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TENGKU RAZALEIGH HAMZAH ON THE NEW ECONOMIC POLICY (NEP) FROM SPEECHES (2009 2012) NEP and Communal

l Politics (10.7.2009)
20. This is not the first time in our brief history as an independent nation that we have found ourselves at an impasse and come up with a ground-setting policy, a new framework, a leap into the future. The race riots of 1969 ended the political accommodation and style of the first era of our independence. Parliament was suspended and a National Operations Council put in place under the leadership of the late Tun Razak. He formed a National Consultative Council to study what needed to be done. The NCC was a non-partisan body which included everyone. It was the NCC that drafted and recommended the New Economic Policy. This was approved and implemented by the Government. 21. The NEP was a twenty year programme. It had a national, and not a racial agenda to eradicate poverty and address structural inequality in the form of the identification of race with occupation. It aimed to remove a colonial era distribution of economic roles in our economy. Nowhere in its terms is any race specified, nor does it privilege one race over another. Its aim was unity. 22. The NEPs redistributive measures drew on principles of social justice, not claims of racial privilege. This is an important point. The NEP was acceptable to all Malaysians because its justification was universal rather than sectarian, ethical rather than opportunistic. It appealed to Malaysians sense of social justice and not to any notion of racial privilege. 23. We were devising a time-limited policy for the day, in pursuit of a set of measurable outcomes. We were not devising a doctrine for an eternal socio-economic arrangement. Like all policies, it was formulated to solve a finite set of problems, but through an enduring concern with principles such as equity and justice. I happen to think it was the right thing for the time, and it worked in large measure. 24. Curiously, although the policy was formulated within the broad consensus of the NCC for a finite period, in our political consciousness it has grown into an allencompassing and permanent framework that defines who we are. We continue to act and talk as if it is still in place. The NEP ended in 1991 when it was terminated and replaced by the New Development Policy, but eighteen years on, we are still in its hangover and speak confusingly about liberalizing it. The NEP was necessary and even visionary in 1971, but it is a crushing indictment of our lack of imagination, of the mediocrity of our leadership, that two decades after its expiry, we talk as if it is the sacrosanct centre of our socio-political arrangement, and that departures from it are big strides. The NEP is over, and we have not had the courage to tell people this. The real issue is not whether the NEP is to be continued or not, but whether we have the imagination to come up with something which better serves our values and objectives, for our own time. 1

25. Policies are limited mechanisms for solving problems. They become vehicles for abuse when they stay on past their useful life. Like political or corporate leaders who have stayed too long, policies that overrun their scope or time become entrenched in abuse, and confuse the means that they are with the ends that they were meant to serve. The NEP was formulated to serve the objective of unity. That objective is enduring, but its instrument can come up for renewal or replacement. Any organisation, let alone a country, that fails to renew a key policy over forty years in a fast-moving world is out of touch and in trouble. 26. There is a broad consensus in our society that while the NEP has had important successes, it has now degenerated into a vehicle for abuse and inefficiency. Neither the Malays nor the non-Malays approve of the way it now works, although there would be multiracial support for the objectives of the NEP, as originally understood. The enthusiasm with which recent reforms have been greeted in the business and international communities suggests that the NEP is viewed as an obstacle to growth. This was not what it was meant to be. 27. It was designed to promote a more equitable and therefore a more harmonious society. Far from obstructing growth, the stability and harmony envisaged by the NEP would were to be the basis for long term prosperity. 28. Over the years, however, and alongside its successes, the NEP has been systematically appropriated by a small political and business class to enrich itself and perpetuate its power. This process has corrupted our society and our politics. It has corrupted our political parties. Rent-seeking practices have choked the NEPs original intention of seeking a more just and equitable society, and have discredited the broad nation-building enterprise which this policy was meant to serve. 29. Thus, while the NEP itself has expired, we live under the hangover of a policy which has been skewed from its intent. Instead of coming up with better policy tools in pursuit of the aims behind the NEP, a set of vested interests rallies to defend the mere form of the NEP and to extend its bureaucratic sway through a huge apparatus of commissions, agencies, licenses and permits while its spirit has been evacuated. In doing so they have clouded the noble aims of the NEP and racialized its originally national and universal concerns. 30. We must break the stranglehold of communal politics and racial policy if we want to be a place where an economy driven by ideas and skills can flourish. This is where our daunting economic and political challenges can be addressed in one stroke. We can do much better than cling to the bright ideas of forty years ago as if they were dogma, and forget our duty to come up with the bright ideas for our own time. The NEP, together with the Barisan coalition, was a workable solution for Malaysia forty years ago. But forty years ago, our population was about a third of what it is today, our economy was a fraction the size and complexity that it is now, and structured around the export of tin and rubber rather than around manufacturing, services and oil and gas. Forty years ago we were in the midst of the Cold War, and the Vietnam War raged to the north. Need I say

we live in a very different world today. We need to talk to the facebook generation of young Malaysians connected to global styles and currents of thought. We face global epidemics, economic downturns and planetary climate change. 31. We can do much better than to cling to the outer form of an old policy. Thinking in these terms only gives us the negative policy lever of relaxing certain rules, when what we need is a new policy framework, with 21st century policy instruments. We have relaxed some quotas. We have left Approved Permits and our taxi licensing system intact. We have left the apparatus of the NEP, and a divisive mindset that has grown up around it, in place. Wary of well-intentioned statements with no follow-through, the business community has greeted these reforms cautiously, noting that a mountain of other reforms are needed. One banker was quoted in a recent news article as saying: All the reforms need to go hand in hand..Why is there an exodus of talent and wealth? It is because people do not feel confident with the investment climate, security conditions and the government in Malaysia. Right now, many have lost faith in the system. 32. The issues are intertwined. Our problems are systemic and rooted in the capability of the government to deliver, and the integrity of our institutions. It is clear that piecemeal liberalization and measure by measure reform on a politicized timetable is not going to do the job. 33. What we need is a whole new policy framework, based on a comprehensive vision that addresses root problems in security, institutional integrity, education and government capability. What we need to do is address our crisis with the bold statecraft from which the NEP itself originated, not cling to a problematic framework that does little justice to our high aspirations. The challenge of leadership is to tell the truth about our situation, no matter how unpalatable, to bring people together around that solution, and to move them to act together on that solution. 34. If the problem is really that we face a foundational crisis, then it is not liberalization of the NEP, or even liberalization per se that we need. From the depths of the global economic slowdown it is abundantly clear that the autonomous free market is neither equitable nor even sustainable. There is no substitute for putting our heads together and coming up with wise policy. We need a Malaysian New Deal based on the same universal concerns on which the NEP was originally formulated but designed for a new era: we must continue to eradicate poverty without regard for race or religion, and ensure that markets serve the people rather than the other way around. 35. Building on the desire for unity based social justice that motivated the NEP in 1971, let us assist 100% of Malaysians who need help in improving their livelihoods and educating their children. We want the full participation of all stakeholders in our economy. A fair and equitable political and economic order, founded on equal citizenship as guaranteed in our Constitution, is the only possible basis for a united Malaysia and a prerequisite of the competitive, talent-driven economy we must create if we are to make our economic leap.

