The Malaise of Malaysian Malays

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To be Malay in Malaysia is to have an advantage.

Together with the indigenous groups, this majority—known collectively as the “sons of soil” or Bumiputras—are afforded preferential treatment, as outlined in the constitution, because of their “special position” in the country.

This ethnic bargain was one of the conditions agreed upon at independence from British rule. Many Malays were subsistence farmers without access to capital and employment, and feared being left behind. Chinese were primarily based in cities and part of the modern industrial economy, and Malay leaders feared that their greater economic influence would translate to greater political influence. This was, of course, very much an oversimplification as many Chinese were also subsistence farmers or poor urban labourers, while there were many wealthy Malays. Nevertheless, preferential treatment for Malays was agreed to as a temporary measure to bridge the perceived gap between the various ethnic groups and counterbalance Chinese economic dominance.

Although today’s Malaysia is now vastly different from its early days of independence, this fear continues to persist, and thus, local politics revolves around the safeguarding of the Malay interest. Given this ethnically-charged political landscape, the single race party formula is the rule rather than the exception.

This game of racial politics, accompanied by a lack of transparency and oversight of those in power, has resulted in another kind of inequality. This time, it’s among the Bumiputras themselves.

The historical context

After achieving independence in 1957, the fledgling Malayan government struggled with the British colonial legacy. During the British administration, the nation’s population was divided according to economic roles, resulting in racial segregation: mining and commerce for the Chinese, rubber plantations for the Indians, civil service and subsistence farming for the Malays.

The Federal Constitution of Malaya, which came into force in 1957, enshrined the Malays’ entitlement to special privileges. Abdul Aziz, the former Chief Executive Officer of the Malaysian Airline System, argues that the historical context must be taken into account to understand the affirmative action policy: “Before Merdeka [independence], the Malays were largely relegated to the villages with no capital, expertise and knowledge… Most were living from meal to meal.” The privileges were therefore considered an important measure to bridge the gap between the Malays and the other races.

The increasing non-Malay population triggered concerns that the Malays would be relegated to second-class citizens in their own country. The inclusion of Sabah and Sarawak during the 1963 merger with Singapore would later secure their status as the ethnic majority, along with the indigenous tribes of Borneo who were also accorded Bumiputra status.

Despite this, Aziz says that “the government didn’t have proper policies [related to affirmative action for Malays] for a long time”, until racial tensions between the Chinese and Malays boiled over on 13 May 1969.

The government had been driving economic growth by cultivating the export market, but did little in terms of equitable distribution. Socio-economic imbalances between the different ethnic groups grew. Tensions between the wealthy urban Chinese and the poorer, rural Malays were further stoked by race-based politics during the 1969 general election. The ensuing violence resulted in hundreds injured and dead—the numbers are still disputed to this day.

The incident prompted the eventual resignation of then-Prime Minister Tunku Abdul Rahman, and provided the impetus for the creation of the New Economic Policy (NEP) to address inequalities between the racial groups.

The New Economic Policy and the Malay elite

The NEP comprised a two-pronged approach: eradicating poverty irrespective of race, and promoting upward social mobility among the Malays.

Preferential treatment was given to the Malays in public sector employment, higher education, public procurement and capital ownership. The idea was to bring about more equality, but these policies have often been instrumentalised to benefit the elite.

The United Malays National Organisation (UMNO), a founding member of the incumbent Barisan Nasional coalition, has governed the country since 1957. Enjoying such uninterrupted dominance, the party has established itself as the core of Malaysia’s political elite, exerting control over the executive and legislative arm of the government.

Without transparent processes, public procurement exercises and the allocation of licenses are often conducted behind closed doors. Instead of facilitating open and fair competition between bidding parties—with priority consideration granted to Malays—the opacity has allowed the political elite to dispense licences and contracts to favoured allies, establishing a system of patronage between the state and Bumiputra tycoons.

Zaid Ibrahim, Malaysia’s former de facto law minister, says the the patronage system shouldn’t come as a surprise to anyone: “The Malay society has always been feudal, and despite the fact that we have a democracy or modern institution, the culture has remained the same. In the past, the ruling elites would be the palace; nowadays, it’s the political leaders.”

“Affirmative action has to be predicated on an open system with good governance,” he says. “Otherwise it will always be abused.”

The rural community

The fate of the rural Malay is intrinsically linked to agriculture. Although efforts have been made by the government to provide assistance, the needs of the smallholders have often been brushed aside by the whims of political leaders.

For rural folk, government intervention comes in the form of Federal Land Development Authority (FELDA) schemes. Championed by the second prime minister, Tun Abdul Razak, and launched in 1956, FELDA’s primary objective is to provide employment opportunities for landless rural Malays.

To Fatimah Mohamed Arshad, Director of Universiti Putra Malaysia’s Agricultural and Food Policy Studies, the scheme chalked up some impressive achievements in the 60s and 70s. It galvanised the rural economy and alleviated poverty. But FELDA is now struggling with some 21^st century challenges.

Instead of achieving upward social mobility, people in the rural community have remained workers on FELDA-run farms, supplying produce to FELDA mills. “There is progress, but not to the level expected,” Fatimah concedes. “Based on the model intended, the settlers would work together and set up cooperatives that would allow them to buy up mills, but this didn’t happen.”

Due to teething problems related to uneven income distribution and disparities in skills, the government abandoned the cooperative land ownership model in favour of another system in which FELDA continues to centrally manage the scheme. The Felda Capital Cooperative (KPF) that FELDA settlers are part of today does not behave like a real cooperative: the members have no control over its operations, nor do they truly reap the benefits.

