Introduction
Situated in Southeast Asia, Malaysia is home to 27.17 million people across an expansive 329,758 km2 of land (Zulkifti et al., 2021). Sixty percent of the population in 2007 identified as Malay “Bumiputera,” twenty-six percent as Chinese, eight percent as Indian, five percent as some other type of Bumiputera, and one percent as belonging to other ethnic groups including Arabic, Sinhalese, Eurasian, or European (Zulkifti et al., 2021). Malay people are considered to be citizens of Malaysia who adhere to the principles of the Malay language and the Islamic faith. In Malaysian politics, speech has become a tool for reality construction, giving political players symbolic power. Election campaigns in Malaysia have been heavily influenced by racial, religious, and reformist divisions that have plagued the country for many years. The country’s ethnic minority has been considered second-class citizens since its independence in 1957, while the ethnic Malay majority has enjoyed a constitutionally protected special status (Zulkifti et al., 2021). Religion and differing political reform agendas intersect and amplify ethnic divisions, adding another layer of complexity to Malaysia’s fragmentation. Poverty is evident in most Malaysian households. More than just setting a minimum wage is required to combat poverty in Malaysia effectively. Malaysia can significantly reduce poverty and increase social mobility by implementing effective policies like strengthening social safety nets, prioritizing education, and implementing progressive wage models. In 2018, the most inclusive and secular government in the country’s history was overthrown due to deep, identity-driven conflicts, demonstrating the destructive repercussions of polarization. Polarization is slowly but surely spreading across Malaysian society, threatening interethnic harmony and reducing social cohesiveness, even though it is mostly limited to the elite level.
Political Theories
Among all the developing countries globally, Malaysia is frequently cited as one of the few countries whose economic policies may be considered worthy of being models for other nations to follow. Most economists believe that Malaysia’s ruling class made liberal economic policy decisions, which resulted in increased foreign direct investment, accelerated technological advancement, avoided resource abundance traps, and made it easier for Malaysia to achieve specialization, comparative advantage, and overall growth (Ritchie, 2005). Particularly noteworthy is that these policies moved to reorganize and reallocate existing resources into new combinations of labor, capital, and technology in ways that at least did not derail and most certainly made it easier for foreign direct investment to drive economic expansion. However, as is well known among political scientists who study Southeast Asian politics, the focus on economic reform and liberalization as the causes of economic growth obscures the role of coalitional politics in directing illiberal government action to alleviate economic inequality based on ethnicity, establish national heavy industries, and benefit politically connected businesspeople (Ritchie, 2005). A deeper dive into the data shows that, like other emerging nations, coalitional bargaining produced an economic policy stew consisting of liberal and illiberal elements (Slater, 2010). However, the coalitional bargain’s reasoning was not to acquire or retain support for liberal reform in one domain while allowing illiberal interference and protection in another, as is the case in other developing nations. The reasoning was backward: growth was generated by increasing and maintaining trade and investment liberalization, which funded expensive redistributive intervention and indirectly compensated the Chinese economic interests that bore the brunt of these measures (Ritchie, 2005). The economy, which had previously been focused on exports of primary commodities and was liberal, was transformed into a dual economy in which government subsidies supported less competitive local firms and efficient multinational corporations produced goods for export in tariff-free export processing zones (Ritchie, 2005).
During the late 19th and early 20th centuries, Malaya saw a flood of Indian and Chinese immigrants drawn by economic opportunities. This led to a society that was multicommunal but deeply divided (Slater, 2010). Within this ethnic mosaic, the Malaysian state started solidifying, characterized by a complicated mix of cooperation and strife (Bhopal, 2019). The British government strongly supported Malaysia’s independence movement immediately following the conclusion of WWII (Bhopal, 2019 ). However, the fragmented polity and incipient ethnic communalism that had grown out of the colonial political economy made it difficult for the ruling elites to negotiate the structure and operation of an independent government (Bhopal, 2019). The British coerced the United Malay National Organization (UMNO) and the Malaysian Indian Congress (MIC) into forming a multiparty coalition known as “The Alliance” in 1952 (Ritchie, 2005). Discontent among various ethnic groups over the widening wealth gap emerged after the 1964 elections but before the 1969 one (Ritchie, 2005). Despite positive strides in equality in some areas, Malays still only owned 1.5% of Peninsular Malaysia’s business equity after over a decade of independence (Ritchie, 2005).