36. If we could do this, we would restore national confidence, we would bring Malaysians together in common cause to build a country that all feel a deep sense of belonging to. We would unleash the kind of investment we need, not just of foreign capital but of the loyalty, effort and commitment of all Malaysians.

NEP and Racial Policy (5-10-10)


I dont see we have any racism policy that is deliberately created by parliament or the government of Malaysia to separate the people into First Class Citizens and Second or Third Class Citizens, like the old apartheid policy of South Africa. There is no special economic policy for any other racial group. The basis of the New Economic Policy is not racially based. The purpose of the New Economic Policy was to create a Malaysian nation. Without a political economy which is balanced and just, particularly addressing the consequences of a colonial economy which excluded the Malays from the main stream of the economy, it would not be possible. It is not a racial policy but an inclusive policy of all communities. All businessmen face the same problem. Everyone agrees that 60% of the poor in the country are the Malays, and if one considers the fact that the Malays make up the majority of the population, the figures in real terms must be huge. Three worries about the country I have three main worries about the economy, the politics and about national unity in this country. First, I worry that the economy of the country might be a source of ethnic disunity and social unrest if the wealth of the country is not fairly and equitably shared among the various races or ethnic groups and among social groups, or the gaps between the majority poor and lower income groups and the rich minority or the upper middle class keep widening. Secondly, I worry that party politics interfere with government functions. I believe that when a party politician becomes a minister he is no more a political activist working on behalf of his party using government or public or taxpayers facilities; he is a public servant working for the Nation and serving the rakyat (All Malaysians) and not working for his party. Of course government policy is usually based on the policy or election manifesto of the ruling party (or parties) but this does not mean that he is to

serve only those who voted for the party and deny the use of government facilities or to spend public money on those who voted for the opposition parties. My worry on national unity is that we are not building it up and giving it substance through the right forms of national policies; instead we chant empty and often emotional slogans calling people to unite and in the process creating more confusion and misunderstanding among the people. There must be a clear national policy on national unity, endorsed by the Parliament as our highest law-making institution. All government policies on economic, social, educational and cultural developments must be geared to this overall national objective: national unity (which is not the same as ethnic unity or unity among the races).

NEP, an equity and unity policy ? (22-3-10)


We have no excuse for our present state of economic and social stagnation. It is because we have allowed that last set of features, our institutional and political framework, to be eroded, that all our advantages are not better realised. So it makes little sense to talk glibly about selecting growth drivers, fine-tuning our industrial or trade policy, and so on, without acknowledging that our economy is in bad shape because our political system is in bad shape. A case in point is the so-called New Economic Model. The government promised the world it would be announced by the end of last year. It was put off to the end of this month. Now we are told we will be getting just the first part of it, and that we will be getting merely a proposal for the New Economic Model from the NEAC (National Economic Advisory Council). Clearly, politics has intruded. The NEM has been opposed by groups that are concerned that the NEM might replace the NEP. The New Economic Model might not turn out to be so new after all. NEP never meant to be permanent The irony in all this is that there is nothing to replace. The NEP is the opposite of new. It is defunct and is no longer an official government policy because it was replaced by the New Development Policy (another old new policy) in 1991. The NEP was brought back in its afterlife as a slogan by the leadership of Umno Youth in 2004. It was and remains the most low-cost way to portray oneself as a Malay champion.

Thus, at a time when we are genuinely in need of bold new economic measures, we are hamstrung by the ghost of dead policies with the word new in them. What happens when good policy outlives its time and survives as a slogan? The NEP was a 20-year programme. It has become, in the imaginations of some, the centre of a permanently racialised socio-economic framework. Dr Ismail Abdul Rahman and Abdul Razak, in the age of the fixed telephone (you even needed to go through an operator), thought 20 years would be enough. Its champions in the age of instant messaging talk about 100 or 450 years of Malay dependency. It had a national agenda to eradicate poverty and address structural inequalities between the races for the sake of equity and unity. The Malays were unfairly concentrated in lowincome sectors such as agriculture. The aim was to remove colonial era silos of economic roles in our economy. It has been trivialised into a concern with obtaining equity and contracts by racial quotas. The NEP was to diversify the Malay economy beyond certain stereotyped occupations. It is now about feeding a class of party-linked people whose main economic function is to obtain and re-sell government contracts and concessions. The NEP saw poverty as a national, Malaysian problem that engaged the interest and idealism of all Malaysians. People like James Puthucheary were at the forefront of articulating this concern. Its present-day proponents portray poverty as a communal problem. The NEP was a unity policy. Nowhere in its terms was any race specified. It has been reinvented as an inalienable platform of a Malay Agenda that at one and the same time asserts Malay supremacy and perpetuates the myth of Malay dependency. It was meant to unite our citizens by making economic arrangements fairer, and deracialising our economy. In its implementation, it became a project to enrich a selection of Malay capitalists. James Puthucheary had warned, back in 1959, that this was bound to fail. The presence of Chinese capitalists has not noticeably helped solve the poverty of Chinese households Those who think that the economic position of the Malays can be improved by creating a few Malay capitalists, thus making a few Malays well-to-do, will have to think again. The NEPs aim to restructure society and to ensure a more equitable distribution of economic growth was justified on principles of social justice, not claims of racial privilege. This is an important point. The NEP was acceptable to all Malaysians because its justification was universal rather than racial, ethical rather than opportunistic. It appealed to Malaysians sense of social justice and not to any notion of racial supremacy.

