The Colour of Inequality by Dr Muhammed Abdul Khalid

"Malaysia is a country forged in the trauma of poverty and racial suspicions with a legacy of stark inequality of wealth along racial lines" (Khalid, 2014).

INTRODUCTION

Assalamualaikum, greetings and salutations!

This video will review the book of “The Colour of Inequality: Ethnicity, Class, Income and Wealth in Malaysia” by Dr Muhammed Abdul Khalid.

Dr Muhammad Abdul Khalid was a Former Khazanah Research Director and economic advisor to former prime minister, Tun Dr. Mahathir Mohamad.

This book is published by MPH Group Publishing in 2014 and 2018. So its available in the MPH Bookstore.

This book provides an analysis on the wealth inequality among the ethnics in Malaysia.

There are 6 chapters including:

1. Introduction and Background

2. Malaysia’s Historical Economic Inequality and Race Relations

3. The Assets Ownership

4. Why The Gap

5. The Way Forward

6. Conclusion

Let me begin this book review by shedding light to the narrative in this book on the origin and evolution of Malaysia’s historical economic inequality and race relations.

The timeline is divided into

(1) Pre-Colonial Malaya (1400-1785)

(2) British Colonial Period (1786-1957)

(3) The Dawn of Independence and Bloody Racial Riots (1957-1969)

(4) New Economic Policy (1970 Until Now)

Let’s go on an adventure through sands of time!

PRE-COLONIAL MALAYA (1400-1785)

We begin with the pre-colonial Malaya.

In the 1400s, the Sumatran Prince, Parameswara founded the Malacca Sultanate (Cole, 1998).

In the 15th century, Melaka became a trading centre due to the strategic trade route.

There was an influx of Chinese and Indian migrants. These migrants transformed Malaya into a plural society. With the indigenous Malays remaining as the majority ethnic until the 19th century.

The economy of the Malay peasantry was primarily on subsistence economy. where the Malays rely on natural resources to provide for basic needs, through agriculture and fishing. There was also small volumes of barter.

BRITISH COLONIAL PERIOD (1786-1957)

In 1786, the British colonised Malaya and exploited Malaya. When the Malays refused to collaborate in the tin mines and rubber plantations, the British brought in cheap labour migrants from China and India. These migrants lived in urban areas.

While the Malays remained in rural areas working on agriculture and fishing.

Thus, there was an ethnic separation by location, language, culture and religion. This made integration difficult.

In the 1920s, Malay Nationalism sparked and awakened the Malays to political questions. This is because Malays were aware of their poverty and economic backwardness condition which was lower relative to the Chinese and Indian migrants.

In, 1946, Malayan Union was introduced and the Malays opposed it because it reduced the powers of the Sultan and the granted citizenship to the non-Malays.

Thus, The United Malays National Organization (UMNO) was formed and protested against the Malayan Union.

In 1948, the Malayan Union was dissolved and replaced by the Federation of Malaya.

In 1954, an Alliance Party was formed. It comprised of UMNO, The Malaysian Chinese Association (MCA) and Malaysian Indian Congress (MIC).

In 1955, the Alliance Party won the First General Elections and negotiated for independence. There was a social contract or a compromise in the struggle for independence and formulating the constitution. where the Malays made concessions to the citizenship of the non-Malays. while the non-Malays recognise the special positions of the Malays. This was embedded in the Federal Constitution of Malaysia.

In 1957, Malaysia gained its independence.

THE DAWN OF INDEPENDENCE BLOODY RACIAL RIOTS (1957-1969)

After independence inequalities rise as Chinese capitals were developed, but Malays had marginally improved their financial position.

The majority of the Malays continued to live in underdeveloped rural areas working in agriculture, small-scale farming and fishing.

While the Chinese dominated the economic sectors and worked in mining, manufacturing and construction and dwelled in urban areas.

Poverty was rampant among Malays and there was enormous income inequality between races. Among the poor households, 75% were Malay, 17% Chinese and 8% Indians.

The factors attributing to Malay poverty included low productivity, exploitation and victimisation, neglect, and the urban-biased policies of the government.

There was a mutual resentment between the Chinese and Malays.

And by 1969, these resentments lead to the bloody historical incident in Malaysia.

