Today is a historic day for us. Malaysians have beer
waiting anxiously to know the successor to the Nem
Economic Policy (NEP) which expired at the end of
1990. Indeed, the keen interest shown by Malaysiam
about the shape of our new policy indicates that we
al have a keen sense of responsibility for the
nation and we are concerned about our future and the
future of the nation. This augurs well for the
nation since ultimately it is the commitment of the
people to our national goals that will ensure the
success of the developmental efforts for our own
benefit.
 
It has often been said in international circles that
development plans in Malaysia are meant to be
followed. In other words we take our plans very
seriously. Many observers have also remarked that
the objectives, targets and strategies that we set
in OUR plans are well thought out, realistic and
achievable and that, by and large, we have been
successful in achieving what we set out to do. This
was largely so with the First Outline Perspective
Plan (OPP1) and the NEP.  God willing, we will
continue to maintain this track record by improving
further our capability to plan and to implement our
plans by mobilising al the resources of the nation
to achieve our objectives
 
The racial riots of 1969 shocked us into realising
the political and social imperatives of addressing
and resolving the twin problems of poverty and
racial socio-economic imbalances facing the nation
at that time. Since the new generation of Malaysians
are generally not aware of the events in 1969, it is
necessary to remind them and also ourselves that in
a multi-racial society like ours the existence of
socio economic imbalances along racial lines is not
conducive to stability or national unity.
Accordingly, efforts to perpetuate socio-economic
imbalances along racial lines will only lead to
instability and disunity in the country.
 
The launching of the NEP in 1970 marked the
beginning of our efforts at socio-economic
engineering designed to bring about a more equitable
distribution of wealth between the different races
and groups in the various strata of society. The
main thrust of this socio-economic engineering was
embodied in a two pronged approach aimed at:
 
(a) eradicating poverty irrespective of race; and
 
(b) restructuring society to reduce the
identification of race with economic function.
 
Within a span of two decades, we targeted that the
incidence of poverty in Peninsular Malaysia should
be reduced from 49.3 % to 16.7% and that the
ownership of share capital in the corporate sector
should be restructured such that the share of Malays
and other Bumiputera would increase from 2.4% to at
least 30% while that of other Malaysians, form 34.3%
to 40%. The foreigners were targeted to reduce their
holdings from about 63.3% to 30% by 1990. Apart from
these, we also agreed on the target that the
employment pattern at all levels should reflect the
racial composition of the population. We also
resolved to undertake this socio-economic
engineering exercise within the context of an
expanding economy so that in the process of
distributing the benefits of development, no ethnic
group experiences a sense of absolute deprivation.
 
It is pertinent to mention here that there have been
may attempts in other parts of the world at
socioeconomic engineering. Almost without exception
they have failed and they have caused untold misery
and dragged down the economy of the nations
involved. The objectives that we had set for
ourselves in the OPP1 and the NEP were therefore
fraught with all kinds of pitfalls and dangers.
 
MACRO-ECONOMIC PROGRESS
 
Let me now briefly deal with the progress we have
made during the last two decades in implementing the
NEP.
 
Since 1970, Malaysia has achieved a rapid and
sustained growth. The real Gross Domestic Product
(GDP) growth averaged 6.7% per annum during the
1971-90 period despite the effects of a very severe
recession in the mid-1980s.
 
The impetus for the rapid growth achieved during the
decade of the seventies came as a result of a high
level of public sector involvement in the economy.
Such a high public sector profile arose from the
need to continue with the social and physical
infrastructure development begun since Independence.
It also arose because of the overriding need to
achieve the objectives of the NEP in the face of a
comparatively underdeveloped private sector. As a
result, public sector investment as a proportion of
total investment increased steadily from 32% in 1970
to a peak of 50% by 1982.  Despite improvements in
the domestic savings rate, the increasingly high
level of such investments had to be financed by
external debt.
 
While we have been successful in achieving growth
targets and in meeting many of the country's
socio-economic goals, dependence on the public
sector was found to be unsustainable.  In addition,
high public sector involvement in direct productive
activities, especially by the Non-Financial Public
Enterprises had not yielded the result that were
expected of them. Indeed their performance in most
instances was dismal, very much the way state-run
enterprises in other countries disappointed their
protagonists.
 
Our response to the serious problems of
unsustainable deficits in the public sector budget
and in the balance of payments took the form of
sharp painful adjustment measures undertaken from
1984 onwards. These included restraints on public
sector expenditure, reduced public sector
involvement in the economy as well as a reversal of
the past practices of using public sector
expenditure to boost demand and growth. In order to
offset the declining role of public sector
expenditure, steps were taken to stimulate private
sector expenditure and investment and to make the
private sector the engine of growth for the economy.
A series of measures were undertaken to liberalise
and de-regulate the economy and to embark on
privatisation of certain Government agencies and
functions so as to reduce public expenditure and
transfer it to the private sector while making the
investment climate more attractive to them.
 
The new strategy to make the private sector the
engine of growth was initially affected by worldwide
recession.  But with the improvement in the world
economy, the strategy enabled the Malaysian economy
to recover strongly from 1987 onwards. In the last
three years between 1988-90, robust growth of higher
that 9% was recorded. Most recent estimates put the
growth rate in 1990 at 10% which, we believe, is
among the highest rate recorded in the world for
1990. This was achieved despite the threats and
instability posed by the Gulf crisis which occurred
in the last quarter of 1990.
 