In contrast, 22.8% were held by Chinese and 0.9% by Indians (Ritchie, 2005). 62.1% were interested from outside the country, while 10.1% were from other sources (Ritchie, 2005). The problem turned political when the opposition parties accused the UMNO leadership of colluding with rich Chinese to take advantage of the Malay peasantry (Ritchie, 2005). Genocidal riots broke out in 1969 as racial tensions rose (Ritchie, 2005). The government introduced the New Economic Policy (NEP) in 1971 as a reaction to this societal turmoil (Ritchie, 2005). A complete and utter societal reorganization was the goal of the NEP (Ritchie, 2005). Without regard to racial distinctions or the correlation between racial and socioeconomic status, it aimed to eradicate poverty. The focus during implementation, though, was on poverty eradication. To decouple race and economic function, two things had to happen:(1) more Malays had to join the ranks of capital and urban wage-labor, and (2) the incomes of the rural Malay peasants had to go up (Slater, 2010). The administration implemented several measures to achieve these goals. In particular, the government’s Malay promotion ministry, Majlis Amanah Rakyat (MARA), made substantial investments in vocational and technical education and training to foster the development of a well-educated urban proletariat (Slater, 2010). By instituting ethnic employment quotas, it pushed for more Malay managers and supervisors to climb through the ranks. It brought the Malay unemployment rate down below the national average.
Political Economic Growth
Achieving interethnic economic parity amongst ethnic groupings was proposed as a goal of the New Economic Policy (NEP), a 20-year restructuring project (Lee & Gomez, 2012). By “eradicating poverty” and speeding up society’s “restructuring” to decrease racial disparities in economic involvement and ownership, the NEP aimed to promote national unity regardless of race (Lee & Gomez, 2012). As part of the program, the government became increasingly involved in the economy through public enterprises, later called government-linked corporations (GLCs) (Lee & Gomez, 2012). This was done to help the Bumiputera population and ensure corporate equity was distributed fairly among ethnic groups. Additionally, the NEP required that all publicly traded companies transfer 30% of their stock to Bumiputeras (Lee & Gomez, 2012). The apprehension that the preferential initiatives would be short-lived and unnecessary informed the original NEP timetable (1971–1990) (Lee & Gomez, 2012). Malaysia has mostly avoided a comprehensive discussion on moving away from Bumiputera preferential treatment, although the key affirmative action tools of the NEP have stayed there with minor adjustments.
Affirmative action interventions in education consisted of newly created post-secondary institutions, scholarships for Bumiputera students, and a racial quota system for university admissions. The Ministry of Education established Bumiputera residential science colleges exclusively in the mid-1970s to increase the number of science and engineering graduates (Mohd, 2012). MARA also set up junior residential colleges, principally for rural and underprivileged students, which also emphasized science subjects and designated higher standards of teaching and facilities (Mohd, 2012). Public tertiary education burgeoned; universities were established across the states of Malaysia (Mohd, 2012). Matriculation colleges, a shorter and easier route to university entrance than sixth form in the national schooling system, expanded in the late 1990s (Mohd, 2012). The Private Higher Education Act of 1996, which permitted domestic private for-profit degree-granting universities, led to a proliferation of private tertiary education institutes (Mohd, 2012). Private higher education thus sustained its significant role in mitigating grievances against affirmative action in public universities (Mohd, 2012). In recent years, scholarship programs have become more transparent in their operation. On the whole, quotas remain the dominant mode of operation, with changes at the margins, including some allotment of non-Bumiputera admission to previously Bumiputera-only institutions.
