Revisiting the NEP: Let’s not re-invent a race-based policy

“Emancipate yourselves from mental slavery;None but ourselves can free our minds.”– Bob Marley, Redemption Song

Emeritus Professor KS Jomo’s lecture, ‘Revisiting the NEP After Half a Century’, delivered at the Bar Council’s auditorium on 17 October, was a great chance to reflect on one of Malaysia’s most consequential public policies.

Above all, it challenged us to ask whether the race-based dimensions of the New Economic Policy still serve the nation’s needs more than 50 years after its introduction.

The ‘Madani’ (civilised) government is promoting initiatives such as PuTERA35, the Bumiputera Economic Transformation Plan 2035. It is worth asking whether Malaysia is confronting today’s inequalities or simply recycling yesterday’s solutions.

Jomo began by placing the NEP within a broader historical context. Too often, people see the policy only as a response to the May 13 riots. In reality, it emerged from decades of economic imbalances rooted in colonialism.

An important intellectual influence was James Puthucheary’s seminal 1960 book, Ownership and Control in the Malayan Economy. Puthucheary argued that the fundamental problem was not wealth held by any local ethnic group. It was the overwhelming dominance of foreign capital in the economy.

Jomo also highlighted the contribution of Agoes Salim. Puthucheary and Agoes were part of the intellectual circle around Abdul Razak Hussein that helped shape the NEP.

Their concern was never simply ethnic redistribution. It was national development, poverty eradication and economic decolonisation.

The NEP was fundamentally a programme of affirmative action. It was designed to address deep socioeconomic disparities between communities. It sought to reduce poverty, expand opportunities for bumiputras and build national unity.

Affirmative action is neither unique to Malaysia nor inherently objectionable.

India implemented similar measures for historically disadvantaged castes, particularly the Dalits.

Around the world, affirmative action for women is widely accepted because systemic barriers still limit their representation in many professions and institutions.

In societies marked by historic inequalities, targeted intervention can be justified.

The key question is whether the conditions that warranted such intervention still exist in their original form.

If the NEP is judged by its first and most important objective – to eradicate poverty regardless of race – it has been an undeniable success.

Malaysia has undergone a remarkable transformation since 1971. According to the Department of Statistics, the absolute poverty rate fell to 5.1% in 2024, down from 6.2% in 2022. Hardcore poverty now stands at just 0.09%.

Relative poverty remains significant at 16.7%, but extreme deprivation has been dramatically reduced.

The ethnic distribution of poverty also reflects substantial progress. The rate is 6.6% among bumiputras, 3.1% among ethnic Indians and 1.5% among ethnic Chinese.

These figures demonstrate that the policy’s anti-poverty mission has largely achieved its purpose.

Poverty reduction receives less attention today. Yet policymakers remain fixated on the NEP’s second prong: the target of 30% bumiputra equity ownership.

As Jomo noted, the debate is complicated by differing methods of measurement. Calculations based on par value often produce results very different from those based on market value.

Mohamed Tawfik, the discussant, told the audience that his father, Dr Ismail Abdul Rahman, Malaysia’s second deputy PM, always considered the NEP targets temporary, like golf handicaps. They were never meant to be permanent.

Scholars such as Terence Gomez have highlighted how state-linked investment vehicles now dominate ownership and control of the economy, raising questions about what the 30% target measures.

The issue is clearly far more contested than official narratives often suggest.

The original rationale for increasing bumiputra ownership was also linked to reducing foreign domination of the economy. Foreign equity ownership has reportedly fallen to around 18% – a dramatic drop from earlier decades.

If both poverty reduction and economic localisation have made substantial progress, why is equity ownership still treated as the central measure of national development?

The answer is more political than economic.

The Madani government’s Putera35 initiative echoes the language and objectives of ethnic ownership targets at a time when Malaysia’s challenges have evolved considerably. This sits uneasily with Anwar Ibrahim’s earlier commitment to move away from race-based economic policies towards approaches based on need and socio-economic disadvantage.

The persistent emphasis on race-based targets increasingly looks less like an economic necessity and more like a political accommodation to ethnic Malay-bumiputra sentiment.

Ironically, one of the NEP’s greatest achievements has created the conditions for a different conversation.

Over five decades, affirmative action policies helped produce a large Malay and bumiputra middle class. This contributed significantly to social mobility, political stability and ethnic harmony. It reduced perceptions of exclusion and gave many people access to opportunities previously beyond their reach.

But success changes the nature of inequality. Today, the most urgent disparities are increasingly found within ethnic groups rather than between them. Wealthy Malays coexist with poorer Malays. The same is true of Chinese, Indians and other communities.

The divide that matters most is now one of income, wealth and opportunity rather than ethnicity. As Aliran commentator Loh Chee Seng has argued, widening intra-ethnic inequality may now be a more serious challenge than inter-ethnic inequality.

A policy designed for the realities of 1971 is ill-equipped to address the realities of 2026.

The NEP deserves recognition for its historic achievements. It helped reduce poverty, expand educational opportunities, build a substantial bumiputra middle class and promote national stability during a critical period of Malaysia’s development.

But successful policies should not become unchangeable articles of faith.

More than 50 years on, Malaysia’s social and economic challenges have changed. Public policy should focus more on need than race, targeting poverty, vulnerability and exclusion wherever they occur.

Programmes for the bottom 40% of households, the hardcore poor and other disadvantaged households offer a more relevant framework for the future.

To paraphrase Bob Marley, the Madani government should emancipate itself from mental slavery to policies long past their period of greatest usefulness. The challenge is not to preserve the NEP indefinitely. It is to build on its successes while recognising its limits.

Malaysia does not need a reincarnated NEP. It needs policies that reflect the realities of a mature, diverse and increasingly class-divided society.

Johan SaravanamuttuCo-editor, Aliran newsletter24 October 2026