The new economic policy after 1990

Abstract

As the Malaysian economy recovers from the recession of 1985, and appearing to have regained its long-term growth path, attention is now focused on the question of a new economic policy to succeed the present New Economic Policy (NEP) introduced in 1970 which is supposed to end in 1990. Indeed, many have asserted that the earliest adoption of a new post-1990 economic policy, even though the old NEP has still more than two years left before its expiry date, would give greater certainty and confidence towards the country's economic future. There are, however, at least two schools of thought on what the future policy should be. The first considers that the recession resulting from the slowdown in the world economy had prevented the attainment of the goals of the 1970 NEP, whose distribution objective is predicated on an accelerated economic growth rate, and therefore would like to see a continuation of the present policy beyond 1990 until the poverty eradication and restructuring of society goals are achieved. The second school insists that the NEP should be terminated in 1990 and replaced with a new policy that in particular seeks to promote growth as the primary goal with all its attendant policy adjustments, with redistribution taking a back seat. The policy debate will range along different positions and premutations of the goals and strategies in between these two schools of thought. It is as yet not clear as to what form the new policy will take. But from present indications and statements made by various leaders, and now the Prime Minister in his opening address at the 1988 National outlook Conference, it clear that elements of the 1970 NEP will have to continue in the post-1990 policy. The new emphasis, or even new elements, will have to take into account the target shortfalls of the old policy, and the changing conditions of the 1990s as compared to the seventies situation. In the final analysis, however, the post-1990 economic policy issue will have to be resolved in political terms through a process of consultation to arrive at a new social contract between the ethnic groups. In this way the New Economic Policy after 1990 will be the policy framework within which economic development strategies will have to be designed for at least the next ten years towards the year 2000 to fulfil the goals of the new NEP. This paper proposes to focus on the changing conditions, including the global economic situation to which the economy has to adjust to, which will determine the eventual direction of the new economic policy, and then to consider the possible dimensions of the post-1990 policy. In the final section we propose the outlines of an Income Doubling Plan as the framework for a new ten- year Outline Perspective Plan (1990-2000) to replace the present OPP which ends in 1990.