Are we ready to exit the New Economic Policy?

That was the subject of a debate last week.

I argued: “No, we are not ready to exit the NEP.”

Yes, that’s my conviction, not a position assigned by coin flip.
Maybe you are surprised, as were many in attendance. A Malaysian Chinese saying we’re not ready to exit the NEP? Take a deep breath.

Let me stress one thing. To say we are not ready to exit the NEP is not to defend every aspect of the NEP and support its implementation forever.

Whether we are ready to exit boils down to two sub-questions: Are we grasping the meaning and problems of the NEP? Do we have an adequate set of solutions to these problems?

Answer to both is No.

So are we ready to exit the NEP? No. Not yet.

We are not thinking clearly about the NEP, and have a feeble grasp of what we are exiting from.

Worse still, we are making minor adjustments and projecting them as systemic reforms, thus deluding ourselves.

The NEP set out two prongs. First, to eradicate poverty irrespective of race. This is non-controversial; we will always have anti-poverty programmes to some extent.

But let us be clear that the particular measures applied toward this objective revolve around basic provisions, such as primary and secondary schooling, health facilities, utilities and infrastructure and social safety nets.

The NEP’s second prong was to accelerate social restructuring to reduce and eventually eliminate the identification of race with economic function.

When talking about exiting the NEP we are decidedly referring to this second prong.

The principal problem is vastly different from the first prong, and from need-based poverty alleviation in general.

The NEP’s second prong addressed the lack of bumiputera participation in tertiary education, professional and management positions, and ownership.

Why should this be distinguished as a policy objective? Because persistent under-representation of a group in these positions is a socially undesirable and unsustainable state, and because barriers to enter these socioeconomic layers exist – grades for university entry, degree qualifications for professional jobs, experience and connections to do business, and so on.

These obstacles would make change happen very slowly without a big push and coordinated effort.

How did the NEP seek to increase the pace of social restructuring?

The distinctive feature of the second prong is bumiputera preference.

Some degree of preferential treatment would be required – in principle, temporarily – to increase bumiputera participation to an extent that ordinarily would not happen.

The situation in 1971, at the start of the NEP, warranted such intervention.

I never hear anyone disputing the “original” NEP. The situation today is vastly different; achievements and problems abound. But that is the subject for another article.

Regardless of what we think about the basis and outcomes of the NEP’s second prong, we must not lose sight of its distinctive feature: bumiputera preference.

We tend to forget or ignore the NEP instruments that must be central to any consideration of exiting the policy.

I am referring to Mara institutions, matriculation colleges, quotas in university admissions, scholarships, licensing, contracting, and the civil service, as well as equity requirements and GLC policies.

Exiting the NEP entails transitioning away from bumiputera preference in these programmes, or phasing them out altogether.

Clearly, these policies are not the same as the NEP’s first prong, which basically gives preference to the poor in basic areas where such targeting based on need is relevant and workable.

The second prong centres on facilitating bumiputera upward social mobility through group preference.

The two prongs are inter-related, but one cannot replace the other.

We cannot simply shift from bumiputera preference to pro-poor preference in, say, civil service employment and government contracting.

Imagine what this entails: giving preference in recruitment and promotion to someone because her parents had low income, or awarding a contract to the guy from the poorest family.

You can see how this does not make sense, and can be damaging to economic efficiency.

Yet we are entertaining an apparent consensus that we can replace the NEP’s second prong with something called “need-based affirmative action.”

This notion is muddled, misleading, convenient and delusional.

Tellingly, how need-based affirmative action (a rebranded NEP first prong) replaces the NEP’s second prong has never been outlined with specifics, beyond being a nice idea with a catchy slogan.

It is not bold or reformist. Indeed, it conveniently avoids the hardest, yet most crucial, of reforms.

I reiterate, I am not arguing that we retain the NEP forever.

I am pressing us to ask the hard and uncomfortable questions about how we might transition away from its current form.

How can we talk of reforming and exiting the NEP when we do not touch its most extensive and impactful programmes in tertiary education and the civil service?

Most notably, matriculation programmes are widely known to be an easier route to university, and the vast majority of bumiputera students pass through it.

Of course, most of the predominantly bumiputera students in these colleges bear socioeconomic disadvantage. But by maintaining an easier programme we waste an opportunity to narrow the schooling gap.

Unless matriculation goes a much greater distance to level the playing field, we are far from exiting the NEP.

This is a pressing issue for all Malaysians, not just the bumiputera community.

This entails very difficult and politically unpopular tasks.

It looks to me that we need to raise the standards of matriculation programmes, then merge the currently parallel systems into a common university entry examination.

Only then can we truly speak of meritocracy, and earnestly prepare bumiputera students for it.

But we do not talk of such things. Until we do, we will perpetuate the NEP without end, regardless of what we may say or intend.