When a population is divided by obstacles, prejudice, fear and suspicion, economic interaction is weakened. Instead of one huge whirlpool of economic activity, all domestic economic activity becomes limited to small communal whirlpools. This situation can be immensely and sorrowfully made worse if the whirlpools run in opposite directions – they will tend to cancel each other out.
In my previous two write-ups, I discussed some of the smaller yet more intractable problems of the Malaysian economy.
The Malaysian Economy is Structurally Dangerous
The Malaysian Economy – What can we do?
In these, I lamented the inherent weakness of the domestic or local economy. A strong local economy is necessary to support and sustain the population. Without a strong local economy, the people get weaker and more dependent on aid and subsidies while the central government gets stronger, big business gets stronger, foreign investment gets stronger and big money of whatever shade and colour or even whether legal or illegal gets stronger.
The cases of Kelantan and Trengganu are indicative. With PAS rule for many years, the local economy of Kelantan while still small is on a relatively firm footing. In Trengganu, however, the nascent local economy was smashed down by the power of petroleum which is a combination of central government, big business, big money and foreign investment. The people of Trengganu are now heavily dependent on petroleum aid and development. When this runs out in a few decades, although politically, the central government will still want to control Trengganu, economically, Trengganu will be like a drug addict to whichever party is in power.
I could be wrong, but these are two very clear choices of development models which will be of great interest to economists in the years to come. Yes, I could be wrong for in a few months, we may even see the US as a non-superpower.
I mention the above examples because it affects my next discussion topic – the NEP Chinese, and on the way I might mention the NEP Mamaks too.
When Tun Dr. Mahathir wrote the Malay Dilemma, his contention was that the Malays needed a few multi-millionaires to kick-start Malay progress and development. This thinking was to dominate the implementation of the NEP for decades and still does.
I would like to argue that such a contention was based on erroneous assumptions and ran into the “chicken and egg” problem, with the result that Tun Dr. Mahathir himself had to blame the failure of the NEP on ungrateful and lazy Malays whose culture did not allow them to seize the opportunities offered.
In my arguments, I would like to present for consideration the differences between Malay millionaires and Chinese millionaires.
Chinese millionaires more often than not started from scratch – the oft-quoted legend is that they had only a few cents in their pockets and the shirt on their backs is all they had to begin with (funny, but nobody ever mentions trousers). This means they had to build their businesses from scratch over many years and had to rely on quite a few good men and women to do so. This basic contribution to the local economy is irrefutable. The typical Chinese millionaire rose to wealth and power on the shoulders of a strong local economy which he helped build, but not Chinese millionaires are typical as we shall see later.
This also means that the typical Chinese millionaire had good command and understanding of all the ins and outs their businesses. Yet still, a further legend goes that the first generation builds the empire, the second generation just barely maintains it and the third generation squanders it. Business acumen and strength of character learnt in the life and death struggle of building the business was all important and this is not easily passed on, even to members of one’s own family.
Malay millionaires unfortunately did not have this advantage. Their wealth was “easy come and easy go”. Most were lost within less than a single lifetime. The business acumen was not fully developed much less passed to future generations of Malay entrepreneurs. It is not the Malays who are to blame, but the “get rich quick” or “instant millionaire” policies of the NEP.
Even for those who are still multi-billionaires, very little of the wealth and knowledge trickle down to the ordinary Malays. This is because the wealth is not built on strong local foundations but on top heavy and very narrow elitist commissions, contracts and grants with very close links to foreign industry and suppliers. Most of the money of these multi-billionaires are either safely stashed in foreign bank accounts or spent in foreign countries. There is only minor benefit to the local economy.
This is the crux of the “chicken and egg” problem. Does the instant millionaire come first or the building of the business and the strong local economy come first? Without a strong local economy, the ordinary citizens of Malaysia do not benefit over the long term because skills and local expertise will not be properly developed and the economic foundation will be weak.
Perhaps with a strong local economy, things may have been very different, but the government did not pay very much attention to the local economy. Very quickly, things started to focus heavily on foreign investment and technology. And for quite some time, Malaysians DID enjoy economic benefits from the money brought in by foreign investors.
This is where the NEP Chinese come in. For while the Chinese did not enjoy very much direct aid and encouragement from the government, they DID benefit from the heavy reliance on foreign investment in the form of jobs and engineering contracts, services and supplies. Quite a few realised that Malays who were still mostly rural based, cannot possibly gather expertise and knowledge in such a short time and benefited by sidling up to NEP Malays for Ali Baba contracts and sharing in the loot from plunder and corruption by illegal or corrupt activities. This created “non-typical” or NEP Chinese millionaires.
I promised to mention the NEP Mamaks, so let me just say that while the NEP Chinese realised that they could benefit from the technical disadvantage of the Malays, the NEP Mamaks realised they could benefit from a closer identification with the Malays and joined UMNO in droves.
