Malaysia agonizes over race policy, 35 years on

From The Washington Post of Tuesday, August 23, 2005
By Jalil Hamid
Reuters

LENGGENG, Malaysia (Reuters) - For decades, Yeow Kim Kin and his fellow ethnic Chinese have been the engine of the Malaysian economy.
Born in China, 64-year-old Yeow has been running his grocery shop in a small town in the rural southwest for 30 years. Most businesses here are run by Chinese and their customers are mainly ethnic Malays, who make up a majority of Malaysia's population.
It is a portrait, in miniature, of the entire $104 billion economy, Southeast Asia's third largest.
"Many just want to make quick profits," he says, putting away his Chinese-language newspaper to sell a Malay man cigarettes.
Despite a 35-year effort to bridge the wealth gap between ethnic Chinese and the poorer Malay majority, business in the rural town where Yeow lives is still dominated by the Chinese.
Though not unique in the world, Malaysia's affirmative-action program was born out of bloody racial riots in 1969 to help address economic imbalances between the Malays and other races.
Malays, known as Bumiputras or sons of the soil, think of themselves as the country's indigenous race, live mainly in the countryside and make up just over half the population.
Ethnic Chinese, whose ancestors came centuries ago as traders or as mine workers shipped in by colonial rulers, make up a quarter but hold about 40 percent of the nation's wealth.
But despite the racial peace of the last three decades, there are growing doubts, within both Malay and Chinese communities, whether the affirmative-action plan is still working.
The plan called for Malays to control 30 percent of the country's equity holdings, up from 2.4 percent in 1970 when it was launched.
But by 2004, Malays held just 19 percent of the equity, more than a decade after the initial deadline of 1990, despite billions of dollars in state contracts and concessions awarded to Malay businesses.
Prime Minister Abdullah Ahmad Badawi's ruling party now wants to carry on the program until 2020, when Malaysia hopes to graduate into a developed nation.
The program is closely watched elsewhere in the region where ethnic Chinese generally dominate business.
In Indonesia, economic disparities fanned anti-Chinese race riots in 1998, at the height of Asia's financial crisis.
There has been some success, but the overall economic achievement of the Malays has been disappointing, says Khairy Jamaluddin, deputy head of the youth wing of the United Malays National Organization (UMNO), the Malay party that dominates government.
"Generally, the Malays lack capital to run or expand their business," he told the party's recent annual assembly.
In 2004, only 19.6 percent of registered firms and 21.5 percent of listed firms were Malay-owned, government data showed. And of the 20 richest Malaysians, only four were Malays.
Some Chinese have misgivings about carrying on with the affirmative action program indefinitely.
"If we keep on failing to achieve the (30 percent) quota and then ask for more, it will go on and on," said Lim Keng Yaik, head of the Chinese-based Parti Gerakan and a member of Abdullah's ruling Barisan Nasional coalition.
Lim said Malays should learn to create and retain wealth, a point that even Abdullah acknowledged. "If not, they will spend all that they are given," Lim said.
Collectively, the Chinese have actually improved their share of the economy since the drive began to redistribute the nation's wealth.
In 1970, they controlled 27 percent of the economy and today their share is about 40 percent, gaining at the expense of foreign investors such as British tin miners and planters.
One reason for failing to meet the target was because Malays had sold out government concessions to non-Malays, Prime Minister Abdullah said.
"This is the action of rent-seekers who seek quick gains," he told party loyalists last month. "The leakages have hurt the image of Malays and eroded the confidence of others toward us."
Yeow, who set up the Lenggeng shop with loans from his late father and a bank, says his recipe for success is sheer hard work.
"The Malays, too, can be successful in business if they are resilient. Many are already doing well, with little help from the government of course."