Managing economic growth amid ethnic diversity: economics, politics and ethnicity in Malaysia

Abstract

It is generally agreed that Malaysian economic policymaking changed rather drastically in the aftermath of the race riots and UMNO palace coup associated with 13 May 1969. While government policy before the New Economic Policy (NEP) was generally considered to be basically laissez faire in approach, and responsive to as well as supportive of both foreign and domestic (predominantly Chinese) private sector interests, the seventies were characterised by growing state intervention, primarily in favour of the nascent Malay business community. While such intervention generally did not threaten the private sector as a whole, particular investors - usually Chinese or foreign - have felt threatened at various times. Seen against this background then, Mahathir's economic policies of the eighties suggest efforts to retreat from the excesses of seventies-type state interventionism, e.g. through privatization, 'Malaysia Incorporated', deregulation and concessions in NEP implementation. The experience of the eighties has also highlighted the limits of and constraints on state intervention in the context of the Malaysian Malaysian export-oriented industrialization from the seventies economy is largely unconnected with the import-substituting manufacturing encouraged from the late fifties. There is no significant segment of the business community which actively promotes redistributive measures to substantially expand the domestic market, thus providing the basis for a different, more nationally-oriented development strategy.