new economic policy

NEW ECONOMIC POLICY (1971-1990)

NATIONAL DEVELOPMENT PLAN(1991-2000)

MUHAMMAD ASYRAF HASSAN 2011203642

INTRODUCTION

Since independence, the government of Malaysia has

formulated various development plans

DEVELOPMENT PLAN IN MALAYSIA

NEW ECONOMIC POLICY

• The NEP was launched by the Malaysian government in 1971 under the Prime Minister Tun Abdul Razak. The NEP ended in 1990, and was succeeded by the National Development Policy in 1991.

• The approach used was growth with equity and active government participation in the economy.

• the government participation is important to ensure equitable growth because different ethnic group were at different levels of economic achievement at the end of the 1st Malaysia Plan.

• The shortcoming of the system were blamed for the racial riots in 1969.

OBJECTIVES OF NEP

• The overriding objective of the NEP was national unity and to foster nation-building.

• After the may 13 tragedy, the policy makers in Malaysia were of the view that national unity can achieved under two-pronged strategies:-

eradicate poverty restructure the society

Period Malays Chinese Indians Rural household

s

Urban household

s1957-1958 55.7 12.1 19.8 44.2 16.8

1967-1968 50.2 12.3 25.6 42.4 17.6

1970 49.3 13.9 20.2 41.7 15.2

Table shows the households with incomes less than RM120/month (%)

*Source: Fong Cha ONN, 1990

Most rural households are Malays involved in agriculture with relatively backward methods used in farming resulting in unproductive yields

Strategy for poverty eradication1. The absorption of the poor rural households

into the modern sector through non-algricultural development.

2. The raising of the productivity of farmers mainly through new land development, provision of irrigation facilities and replanting of rubber with higher yielding varities

3. The provision of basic services such as education, health and utilities e.g. electricity and water supply.

Strategy for restructuring society

1. Employment by sectors should commensurate more to the racial composition of the population i.e. about54% malay35% chinese10% indians1% others

2. Bumiputera should own and manage at least 30% of the equity of the corporate sector, other Malaysians 40%, while foreigners 30% (30:40:30)

3. The need to create Bumiputera Commercial and Industrial Community (BCIC). The Malaysian Policy planners viewed the shortage of Bumiputera entrepreneurs as a major block in achieving a fairer distribution of income.

• To ensure success on the restructuring of society, many new measures had been introduced e.g. many enterprises were set up through statutory bodies like MARA, FELDA, FAMA, MARDI to facilitate the entry of Malays into modern urban sectors

• Besides the existing government agencies, new agencies as RISDA, MAJUTERNAK, MAJUIKAN, were built to raise income and productivity of the bumiputera.

ACHIEVEMENTS OF NEP

Increase in GDP i.e. high economic growth.In 1970s, the average annual growth rate was 8.3%, which continued well into 80s and 90s. The rapid growth rate was accompanied by relatively low and stable prices as well as low and declining unemployment rate.

The manufacturing sector has been expanding rapidly since 1970

Fairer distribution of income.

Increased employment opportunities.The rapid growth resulted in a doubling of employment from about 3.4 million in 1970 to 6.7 million in 1990.

Improvement in the participation of Bumiputera in the modern sectors since 1970.there was a large reduction of Malays involved in the agriculture sector and those who stayed, most adopted modern farming.

FACTORS RESTRICT THE ACHIEVEMENT OF NEP GOALS

The recession of the 80s.

Projects undertaken by the private sector was badly affected as they were unable to secure domestic or foreign loans.

The banking sector faced problems of unpaid loans.

• The Bumiputera were relatively inexperienced in their business ventures and many went bankrupt.

• Attitude of the Malays towards the policy and government.

• Attitude of the non Malays toward the policy implementation.

THE NATIONAL DEVELOPMENT POLICY

• The approach adopted was Balanced Development

• It is important in order to establish a more united and just society.

• NDP aimed at making Malaysia a fully developed nation by the year 2020

• National unity remains the ultimate goal of socio-economic development

STRATEGY OF NDP

The NDP maintains the elements of the NEP i.e the two pronged strategy

However four new dimensions were added to the basic strategies in order to eradicate poverty faster and accelerate the process of restructuring Malaysian society.

The four new dimensions

• Shift the focus of anti-poverty strategy (NEP) towards eradication of hard core poverty while at the same time reducing the relative poverty.

• Focus on employment and rapid development of an active BCIC as a more effective strategy to increase meaningful participation of Bumiputera in the modern sectors of the economy.

• Rely more on the private sector to be involved in the restructuring of society

• Focus on human resource development as a fundemental requirement to achieve the objectives of the growth and distribution

The development thrusts for the NDP encompassed the following critical aspects:1. Growth and equity2. Balancedd development3. Reducing and eliminating the social and

economic inequalities4. Strengthening national integration5. Development a progressive society6. Human resourse development7. Science and technology8. Protection of environment and ecology

NDP ACHIEVEMENTS

GDP growth.The GDP grew from RM79.1 billion in 1990 to RM209.3 billion in 2000

Reduction of povertythe overall incidence of poverty had reduced from 17.1% in 1990 to 7.5% in 1999

Fairer distribution of income

Bumiputera involvementthe percentage of Bumiputera involved in the secondary sector increased to 18.7% in 2000 while in tertiary sector was increased to 49.0%

Improved quality of life.the quality of living of Malaysian had improved compared to the situation in 1990.

References

• Text book of “The Malaysian Economy: Past and Present” by Habibah Lehar

• www.wikipedia.org

• www.youtube.com