We were a policy with a 20-year horizon, in pursuit of a set of measurable outcomes. We were not devising a doctrine for a permanent socio-economic arrangement. We did not make the damaging assumption of the permanently dependent Malay. Today we are in a foundational crisis both of our politics and of our economy. Politically and economically, we have come to the end of the road for an old way of managing things. It is said you can fool some of the people some of the time, but not all of the people all the time. Well, these days the time you have in which to fool people is measured in minutes, not years. The world is greatly changed. The next move we must make is not a step but a leap that changes the very ground we play on. The NEP is over. I ask the government to have the courage to face up to this. The people already know. The real issue is not whether the NEP is to be continued or not, but whether we have the imagination and courage to come up with something which better addresses the real challenges of growth, equity and unity of our time. At its working best, the NEP secured national unity and provided a stable foundation for economic growth. Taken out of its policy context (a context that James helped frame) and turned into a political programme for the extension of special privilege, it has been distorted into something that its formulators, people such as the late Tun Razak and Tun Ismail, would have absolutely abhorred: it is now the primary justification and cover for corruption, crony capitalism and money politics, and it is corruption, cronyism and money politics that rob us and destroy our future. No one who really cares about our country can approve of the role the NEP now plays in distorting the way we think about the economy, of our people, of our future, and retarded our ability to formulate forward-looking economic strategy. The need for a holistic approach to development based on the restoration and building of confidence. We need a wholistic approach to development that takes account of the full potential of our society and of our people as individuals. We need an approach to development that begins with the nurturing and empowerment of the human spirit. Both personally and as a society, this means we look for the restoration of confidence in ourselves, who we are, what we are capable of, and the future before us. Caught in the middle-income trap I return to the question of the middle-income trap that I alluded to some time ago. I am glad that notion has since been taken up by the government. The middle-income trap is a condition determined by the quality of our people and of the institutions that bind them. It is not something overcome simply by growing more oil

palm or extracting more oil and gas. Our economic challenge is to improve the quality of our people and institutions. Making the break from the middle-income trap is in the first place a social, cultural, educational and institutional challenge. Let me just list what needs to be done. Before we can pursue meaningful economic strategy we need to get our house in order. We need to: 1. Undertake bold reforms to restore the independence of the police, the anti-corruption commission and the judiciary. Confidence in the rule of law is a basic condition of economic growth. 2. Reform the civil service 3. Wage all-out war on corruption 4. Thoroughly revamp our education system 5. Repeal the Printing Presses Act, the Universities and Colleges Act, the ISA and the OSA. These repressive laws only serve to create a climate of timidity and fear which is the opposite of the flourishing of talent and ideas that we say we want. 6. Replace the NEP with an equity and unity policy (a kind of New Deal) to bring everyone, regardless of race, gender, or what state they live in and who they voted for, into the economic mainstream. These reforms are the necessary foundation for any particular economic strategies. Many of these reforms will take time. Educational reform is the work of many years. But that is no excuse not to start, confidence will return immediately if that start is bold. As for particular economic strategies, there are many we can pursue:

We need to tap our advantage in having a high savings rate. Thanks to a lot of forced savings, our savings rate is about 38 percent. We need more productive uses for the massive funds held in EPF (Employees Provident Fund), LTH (Lembaga Tabung Haji), LTAT (Lembaga Tabung Angkatan Tentera Malaysia) and PNB (Permodalan Nasional Berhad) than investment in an already overcapitalised stock market.One suggestion is to make strategic investments internationally in broad growth sectors such as minerals. Another is that we should use these funds to enable every Malaysian to own their own home. This would stimulate the construction sector with its large multiplier of activities and bring about a stakeholder society. A fine example of how this is done is Singapores use of savings in CPF to fund property purchases. The government could make sure that the the land office and local government, developers and house-buyers are coordinated through a one-stop agency under the Ministry of Housing and and Local Government. This would get everyone active,

right down to the level of local authorities. The keys to unleashing this activity are financing and a radical streamlining of local government approvals.

We have been living off a drip of oil and cheap foreign labour. Dependence on these easy sources of revenue has dulled our competitiveness and prevented the growth of high-income jobs. We need a moratorium on the hiring of low-skilled foreign labour that is paired with a very aggressive effort to increase the productivity and wages of Malaysian labour. Higher wages would mean we could retain more of our skilled labour and other talent. Five years ago, I called for a project to make Malaysia an oil and gas services and trading hub for East Asia. Oil and gas activities will bring jobs to some of our poorest states. We should not discriminate against those states on the basis of their political affiliations. No one is better placed by natural advantage to develop this hub. Meanwhile Singapore, with not a drop of oil, has moved ahead on this front. We should ready ourselves to tap the wealth of the emerging middle-class of China, India and Indonesia in providing services such as tourism, medical care and education. That readiness can come in the form of streamlined procedures, language preparation, and targeted infrastructure development.

These are just some ideas for some of the many things we could do to ensure our prosperity. Others may have better ideas. We are in a foundational crisis of our political system. People can no longer see what lies ahead of us, and all around us they see signs of decaying institutions. Wealth and talent will continue to leave the country in droves. To reverse that exodus, we need to restore confidence in the country. We do not get confidence back with piecemeal economic measures but with bold reforms to restore transparency, accountability and legitimacy to our institutions. Confidence will return if people see decisive leadership motivated by a sincere for the welfare of the country. The opposite occurs if they see decisions motivated by short-term politics. Never mind FDI (foreign direct investment), if Malaysians started investing in Malaysia, and stopped leaving, or started coming back, we would see a surge in growth. In the same measure we also need to break the stranglehold of communal politics and racial policy if we want to be a place where an economy driven by ideas and skills can flourish. This must be done, and it must be done now. We have a small window of time left before we fall into a spiral of political, social and economic decline from which we will not emerge for decades. This is the leap we need to make, but to make that leap we need a government capable of promoting radical reform. That is not going to happen without political change. We should not underestimate the ability of our citizens to transcend lies, distortions and

myths and get behind the best interest of the country. In this they are far ahead of our present leadership, and our leadership should listen to them.

