THE POLITICAL ECONOMY OF MALAYSIA 1970-87

Abstract

Political economy studies the coexistence of politics with economics in a society where the workings of the former is not totally in consonant the assumptions of the other. The resulting conflict of interest is detrimental to the rational workings of the economy. In this respect, Malaysia offers a good example of this blurred and incompatible dichotomy. The reason why politics in Malaysia has assumed such an important and sometimes superseding interests over economic logic can be traced to the legacy it inherited. Colonialism created a plural Malayan society where each ethnic group were at vastly different levels of advancement. In particular, the Malays were found to be in an economically disadvantageous position vis-a-vis other ethnic groups. The NEP was thus upheld as a solution to such economic disparity. It seeks to eradicate the existant poverty and to eliminate the identification of race with economic function. The Bumiputras are to be the prime beneficiaries in this restructuring process whereby the public enterprise and educational revamp would apportion equity in their favour. The danger, however, of such manipulations to serve political objectives goes against the functioning of free market forces in allocating goods and services. The achievement of equity was, inevitably, achieved at the expense of efficiency. As regards equity, the extent of Malay of shareownership and Malays' involvement in the commercial and industrial sector, substantial progress have been made. However, there were some semblence of concentration of shareownership. In education, Malays have been adequately represented at the highest education level, but the regressive distribution of scholarships tend to perpetuate further intra-ethnic income inequality. With respect to efficiency, the presence of PEs resulted in the of effort, crowding out the private sector, duplication inefficient resource utilisation which of led to financial losses and budget deficit. This, in turn, gives rise to national debt and deficit in the current account. were evidence of overinvestment, labour and other impediments to On the educational front, there mismatched skills, monopsony of human capital formation. In spite of the tradeoff between equity and efficiency, Malaysia cannot afford not to pursue an ethnocentric policy. Its political stability is predicated on a society where every ethnic group must have a stake in economic life. In line with this, it is therefore likely that some form of continued privileges for Malays will be pursued even after the demise of the NEP.