Our greatest achievement is that we have restored
fiscal and financial stability in the economy,
strengthened the balance of payments and reduced the
external debt burden considerably through
prepayment. The economy has returned to a high
growth path. With economic expansion, the
unemployment rate has been reduced to 7.4% in 1970
to 6% in 1990, resulting in a tightening of the
labour market and improvements in wage levels for
the workers. The per capita income, in nominal
terms, has increased to more than five-fold from
$1,106 in 1970 to $6,180 in 1990.
 
 
The recent progress of the economy exceeded all our
expectations. In the manufacturing sector alone,
total approved projects increased from $9,100
million in 1988 to $28,200 million in 1990, a
three-fold increase in three years. This shows the
confidence investors, particularly foreign
investors, have in the attractiveness of our economy
as well as in our pragmatic policies.  Manufactured
exports and tourism earnings have shown a remarkable
performance never achieved in the past.  The inflows
of export earnings and foreign capital were larger
that ever experienced before, providing strength to
the economy as well as enabling the country to
maintain a satisfactory level of reserves, which is
important for sustaining growth and keeping the
inflation rate low.
 
PROGRESS OF THE NEP
 
There is general consensus in the country that very
substantial progress has been made in eradicating
poverty and that the achievements have been better
than expected. The national incidence of poverty has
declined from 52.4% in 1970 to 17.1% in 1990. In
Peninsular Malaysia, the incidence of poverty
declined to 15% while in Sabah and Sarawak, it
declined to 34.3% and 21%, respectively. This
reduction is a significant achievement by
international standards although the poverty line of
$370 for 1990 is far above those used in many
developing countries to define poverty. According to
international institutions such as the World Bank,
we have been very generous with our definition.
Obviously, if the poverty line income was lower, we
will still get a much lower level of poverty, as
found by the estimates made by other institutions.
 
A significant achievement which is most encouraging
in the implementation of the NEP is in the poverty
eradication programme. During the period of the last
two decades, about 480,000 households in Peninsular
Malaysia have been lifted out of poverty. Poverty is
not a serious problem any more in Peninsular
Malaysia as it used to be in the 1970s, but in Sabah
and Sarawak, although the incidence of poverty has
declined sharply, it is still high compared to
Peninsular Malaysia.
 
With the progress in eradicating poverty, the mean
monthly household income for the bottom 40% of
households in Peninsular Malaysia has increased from
$76 in 1970 to $421 in 1990. The mean household
income for the bottom 40% of households in Sabah and
Sarawak also showed an increase from $68 to $390 and
$74 to $436, respectively. In fact, the mean income
of the bottom 40% of households has been increasing
at a faster rate than that of the middle and higher
income groups, resulting in an improvement in income
distribution.  The most important factor influencing
the improvement in rural incomes and the reduction
of income inequalities is the changing pattern of
employment. With economic growth and the rapid
expansion of the industrial sector, there are now
more employment opportunities in the
non-agricultural sectors. As a result, there has
been a steady trend in the country for the rural
poor to leave their traditional low income
agricultural activities and move into higher paying
employment in the manufacturing, construction and
services sectors. Among most rural households today,
traditional agriculture is no longer the only source
of income because their children can now get other
kinds of employment in the nearby cities and towns
to supplement the family income. Clearly, the
structure of employment and the income sources of
the people, especially those in the rural areas,
have changed with economic growth.
 
 
The Government's rural development programmes have
played a major role in enabling the poor to
diversify their employment and source of income. The
most important these programmes is, of course,
education as it provides the capacity for the rural
poor to take advantage of the growth opportunities
in the country.  By investing heavily in education,
health, transport and communication in the rural
areas, we have increased the mobility of the rural
labour force and raised the capacity of youths to
participate in the urban employment market and
escape from the clutches of rural poverty.
 
We have also made progress in restructuring the
employment pattern so as to reflect more closely the
racial composition in the country as envisaged in
the targets set for the 1971-90 period. In the last
twenty years, the progress made by the Bumiputera in
education and employment has been encouraging
although there are still also some major gaps and
shortfalls.  For example, the share of Bumiputera
employment in manufacturing has increased
substantially to 50.3% by 1990 but this increase is
concentrated in the lower and unskilled categories
of employment. In terms of occupations, while their
share in the professional and technical jobs is
high, this is mostly due to their high share of
employment in the nursing and teaching professions.
In professional occupations such as engineers,
doctors and accountants, Bumiputera are still
under-represented relative to their share of the
population despite the efforts made to increase the
output of Bumiputera graduates from the universities
and colleges.
 
In the case of non-Bumiputera, while all have
benefited from the growth of employment, their share
in certain sectors such as agriculture, land
settlement and Government services has remained
small in relation to their percentage of the
population. As regards the Indians, their former
disproportionately high share of employment in
certain professional groups has been declining
although in absolute terms they have increased.  The
Bumiputera of Sabah and Sarawak have also not
benefited as much as the Bumiputera in Peninsular
Malaysia from the growth of education, employment
and income opportunities in the country. The
Government is aware that the minority groups are
lagging behind in certain areas and therefore their
needs for more excess to education and employment
opportunities will be given greater attention.
 