NEP and Malaysias New Political Economy (16-2-12)


4. It is my contention that the changes that took place in the 1980s were profound, pervasive, and influenced the value systems in public life. It has also brought about structural changes in our society. These structural changes I dont mean formal constitutional changes only relate to the way that constitutional issues are being interpreted today. They relate to the way in which political parties have been transformed and the manner in which politics is being conducted today, both within and outside the political parties themselves. It has also brought about changes to the administration of the state apparatus both unto itself and in its relations with the public. Equally important is what I call public values; in other words, values associated with the public responsibility that goes along with the position that one assumes. The sum total of the transformation and its influence will have serious consequence on the future of our country, as those changes are still with us in public life, particularly the politics of the day. 5. Before I explain the nature of the changes and its consequence, I would like to state briefly the political culture, understanding, and values that prevailed prior to the transformation, just in order to emphasize the contrast. At the time of Independence, the problems of the country were those that we inherited from our colonial past. The most striking aspect of it was the fragmented nature of our society in almost every aspect of public life, particularly in politics and the economy. Race dominated the general view of both politics and the economy. There was also extensive poverty, both in the rural and urban areas. But the rural and the urban distinction had another aspect to it, and the rural economy was at subsistence level unlike the urban areas. It had also a racial distinction. But the distinctions of poverty levels carried also a racial distinction. In the urban areas, the middle class also had racial characteristics. Capitalism as practiced in the colonial period was clearly unsustainable to maintain a cohesive and united community within Malaysia. 6. Many of us who decided to be involved in politics soon after Independence were inspired by the challenges that the new nation faced in solving those problems. The ideals were those that were prevalent at that time in Asia and inspired by thinkers of that time. The ideals were for change in society to a more balanced and one where racial divisions will not be identified with politics or economy, and poverty, both in the rural and urban areas, would eventually disappear without the racial divide. The objective was always the common good and to create a nation that was cohesive and modern. This was to be achieved by economic changes in their nations economy and the lives of its people.

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7. The best way in which I can illustrate the point is by drawing your attention to the ideals as expressed in the 1971 Second Malaysia Plan. It is a quote that is worth repeating and remembering: National unity is the overriding objective of the country. A stage has been reached in the nations economic and social development where greater emphasis must be placed on social integration and more equitable distribution of income and opportunities for national unity. It went on to state: The quest for national identity and unity is common to many countries, especially new and developing countries. This search for national identity and unity involves the whole range of economic, social and political activities, the formation of educational policies designed to encourage common values and loyalties among all communities and regions; the cultivation of a sense of dedication to the nation through services of all kinds, the careful development of a national language and literature, of arts and music, the emergence of truly national symbols and institutions based on culture and tradition of society. The basic point is emphasized in the Rukun Negara: from these diverse elements of our population, we are dedicated to the achievement of a united nation in which loyalty and dedication to the nation shall over-ride all other loyalties. 8. What happened in the 1980s was a deviation from these ideals. It had nothing whatsoever to do with the New Economic Policy. It was something very, very different. An economic policy of the kind that the Second Malaysia Plan envisaged would require a gestation period of more than a decade, optimistically. It was intended as a social engineering policy. It is in the nature of economic policies that results are not immediately evident and can only be achieved in the fullness of time. The New Economic Policy unfortunately did not survive the leadership prior to 1980 and faded before the full impact of that policy could be seen. 9. What happened from 1980 onwards was an intervention of a new form of capitalism that was not obvious but reflected in the way the leadership that came after the mid-1980s conducted itself in the implementation of economic policies and the exercise of political power. The dominant economic thinking during the 80s was economic policies which came under the category of neo-liberalism. Neo-liberalism was an ideology and a political philosophy with its own values of public responsibility. It had a very precise view of what the economic system should be and what kind of supporting financial system should underpin it. 10. The distinguishing feature of this policy is privatization of public ownership of utilities essential for public good, such as water, power, public transport, health and other

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services irrespective of whether they were efficient and must necessarily be owned by the State. In order to assist the neo-liberal economic policy, it also encouraged low taxation, mobility of labour to keep wages low, unrestrained mobility of finance, and the rise of the stock market as a means of financialization of profit and capital to facilitate its mobility and accumulation. 11. It was within that new dominant ideology of neo-liberalism that the incumbent power realized that this new approach to economy opened up opportunities for those who had power and those whom they wanted to favour. There was an understanding that in order to benefit from that new economic system, political power needed selective businessmen who would work together for their mutual benefit. The benefit to the nation was merely incidental and necessary to continue the new status quo that they were building. Eventually, by this relationship, political power became a means to business and accumulation of wealth as a practice of those in politics and business; in other words, those in politics sought out business and businessmen sought out politicians who would work with them. This new feature came into existence gradually and had its peak in about the 90s. The character of capitalism changed and the values of some Malaysians also changed. By privatizing the public ownership of what is economically called public good, the values that went with public good changed to private profit accumulation of wealth and greed. The nature of public responsibility also changed. 12. This new feature in Malaysian political life eventually became a powerful mode of thinking that permeated political parties and the institutions of the State. Party politics, particularly, took a change in order to consolidate the status quo of power. Changes in the constitution of political parties ensured continuation of leadership and political power. But the leadership within the party and the political system became acceptable only because the benefits of business were also shared by those who supported the leadership. A hierarchy of financial interest coinciding with the power structure was built within and outside the party. 13. These changes also created a corrupt form of public values which has very serious consequences and with which society is now burdened. The system became self-serving for entrenched political and business interests. All those in the hierarchy of the system also benefited and, in order to maintain that system, they supported the centralization of power within the party leadership and the government. 14. With the changes in the political party system, particularly a political hierarchy supported by business, the centralized political power had to feed this combination of business and political hierarchy with business opportunities. The centralized power enabled discretionary use of political power to make decisions on public expenditure and privatization. The public expenditure that I am referring to is the public procurement contracts. The money generated by the distribution of public procurements, contracts and privatization programme became a self-serving economic system to maintain power and accumulate wealth.

