NEP
'It will destroy the Malays'
Surprising "end it" call made by retired Guthrie CEO, Khalid Ibrahim. By Bede Hong. Malaysiakini.
Oct 4, 2006

Since joining Party Keadilan (Parti Keadilan Rakyat) as its treasurer in July, Khalid Ibrahim has called for the abolishment of the New Economic Policy (NEP) - an affirmative action scheme launched in 1971 to uplift the lot of poor Malays.

The call is surprising as it comes from a person once described as an 'industry captain'.

Khalid, 60, is the former chief executive of Kumpulan Guthrie Bhd and former group chief executive of government-linked plantations company Permodalan Nasional Bhd (PNB).

He stepped down from Guthrie in 2003. He also set up an asset-management company managing funds from licensed offices in Kuala Lumpur and Singapore.

After spending nearly two decades in fund management, most recently with Malaysia's National Equities Board (PNB), Khalid has made an about turn.

Interviewed by malaysiakini, Khalid, among other things, describes the NEP as 'the devil' and laments the lack of successful bumiputera entrepreneurs.

Interview (truncated)

Malaysiakini: If the NEP is not doing what it's supposed to do, then what is it being used for?

Khalid: It is a known secret that all division heads of Umno have a chance to get contracts from the government in order for them to fund their political activities. They became Malay rent collectors used by non-Malays to become front-runners to get these projects. And it becomes a habit and a norm rather than an exception.

Now the whole country is in a mess. In fact, if you take notice, the on-going exchanges between (Dr) Mahathir Mohamad) and Dollah Badawi (Abdullah Ahmad Badawi) are centred on the failure of contract handouts rather than the poor or the marginalised people. The debate has left out the poor people of Sabah for example, where statistics show a very high percentage of poverty.

We do see that the NEP has become a tool for securing income, unearned income for those who don't do work. It's really a free income for those who have connections with the government.

The after-effect is that there is so much loss in government expenditure that the taxpayers are not getting the value on the expenditure made.

The NEP is not being updated, compared to other institutions that were set up in the early days like PNB, Tabung Haji, Felda, Tabung Angkatan Tentera. Unlike the NEP, these other institutions are moving forward in a steady way.

They had wanted to create so-called Malay corporate leaders and entrepreneurs when in fact it's very hard to find them now. Those who are the super corporate entrepreneurs now, in terms of world class standards, you don't get bumiputera or Malay names.

You get names like T Ananda Krishnan, Yeoh Tiong Lay, Lim Goh Tong and Robert Kuok (laughs) ... I think the whole of Malaysia enjoys the NEP because the NEP is not going to the Malays.

In our discussion on the NEP ... participants were telling us since the early 1980s and 90s they (the top businessmen) were constructing companies and building real estates and so forth. They became major players, the companies grew from millions to billions. But until today, they are just sub-contractors in Malaysia.

But if you analyse them (the major players) in a cynical manner, their success (is founded on the ability) to use the Malays to get contracts, and they benefited enormously from that. This is the seed of corruption...These sub-contractors now have to increase their cost in order to compensate the bribe they pay the runners to get those contracts.

Can you imagine this in Malaysia that wants to have more corporate governance, to become a highly regarded transparent nation? I think the NEP has in fact destroyed us, corrupted the whole thing. That's why we say, hey, it doesn't please a lot of Malays, it also doesn't please the Chinese or Indians, and it also destroys the good character of how we to do business.

People have been saying it's only about implementation, but it has already taken the character of the devil (laughs). We cannot do with this. That's why it (NEP) deserves to be cut off.

This instrument is going to be one that will kill us and kill the nation. It has become a cancer of society. And to solve the problem of cancer, we cut it off.

The fight within Umno is on how they're getting the best of the NEP. The 3,000 (UMNO delegates) control the destiny of the nation. Ask people in the villages, they'll tell you they wouldn't know that they have big contracts waiting for them.

malaysiakini: How would things be like if the NEP is abolished or modified ...

Khalid: Now, if it wasn't for the NEP, we could have achieved better growth because of the better ability to use resources. We could have an additional three or four percent in annual growth.

If you look at Singapore or Malaysia, they started off about the same time, that means the per capita income in both countries were about the same. Now, Malaysia's just below US$5,000 but Singapore's US$21,000.

What does this mean? Should we be discussing about the NEP? The logic of the technical economic argument shows that the NEP hindered growth, while the proponents of the NEP during my period (said it) was to create political stability. Without political stability, there is no environment for industrial growth.

But the environment has changed, foreign investors are afraid of coming in. Investors have to consider this renter class that is going to tax you 30 percent.

I think the NEP has also condoned the lack of professionalism in governing and management, meaning it doesn't care whether you are efficient or not, when you distribute to your friend. You can charge a higher price.

In order to hide all these mismanaged activities, the government is not being transparent. The government still relies on the OSA (Official Secrets Act) to hide the inefficiencies. Now there is no separation between the executive, legislature and judiciary in order for there to be check and balance.

In fact, the government has become a collusion with everybody rubbing each other's back. Certain ministries and civil servants must be cunning enough to adjust some of the requirements of general order in order to accommodate the giving of these concessions.

And of course the politicians have to collude with the executive in order for them to have free trips to play golf in exotic places under the pretext of trying to set up real estate investment and study tours.

During the Anwar (Ibrahim) case, you can see this relationship (between the executive, legislature and judiciary). They became one team. That's where we are now, the result of trying to implement the NEP ... a creature that is going to destroy the future generation of Malays.

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