The Burden of Privilege on the Malaysian Economy

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Published on January 27, 2021

By Sukudhew (Sukhdave) Singh

Former Deputy Governor, Central Bank of Malaysia | Former Independent Director, Khazanah Nasional Berhad 

There are three systems of privileges that are operating in Malaysia: race, religion and titles. All of them are intended to confer privileges to certain groups and come with exclusive economic benefits for those who are favored by these systems.

There is no problem with earned or deserved privilege because such privilege is based on a significant contribution to society and the economy. Such privilege is justifiable given the contribution to the greater good. Also, extreme inequality never benefits a society and cannot be justified. Therefore, extending certain privileges that would enable the economically disadvantaged groups in a society to progress and make a better living are also justifiable. What is not justifiable is when the system of privileges is abused, as is clearly the case in Malaysia, and unearned and undeserved privileges are bestowed. There are social and economic costs to any privilege system and the abuse of these systems only increases those costs.

The Privileges of Race and Religion

Let me deal with race and religion first, which by design, have fractured Malaysian society and created a system of privileges that is hard to justify. Let me illustrate with a couple of examples:

When a Malay tycoon can buy a string of houses in Malaysia at discounted prices while middle income non-Malays have to pay full prices to buy their family homes (effectively subsidizing the tycoon), such discriminatory and unwarranted privilege is justified by a system of privileges related to race.

When a Muslim man can walk into a supermarket and demand that it removes the section containing the “non-halal” products consumed by non-Muslims, there is a religious privilege system that is empowering such inconsiderate and uncouth behavior and its associated belief that the customs and practices of one part of society supersede those of the others.

Race and religion have been used to enshrine a privilege system that has created different classes of citizens in the country. Political shenanigans like the large-scale giving of blue ICs to foreigners in Sabah have elevated those foreigners, because of their religion, to enjoy privileges that are denied to other long-standing citizens of the country. When race and religion are the determinants of privilege, merit has a much smaller role in society and in the allocation of economic opportunities.

As it is, the privileges of race and religion have elevated mediocre minds to where they can tell the rest of society what it can and cannot do. The privileges of race and religion have lifted unqualified and incompetent individuals into positions of leadership. The privileges of race and religion have provided opportunities for individuals to enrich themselves through dishonest means, to betray public trust, to loot public funds – all with impunity. The privileges of race and religion have legitimized rent-seeking as an economic activity. The privileges of race and religion have allowed exclusive access to economic resources through institutionalized discrimination. It is primarily to safeguard these privileges that Malaysia has been unwilling to sign up to some very basic international conventions on human rights, including the International Conven­tion on Elimination of All Forms of Racial Discrimination (ICERD), International Convention on Civil and Political Rights (ICCPR), and Inter­national Convention on Eco­nomic, Social and Cultural Rights (ICESCR).

The New Economic Policy was misguided. Instead of focusing on economic need, it decided to focus on race. Had it focused on economic need, it would have achieved superior outcomes in reducing all forms of economic inequality, it would have led to far less distortionary policies, and it would not have entailed the massive waste of taxpayers’ funds. Most important of all, it would have cemented a Malaysian identity where all citizens in need are treated equally. By making the NEP race-based, it has allowed unscrupulous individuals to hijack the benefits to enrich themselves while enacting self-preserving policies that are definitely not in the interest of the Malaysian economy, and may not even be in the interest of those that the NEP was supposed to help.

I am very pessimistic that the Malaysian economy will ever be unshackled from the fetters of the NEP. It has proved to be too profitable for those who have hijacked its benefits and a large deluded sector of our society continues to be fed the narrative of “us against them,” that has been the foundation of such policies. This means that the economic distortions created by these policies will continue to undermine the Malaysian economy at a time when the global competitiveness of the Malaysian economy is being challenged as it never has been before. It is a burden of privilege that the Malaysian economy can ill-afford.

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