Malaysia’s biggest liability: Racial discord

Malaysia’s biggest liability: Racial discord

For a country that abhors public protests and suppresses them with strict rules against illegal assembly, Malaysia has had two big demonstrations in Kuala Lumpur just this month. With elections expected to be held next year, a certain rise in political temperature isn’t surprising.

However, two large street rallies within a month may also be a sign that the 50-year-old code defining the rules of engagement between the state and the three main ethnic groups—the “social contract" of Malaysia—is fraying.

The biggest source of discontent is race, a four-letter word in a country where three-fifths of the 27 million people are Malays, about one-fourth are Chinese and 10% are Indians.

Many in the minority Chinese and Indian communities are disenchanted with economic policies that favour the Malays. And while privileges granted to the Malay Bumiputeras—or “sons of the soil"—can’t be taken away abruptly, the case for separating entitlements from racial identity is building.

There are, of course, limits to how far Prime Minister Abdullah Ahmad Badawi may be prepared to go and how soon. To the extent affirmative-action policies make Malaysia unattractive to foreign investors, Abdullah has already shown a willingness to respond. The government has said that companies setting up tourism or logistics businesses in the Iskandar Development Region of Johor won’t need to comply with a rule requiring foreign companies to have at least 30% ethnic Malay ownership.

This is a welcome step because Malaysia received just $6 billion (Rs23,880 crore) of foreign direct investment last year. Thailand got $10 billion and India received $17 billion.

Ending preferential treatment for Malays in lucrative government contracts is going to be more problematic.

Free trade talks with the US and Australia have been delayed, and the ones with New Zealand have had to be suspended primarily because Malaysia’s policy of discouraging non-Malays—including foreigners—from bidding on government tenders is unacceptable to these countries.

The same issue might also jeopardize a free trade deal between the Association of South-East Asian Nations—of which Malaysia is a member—and the European Union.

The Federation of Malaya’s 1957 Constitution, which was drafted as the British were leaving, recognized that the indigenous Malay community needed special help, including quotas in government jobs, business permits and university places, to improve their abject economic standing.

The acceptance of this arrangement by the minority Chinese and Indian communities—“foreigners" in the land of the ethnic Malay Muslims—was seen as the basis of their citizenship and participation in a grand political coalition that has ruled Malaysia uninterrupted since independence.

Following bloody race riots in 1969, the New Economic Policy of 1970 made it an avowed goal of state policy to lift the share of corporate ownership for the Bumiputeras to 30%, from just 2%. There was an uproar last year when a Malaysian economist argued in a study that the goal may already have been more than met and it was time to dismantle economic policies based on race.

The political rhetoric is still staunchly against any such dilution of affirmative action. At his party’s annual congress this month, Abdullah described Malay interests and the social contract between communities as “sacred".

However, the economic reality is different.

Malaysia’s annual per capita income has jumped an impressive 26-fold in the past 50 years to 20,900 ringgit (Rs2.5 lakh). But the decades of sustained, rapid growth in prosperity are now history. The rise of China and India is forcing Malaysia to discover new sources of competitiveness; in such an environment, the policy of race-based discrimination is increasingly untenable.

The area where Malaysia has paid the heaviest price is education. In the 1980s, government policy reduced national schools to “Malay enclaves", in the words of University of Sydney political scientist Lily Zubaidah Rahim; as a result, the Chinese opted out in large numbers.

Thus, the ideal place to integrate the races became the starting point of segregation. While ethnic quotas in higher education were removed in 2002, university entrance norms for non-Malays are still significantly tougher. Talent that is badly needed to build a knowledge-driven economy is forced to migrate.

The 10 November protests called for an improvement in the electoral process so that the next polls are free and fair; the second rally, however, had an overt racial tone.

The Hindu Rights Action Force, which organized the demonstration, is suing the British government for not protecting the rights of the minority Indian community at the time of independence.

The real purpose of the protesters is, of course, to draw attention to the unfairness of the 1957 constitutional arrangement and to show that the Malays aren’t the only underclass in Malaysia. The Tamil-speaking Malaysians, not counting wealthy businessmen such as pay-TV and telecommunications czar T. Ananda Krishnan, remain rather poor as a community.

A renegotiation of the Malaysian social contract so that entitlements are realigned with real economic needs will be a slow, challenging process, though nothing short of it can really heal the wounds festering for half a century.

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