It is clear that poverty can be greatly reduced and
that absolute poverty can be eradicated. The notion
that the poor is fated to be poor is due to
ignorance, for clearly when the poor is given
adequate help, they can improve themselves. And when
they become rich, this too is fate or takdir. It is
the duty of a responsible Government to help the
poor and eradicate poverty and Islam does not say
that such help is un-Islamic.
 
In the effort to eradicate poverty it is important
that the poor are motivated to overcome their own
poverty.  Those who try to convince poor people that
they should not strive against their fate are in
fact undermining the spirit of the poor to work
towards their own salvation.  Such people are in
fact trying to suppress the poor and keep them poor
forever. Islam has never decreed that Governments
should deliberately kill the spirit of the poor to
strive to better themselves. Only those who do not
understand Islam or who have other motives would
actively deprive the poor of the help and
opportunities to better themselves.
 
The restructuring strategy under the NEP designed to
increase the Bumiputera ownership and control
especially in the commercial and industrial sectors
of the economy has also met with much success in
quantitative terms. The Bumiputera share of equity
in the corporate sector has increased rapidly from
2.4% in 1970 to 20.3% in 1990. Although this is
still below the target of at least 30% envisaged
under the NEP, the rate of increase has been very
high as the Bumiputera started from a much smaller
base compared to other races. However, most of this
progress was due to the efforts of institutions such
as the Permodalan Nasional Berhad (PNB), PERNAS and
Tabung Haji while the equity acquired by Bumiputera
as direct investors is relatively small. Further,
there has been slow progress made by Bumiputera to
develop as a commercial and industrial community and
become owners and operators of their own businesses.
Although the Government provided substantial support
and subsidies to assist, them the incidence of
business failures was rather high among them.
Experience during the NEP period indicates that
although equity ownership has increased, this alone
has not been sufficient to create a strong
Bumiputera commercial and industrial community
capable of retaining their share. There must be more
effective efforts to develop their management and
entrepreneurial skills as well as their value system
so that the quality of their participation in the
economy can be significantly improved and made more
permanent.
 
Looking at the total picture, however, there is no
denying that despite the shortfalls and weaknesses,
great strides have been made to achieve both growth
and equity in our development and achievements,
making Malaysia a unique model among developed
countries.  There is hardly any multi-racial country
in the developing world which has been able to carry
out this experiment in socioeconomic engineering
successfully, without disrupting and reducing or
even negating economic growth.
 
Usually, if wealth is redistributed economic growth
is retarded. If on the other hand, economic growth
is give priority, then the inequities in society
will be accentuated. We can be justly proud that
through the NEP, we have been able to make the
employment and ownership structure in this country
more multi-ethnic and to reduce poverty without
sacrificing economic growth. Indeed our economic
growth actually outstripped those of other countries
not undergoing restructuring. And all these are
achieved in the context of a democratic system with
peace and stability prevailing.  When all is said
and done, the NEP must be acknowledged as one of the
greatest policies of independent Malaysia, enabling
it to prosper without the blatant injustices of a
totally materialistic society.
 
THE NEW DEVELOPMENT POLICY
 
We have made remarkable progress but we still have
more to do. The objectives of the NEP have not been
fully realised.  Poverty still remains, although the
magnitude of the problem has been substantially
reduced. There are still wide gaps among the
communities and the B umiputera still lag behind in
a number of important fields, especially in the
field of ownership and management of commercial and
business enterprises and in the professions. Within
the different non-Bumiputera and the Bumiputera
communities too, there is inequitable distribution
of wealth which needs to be redressed.
 
We must not allow the success we have reaped to slip
out of our hands because of our complacency. We must
push on with policies designed to reduce further the
current disparities among the races in order for
national unity to be firmly established.
 
The OPP2 covering the period 1991-2000 has been
formulated based on a new policy called the New
Development Policy (NDP).  This new policy will
maintain the basic strategies of the NEP of
eradicating poverty and restructuring society so as
to correct social and economic imbalances and
thereby contribute towards national unity.
 
National unity remains the ultimate goal of the NDP
because a united society is essential to the
promotion of social and political stability an
sustained development.  The NDP will set the pace to
enable Malaysia to become a fully developed nation
by the year 2020 not only economically but also in
terms of social justice, moral and ethical values,
political sophistication, quality of life and the
administrative efficiency of the Government.
 
In the course of implementing the NEP we were able
to identify methods which were effective and those
which were not.  There were also many areas of
weaknesses which should be remedied. Therefore,
while maintaining the basic strategies of the NEP,
the NDP will aim at bringing about a more balanced
development encompassing the following critical
aspects:
 
striking an optimum balance between the goals of
economic growth and equity;
 
ensuring a balanced development of the major sectors
of the economy in order that growth will be more
even mutually complementary and supportive;
 
reducing, and ultimately, eliminating social and
economic inequalities and imbalances to promote a
fair and more equitable sharing of benefits of
growth by all Malaysians;
 
promoting and strengthening national integration by
reducing the wide disparities in economic
development between states and between the urban and
rural areas in the country;
 
developing a progressive society in which the
welfare of citizens is spread to all, while being
imbued with positive moral and spiritual values and
an increased sense of national consciousness and
pride;
 
promoting human resource development including
creating a productive and disciplined work force and
developing the necessary skills to meet the
challenges of an industrial society through a
culture of merit and excellence without jeopardising
restructuring objectives;
 
making science and technology integral components of
socio-economic planning and development and
promoting a science and technology culture
compatible with the process of building a modem
industrial economy;
 
ensuring that in the pursuit of economic development
adequate attention is given to the protection of the
environment and ecology so as to maintain the long
term sustainability of the country's development as
well as the quality of life.
 
