exclusive The revival of the much-contested New Economic Policy (NEP) would not be a pragmatic move in the present environment, says renowned economist Prof Emeritus Mohamed Ariff.

"Can we have the kind of NEP policy that we had before? The answer is 'no' under present conditions," he said in an hour-long interview with malaysiakini recently.

Ariff, who is also executive director of the Malaysian Institute of Economic Research (MIER), said there is an urgent need to re-examine the NEP and address its shortcomings to avoid repeating mistakes.

"Let's see why it did not reach the target for distribution (of 30 percent equity) within the bumiputera community. Why is it the average bumiputera is not as well off as the numbers suggest?" he asked.

The NEP was introduced in 1970, soon after the infamous May 13, 1969 racial riots. Its initial objectives were 'to eradicate poverty regardless of race' and 'restructure society to eliminate the identification of race with economic function'.

To consolidate the economic status of the bumiputeras, who were deemed have been left out of the development process, the NEP imposed ethnic-based quotas for university admissions, licences and scholarships.

The policies continued under the National Development Policy (NDP) when the shelf-life of the NEP expired in 1990. The new policy was purportedly designed to cover all disadvantaged Malaysians.

Umno Youth had made a call to revive the NEP during its recent annual assembly. It said the policy should be relaunched as the New National Agenda.

Unrealistic scenario

Ariff said 'the world has turned 180 degrees around' in the era of globalisation and that this should be taken into account before there is talk about giving new life to the NEP.

"Let us think of the situation now. Let us get our bearings right first before we pick up on the NEP again," he said.

He stressed that efficiency has to be emphasised in the increasingly competitive world because of the existence of the General Agreement on Tariffs and Trade and the World Trade Organisation.

"Put all things in proper perspective, and you will find the space for affirmative action is much smaller now than before. Now you have to talk about efficiency [...] we have to be mindful of the fact that we are now living in the extremely competitive world, " he pointed out.

He warned that the nation's glory days of double-digit economic growth of the early 1990s are over and that it would be no longer feasible to proceed with the NEP when economic expansion is being held back.

Ariff said MIER has estimated that the potential economic growth for the next five years would be about 6.5 percent, "which is sustainable".

"Anything above that cannot be sustained. You may have temporary growth of seven percent, but it will fall back to six or below [...] even the best case scenario is seven percent growth. But the best case scenario is not a realistic scenario," he said.

To counter the challenges ahead, he said affirmative action policies should help marginalised non-bumiputeras as well.

"Of course there are poor people in every community. The fact is you cannot ignore the marginalised Chinese, marginalised Indians and whoever (else) that needs assistance.

"In fact, the NEP initially talked about eradicating poverty across racial lines. In another words, this is the time for Malaysians to (stop looking) at things (along racial lines)."

Need for transparency

Ariff also noted that while there may be some justification for the government to concentrate on awarding projects to bumiputera firms, transparency is required in the practice.

"There was absolutely no transparency in the past, in the sense that there were no open tenders. Now, we need to have more transparency," he said, also raising the argument for greater exposure to competition among bumiputeras.

"By protecting them, by insulating them from competition, you are actually doing the community a disservice. I am not asking them to compete with the Chinese or Indians, but among themselves."

He also said transparency would help reduce complaints of 'crony capitalism' and the fact that wealth is concentrated in the hands of a few.

"A lot of bumiputeras who submit applications do not get anything. They do not know (why they did not succeed) because there is no transparency.

"Maybe another guy is closer to the politically powerful, so he gets it. If you have transparency, there is a little space for this kind of abuse."

Under the proposed New National Agenda, greater transparency and accountability should be upheld, he said.

"Instead of creating 10 billionaires, why can't we create 10,000 millionaires? I think we have to make sure that the benefits filter down."

Smart partnerships

Ariff pointed out the need to create the right policy environment for anyone with smart ideas and skills to excel and shine.

"Even the prime minister (Abdullah Ahmad Badawi) has said that some people have received excessive assistance ... some get too little and some none at all. Something must be done about this."

While small and medium enterprises (SMEs) need more assistance from the government to stay competitive, Ariff said it is necessary to distinguish between these.

"We should focus more on small-scale enterprises (many of which are owned by Malays), and not so much on medium-scale ones which are better positioned to be self-reliant. It's the small guy at the micro level who needs assistance.

"I am not saying that you should ignore the medium-size ones [...] have the focus on smaller ones to ensure that there is more equitable distribution of wealth."

He also said the bumiputera community needs the cooperation of its non-bumiputera counterparts to climb the economic ladder.

"The government's help is necessary, but it's not sufficient. They (bumiputeras) cannot really get into the mainstream without being accepted by non-bumiputeras," he added.

"I am not talking about Ali Baba-enterprises, but about genuine partnerships ... real smart partnerships."