The focus was on professional and managerial roles, where the underrepresentation of Bumiputeras was most pronounced. With relatively few private sector initiatives, this form of affirmative action mostly benefited the public sector. Before the NEP, there were already steps to maintain the representation of Malay people in government ministries, particularly in positions of high authority (Lee & Gomez, 2012). Under the NEP, preferential hiring and promotion persisted more intensely, supported by the growth of the public sector, particularly in the 1970s and up until the mid-1980s (Lee & Gomez, 2012). A racially representative workforce was the overarching goal; however, achieving proportionate group representation must be outlined in a timetable or systematic plan (Lee & Gomez, 2012). Malaysia has taken a primarily state-centric strategy for the growth of Bumiputera enterprises. For example, agencies were established in the 1970s and 1980s to assist Malay companies (Lee & Gomez, 2012). 109 in 1970, 656 in 1980, and 1,149 in 1992 were state-owned enterprises, which included public services agencies, statutory bodies, and government-owned private or public companies (Lee & Gomez, 2012). The industries with the highest concentrations of state-owned enterprises were manufacturing, services, agriculture, finance, and construction.
The most heavily emphasized and politically significant NEP goal is equity ownership, which is also the area where Malay underrepresentation in official metrics is most pronounced. Even though the NEP used affirmative action to try to lessen ethnic disparities in wealth, income, and employment, the government stated that no group would suffer loss or feel deprived due to the policy (Yacob, 2021). The administration stated that economic growth was the main means of ” restructuring ” (Yacob, 2021). Taxation, financing state firms, and the banking system—which would give Bumiputeras preferential credit access and finance for purchasing corporate equity—were to be used to redistribute assets (Yacob, 2021). Early in the NEP, progress on this front was sluggish, but by the middle of the 1970s, public demand had grown for the state to step in more aggressively (Yacob, 2021). The Industrial Coordination Act of 1975 enforced the transfer of equity to Bumiputera entities (Yacob, 2021). Large and medium-sized businesses were required to obtain a manufacturing license, which was contingent on at least thirty percent of the shares allotted to Bumiputera individuals or agencies at prices set by the government (Gans-Morse et al., 2014). This rule did not apply to export-oriented (more than 80% of output exported) companies, most of which were held by foreign entities (Gans-Morse et al., 2014). The government also moved quickly to acquire stakes to gain institutional representation of Bumiputera interests. Many of these organizations, such as Kumpulan Wang Amanah Pencen15, Khazanah Nasional, the Employees Provident Fund (EPF), Petroliam Nasional (Petronas), the Ministry of Finance Inc., and Lembaga Tabung Haji, have grown to be significant equity stockholders (Gans-Morse et al., 2014). Permodalan National Berhad (PNB, or National Trust Ltd.), one of the state-run Bumiputera trust funds, was established in the late 1970s and has since sold units and made significant investments in the national priority sector (Gans-Morse et al., 2014).
The NEP period saw a continuous increase in Chinese money, but because affirmative action helped to exclude these businesses from project and contract awards, the community’s ability to start new businesses was weakened (Mkandawire, 2005). As Chinese enterprises grew, they inevitably had to accommodate the state. Interethnic contacts became more prevalent following the establishment of the NEP (Mkandawire, 2005). Initially, notable Malays were appointed to boards of directors of the leading Chinese-owned companies, mostly to provide these companies with access to the state or a way around bureaucratic red tape (Gans-Morse et al., 2014). Despite owning equity in these companies, these directors did not actively participate in their management or growth (Gans-Morse et al., 2014). Second, unfair Ali-Baba partnerships were formed at the Small and midsize enterprises (SME) level, where the Chinese carried out the contracts while the Malays only supplied the terms (Gans-Morse et al., 2014). Third, economic alliances were formed more equitably among Malaysian elites (Gans-Morse et al., 2014). This reduced poverty among the Malays as more of them were getting employment from these enterprises.