The NDP has taken into account the progress that has
been made so far under the NEP and the strengths and
weaknesses of our development efforts. It contains
several shifts in policy to provide a new dimension
to our development efforts, particularly in the
efforts to eradicate poverty and restructure
society. The new dimensions of the NDP will be to:
 
put greater emphasis in the anti-poverty strategy
with a view to eradicating hard-core poverty, while
at the same time reducing relative poverty;
 
focus more on rapid development of an active
Bumiputera Commercial and Industrial Community
(BCIC) as an essential strategy to increase and
render permanent Bumiputera participation in the
economy;
 
rely more on the private sector's involvement in the
restructuring process; and
 
focus more on human resource development including
moral and ethical values in order to achieve the
objectives of growth and distribution.
 
The new dimensions in the NDP will take into account
a number of considerations. Accordingly as there has
already been substantial progress under the NEP in
achieving the objectives of eradicating poverty and
restructuring society, there will be less need for
extensive Government intervention . Instead there
will be a more selective approach which takes into
account the need or quality and sustainable result.
The indiscriminate distribution of wealth which is
immediately frittered away does not only defeat the
objectives of poverty eradication or restructuring,
but they do lasting damage by creating a very
dependent society which cannot manage without
continuous Government support.
 
In the process of eliminating hard-core poverty and
reducing the imbalances, the stress will be on
education and training before support is given. The
candidates must be ready to help them selves and
face the realities of a competitive society before
they receive support or opportunities.
 
A second major consideration in pursuing the
socio-economic goals of the NDP is that it is
necessary to take into account the needs of the
economy to compete efficiently in the international
market place and to face the new challenges that are
already emerging. For instance, all countries
including the centrally planned countries are now
liberalising their economies and competing strongly
for foreign capital. In the face of this challenge,
Malaysia must enhance its attractiveness for
investors and businessmen to expand their activities
in this country.
 
In the export market, there is a possibility of
increased protectionism in world trade. To meet al
these challenges, we must establish a liberal policy
framework which encourages the private sector to bet
more efficient and willing to take longer term risks
and to be more innovative so that we can accelerates
the industrial development of the country without
making monumental mistakes. Reliance on the GSP must
be reduced as rapidly as possible so as to avoid the
frequent threats of GSP withdrawal.  Thirdly,
Malaysia's progress towards a fully developed nation
by the year 2020 must involve the participation of
all communities. This means that in implementing the
two-pronged strategies of theNDP, the policy should
encourage the mobilisation of all our resources and
the utilisation of the creative potentials of our
multi-racial society to build a strong economy and
make the country more resilient against the
instabilities and uncertainties of the world
economy. We believe that each race has its own
character and strength that can complement the
others. The NDP, therefore, has been formulated to
provide opportunities for all Malaysians to play
their part more effectively in the development of
the country.
 
POVERTY ERADICATION
 
The growth in the economy and the creation of income
and employment opportunities in the modern sectors
of the economy are expected to reduce the incidence
of defined poverty from 17.1% in 1990 to 7 .2% in
the year 2000. Unemployment in the country is
expected to fall to 4% by the year 2000 and with the
consequent tightening of the labour market,
productivity will have to be improved in order to
justify wage increases. The standards of living will
therefore generally improve.
 
In implementing the policies for poverty
eradication, the NDP will take into account the need
to make certain changes in the role of the public
sector. Since unemployment and poverty in the rural
areas were serious problems at the start of the NEP
twenty years ago, the public sector had to intervene
directly to open up new lands and to provide large
subsidies to smallholders to create new jobs and
support their incomes. This was necessary because
the only source of income in Malaysia then was land
for agriculture. Large acreage was needed to support
each Felda settler, for example. Experience has
shown that it costs more to run these land schemes
than similar estates run by the private sector. In
addition, the children of the settlers being better
educated, are disinclined to work on the rubber or
oil palm hold ings. They prefer, and rightly so, to
work in more lucrative urban jobs. Unemployment is
now resolves through the opening up of numerous
factories, which employ more workers per acre of
land. As agricultural produce like rubber and palm
oil are still a necessary part of the economy, their
production is best done by commercial estates.
 
Of far greater importance than subsidy to farmers is
the training that should be given to the rural
youths to enable them to take up skilled work which
brings better pay. Subsidies and support will still
be needed for paddy planting and fishing, mainly to
upgrade them and reduce the reliance on manual
labour while increasing their productivity.
 
It is envisioned that within the next ten years the
Felda estates will face serious labour problems. The
original settlers will no longer be available and it
is likely that their children will not be interested
in even managing the holdings. A solution will have
to be found for this.  Where land is required for
new estates the Government will favour the
experienced estate management companies to open them
up.
 
