind the minority Chinese and old colonial companies.
Malaysia's strength and also its weakness is the mixed population of Muslim Malays and other indigenous peoples, Chinese and Indians.
Ideally, this could help develop good economic relations with the booming economic powers China, India and the Middle East. But Malays, although they dominated the civil service, were otherwise economically backward, many of them poor farmers.
Big British trading companies and foreign investors in tin mines and rubber and palm oil plantations commanded the bulk of the corporate wealth. Chinese, whose ancestors arrived in the then Malay states from the 15th century onwards, owned most smaller businesses, and Indians had a variety of jobs, from rubber tapping to small trades and professions like law and banking.
The harmony was smashed in race riots of 1969 that forced the resignation of founding prime minister Tunku Abdul Rahman and made Abdul Razak and his colleagues determined to level the economic playing field for the bumiputra through privileges, quotas and subsidies, especially in education, housing, jobs and opportunities to own shares. The policy was intended to last for 20 years, but it has suited the rulers to keep it in place.
Malays have since prospered, and corporate wealth has shifted to Malay hands, though much is held by state conglomerates. Critics complain the privileges have been earned at the price of corruption, falling standards of education and the emigration of thousands of Chinese and Indians. Najib has acknowledged that there are 300,000 to 500,000 professionals working abroad, 40 per cent of them in neighbouring Singapore.
Former finance minister Razaleigh Hamzah, who used to be known as the 'father of the bumiputra economy' for his work in promoting bumiputra interests, complained this year: 'The NEP was to diversify the Malay economy beyond certain stereotyped occupations. It is now about feeding a class of party-linked people whose main economic function is to obtain and resell government contracts and concessions.'
Najib, who became prime minister a year ago last week, has already removed a few privileges but has run into opposition from powerful figures in his own United Malays National Organisation, the leading party in the ruling coalition.
His deputy said last year the NEP was perfect but its implementation was weak. Another powerful Malay MP claimed Malays were still amateurs while Malaysian Chinese were in the 'Premier League', so Malay privileges must be maintained.
Najib also faces opposition from the Malay Consultative Council, a group of Malay non-governmental organisations that has been holding rallies similar to US Republican 'tea parties' to defend Malay supremacy.
Confronted with budget deficits, the growth of an impoverished underclass of all races, renewed religious tensions between Muslims, Christians and Hindus, plus competition from China, Vietnam, Indonesia and elsewhere in the region, Najib has recognised that it is wasteful to pamper the Malay elite.
Najib was bold in his promises, but he timidly called his plan the 'New Economic Model'. With elections due in 2013, the question being asked in Malaysia is whether Najib will risk taking on his own political base in the interest of national unity and economic progress.
Number of years from now in which Najib hopes to double the average income in Malaysia: 10