The Outcome
The way Malaysian politics were conducted in the last third of the 20th century had certain consistent features. The same prime minister has been in government from 1981 to 2003 for more than 20 years, during which time he faced strong criticism for his leadership style from inside and without his party (Gomez, 2016). However, the essential thrust of his public policies remained the same. Society was undergoing change at the time, and a thriving, multiethnic middle class was starting to demand more responsibility from elected officials (Gomez, 2016). Since the mid-1980s, there have been constant calls for reforms. Still, the same multiparty coalition, Barisan Nasional (BN), or National Front, has consistently won elections and held a two-thirds majority in parliament—even during economic downturns and after crippling political rivalries that gave rise to potent opposition coalitions (Gomez, 2016). Only in 2008, after a historic general election, did conventional politics experience an unanticipated revolution (Ravallion, 2020). In addition to losing the general vote on the Malaysian Peninsula, BN also lost control of five of the 13 state governments in the nation; it was only able to hold onto power thanks to the backing it had received in the two Borneo states of Sarawak and Sabah (Gomez, 2016). Although the United Malays National Organisation (UMNO) garnered support in Sabah, it is mostly dependent on its coalition partner, the Parti Pesaka Bumiputera Bersatu, also known as the United Bumiputera Party, to maintain its position of power at the national level since it is not present in Sarawak (Gomez, 2016).
Before the 13th general election in 2013, there was still a great deal of popular dissatisfaction with BN, which was, by this point, one of the few long-standing, powerful coalitions left on the globe (Bhopal, 2019). Following the 2008 election, a seemingly disparate set of parties formed a budding tripartite opposition coalition that could state governments responsibly and transparently (Bhopal, 2019). Even though the BN promised significant political and economic changes in 2009, Malaysia did not appear to be doing much better by 2013. After several exposés involving high-ranking officials, there was increasing concern in metropolitan areas about the expanding corruption (Gomez, 2016). Even though public documents produced in 2009 promised to solve these issues, poverty persisted in rural regions because of appallingly inadequate infrastructure and inefficient policies (Gomez, 2016). Following a smooth handover of power from BN to Pakatan Harapan (PH), the 2018 general elections raised expectations for a “New Malaysia” (Ravallion, 2020). In PH, there were two well-known parties, DAP and PKR, as well as two new parties, Parti Amanah Negara (Amanah) and Parti Pribumi Bersatu Malaysia (Bersatu), which split off from Parti Islam se-Malaysia (PAS) and UMNO, respectively (Ravallion, 2020). Following the Pakatan Harapan coalition’s victory and the formation of the government in Malaysia’s 2018 general election, there was a notable political shift in the country as Prime Minister Mahathir Mohamad was appointed (Ravallion, 2020). The new administration implemented policy adjustments and reforms, including initiatives to combat corruption and advance good governance. A shift in the political environment in 2020 resulted in Prime Minister Mahathir Mohamad’s resignation and the creation of the Perikatan Nasional alliance (Ravallion, 2020). Yassin Muhyiddin took over as prime minister (Ravallion, 2020). Before the COVID-19 pandemic, Malaysia had achieved significant strides toward eradicating severe poverty and reducing absolute poverty, such as raising the poverty line and offering education through building schools. The Sustainable Development Goal (SDG), which aims to eradicate poverty by 2030, nevertheless presents formidable obstacles (Ravallion, 2020). By raising the national poverty line income (PLI) from RM980 to RM2,208 per month in 2020, the government raised the poverty rate from 0.4% to 5.6% (Ravallion, 2020). This was done to represent the increased living expenses and the complex nature of poverty. The government implemented several other measures to lessen the COVID-19 pandemic’s effects on underprivileged and vulnerable populations, including wage subsidies, food assistance, cash transfers, tax breaks, and loan moratoriums.
Policymakers have proposed alternatives to a minimum wage to lessen the negative effects of poverty. Although this proposal aims to ensure a minimum level of living for all employees, it also raises concerns about possible job losses due to increased labor expenses (Ravallion, 2020). Malaysia set a minimum wage of RM1,500 in 2020 (Asadullah et al., 2023). According to recent data released by the Department of Statistics, Malaysia (DOSM), this strategy has contributed to a notable 7.7 percent increase in the median wage in 2022, which is expected to reach RM2,424, up from RM2,250 in 2021 (Asadullah et al., 2023). Minimum wages safeguard low-wage workers, lessen poverty and inequality, and provide a minimum income that can raise living standards. This can be a useful instrument in the battle against extreme poverty and economic inequality.
References
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Yacob, S., 2021. PETRONAS, Oil Money, and Malaysia’s National Sovereignty. Journal of the Malaysian Branch of the Royal Asiatic Society, 94(1), pp.119-144. https://doi.org/10.1353/ras.2021.0014
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