Instead of the broad-based approach as in the past,
the role of the public sector in poverty eradication
programmes will concentrate on those programmes
which are the responsibility of the public sector
such as education and training, health, rural roads,
transport and communications, housing, water and
electricity.  Although most areas in the country are
well-served with these basic services, there is
still a need to do more to provide better access to
these services in the remote kampungs, villages and
in some estates as well as in the states of Sabah
and Sarawak. In particular, these programmes will
focus on meeting the specific needs of the poorest
households to relieve them from poverty.
Fortunately, the number of hard-core poor households
who receive incomes less than half of the poverty
line and whose living conditions are extremely poor
is not large. It is estimated that only about
143,000 households or about 4% of the total
households are hard-core poor.  Specific programmes
targeted for this group will enable most of them to
be brought above the poverty line by the end of this
century.
 
In addition to this, consideration will be given to
relative poverty which is expected to be a bigger
issue in the future. When groups within a community
feel that they are much worse off economically than
others, even if in reality their situation has
improved in absolute terms, it is quite likely that
they will feel a sense of deprivation or
frustration.  Therefore, the Government will
continue to enhance income opportunities for the
lower income groups of all races by improving their
access to better services and amenities in both the
rural and the urban areas. In particular greater
efforts will be made to reduce the wide regional
imbalances in the country, especially the imbalances
between the states of Sabah and Sarawak and the rest
of the country. As poverty and economic disparities
in the less developed states of the Peninsula are
still high, we will address these problems more
urgently under the NDP. Migration to the urban areas
also contribute towards poverty and the Government
will give appropriate attention to the problem of
urban poverty.
 
RESTRUCTURING OF SOCIETY
 
Turning next to the strategy of restructuring
society, the NDP will continue with the efforts to
increase the share of Bumiputera in the economy both
in terms of employment as well as in ownership and
control of the economy. This is necessary since
current disparities in development among the ethnic
groups are still large. In particular, the
Bumiputera are still far behind the other races in
business, especially in the commercial and
industrial activities which, with the emphasis on
industrialisation, constitute the growth sectors of
the economy.  In continuing with these efforts, the
Government realises that it is essential to pay more
attention to the qualitative aspects of Bumiputera
participation as these have been given less emphasis
in the past. A higher quality of participation by
the Bumiputera will enable them to contribute
effectively to the development process and to make
them more self-reliant and less dependent on the
Government for support. Additionally their capacity
to retain their share will increase with qualitative
improvement in Bumiputera participation.
 
The main emphasis in strengthening and enlarging
Bumiputera participation in the modern sectors of
the economy will therefore be on increasing their
skills in management and entrepreneurship as these
skills are the real asset of a nation.  Possession
of wealth without the ability to manage it will only
result, sooner or later, in the loss of such wealth
or the Bumiputera just becoming an instrument to be
used by others to secure higher shares in the
corporate sector. While we would like to se more
Bumiputera partnerships, the 'Ali Baba' type of
arrangement in which Ali is not only passive but
risks no capital of his own must be regarded as a
form of undermining the NDP.  Non-Bumiputera
partners must find genuine Bumiputera partners
willing to risk their capital and involve themselves
in the dayto-day running of the business.  More than
that we expect the non-Bumiputera partner to
actually train and expose their Bumiputera partners
to real-life business experience. The
non-Bumiputeramustrealise that the faster the NDP
target is achieved and the Bumiputera become real
business people, the sooner will the need to favour
Bumiputera as a matter of policy be ended.
Conversely, of course, if the 'Ali Baba' partnership
is resorted to, then the OPP2 will have to be
followed by similar policies after its expiry
period.
 
For their part, the Bumiputera too must be serious.
The NDP is not a get-rich-quick scheme for them. It
is meant to vastly improve their chances of getting
a fair share of the wealth that is being generated
in this country and to retain and build up on that
wealth. Lending their names and becoming sleeping
partners will not make them good businessmen. They
must risk their capital no matter how small it may
be. They must be completely involved in the running
of the business. They must force themselves to learn
and learn fast. They must concentrate on one or two
businesses and not have meaningless involvement in
dozens of companies.
 
It must be emphasised that we do not have all the
time in the world. Bumiputera cannot expect economic
policies to always favour them. Politically split as
they are, the day may not be far off when their
influence in the Government will diminish and the
Government will no longer be willing to defend and
formulate policies to help them.
 
They must remember that there will be always be
competition in business. Such competition will not
always be according to the rules. Like politics,
business can be dirty. Complaining about being
sabotaged all the time will not help. They must
appreciate that such so-called sabotage are
frequently with their collaboration.  They must
therefore learn to face competition. For as long as
they lean on the Government to protect them, their
skills will not be properly developed. There is only
so much the Government can do. The rest will have to
be done by them.  It is time the Bumiputera cease to
expect to do business only with the Government. They
must go fully into the market to compete. The
contracts and the sales must be with the public. It
is not impossible to reduce their dependence on
Government contracts. But they have to be efficient.
They cannot expect a 5% price advantage outside the
Government.  Non-Bumiputera for their part must be
prepared to give contracts to Bumiputera even when
they are not involved in Government projects.
 
The belief that to succeed in business one has to
cheat is totally erroneous. Equally erroneous is
that all non-Bumiputera cheat. Honesty pays although
it will take time. Cheating will earn you some
profits first time around. But there will be no
second or third time. Bumiputera must have a longer
term outlook. A small profit that will come
repeatedly is much better than a one-time killing.
 
The Government is aware of the threat often made by
Bumiputera businessmen not to support the Government
if we do not look the other way when they misbehave.
But we will not be deterred in doing what we are
convinced is in the long-term interest of the
Bumiputera businessmen and the Bumiputera generally.
 
