MALAYSIA'S NEW ECONOMIC POLICY : PROFILE, SUCCESS AND FUTURE DIRECTIONS

Abstract

The Malaysian economy has been regarded as one of the fastest growing developing economies in the world. The World Bank has classified Malaysia as one of the eight high performing Asian economies (HPAEs) amongst Japan, South Korea, Taiwan, Hong Kong, Singapore, Thailand and Indonesia. Underlying Malaysia's economic development is the New Economic Policy or the NEP. The NEP was conceived in the year 1970, as an aftermath of the bloody racial riots in May 1969. Since then, the NEP has profoundly affected the shape and the nature of the Malaysian economy. Indeed, the NEP has been hailed by many as the cornerstone that has led to the success of the Malaysian economy. Resulting from the economic dislocations brought about by the Asian financial crisis however, there has been some soul-searching in Malaysia with regard to the success of its NEP model. Was the NEP a major factor that contributed to Malaysia's rapid economic growth prior to the financial crisis, or has its role been overstated? Did the excesses of the NEP policies make Malaysia even more vulnerable to a financial crisis? Should the NEP continue in light of the current difficulties? Are there any viable alternatives? These are the questions that we would seek to answer in this academic exercise. We would see that the Malaysian NEP model has in fact been a double-edged sword, contributing to the country's stability on the one hand, but at the same time, having unintended adverse repercussions on the economy as well. A national approach as opposed to the bias ethnic framework would also be suggested as an alternative to the NEP model.