Anwar Ibrahim has been campaigning strenuously in the on-going Ijok by-election campaign. But what exactly is his vision for the Malaysian economy and why is he asking for an end to the NEP? Aliran Monthly caught up with the reformasi icon for a frank and in-depth interview recently.
In the first of two parts, we zoom in on the economy, in particular the New Economic Policy. Anwar himself has morphed from an ardent champion of the New Economic Policy to a vocal opponent. We asked him how the transformation took place and why. And what does he see as an alternative to the policy? Would that alternative bring pain or relief to long-suffering Malaysians in the grassroots who continue to be left out from the mainstream of development? We also ask him about his plans for the coming general election.
Aliran Monthly: Let us start by asking a few questions about the economy, tapping into your own experiences before. We would like to begin with the NEP, although it was supposed to have ended some time ago. Lately, you and Keadilan have been openly saying that we should terminate the NEP. We would like to know why you called for the termination and at what point in your career did you decide that the NEP – or whichever dimensions of the NEP you find objectionable – should be discontinued. Was it a more recent reflection because of what you see in terms of the so-called Malay agenda or was it also something about the implementation of the NEP that you couldn’t quite agree with for economic management from now onwards?
Anwar Ibrahim: Let me be frank. I emerged from a generation of Malay activists that were supportive of the NEP. At that time, we felt very insecure in terms of the level of professional expertise, educational achievement, in economy and trade. That was in the early seventies. I thought the wisdom was about public education and giving exposure, opportunities to the Malays. Objectively, in terms of social mobility, it has achieved a phenomenal (amount) in terms of a new breed of Malay professionals, intellectuals – I am not sure, intellectuals – graduates, okay.
But then, by the mid-eighties, you sense a semblance of cronyism – UMNOputras abusing the process. At the time I was Finance Minister, this was clearly the major bone of contention with Aliran of course – I subscribed to Aliran those days, sometimes at my expense, but I share the criticism – but I maintain that rapport …like Jomo, Syed Hussein Ali… and they were very tough in their criticism. Of course, sometimes I start to rationalise; sometimes I am a bit defensive.
But clearly we realised, some of us within the party leadership, we had to depart a bit from the conventional approach towards the old NEP …. at the concept or policy. You see my budget speeches? Hardly any reference to the NEP. At one of the internal meetings, (it was raised) with Mahathir. I said, “Okay I will look at it.” I made some reference to Vision 2020 merely to survive, but hardly any reference to the NEP because by that time I thought it was … (inaudible) … rendering obsolete. I was getting quite involved in the discourse at international level – competitiveness, globalisation and, of course, it is seen to be discriminatory – not affirmative action per se but affirmative action based on race ….
So that was it, it was a gradual … (inaudible) … although there was a difference, I mean, in terms of style. People do differentiate between Daim’s style and mine… cronies within the large segment of new Malay middle-class. We had about 40 to 50 new young professionals coming out and setting up their companies and working sometimes under non-Malay or Chinese companies. But by the late nineties, the whole issue of rampant and endemic corruption and cronyism and … Indonesia, reformasi, this also affected us very much here.
In prison, I had more time to reflect but soon after I was released, I started having this sort of discussion. In my first address to the party congress in Ipoh, 2005, although I did not say that I would dismantle the NEP, the entire message was there: we must be prepared to move on and introduce a new Malaysian economic agenda. Very concerned about the position of Malays, the marginalised, I highlighted the Indian problems, economic and social problems in the estate sector, and Chinese squatters …but… mainly the issue of losing our international competitiveness in the globalisation era.
Then we had a series of discussions and many Malay professionals cautioned me about the dangers of opening up, and then the Malays would suffer…because they (would) have no protection. We talked through (it). I disagreed because I said if the policy is clear and transparent, and you have an open tender … (if) the Chinese companies (are) more efficient…. it presents the case and gets the tender …. it is always possible to have a policy that ensures that all the big projects take into consideration the racial factor, meaning subcontract to the Malays, Chinese, Indians. That in my experience as Finance Minister was possible. I mentioned, in my experience, I have seen some banks … some big Chinese companies (and said to them), “Look, make sure you subcontract and get the others to participate.”
I gave the example of public institutions, universities, declining standards of education, loss of competitiveness, and the ability of India to have the Indian Institute of Technology. And around the world, you have (New York Times columnist Thomas L.) Friedman’s The world is flat, highlighting the increase in the numbers of qualified competent engineers from China and… things like that we must debate here.
We have given a chance for Malays to lead these academic institutions for the last 40 to 50 years. Can’t we – I don’t know, 17 or 20 public academic institutions – ensure that or at least allow for three or four, for a start, Chinese – qualified competent Chinese – academics to lead these institutions. It is very clear….to train Malaysians – Chinese and to make sure there are enough Indians and Malays or Ibans and Kadazans. And if for example we find very poor Malays in terms of general competence or academic achievements, then we can question… and I am sure they will take it as a challenge. So I said, why don’t we start with three Chinese and one Indian (to lead some of these public academic institutions).