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15. The volume of money generated in terms of public expenditure and private gain arising from this policy has never been properly audited or revealed to the public. In order to avoid public controversy of the public procurement contracts and privatization, the Official Secrets Act was expanded to include contracts involving public procurements and privatization. As a result, business and power became more and more entrenched and powerful. The fear of losing power also equally became a matter to be avoided at all costs. In these circumstances, money became a dominant political weapon in political parties and the entire electoral process. This new culture of politics released forces within the political parties and the public arena unseen before. 16. This new focus of the political economy became less and less sensitive to the real socio-economic problems of the people and essential changes that were necessary were ignored or misconceived. 17. It is now generally accepted by those who understand economics that statistical evidence and economic reality are not the same. Nevertheless, the reliance on statistical evidence can lead us to make believe that all is well when it is not. I say this because the empirical evidence that is evident seems to suggest that over time the focus of growth was on accumulation of wealth rather than the realities of the socio-economic problems that the people face. One example of this is the changes in the character of labour in Malaysia. The demand for labour has been seen as an opportunity to create a rentier political class from those who are part of the political apparatus. It has reached such proportions that there is an alarm that the employment opportunities have all been taken up by foreign labour. The effect of the policies of making labour a commodity available to employers has many consequences, one of which is to squeeze out our citizens from gainful employment and the lower end of the economy, such as hawking, etc, as a means of living. 18. Be that as it may, this can be a turning point for our nation in a positive sense if we recognize the nature of our problems. One of the major problems that would be in the way of meeting the consequence of the crisis will be the education and standards of skill of our people. As a means of an economic recovery, we will require a fundamental change in the education system we provide for our citizens. We need an education system that produces quality and skills. I would say that under the present system, it will be difficult for us to achieve that. We need the moral courage to reform the entire education system that we have today. I would also add, we need a massive adult education programme to ensure that the present generation is not left behind. The objective of the adult education should be to provide the necessary language and technical skills and to involve as large a section of the population in non-formal educational programmes which will bring national cohesion and at the same time rejuvenate dormant areas of our economy, such as the agricultural sector. We have enough land. What we need is for those who are prepared to go into these areas of our economy to be equipped with the technical knowledge that is necessary to bring about a green revolution in our country.

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19. What is illustrative of the consequence of the economic policies of the 1980s and 1990s is the household debt of average Malaysians, which is about 75% and 40% of the household debts is beyond 100% of their earnings. As a result of this, the average Malaysian generally lives under a very high social and economic tension within their families and within society struggling to make ends meet. The household problem has many ramifications. It has spawned wide-spread illegal money-lending (the true Ah Longs). The consequences have been devastating on families and individuals. The financial system as it is now does not seem to be geared to make the lives of ordinary people comfortable or to minimize social tension. Part of the cause of rising debts among households is because of the structure of the financial system within which the ordinary citizen has to live, such as the romping speculation in housing, inflation in the goods of daily requirements, and the mortgage system on which the people depend for ordinary comfort. 20. As a consequence of economic policies in the past, inequalities have also widened. Today, Malaysians suffer from a very wide inequality, and there is a suggestion that the inequality is higher than in Thailand and Indonesia. This inequality cuts across racial boundaries. If the economy declines in the future, the problems that I have highlighted in terms of the household debt and the widening inequality will go into a deeper crisis of confidence among the people, particularly the young who feel alienated from the economic system. 21. No democratic system, no institution as envisaged by our Constitution, can survive a political economy of this nature. There is too much money in politics and it has become inseparable from power and the electoral process. The corrupting influence of money in public life is obvious for any need for explanation. While the economic and social problems accumulate, a divide has been created by those who benefit from the dysfunctional system and those who suffer from it. It is no different from the experience of many counties in the Middle East. Many who had enjoyed the benefits of incumbent power sustained the system and were reluctant to give up power or change. 22. The lesson we have to learn from the Arab Spring is that a dysfunctional democracy, however well dressed by public relations exercises or subsequently by media, cannot withstand the realities that are the natural consequence of abuse of power and wanton accumulation of wealth. That is the most important message, I think, that the Arab Spring has conveyed and we must take cognizance of it. 23. The danger we face is that the conflation of business and politics has become so dominant that it has the same influence an ideology would have. If we are to restore democratic ideals in our political discussions and the electoral process, have genuine political parties which can genuinely function in what they think is the interest of the people, and participate in the economy, then there must be a separation of business from politics. Without this precondition, Malaysias economy can avoid a crisis worse than what we see in the West.

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24. For business to play a responsible and major role in creating a viable economy, it must be freed from politics. The economy of business must be returned to the people in order for them to develop. It must be given the freedom to function without having to depend on political patronage. The right to do business as part of the national economy must be a fundamental right, not subject to favours by politicians or bureaucrats. 25. But that change will not come about until the public earnestly are allowed to discuss the dangers of conflating business and politics. That includes the danger of allowing political parties that are in power to take advantage of their political power for financial benefit. Parties must be strictly confined to democratic activities and political policies which they believe in and business must function autonomously from political parties. Unfortunately for us, this has not been the debate in any of the elections in the last three decades. We need to think urgently of the dangers of this unspoken reality of our politics. 26. If I am correct in my understanding that the ideology of business and politics had become fused with the neo-liberal ideology and as part of our political economy - by that I mean the process of thinking about economics, politics, policy, and leadership - then we have a lesson from the crisis in the West which is happening now where neo-liberal policies have failed not only as a financial system but in all its economic and political objectives. It must send a signal for us to seriously examine whether in fact there is a fusion of money politics and neo-liberal ideology, that is the worst of both worlds. And what can happen to us, not now but in the future is an urgent issue we have to deal with now, not when it happens. The gestation period of misconceived economic policy is as long as good economic policies, but the longer we wait the worse the consequences and higher the price we pay. 27. One of the weaknesses we have as a nation is the absence of a critical mass of people who think in economic terms and can take a critical view of the realities of the economies that we face today as a matter of national interest above sectarian interest. The absence of this critical mass will make it easy for those who want to deviate from the real issues that we face.

Mix of politics with business fuelled economic woes, says Ku Li


KUALA LUMPUR, Feb 16 Tengku Razaleigh Hamzah today charged that years of political patronage and the long standing system of co-dependency between business and politics arising from the Mahathir era had led to neglect of the peoples real socioeconomic problems. The outspoken veteran Umno leader added that economic policies of the past, which kicked off from the 1980s onwards, had also widened inequality in Malaysia and would worsen if the present administration does not move to separate business from politics. With this pre-condition, Malaysias economy can avoid a crisis worse that what we see in the West, he said during a luncheon talk today.

