History of Malaysia

    In 1970, 75 percent of Malaysians living below the poverty line were Malays, the majority of Malays were still rural workers, and Malays were still largely excluded from the modern economy. The government’s response was the New Economic Policy of 1971, which was to be implemented through a series of four five-year plans from 1971 to 1990. The plan had two objectives: the elimination of poverty, particularly rural poverty, and the elimination of the identification between race and economic function. This latter policy was understood to mean a decisive shift in economic power from the Chinese to the Malays.

    Poverty was tackled through an agricultural policy which resettled 250,000 Malays on newly cleared farmland, more investment in rural infrastructure, and the creation of free trade zones in rural areas to create new manufacturing jobs. During the 1970s and ‘80s rural poverty did decline, particularly in the Malayan Peninsula, but critics of the government’s policy contend that this was mainly due to the growth of overall national prosperity and migration of rural people to the cities rather than to state intervention.By 1990 the poorest parts of Malaysia were rural Sabah and Sarawak, which lagged significantly behind the rest of the country. These years saw rapid growth in Malaysian cities, particularly Kuala Lumpur, which became a magnet for immigration both from rural Malaya and from poorer neighbours such as Indonesia, Bangladesh, Thailand and the Philippines. Urban poverty became a problem for the first time, with shanty towns growing up around the cities.

    The second arm of government policy, driven mainly by Mahathir first as Education Minister and then as Prime Minister, was the transfer of economic power to the Malays. Mahathir greatly expanded the number of secondary schools and universities throughout the country, and enforced the policy of teaching in Malay rather than English. This had the effect of creating a large new Malay professional class. It also created an unofficial barrier against Chinese access to higher education, since few Chinese are sufficiently fluent in Malay to study at Malay-language universities. Chinese families therefore sent their children to universities in Singapore, Australia, Britain or the United States – by 2000. This had the unintended consequence of exposing large numbers of Malaysians to life in Western countries, creating a new source of discontent. Mahathir also greatly expanded educational opportunities for Malay women – by 2000 half of all university students were women.

    To find jobs for all these new Malay graduates, the government created several agencies for intervention in the economy. The most important of these were PERNAS (National Corporation Ltd.), PETRONAS (National Petroleum Ltd.), and HICOM (Heavy Industry Corporation of Malaysia), which not only directly employed many Malays but also invested in growing areas of the economy to create new technical and administrative jobs which were preferentially allocated to Malays. As a result, the share of Malay equity in the economy rose from 1.5 percent in 1969 to 20.3 percent in 1990, and the percentage of businesses of all kinds owned by Malays rose from 39 percent to 68 percent. This latter figure was deceptive because many businesses that appeared to be Malay-owned were still indirectly controlled by Chinese, but there is no doubt that the Malay share of the economy considerably increased. The Chinese remained disproportionately powerful in Malaysian economic life, but by 2000 the distinction between Chinese and Malay business was fading as many new corporations, particularly in growth sectors such as information technology, were owned and managed by people from both ethnic groups.

    Malaysia’s rapid economic progress since 1970, which was only temporarily disrupted by the Asian financial crisis of 1997, has not been matched by change in Malaysian politics. The repressive measures passed in 1970 remain in place. Malaysia has had regular elections since 1974, and although campaigning is reasonably free at election time, it is in effect a one-party state, with the UMNO-controlled National Front usually winning nearly all the seats, while the DAP wins some Chinese urban seats and the PAS some rural Malay ones. Since the DAP and the PAS have diametrically opposed policies, they have been unable to form an effective opposition coalition.