Nevertheless, the Government will continue with its
efforts to increase Bumiputera ownership and
participation in the corporate sector in line with
the original objective of achieving at least a 30%
stake. This, however, will be implemented in a
flexible and liberal manner so as not to unduly
affect growth. Therefore, under the OPP2 no
quantitative targets and no specific time frame has
been set for achieving a quantitative objective.
However, at the end of the year 2000, a review will
be made of the policy to support Bumiputera
participation in the economy.
 
The development of a viable and an effective
Bumiputera Commercial and Industrial Community will
be given higher priority under the restructuring
strategy than equity ownership.  Agencies such as
the PNB and the State Economic Development
Corporations (SEDCs) created to enhance Bumiputera
participation in the private sector will have to
adopt new and more effective strategies to enlarge
the pool of Bumiputera entrepreneurs and managers to
effectively participate in companies in which
Bumiputera have substantial stakes. Agencies like
the PNB should venture into new areas through
developing venture capital companies and
entrepreneurial development.
 
It is no longer adequate for such agencies to play E
passive role and to be content with mobilising
Bumiputera capital to acquire equities on behalf of
Bumiputera at privileged prices.
 
The existing system of quotas and licenses which are
granted to provide special assistance for Bumiputera
to enter into business activities will be
implemented more selectively to ensure that only
those with potential, commitment and good track
record will get the assistance so that they can be
viable on their own over time. This may delay the
achievement of quantitative targets but as we have
said we are more interested in quality. The former
stress on quantity had resulted in Bumiputera owning
100% of continuously losing companies. It is the
Government's view that they will be better off
owning 10% of profitable companies.
 
Ultimately, the Bumiputera must learn to participate
in business in an environment of competition and
efficiency so that they can integrate themselves
into the mainstream of the economy and be recognised
as genuine businessmen and entrepreneurs. We are
glad that a few Bumiputera have actually achieved
this status under the NEP but we need more of them
in order to sustain the results of the quantitative
achievement of the policy.
 
RETAIL BUSINESS
 
A very noticeable feature of the Malaysian
commercial scene is the poor representation of
Bumiputera in the retail business.  This is due to
various factors, among which is the difficulty of
finding suitable and affordable premises and the
fact that in the urban areas non-Bumiputera make up
the biggest proportion of the clientele.
 
While the Government hopes that all Malaysians
should patronise all Malaysian retail outlets
without any discrimination there is a need to train
Bumiputera in the art of retailing. The emphasis on
being 100% Bumiputera enterprise should cease. It is
counter productive as the customers in the urban
areas are mostly non-Bumiputera. Instead Bumiputera
retailers in the urban areas should tailor their
sales presentation so as to de-emphasise
theirBumiputera character and aim for the larger
market.
 
Another obstacle to Bumiputera involvement in the
retail business in the urban areas is the unwilling
ness of Bumiputera with the capital and the skill to
go into retailing. Invariable those who opt for
retailing are undercapitalised and unskilled in the
sophistication of urban retailing. There is a notion
among Bumiputera that there is no money in retailing
and one cannot get rich quick, an overwhelming
obsession with many Bumiputera.
 
The Government will study these problems and
obstacles and will try to formulate a solution. But
no solution will be effective without the Bumiputera
themselves appreciating that there is no way they
can achieve the Malaysianisation of Malaysian towns
and cities unless they are prepared to move into the
retail business.
 
I would like to stress that while the strategy of
restructuring society is primarily concerned with
increasing the shade of the Bumiputera in the
economy, there is also need to correct the
imbalances relating to the under-representation of
the non-Bumiputera in the certain sectors such as
agriculture, land settlement schemes and in public
sector employment. It is, therefore, proposed that
more opportunities be provided to the
non-Bumiputera, especially the minority groups such
as the Indians and also the Bumiputera communities
in Sabah and Sarawak to increase their
representation and to make the employment pattern in
these sectors more multi-ethnic. Similarly, in
implementing the privatisation programme,
opportunities will also be given to the
non-Bumiputera to participate in the privatised
projects and to won shares in these projects. Thus,
where possible, the restructuring strategy will take
into account the needs of all communities to have a
greater access to the opportunities created by the
Government. However, it is necessary and important
for the private sector to balance Government action
by increasing the intake of Bumiputera into the
higher occupational levels in order to bring about a
balance in the employment structure between the
public and the private sectors.
 
ECONOMlC GROWTH AND STRUCTURAL CHANGE
 
Like the NEP, the objectives under the NDP will be
implemented within the context of high economic
growth. For the 1 1990s under the OPP2, our aim is
to maintain and capitalise on our strengths and
reduce our weaknesses so that we can achieve a rapid
and sustainable growth rate of 7% per annum in real
terms.  Such a rate of growth in the output of goods
and services will result in the doubling of the
output of goods and services in real terms to about
$155 billion by the year 2020. Malaysians will be
able to enjoy a higher standard of living with per
capita income reaching to about $17,000 by the year
2020.
 