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There is too much money in politics, he continued, adding that this forced further disparities between those who benefit from this dysfunctional system and those who suffer from it. No democratic system, no institution as envisaged by our Constitution, can survive a political economy of this nature. There is just too much money in politics and it has become inseparable from power and the electoral process, said the Kelantan prince popularly referred to as Ku Li. Ku Li (picture), known to be one of the greatest critics of the New Economic Policy (NEP) and Tun Dr Mahathir Mohamads handling of it, was speaking on the state of Malaysias political economy during a luncheon at the Royal Selangor Club here. The Gua Musang MP said what happened in the 1980s was a deviation from the ideals of promoting unity and equitable distribution of wealth, as enshrined in the 1971 Second Malaysia Plan. The NEP, he said, had unfortunately failed to survive the leadership prior to 1980 and faded before its full impact could be felt. What happened from 1980 onwards was an intervention of a new form of capitalism that was not obvious but reflected in the way the leadership that came after the mid-1980s conducted itself in the implementation of economic policies and the exercise of political power, he said. Eventually, said Ku Li, political power became a means to business and accumulation of wealth, thus creating a co-dependency between the two. All those in the hierarchy of the system also benefited and, in order to maintain that system, they supported the centralisation of power within the party leadership and the government, he said. To ensure its political survival, this centralised power, he said, had to feed those within the system with business opportunities. As such, those on top enabled the discretionary use of political power to distribute public procurements, contracts and privatisations programmes and created a self-serving economic system, he added. In these circumstances, money became a dominant political weapon in political parties and the entire political process. This new culture of politics released forces within the political parties and the public arena unseen before, he said. But, added Ku Li, the system eventually led to neglect of the peoples socio-economic problems as essential changes to the economy were either ignored or misconceived.

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He pointed to the growing household debts of Malaysians across the racial divide and employment problems, caused by the alarming presence of foreign labour in the job market. Ku Li also drew links between Malaysias political system and the Arab Spring and urged the present administration to learn from the Middle Eastern uprising. The lesson we have to learn from the Arab Spring is that a dysfunctional democracy, however well-dressed by public relations exercises or subsequently by media, cannot withstand the realities that are the natural consequence of abuse of power and wanton accumulation of wealth. That is the most important message, I think, that the Arab Spring has conveyed and we must take cognisance of it, he said. link:http://www.themalaysianinsider.com/malaysia/article/mix-of-politics-with-businessfuelled-economic-woes-says-ku-li/

NEP a source of disunity (24-2-12)


28. It is strange that after 55 years of freedom, we have not learnt the simple art of living together as brothers and sisters. 29. The countrys source of strength is unity, and this source of strength has been slowly whittled away over the years. 30. We have become a nation of strangers, as evidenced in the fields of politics, the economy, education and the civil service. 31. The strong presence of communal political parties in the country is chiefly to be blamed for the sad state of race relations in the country. These political parties invariably support racial policies and imbibe racial sentiments among the people whom they represent 32. In their day-to-day administration of the country, the powers that be often give scant regard to the constitutional provision contained in Article 8(1) which states that all persons are equal before the law and entitled to the equal protection of the law; and Article 8(2) which states that there shall be no discrimination against citizens on the ground only of religion, race, descent or place of birth in any law relating to the acquisition, holding or disposition of property or the establishing or carrying on of any trade, business, profession, vocation or employment.

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33. One major sore point in the area of race relations is the New Economic Policy, whose original intention to create unity has been subverted to become a major source of disunity not only between the various races but also among the Malays and bumiputras in general. 34. The New Economic Policy, which was conceived in 1971 not long after the Tunku had retired as Prime Minister, was primarily created to address poverty, and to raise the level of Malay participation in the economy. 35. It was intended for all Malaysians, and not just for the Malays or bumiputras. 36. As a former Finance Minister, let me emphasise that it was never the intention of the NEP to create an incubated class of Malay capitalists. 37. If we visit the government departments or universities, we wonder where all the nonMalays have gone. 38. After 1969, suddenly there was this attempt to recruit mostly Malays into the civil service. 39. It is tragic that the civil service does not reflect the racial composition of the Malaysian population, as the predominant presence of only one race tends to engender a sub-culture that is antithetical to the evolution of a dynamic and efficient civil administration in the country. 40. Our school system is not as it used to be. The non-Malays prefer to send their children to vernacular schools, as the national schools have assumed an exclusively Malay character. 41. Needless to say, national schools have become even less attractive to the non-Malays as English is no longer used in the teaching of mathematics and science. 42. The situation will be very different if all discriminatory practices in the education system were to be abolished, and a common system of education for all is adopted. 43. National unity is the one area that we cannot afford to ignore, and the real genesis of national unity, I submit, is from an unlikely source: Parliament, warts and all. 44. It is the Parliament that has the final say in charting the direction the country is heading to. 45. We must have a strong and resolute government which recognises the needs of all Malaysians, and formulates the right policies for the propagation of a cohesive and integrated society. 46. If Parliament enacts policies that are just and fair for all Malaysians based on meritocracy and need, more than half the battle for national unity would be won.

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NEP and Captive Minds (1-2-12)


10. Now the next issue is, are we able to exercise our mind with wisdom? Unfortunately, as a people and as a nation, we are not able to do so. We are born free, but our minds have become captive. 11. In our country, the problem of the captive mind has its origins in the race dilemma to an extent that we have become incapable of devising an analytical method independent of current stereotypes about Malays, Chinese, Indians and the others. Our thinking is based completely on a racial world view when it comes to matters of politics, education, economics, planning, and so forth. 12. Needless to say, we promote a racial world view that thrives on the policy of divide and rule. 13. The citizens of the land are exiting the country in large numbers, and the gap is filled, not by people with equivalent skills and potentials, but by unskilled labour from abroad. Public universities have no places for locals, but they are absorbing large numbers of foreign students. It is sad that our own people should be deprived of the benefits of a good education a resource that has been described as the global currency of 21st century economies. 14. And yet education is seen as the best solution to the economic uncertainties of the times, as it enables our people to compete, collaborate and connect in a way that drives our economies forward. 15. And today, we have the captive mind, the product largely of our education system, which has failed to generate its opposite, the creative mind. The captive mind feeds on trivia and fragmented knowledge, and students are not taught to be philosophical, universal or intercultural. 16. Our educational curricula do not encourage the moral and intellectual reform of the mind. If we look west, we find that the development of education took place as part and parcel of the evolution of society and civilization as a whole. But in our own case, the education system has failed to impart the fundamentals of scientific thinking and reasoning in relation to our own society. 17. Captive minds tend to avoid major issues such as the concept of good governance, meaning of development, the effect of corruption on society and the rule of law. 18. Again, as it stands today, in the area of economy, there is no honest intellectual inquiry to find out why, despite many years of implementing the New Economic Policy, inequitable distribution of income continues to plague the people, and why we are lagging behind countries that do not have as much resources.