It is going to really affect adversely… When I was Finance Minister, there was a big debate among the civil service about the position of secretary-general. And I decided in favour of Clifford Herbert, not because of anything else – because he was very senior. In terms of macro-economics, he was about the best in the civil service and he has been known to be a man of very high integrity. This was the first, in recent times, non-Malay in the Treasury. And that did not cause much problem in terms of even a policy (that favoured the) Malays.
AM: We wonder if now, with the benefit of having gone through the 1997-98 financial crisis and subsequent recovery, if Keadilan and you yourself will draw out a programme for economic management, something to replace the NEP with. What kind of a state-market mix would you be looking at – assuming the crisis of 1997 and 1998 was really in some ways a clash between the state and the market over certain kinds of issues like liberalisation, deregulation, state intervention? Right now, if there was an election coming up and Keadilan had to put up an economic management programme, what kind of state market mix… how much liberalisatiion and how much intervention, how much protection for the domestic sector…?
Anwar: …I believe in a free market economy and a more liberalised …. I believe that this trend with all its limitations is irreversible. But of course the country has to protect… There are some areas that we need to intervene or gradually move towards liberalisation. I know it is contentious and I know the feelings and sentiments of the anti-globalisation movement.
But we have to take into account firstly the issue of growth. I firmly believe that economic policy measures need to be taken in every field possible to promote growth. And then of course the philosophy of ensuring distributive justice or equity or humane economy will have to be dealt with. I always promote to my students that reading Adam Smith’s The Wealth of Nations must come together with The Theory of Moral Sentiments – to give a balance between an excessive free market with a more moral, human dimension.
And then, of course, with specifics: where do we strike the balance, how fast do we move towards globalisation? From the view (of economists) like Hernando de Soto (a champion of market economics and property rights), this globalisation is not global in its entirety because if you look at China… one fifth of China is globalised. You have to have some sort of caution.
Secondly, the contradiction, hypocrisy of US policies, the EU, when it comes to trade practices, agriculture subsidies, this needs to be considered too. We cannot be totally naïve in dealing with it.
But when it comes to national resolve – to be able to be far more competitive, attractive as a destination for foreign direct investment, to work towards synergy with the region – I don’t think we can compromise on that.
AM: Do you think that this process of liberalisation… isn’t it also contributing to widening income disparities? This process of ensuring growth – it would appear that for the last two decades that the trickle-down approach hasn’t really reached the people who need it most. So if we concentrate on just economic growth, is it going to reach the people in the grass-roots?
Anwar: That’s why I said we must take all measures necessary to propel the economy for fast robust growth. But always ensure (that) humane economy, equity and distributive justice must be part and parcel of our entire economic policy guideline. The failure in liberalisation is because you ignore the issue of moral hazards and the issue of equitable distribution. You see the Gini coefficient (a measure of income inequalities within the population) – not only in Malaysia but in many countries, like Indonesia which is considerably poor – the latest report is evidence to the fact that the Gini coefficient has increased. And this is unacceptable, in a poor country, where this Gini coefficient becomes far worse. Of course you can deal with (it happening in) the United States and Europe but certainly, to me, in Malaysia, this is not tenable – which means liberalisation must take this into account … .
I agree with you that trickle-down economics, (the) Keynesian policy of pump-priming, as a policy, yes, pump-priming – but it depends what sector? I mean, my debate with Mahathir in those days was because – not in the sense we didn’t agree on pump-priming – but what projects are you talking about? You are talking about the mega projects, you are talking about huge contracts to your cronies. But it was not pump-priming through education, public health programmes – you can see the hospitals packed (in) Seberang Jaya, Bukit Mertajam – spend an hour there, it’s pathetic.
So it is nothing to do with the economic policy or race, it is just the basic issue of a humane economy or sense of justice that is not present. So I agree with you. I agree with you… liberalisation… I used to quote extensively from (American economist and social scientist) Mancur Olson’s book on prosperity (Power and Prosperity). (He) talks about two forms of banditry: the traditional – they come, the feudal lords, and like tyrants come and create havoc, seize everything from the farms and leave…. after 11 months, they come back the following year. So every month in the year they create havoc – that’s the first form of banditry.
The second form of banditry, according to Mancur Olson, is far more severe – it is a more sophisticated form in the name of liberalisation, deregulation, privatisation. And the banditry is continuous throughout the year – you increase the toll unjustly to enrich the few – that means you rob everyday from the public. So don’t tell us about liberalisation. Liberalisation means you allow some ministers to conduct … (inaudible) ….or deregulate… or privatise in order to ‘piratise’…??