The increase in output of goods and services will be
accompanied by a major structural transformation of
the economy.  While the share of agriculture in GDP
will continue to decline, the share of the
manufacturing sector and the non-Government services
sector will continue to increase. The agriculture
sector cannot be expected to grow at rates
experienced in the past because of land and labour
shortages in Peninsular Malaysia and labour and
infrastructural constraints in Sabah and Sarawak.
Future development of the sector will require a
major shift towards increased commercialisation and
private sector participation, higher value-added and
the development of new crops. The manufacturing
sector is projected to grow by 10.5% per annum
resulting in the share of manufacturing sector in
GDP increasing from 27% in 1990 to about 37% in the
year 2000. The structure of exports will also
undergo further changes, with manufacturing exports
accounting for about 80% of total exports and
agricultural exports declining to 6% . All these
structural changes indicate the emergence of an
industrialised economy by the turn of the century.
 
An important sector that can contribute vastly to
economic growth and reduce invisible deficits is the
service sector. The efficient management of ports,
airports, land, sea and air transportation, both
domestic and international must be given serious
attention. The insurance industry must be upgraded
so as to be able to service international trade.
 
The tourist industry will have the greatest
potential for growth. More than anything else the
tourist industry is a service industry. The physical
facilities must be complemented by service Of a high
standard. Prices must always be reasonable and
related to cost rather than to the opportunities to
exploit.
 
Malaysians as a people must realise that tourists
can contribute to their well-being. With care we can
avoid the cultural pollution that a tourist industry
can bring about. It behoves upon Malaysians to make
the tourists feel welcome always. And certainly
those who are directly involved in the industry must
fully extend themselves to ensure that visitors to
Malaysia will return again and again.
 
It is necessary to emphasise again here that while
these structural changes are essential to make us a
fully developed nation, they can only happen if we
adopt the right policies towards growth and the role
of the private sector in the economy. Thus in the
NDP, the management of economic policies will
continue to provide the incentives for investors to
increase their activities and for entrepreneurs to
be more willing to take risks and be more
innovative.
 
It is wrong to think only of reduced taxes as
incentives.  The strongest incentive is a healthy
and liberal environment free of official harassment
and red tape for local and foreign investors to
expand their businesses in the country.  The
management of economic policy will therefore ensure
that apart from maintaining fiscal and financial
stability, the investment policies will continue to
be implemented in a liberal manner so as to allow
investors to have majority ownership and control in
their projects, particularly for export-oriented
projects. The service given to investors must give
little room for complaints.  Local investors will be
given the same treatment in the implementation of
the equity guidelines for export-oriented projects.
However, it must be pointed out that in business, a
willingness to spread opportunities will actually
lessen risks.  It makes good business sense to
appreciate the aspirations of others.
 
 
INTERNATIONAL ECONOMIC DEVELOPMENT
 
The prospects for achieving the growth targets
outlined in the OPP2 are bright in the light of the
recent performance of investments and exports and
better management of the nation's resources.
However, the external environment will continue to
be a major factor in determining the pace of
economic growth in view of the importance of foreign
trade and investment in the economy. There are still
several important international economic issues that
are unresolved and which continue to create
uncertainty in the prospects for growth of
developing countries.  The creation of a unified
market in Western Europe, the democratisation of
Eastern Europe, the structural changes being
undertaken in the Eastern European countries along
market-based principles and the end of the Gulf War
provide increasing opportunities for developing
countries to expand their trade.  Malaysia must take
advantage of the potentials of all these changes in
our efforts to expand and diversify our trade.
 
However, these changes are not without threats
against the growth of developing countries like
Malaysia Rising protectionism, lack of policy
coordination among developed countries on monetary
matters, the slow progress towards agreement at the
new Uruguay rounds of the GATT negotiations, and
above all, the emergence of new trading blocs such
as in the USA-Canada and the USA-Mexico trade
regimes and the unified market of EC pose dangers
for free trade at a time when developing countries
like Malaysia are seeking greater access to the
markets of America and Europe.
 
As I have said more than once before, our experience
shows that there is no such thing as free trade.
Trade was free when we were the markets for the rich
developed countries. But when we want to gain access
to the market of the rich countries to sell our
manufactured goods, restrictions are imposed. The
very people who taught us to abide by the rules of
competition are now violating these same rules for
their own political and economic reasons.
 
While we will continue to participate actively to
bring about a new international economic order, we
cannot bemoan the lack of cooperation from developed
countries and do nothing. We must do our best to
penetrate the markets of developed countries and
diversify our export markets. Our interest in South
South trade, our initiative in the G-15 movements,
over active participation in regional organisations
like ASEAN and APEC as well as our role in
championing the cause of the East Asia Economic
Group (EAEG) concept and the formation of trade and
investment links with developing countries in South
East and East Asia represent efforts to diversify
trade links and create a fairer and mutually
beneficial trading relationship between nations.
These actions, we believe, will help increase world
trade as well as counteract some of the negative
effects of rising trade protectionism by certain
developed countries.
 
SECTORIAL STRATEGIES
 
The manufacturing sector will continue to spearhead
the development of the economy in the next decade.
With the emergence of labour shortages and the
consequent tightening of the labour market, the
stress will be on high technology and less labour
intensive industries.  Measures must be taken to
diversify and broaden our industrial base through
the generation of new growth industries, especially
in basic metal, fabricated metal, petroleum and
transport equipment industries as well as
non-metallic mineral, rubber and those wood-based
industries which are less labour intensive. The
small- and medium-scale industries will be further
promoted and upgraded so that they will not only
support the major industries but will themselves
grow into industrial giants.  Such growth must be
well-planned and the capacity to finance and manage
must be given serious consideration. The tendency to
expand in every direction simply because of apparent
opportunity must be avoided. It is also important
that companies specialise and avoid going into
certain popular businesses simply because everyone
else appears to be doing so.
 