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19. To this very day, the electorate has not understood the implications of the New Economic Policy which has produced results that are diametrically opposed to the original intention of bridging the gap between the haves and the have-nots. The longer we try the policy, the further we are from the original goal. 20. If the doctor keeps on prescribing the same medicine which produces opposite results, then something must be wrong with the doctor, and something more serious must be wrong with the patient who keeps on trusting the same doctor. 21. Today, the discrepancy between vision and reality has taken on an alarming turn. It has gone far beyond economics into the realm of ethics and morality. In numerous instances it has taken the form of corruption and decadence which has pushed the economy further down the drain. 22. Today, we are saddled with a spiraling national debt brought to exist by wanton corruption and wasteful spending. It is feared that in relation to Singapore which is free of foreign debts, if we are not careful, it wont take us long before we become another Greece. The problem continues to escalate, despite being highlighted by the Auditor General year after year in his annual reports. It has been estimated that we can easily save RM25-30bn without changing any of the deliverables if only we can get rid of corruption and cronyism. 23. Professor Alatas once said that we have different types of governments such as democracy, autocracy, theocracy, and so forth, and now we need to describe our government as one that keeps the people ignorant. According to him, we need to use new terms such as ignocracy to describe a government that wants to keep the people ignorant. 24. And yet for a democracy to succeed it is of cardinal importance for us to make informed choices.

Support for NEP coming from captive minds, says Ku Li


KUALA LUMPUR, April 1 Tengku Razaleigh Hamzah resumed his attack on the New Economic Policy (NEP) today, stating that captive minds continue to support it despite Malaysia moving further from its objective of redistributing wealth through proBumiputera policies. The Umno veteran said there has been no intellectual inquiry into why despite many years of implementing the NEP, inequitable distribution of income continues to plague the people as we have become incapable of devising an analytical method independent of current stereotypes about Malays, Chinese, Indians and others. Ku Li today said, The NEPhas produced results that are diametrically opposed to the original intention of bridging the gap between the haves and the have-nots. file pic

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If the doctor keeps on prescribing the same medicine which produces opposite results, then something must be wrong with the doctor, and something more serious must be wrong with the patient who keeps on trusting the same doctor. Our thinking is based completely on a racial world view when it comes to matters of politics, education, economics, planning, and so forth. Needless to say, we promote a racial world view that thrives on the policy of divide and rule, the Kelantan prince said at a book launch in Ipoh this morning. Tengku Razaleigh, popularly known as Ku Li, had in February said as a former finance minister, let me emphasise that it was never the intention of the NEP to create an incubated class of Malay capitalists. His statement further fuelled scrutiny of former prime minister Tun Dr Mahathir Mohamads policies after the Najib administration decided to settle out of court the RM589 million debt owed by former Malaysia Airline System Bhd (MAS) chief Tan Sri Tajudin Ramli. The settlement sum was undisclosed, prompting intense public criticism and attacks from the opposition over the right of taxpayers to know the amount of public funds recovered. Tajudin, 65, had served as the airlines executive chairman from 1994 to 2001 and was a poster boy of former finance minister Tun Daim Zainuddins now-discredited policy of nurturing a class of Malay corporate captains on government largesse during the Mahathir administration. Ku Li, one of the greatest critics of the NEP and Dr Mahathirs handling of the policy, had challenged the long-serving prime minister for leadership of Umno in 1987, which he subsequently lost by a narrow margin. He said in his speech today that the countrys education system does not encourage the moral and intellectual reform of the mind resulting in a lack of debate on major issues such as good governance, corruption and rule of law. To this very day, the electorate has not understood the implications of the NEP which has produced results that are diametrically opposed to the original intention of bridging the gap between the haves and the have-nots. The longer we try the policy, the further we are from the original goal. The discrepancy between vision and reality has taken an alarming turn. It has gone far beyond economics into the realm of ethics and morality. In numerous instances it has taken the form of corruption and decadence which has pushed the economy further down the drain, he said.

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He said wanton corruption and wasteful spending had resulted in spiralling national debt that now amounts to RM456 billion or 53 per cent of the GDP, which if we are not careful, it wont take us long before we become another Greece. link: http://www.themalaysianinsider.com/malaysia/article/support-for-nep-coming-fromcaptive-minds-says-ku-li/

The Looting and Decline of Malaysia (Pre Merdeka Speech)


I dont think its mere nostalgia that that makes us think there was a time when the sun shone more brightly upon Malaysia. I bring up sport because it has been a mirror of our more general performance as nation. When we were at ease with who we were and didnt need slogans to do our best together, we did well. When race and money entered our game, we declined. The same applies to our political and economic life Soon after independence we were already a highly successful developing country. We had begun the infrastructure building and diversification of our economy that would be the foundation for further growth. We carried out an import-substitution programme that stimulated local productive capacity. From there we started an infrastructure buildup which enabled a diversification of the economy leading to rapid industrialisation. We carried out effective programmes to raise rural income and help with landless with programmes such as FELDA. Our achievements in achieving growth with equity were recognised around the world. We were ahead of Our peer group in economic development were South Korea, Hong Kong, Singapore and Taiwan, and we led the pack. I remember we used to send technical consultants to advise the South Koreans. By the lates nineties, however, we had fallen far behind this group and were competing with Thailand and Indonesia. Today, according to the latest World Investment Report, FDI into Malaysia is at about a twenty year low. We are entering the peer group of Cambodia, Myanmar and the Philippines as an investment destination. Thailand, despite a month long siege of the capital, attracted more FDI than we did last year. Indonesia and Vietnam far outperform us, not as a statistical blip but consistently. Soon we shall have difficulty keeping up with The Philippines. This, I believe, is called relegation. If we take into account FDI outflow, the picture is even more interesting. Last year we received US$1.38 billion (RM4.40 billion) in investments but US$ 8.04 billion flowed out. We are the only country in Southeast Asia which has suffered nett FDI outflow. I am not against outward investment. It can be a good thing for the country. But an imbalance on this scale indicates capital flight, not mere investment overseas. Without a doubt, Malaysia is slipping. Billions have been looted from this country, and billions more are being siphoned out as our entire political structure crumbles. Yet we are gathered here in comfort, in a country that still seems to work. Most of the time. This is due less to good management than to the extraordinary wealth of this country. You were born into a country of immense resources both natural and cultural and social. We have been wearing down this advantage with mismanagement and corruption. With lies, tall tales and theft. We have a political class unwilling or unable to address the central issue

