Affirmative Action Quandary

Affirmative Action Quandary

by Dato’ A Kadir Jasin

Malaysian Business, 1-15 July 2010

While it is acknowledged that the government should be more transparent and efficient in its pursuit of market-friendly affirmative action, the real question is whether the market wants to be a willing partner in any such action, especially since the recent global economic crisis has shown that the market cannot self-regulate.

THE AFFIRMATIVE Action Plan introduced via the New Economic Policy (NEP) 40 years ago continues to be hotly debated.

Although it came to an end a full decade ago, its two key objectives of eradicating poverty irrespective of race and restructuring society remain in force in one form or another.

In recent times, the NEP debate gained an added impetus when the government of Prime Minister Datuk Seri Mohd Najib Abdul Razak introduced a series of policy initiatives that has been applauded by some and derided by others.

The growing debate is due, in part, to the failure of the government to effectively communicate its ideas to the people, resulting in conflicting understanding and interpretations.

The debate has reactivated existing grass-root organisations and spawned new ones. Among the vocal newcomers are the Perkasa and the Malay Consultative Council, both of which represent the Malay interest and are understandably suspicious of the government’s new ideas.

A recent important input to the debate came from Mohd Najib’s own brother, banker Datuk Mohd Nazir Abdul Razak, who gave a lengthy interview to the influential Mingguan Malaysia to explain his stand on the issue.

In the June 20 issue of the paper, Mohd Nazir, who is the Group Chief Executive Officer of the CIMB banking group, said: ‘To me, the New Economic Policy objectives of eradicating poverty and restructuring society are still relevant and should be retained, but at the same time we should add another objective, that is to build and create a more competitive Bumiputera community. This is very important to ensure the survival of the Malays …’

As I had stated in my blog post on June 22, Mohd Nazir’s proposal was in line with a recent affirmation by the Prime Minister that the 30% Bumiputera ownership target and the creation of the Bumiputera Commercial and Industrial Community (BCIC) would continue to be pursued.

Mohd Najib’s statement was reported to have caught some members of his National Economic Advisory Council (NEAC) by surprise as they had hoped that he would agree with their proposal to do away with the NEP.

Since then, however, the affirmative plan appears to have clawed its way back into the agenda of the NEAC. A workshop involving members of the council, academicians, civil servants, social thinkers and representatives of the trade was recently held in Kuala Lumpur to discuss the subject of transparency and market-friendly affirmative plan.

Clarifying the misconception that he was against the NEP, which was the handiwork of his late father Tun Abdul Razak Hussein, Mohd Nazir said: ‘I am not critical of the NEP because I agree that the policy had helped Malaysia achieve strong economic growth and political stability. What I had said was the need to make a comprehensive study of the implementation aspects of the policy….’

Mohd Nazir was stating the obvious. There have been many calls in recent years for a complete examination of the effectiveness of the implementation of the NEP and the succeeding affirmative policies – the National Development Policy and the Vision Development Policy.

There is widespread recognition that the kinks in the implementation of the plan has led to uneven development and distribution of wealth, which, in recent years, has caused the income gap to widen dangerously not only among the races, but also between the rich and the poor in the same race.

Whatever the final policy and programmes adopted by Mohd Najib’s administration from the voluminous recommendations of the NEAC, one thing must be recognised without reservation – that is, no nation can be considered civilised and humane if the majority race and community is oppressed and marginalised.

As for Mohd Nazir the banker, being the CEO and a key shareholder of the second largest GLC bank in the country, he can play an important role in assisting and showing the Bumiputeras, especially those in business, the way to become competitive. He has to practise what he preaches.

Market regulation

IT was reported on June 22 that the Domestic Trade, Cooperatives and Consumerism Ministry would discontinue retail licences for chicken, cement and mild steel round bars from July 15.

The minister, Datuk Seri Ismail Sabri Yaakob, told reporters in Parliament that the three items were being exempted from licence requirement because they are no longer controlled items.

The announcement came hot on the heels of a nationwide boycott threat by traders who opposed a government proposal to require them to have additional permits to trade in sugar, wheat flour and cooking oil.

This brings us to the larger issue of market regulation and the idea of creating a transparent and market-friendly affirmative plan.

Despite decades of market regulation, which is the legacy of the colonial era when prices and supplies were regulated to minimise profiteering and, during the 1948-1962 Emergency, to stop supplies from falling into the hands of communist terrorists, its effectiveness remains questionable.