Within the agricultural sector, in view of land
constraints in Peninsular Malaysia and shortages of
labour, more emphasis will be placed on increasing
productivity in the sector rather than on opening up
new land. There will be greater commercial
reorientation in the sector in terms of the choice
of crops and management style as well as a reform of
the inefficient smallholder operations towards a
more organised and estate-like approach. Priority
will be given to the rejuvenation and conservation
of forestry resources through a planned programme of
reforestation and the management of logging.
 
In order to accelerate growth, high priority is
given under the OPP2 to the development of science
and technology and human resources. Further
development of the industrial an agricultural
sectors will require absorption of new and existing
technologies and utilising them more efficiently.
This will strengthen our domestic technological
capabilities and promote industrial competitiveness.
The Government will embark on a deliberate effort to
increase private and public sector investment in
Research and Development (R & D) and will aim to
more than double the R & D expenditure as a
percentage of GNP from the current level of 0.8%. R
& D must be regarded as a part of the normal cost
rather than as a diversion of disposable profit.
 
HUMAN RESOURCE DEVELOPMENT
 
An important thrust of OPP2 is the high priority to
be given to the development of human resources.
Human resource development is critical for the
success of every nation because more than anything
else the quality of human resources determines the
extent of competitiveness, productivity,
innovativeness as well as efficiency of a nation's
economy. We must create a productive and an
efficient labour force which has strong ethical and
moral values and a commitment to excellence.  In the
context of Malaysia, human resource development is
not only critical for growth, but it is also
critical for the attainment of equity objectives.
Developments in the last two decades have amply
demonstrated that education and training are
powerful tools to increase the incomes of the poor
by facilitating upward mobility and access to modern
sector jobs, and in reducing social and economic
disparities among the ethnic groups.
 
With the transformation of the nation from an
agricultural economy to an industrial economy, there
will be new demands not only for technical,
managerial and skilled manpower but also for a
labour force that is instilled with the values and
culture of an industrialized society. Industrial
skill will have to be developed at a rapid pace to
provide support for further expansion of the
manufacturing industries. While the Government will
continue to expand and re-orientate the education
and training system, the private sector will be
called upon to share a larger burden of training the
human resources of the country.  This is to enable
the output from the training institutions to become
more relevant to the actual needs of the private
sector.  The contents of the training programmes
must be more sensitive to the technological and
skill changes taking place in the economy.
 
I have highlighted for the consideration of
Honourable Members of this House, the targets and
the policies of the OPP2 and the salient features of
the NDP.  The NDP takes into account the needs of
all Malaysians. There should be no fear or doubts in
the minds of any ethnic group that they would lose.
Malaysia is rich in resources and there is enough
for everyone to gain from the process of
development. But it must be emphasised that if the
Bumiputera gained more than others, this is because
they began with a lower base-line and more need to
be done for them to bring them up to the level of
development of other Malaysians. Only by doing this
can we be assured of political and social stability
as well as national unity, a prerequisite for
progress.
 
We must continue with the process of reducing the
glaring imbalances among the ethnic groups as long
as it exists.  Therefore, may I say once again, it
is better that all Malaysians work together to
remove these imbalances as fast as possible. The
task of reducing these imbalances should not be left
to the Government alone. It is also the duty of the
private sector to play a more sincere and effective
role in providing productive opportunities for the
Bumiputera to advance themselves. The faster we move
towards redressing ethnic imbalances, the lesser
will be the need to have special privileges for the
Bumiputera.
 
The NDP has been prepared following exhaustive
analyses of social and economic developments in the
country after taking into account the views of
various groups in society, the private sector and
the National Economic Consultative Council. To all
those who have contributed in one form or another to
the formulation of the new policy, I wish to record
the Government's warm appreciation for their
assistance.
 
CONCLUSION
 
Our task now is to make the NDP work. The next ten
years will be filled with challenges both in the
international economy and in the domestic economy.
We must be dynamic, innovative and pragmatic in our
approach and above all the private sector must play
a leading and proactive role.
 
To overcome challenges and to survive in a
competitive world we must be prepared to adjust and
to change. Changes in the value system and in our
attitudes, are important prerequisites for progress.
We must be prepared to work hard, be disciplined and
less dependent on subsidies and welfare. The history
of civilisation has provided us with enough evidence
about the sad fate of societies.which fail to change
or which change too late.  Societies which fail to
react quickly to changing circumstances will be left
behind, stagnate and eventually fall into
insignificance.
 
The Government will ensure that its machinery at all
levels will work efficiently and closely with the
private sector in the spirit of Malaysia
Incorporated. Further, the Government will continue
to hold dialogues with the private sector to
maintain better cooperation and greater private
sector involvement in the
 
implementation of the NDP. In working towards the
goals set by the OPP2 and the NDP, Malaysians from
all walks of life must strive harder to succeed.
Together, all of us, by the will of Allah and His
Blessings, will continue to prosper and achieve the
goal of building up a progressive, prosperous and a
united nation. Let us all strive hard and dedicate
ourselves to achieving the objectives and targets of
the OPP2 and the NDP so that we can all contribute
towards making Malaysia a fully developed nation by
the year 2020.