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of the day because they have grown fat and comfortable with a system built on lies and theft. It is easy to fall into the lull caused by the combination of whatever wealth has not been plundered and removed and political class that lives in a bubble of sycophancy. I urge you not to fall into that complacency. It is time to wake up. That waking up can begin here, right here, at this conference. Not tomorrow or the day after but today. So let me, as I have the honour of opening this conference, suggest the following: Overcome the urge to have our hopes for the future endorsed by the Prime Minister. He will have retired, and Ill be long gone when your future arrives. The shape of your future is being determined now. Resist the temptation to say in line with when we do something. Your projects, believe it or not, dont have to be in line with any government campaign for them to be meaningful. You dont need to polish anyones apple. Just get on with what you plan to do. Do not put a lid on certain issues as sensitive because someone said they are. Or it is against the Social Contract. Or it is politicisation. You dont need to have your conversation delimited by the hyper-sensitive among us. Sensitivity is often a club people use to hit each other with. Reasoned discussion of contentious issues builds understanding and trust. Test this idea. Its not uber-liberal to ask for an end to having politics, economic policy, education policy and everything and the kitchen sink determined by race. Its called growing up. Go look up liberal in a dictionary. Please resist the temptation to say Salam 1 Malaysia, or Salam Vision 2020 or Salam Malaysia Boleh, or anything like that. Not even when you are reading the news. Its embarrassing. I think its OK to say plain old salam the way the Holy Prophet did, wishing peace unto all humanity. You say you want to promote intellectual discourse. I take that to mean you want to have reasonable, thought-through and critical discussions, and slogans are the enemy of thought. Banish them. Dont let the politicians you have invited here talk down to you. Dont let them tell you how bright and exuberant you are, that you are the future of the nation, etc. If you close your eyes and flow with their flattery you have safely joined the caravan, a caravan taking the nation down a sink hole. If they tell you the future is in your hands kindly request that they hand that future over first. Ask them how come the youngest member of our cabinet is 45 and is full of discredited hacks? Our Merdeka cabinet had an average age below thirty. Youre not the first generation to be bright. Mine wasnt too stupid. But you could be the first generation of students and young graduates in fifty years to push this nation through a major transformation. And it is a transformation we need desperately.

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You will be told that much is expected of you, much has been given to you, and so forth. This is all true. Actually much has also been stolen from you. Over the last twenty five years, much of the immense wealth generated by our productive people and our vast resources has been looted. This was supposed to have been your patrimony. The uncomplicated sense of belonging fully, wholeheartedly, unreservedly, to this country, in all it diversity, that has been taken from you. Our sense of ourselves as Malaysians, a free and united people, has been replaced by a tale of racial strife and resentment that continues to haunt us. The thing is, this tale is false. The most precious thing you have been deprived of has been your history. Someone of my generation finds it hard to describe what must seem like a completely different country to you now. Malaysia was not born in strife but in unity. Our independence was achieved through a demonstration of unity by the people in supporting a multiracial government led by Tengku Abdul Rahman. That show of unity, demonstrated first through the municipal elections of 1952 and then through the Alliances landslide victory in the elections of 1955, showed that the people of Malaya were united in wanting their freedom. We surprised the British, who thought we could not do this. Today we are no longer as united as we were then. We are also less free. I dont think this is a coincidence. It takes free people to have the psychological strength to overcome the confines of a racialised worldview. It takes free people to overcome those politicians bent on hanging on to power gained by racialising every feature of our life including our football teams. Hence while you are at this conference, let me argue, that as an absolute minimum, we should call for the repeal of unjust and much abused Acts which are reversals of freedoms that we won at Merdeka. I ask you in joining me in calling for the repeal of the ISA and the OSA. These draconian laws have been used, more often than not, as political tools rather than instruments of national security. They create a climate of fear. These days there is a trend among right wing nationalist groups to identify the ISA with the defence of Malay rights. This is a self-inflicted insult on Malay rights. As if our Constitutional protections needed draconian laws to enforce them. I wish they were as zealous in defending our right not to be robbed by a corrupt ruling elite. We dont seem to be applying the law of the land there, let alone the ISA. I ask you to join me in calling for the repeal of the Printing and Publications Act, and above all, the Universities and Colleges Act. I dont see how you can pursue your student activism with such freedom and support in the UK and Eire while forgetting that your brethren at home are deprived of their basic rights of association and expression by the UCA. The UCA has done immense harm in dumbing down our universities.

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We must have freedom as guaranteed under our Constitution. Freedom to assemble, associate, speak, write, move. This is basic. Even on matters of race and even on religious matters we should be able to speak freely, and we shall educate each other. It is time to realise the dream of Dato Onn and the spirit of the Alliance, of Tunku Abdul Rahman. That dream was one of unity and a single Malaysian people. They went as far as they could with it in their time. Instead of taking on the torch we have reversed course. The next step for us as a country is to move beyond the infancy of race-based parties to a non-racial party system. Our race-based party system is the key political reason why we are a sick country, declining before our own eyes, with money fleeing and people telling their children not to come home after their studies. So let us try to take 1 Malaysia seriously. Millions have been spent putting up billboards and adding the term to every conceivable thing. We even have cuti-cuti 1 Malaysia. Cant take a normal holiday anymore. This is all fine. Now let us see if it means anything. Let us see the Government of the day lead by example. 1 Malaysia is empty because it is propagated by a Government that promotes the racially-based party system that is the chief cause of our inability to grow up in our race relations. Our inability to grow up in our race relations is the chief reason why investors, and we ourselves, no longer have confidence in our economy. The reasons why we are behind Maldives in football, and behind the Philippines in FDI, are linked. So let us take 1 Malaysia seriously, and convert Barisan Nasional into a party open to all citizens. Let it be a multiracial party open to direct membership. PR will be forced to do the same or be left behind the times. Then we shall have the vehicles for a two party, nonrace-based system. If Umno, MIC or MCA are afraid of losing supporters, let them get their members to join this new multiracial party. PR should do the same. Nobody need feel left out. Umno members can join en masse. The Hainanese Kopitiam Association can join whichever party they want, or both parties en masse if they like. We can maintain our cherished civil associations, however we choose to associate. But we drop all communalism when we compete for the ballot. When our candidates stand for Elections, let them ever after stand only as Malaysians, better or worse. The world is a dangerous place not because of people who do evil, but because of good people who look on and do nothing about it. Albert Einstein Tengku Razaleigh Hamzah http://tengkurazaleighhamzah.com/

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