The recent boycott threat by the traders can be seen within the context of the open market mantra of the New Economic Model (NEM).

It has certainly emboldened traders to oppose what they see as the continuing attempts by the government to interfere with market forces in determining the demand and supply of goods and services.

The transparency mantra

HERE lies our dilemma. While prices are best left to the forces of demand and supply, our traders are not exactly well-known for fairness and discipline. On the contrary, they are, perhaps, among the most indisciplined lot and are prone to cheating and profiteering.

So, I was a bit unsure when I was invited to give my views on the transparent and market-friendly affirmative action at an NEAC workshop in Kuala Lumpur recently.

Maybe we could be more transparent in the way we do things. But can we ever expect the market to be friendly to any plan or action that restricts its freedom?

The stubbornness of traders aside, the government and its regulatory agencies are not faring any better. Bureaucratic inefficiency and corruption often collude to render attempts to regulate supplies and moderate prices ineffectual.

So, how much more transparent should the government be? The answer lies not just in being transparent, but more importantly, in convincing the public that the government is also truthful.

Take our socio-economic statistics, for instance. The accuracy of facts and figures presented by the government is often questioned. There’s suspicion that they are either not sufficiently comprehensive or are subject to manipulation.

Making things worse is the tendency of our political leaders of making contradictory statements and quoting contradictory figures. The debate on the rationalisation of subsidies is a case in point, when two ministers quoted two different sets of subsidy figures.

This is due to the general decline in the ability of the leadership, be it political, administrative or business, to articulate issues and make clear statements.

The closing down or downgrading of research, planning, monitoring and coordinating agencies in recent decades have affected information gathering and dissemination.

Media reporting has also shifted from development to politics. Even straightforward development reporting is laced with or skewed towards politics and politicians.

On the other hand, transparency has become imperative. It’s no longer the question of choice. The explosion of information and telecommunications technology (ICT) has made it nearly impossible to be secretive. The question is the degree of transparency and openness.

There’s the need to rationalise between the need to be transparent and the right to secrecy, confidentiality, privacy and the protection of official and business secrets.

What exactly is market-friendly?

HAS the government not been friendly to the market all this while? If that’s the case, how do we account for our past performance, in particular, the expansion of the private sector?

How do we explain the transformation of the private sector as the engine of growth during the NEP period if the policy had indeed been unfriendly to the market?

Who benefited the most from the massive public-sector spending during the NEP period? Certainly, it was the market. It benefited much more than the targeted groups – the poor and the needy.

So, how much more friendly can the government be towards the market in the implementation of the affirmative action under the NEM?

My concern is less with the ability of the government to pursue market-friendly affirmative action, but with the willingness of the market to be a participant in any affirmative action. I may be wrong, but I have a nagging suspicion that the market in general opposes or, at the very least, is indifferent to affirmative action.

I think we know by now that many national business figures and trade associations are openly opposed or are, at least, critical of the affirmative action under the NEP, despite the fact that they benefited hugely – directly and indirectly – from it.

They do this out of selfishness and greed, ignoring the fact that had it not been for the NEP and the subsequent growth with distribution policies, the economy would not have expanded at the rate it had.

It is the expansion of the purchasing power of the masses, including the subsidy elements, that has enriched and empowered the business community, which today is taking out billions of ringgit annually to invest abroad or simply earn higher interest income.

The market will continue to make real or token objection to the affirmative action no matter how it is packaged. Sadly, there’s a strong element of communalism here.

But the market has it reasons to oppose affirmative action. There is the concern that the system is neither sufficiently efficient nor transparent. Corruption and abuse of power remain a concern, although the market itself is guilty of encouraging this white-collar crime.

Since the rich and the powerful can resort to bribery to get what they want, corruption and abuse of power actually punish small businesses, many of which are Bumiputera-owned, as they are unable or unwilling to give bribes.

So, while we support transparency, we have to set a limit to how friendly we want to be towards the market. The systemic failure of the market-driven economy that started with the sub-prime crisis in the US in 2007 is clear indication of the market’s inability to self-regulate. As such, to place the economy too much in the hands of the market is unwise. The government must continue to play a firm regulatory role.

Published in: on July 29, 2010 at 08:50  Comments (2)  

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2 CommentsLeave a comment

  1. The NEM Poll

  2. This always seems like one of those issues that doesn’t have a great solution. I suppose we will have to settle for halfway-decent solutions until someone comes up with a genius plan of some sort.

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