But the bottom line is economic growth and national welfare, public welfare. It is not the policy. I went through that – it is interesting, this experience – the debate itself. It means different things to different people.
AM: But in South America, there is this whole reaction against liberalisation. They are nationalising sectors precisely because of what you said – a few had benefited and the majority are still poor. There is a reaction there against liberalisation. Do you think that kind of reaction would resonate in this part of the world?
Anwar: That’s true – the reaction is not to liberalisation per se but the excesses due to corruption and cronyism. But I am not an economist – not trained economist, but from my… point it is also local dangers. This reaction of reversing the cycle – my worry is that it has been tested in the past and a purely crude ideological socialist agenda has not worked.
It has to be a fair balance between pro-growth market economy, liberalisation with a clear … human…humane economics ….. how humane? we have to navigate in such a way. But I am more convinced than ever, it is just not this prescribed policy type. It is actually conducted by a team of people -. conduct it in a transparent manner – who are accountable. I mean, you conduct … It can be liberalisation, it can be a socialist programme…blatantly corrupt. I know many socialist regimes are so blatantly corrupt. They may be capitalist regimes – not corruption sometimes in a crude manner, but like in Washington DC, institutionalised corruption – it is corruption and banditry all the same.
AM: Actually this is a question we raised on the market and the state mix. Because we think we have a peculiar type of problem in this country. You have mentioned some of the successes of the NEP. We think it is one of the ironies that in some ways the NEP managed to abolish the identification of race with occupation and function, which was the second prong (of the NEP), only for it to be replaced with the identification of race with economic sector.
As it were, the public sector has become almost entirely Malay-dominated and the private sector – although it is not as non-Malay as before – is still deemed to be very much non-Malay. And you have said that when you were Minister of Finance you had a non-Malay for a secretary-general. We just wonder, from your opinion, looking at the way the Ninth Malaysia Plan now is talking about this new so-called Malay agenda again, how do you deal with it? Are there ways we can think of – of redressing this divide between sectors along ethnic lines?
Anwar: Just fight (laughs).
AM: Just fight?
Anwar: (Laughs again) No, no,.. let’s look first at the issue of credibility in leadership to articulate such a position – I mean, a policy that is rendered obsolete. We have used incontrovertible evidence to prove there were major abuses and excesses. It has not been addressed. To the simple Malay, Umno supporter, he is probably convinced that this is a sure method to secure, to ensure his survival.
But… the policy is really flawed and we have lost in competitiveness. There is evidence of abuse of power and corruption. Many of my friends, Malay professionals, had advised me, “Look Anwar, you are venturing (into) a very dangerous sort of battle (and) many Malays cannot take it.”
But I have addressed predominantly Malay crowds, rural, and I asked them. I said, “I am not going to sacrifice Malay position or Malay interest. I am a Malay and I am also responsible. But I am also a Malaysian,” I said, “and I believe that a Malaysian economic agenda, having this plan and executing it in a transparent manner will ensure the success of the Malays together with the Chinese and the other communities.”
I mean that’s our conviction. So it is how we articulate the conviction. The major battle… how can we disseminate effectively and convince them. But from my experience, frankly, I don’t have a problem. I mean, talking to the Malay professionals, civil servants, who were very worried about this – I mean, some were genuine. It is not that they have secured or obtained a lot of personal advantage but then, they are concerned. We told them, “Look, …. in the civil service, what’s the problem? There is congestion here in the hospital in Seberang Jaya, (for instance). Who suffers most? The poor Malays, Chinese and Indians. Why can’t we have additional facilities for their purpose?”
AM: If, as some speculate, the election may be around the corner, let’s say in 2007, before you become legally permitted to contest, how would you personally and also publicly take up this challenge…?
Anwar: Well, we promote an agenda, a reform agenda. I will accept mediations with the President and Keadilan leadership, with the DAP and with Pas, separately, until…we have to come up with a more coherent, clear agenda. Now, we have done it in 1999 but we expect a more detailed sort of a reform programme. Notwithstanding (whether we now) decide to take over the government or deny them a two-thirds majority or control two states – that is to be debated. But… what is the agenda?.
(Some say), “Anwar, we believe that you can or you should accept the challenge and take the lead.”
I said, “Okay, if you want me, notwithstanding (if) I can contest or not, we need the support … and… support me and support the agenda. That’s more important.” So I think we just need to work on this.
…I am quite realistic. I am not living in a dream. I am no longer in prison – I didn’t know at that time – but now I move. Probably last year, I was kept a bit busy internationally but now I am focused, I am here.. I am committed and determined. And the method, the vehicle of support is Keadilan, working hard, in collaboration and understanding with both Pas and DAP, and trying to encourage more progressive civil society groups, including Aliran, to be together in this new reform initiative.
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