“[T]he cooperative is run by the FELDA officers, which is a big no-no,” Fatimah says. “By right, the cooperative should be run by the settlers themselves, instead [KPF] behaves like an investor-owned firm, where the cooperative board invests the money somewhere else and pays the settlers dividends.”

As smallholders, rural Malays under the FELDA scheme have no direct involvement in value-added production—the most profitable aspect of the agricultural industry. Although they are paid for their toil on the farms, the profit margin of the sales of palm fruit, for example, are meagre compared to the margins earned after the fruit is processed into cooking oil or oleochemical products.

“The margin is earned by somebody else but not farmers, the farmers remain stuck in primary production,” Fatimah says.

Control and profit was further moved out of the smallholders’ hands when Felda Global Ventures Holdings (FGV), a publicly-traded government linked agribusiness, acquired KPF’s stake in FELDA Holdings Berhad (FHB), the world’s largest crude palm oil producer. Although pitched as a measure to “streamline operations between FGV and Felda Holdings”, the benefits mostly fell to FGV, while the cooperative found itself deprived of access to any share of the profits from the downstream value-added production.

“FHB is crucial to KPF’s operation, without it the cooperative’s future is bleak,” says Mazlan Aliman, president of the National FELDA Settlers’ Children’s Society.

King of the Road

Malaysia’s Bumiputra policies also extend to the automotive industry. The Ministry of International Trade and Industry (MITI) oversees a licensing system that grants approved permits (AP) to individuals, allowing them to import and distribute cars in Malaysia.

This policy, introduced in the 1970s under the NEP, was intended to spur participation of the Bumiputra in the used car industry. But it’s an open secret today that the system has become both hugely lucrative and much abused enterprise; a single permit could be resold for MYR25,000 to MYR40,000.

A list of AP recipients, made public in 2005 to quell widespread speculation of corruption, showed that four individuals—Dato’ Syed Azman Syed Ibrahim, Dato’ Azzudin Ahmad and Dato’ Mohd Haniff Abd Aziz of Weststar Motorsport and the late Tan Sri Nasimuddin SM Amin of Naza Motor Group—collectively claimed the lion’s share of issued permits. Out of 134,607 permits issued in 2004 and 2005, the four “AP kings” received 67,158—about half of all issued permits.

Although the government claimed that there was no monopoly of permits—arguing that the recipients were franchise holders of different brands—observers pointed out that two of the four “AP kings”, Dato’ Syed Azman and Dato’ Mohd Haniff, were former MITI officers. “It’s not a redistribution of wealth, but reconcentration into a bangsawan [nobleman] class,” former member of parliament Dzulkifli Ahmad said in 2008.

Calls to abolish the licensing system have come from both sides of the political divide. Former finance minister Tun Daim Zainuddin has urged the government to consider the interests of a larger segment of the Malaysian population, while opposition politician Chong Zhemin has called for the release of a full list of AP recipients, dating back to the 1970s, so as to determine if the system has truly benefited the Bumiputras, instead of just a select few linked to UMNO.

Imprecise Instrument

According to the latest figures from the Malaysian Department of Statistics, Malaysia has shown significant improvement in alleviating inequality over the decades. Its Gini coefficient, which measures inequality in society, dropped from 0.513 in 1970 to 0.399 in 2016.

But the numbers for Amanah Saham Bumiputera (ASB), a unit trust fund exclusive to the Bumiputras, tell a different story. According to the ASB’s 2016 report, the average savings of 73% of its subscribers was a meagre MYR537.50, while the average value for the top 0.22% was over MYR778,000—a clear indicator of inequality within the Malay population in Malaysia.

For 32-year-old Hafiz Zainal Abidin, taking advantage of a lucrative investment platform like ASB is a pipe dream. Although he managed to secure a place in Universiti Putra Malaysia for a diploma in graphic design and animation, he ultimately chose to abandon those plans.

“My parents did not discourage me from studying outright, but with two siblings in university I did not want to burden my father with a five-figure tuition,” he explains.

His father who worked as a train conductor with Kereta Api Tanah Melayu, the then-national rail company, is now retired, while his mother is a housewife. Putting another child through university—Hafiz is the youngest of four siblings—would have been a source of constant stress.

Since abandoning his plans to go to university, Hafiz went on to work in event planning and retail industry.  Although he found steady work since leaving school, Hafiz found himself without a job a year ago. Despite fulfilling the requirements for BR1M, a cash assistance scheme aimed at low income earners, his application was rejected.

He currently works as an Uber driver earning MYR150 to MYR200 a day. He’s working on his next album with his death metal band, Lavatory, while considering his next career move. For him, the policies and affirmative action accounts for nothing.

Speaking of the handout, he said “I think it is better to implement better employment regulation than to give handouts.”

More of the Same

Efforts to improve the economic lot of the Malays in Malaysia have been long-standing, and continue to this day. But so do questions over the fairness of such programmes, and their effectiveness in reducing inequality among the Bumiputra.

“No one can deny that in the past, there are those among us who have received too much assistance and too many chances,” former Prime Minister Tun Abdullah Badawi remarked during his address to the 56th UMNO General Assembly in 2005. “There are those who have not received enough assistance and those who have not been given opportunities at all. This is not fair and far from just. This cannot continue.”

His comments were met with rapturous applause, but the issues continue to persist 13 years later.

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