Over time, this distinction between typical and non-typical Chinese millionaires is becoming blurred nor do the Chinese themselves bother to differentiate anymore. This seems to be attitude of the very practical Chinese mind.
To understand the Chinese mind better, we need to go back a little in history. The Chinese were probably already in Malaysia perhaps even before the Malacca Sultanate. There is archaeological evidence that they may have been in Malaysia for trade and mining for gold and tin besides other activities in the 13th and 14th centuries, but this has very little cultural impact and is mostly forgotten in the mist of time.
The second (?) wave of Chinese came with the voyages of Admiral Cheng Ho and these left pockets of Chinese in Kelantan, Trengganu, Pahang and Negri Sembilan as well as sufficiently sizeable populations in Malacca who created the now famous Nyonya culture which was partly but never fully absorbed into Malay culture.
The third (?) and most memorable wave came with the British as indentured labourers as well as tin miners and merchants. In fact they came in such large numbers they outnumbered the Malays and took sides in Malay politics of the time, often on opposite and contending sides of each other depending on the triad that they belonged to.
This wave was in such huge numbers they did not have to mix and mingle to survive. They built their own schools as well as industries and had an economic life that was relatively self-contained.
Culturally and economically, there was no pressure to intermix with the Malays, but there was definitely a pressure to deal with the British who controlled the police force and strategic institutions such as ports, transport, customs, taxes, security and law.
The Chinese mind is therefore tuned towards the Chinese cultural and linguistic homeland as well as English culture and language as colonial masters. What cultural interaction with the Malays was limited to a small amount of trade, some land matters as well as problems of living together as neighbours. Thus historically, the Chinese mind has been more external oriented than internally oriented as far as Malaysia is concerned.
This is reflected in the political parties that represent them. When after the war, countries were throwing off the colonial yoke, Malays became infected with nationalism, but the Chinese were infected with Chinese nationalism and communism. This tragic racial distance forced even some militant Malay nationalists to tone down their anti-British and anti-colonial activities. After a brutal and punishing few years of armed struggle, the communists were soundly defeated. Socialists of all shades and sizes were persecuted and socialist influence driven into oblivion.
This left Kuomintang influence with an opening into the Chinese political mind. Across the causeway, the PAP reigned supreme and spread its influence into Malaysia. The MCA and the DAP essentially started as representatives of these two trends. Over the years, like Nyonya culture, these two political parties have adapted but never fully integrated into the local political scene. There was never any Malaysian Chinese nationalist movement of any strength. This weakness makes it very easy for opportunists and corrupt individuals on the Malay, Chinese and Mamak sides to gain power using racial sentiments.
Why spend almost a quarter of this write-up on this interpretation of history? Well, for one thing, Malays and Chinese form the 2 biggest population segments in this country and for the local economy to gain strength, it is essential for the 2 groups to cooperate and offer mutual help. The weakness of Malaysian Chinese nationalism and the external orientation of the Chinese mind translates into a weak local economy. This is compounded by Malay fears and insecurity.
When a population is divided by obstacles, prejudice, fear and suspicion, economic interaction is weakened. Instead of one huge whirlpool of economic activity, all domestic economic activity becomes limited to small communal whirlpools. This situation can be immensely and sorrowfully made worse if the whirlpools run in opposite directions – they will tend to cancel each other out.
I still contend that the happiness of the whole people makes for economic well-being and that all impediments and obstacles to such happiness must be removed. There are some who will say this is too simplistic, but let me make this statement with a slight tongue-in-cheek. This contention may suffer from the “chicken and egg” problem – does economic well-being create happiness or does happiness create economic well-being?
But if there are any economists out there who can prove that happiness is primary and can prove that some sort of happiness index can be firmly and uni-directionally linked to economic well-being to aid in future developmental economic planning for the 3rd world and thus win the Nobel Prize, please mention that “batsman” first triggered this thought?
I say also that it is not necessary to wait for the central government to act. In a sense this is like “opposition economics” and can be implemented by state governments. The PAS government in Kelantan is a good example and there is ample opportunity for the DAP state government in Penang to follow suit in small progressive steps.
By batsman
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The Blogs 
It is simple for everyone. Those who are poor, ask yourselves: are you working or engaged in economic productive activity or wealth producing activity the minimum 8 hours per day. Every religion wants that. But I can't blame you. There are others who work on hot air. Keuntungan atas angin and it can be huge- hundreds of millions. If you work two hours only, you will remain where you are. If you work to improve your skills and learning, it will earn you more in the future. The govt. cannot work for you nor help you. You should avoid being absent due to kenduris and make foreign workers more trustworthy. Your elders and relatives should learn this. Let you work and improve the next generation. Not call you to be with them and destroy your future as well as future generations.
NEP is a very dangerous weapon for the human-mind, and should be totally scrapped.
The effect is exactly like spoiling a child with money.
"Knowledge is Power"