On May 13 of 1969 in Kuala Lumpur, there was a clash between the opposition victory parade of Democratic Action Party (DAP) and an UMNO counter-march. Riots began and got violent costing the lives of 196 Malaysians.

Malaysia declared darurat or state of national emergency. The parliament was suspended and was replaced by an ad hoc cabinet, the National Operations Council.

NEW ECONOMIC POLICY (1970 until 1990)

In 1971, The National Operations Council formulated the New Economic Policy. It is an affirmative action-based policy which aims to eradicate poverty regardless of race and restructure society by eliminating identification of race with economic function.

It is to be noted that the term Bumiputera was then introduced which means "sons of soil." Bumiputera is the political category drawn from the combination of the Malays and indigenous peoples in referring to the group that is eligible for the exclusive benefits provided in the New Economic Policy (Fee, 1997; Nagaraj, Nai-Peng, Chiu-Wan, Kiong-Hock, & Pala, 2015; Peng Tey, Li Lai, Tho Ng, Leng Goh, & Osman, 2019).

Now let’s jump into the analysis in this book by answering the question:

SINCE 50 YEARS OF THE IMPLEMENTATION OF NEW ECONOMIC POLICY, DID THE PERFORMANCE OF NEW ECONOMIC POLICY PRODUCED DESIRED RESULTS?

As much as New Economic Policy paints an aspirational picture of a future Malaysia. The reality isn’t so rosy.

New Economic Policy had performed quite well and all groups, including the non-Bumiputera performed well. However, Bumiputera remain the largest group with the lowest income. And their asset ownership remains minuscule.

WEALTH ANALYSIS

Since we have clearly established Malaysia’s historic development, how is the country progressing in terms of wealth distribution?

Well, according to this book, there is ethnic disparity. Bumiputera have the least wealth compared to other ethnic groups.

Why is there wealth disparities ?

Firstly, because of the historical transmission of inequality. As we had mentioned earlier, the Chinese had a head start in accumulating wealth compared to the Bumiputera.

Secondly, because of the labour market impediments. There is alleged discrimination in hiring Chinese in the public sector. In retaliation, there is discrimination in job hiring of non-Chinese in the private sector.

Thirdly, is implementation failure. Where the blame is on the failure of stakeholders in ensuring economic success of the Bumiputera community.

RECOMMENDATION

Thus, this book proposed a number of recommendations to address wealth inequality in Malaysia.

Firstly, is the asset-based policy. This includes relieving heavy debts of students for financing. It has been empirically proven that education is one of the keys to wealth accumulation. However, the poor are falling behind in securing higher education qualifications due to their inability to afford the expensive cost of university tuition. Next is reducing barriers to owning a house. This would increase wealth, provide security, stability and pride.

Secondly, is the tax restructuring which includes taxing capital gains, inheritance tax and taxing consumption on luxury goods. These taxes increases progressive incidence of the tax system and redistribute wealth.

Thirdly, is that there should be an anti-discrimination law against the non-Chinese in the labour markets and procurement in the private sectors. Anti-discrimination laws should be enforced in increasing wealth of the poor and closing racial gaps.

CONCLUSION

This book clarifies that the current government policies contributes to the widening wealth gap and this book also proposes corrective measures can reduce the inequalities in Malaysia.

In Dr Abdul Khalid’s own words derived from the book:

“Unless bold and drastic actions are taken urgently, a harmonious future for Malaysia is uncertain. There must be an urgency to give every Malaysian economic security, a better and sustainable future that is essential for a stable, harmonious and prosperous society.”

REFERENCES

Cole, A. (1998). The Malaysian “Vision 2020” National Development Plan: Implementation Problems In Sabah.

Khalid, M. A. (2014).The colour of inequality: Ethnicity, class, income and wealth in Malaysia. Petaling Jaya: MPH publishing.

Fee, L. K. (1997). Between kingdom and nation: the metamorphosis of Malay identity in Malaysia. Southeast Asian Journal of Social Science, 25(2), 59–78.

Nagaraj, S., Nai-Peng, T., Chiu-Wan, N., Kiong-Hock, L., & Pala, J. (2015). Counting ethnicity in Malaysia: The complexity of measuring diversity. In Malaysian Journal of Economic Studies (Vol. 46).

Nair, S., & Sagaran, S. (2015). Poverty in Malaysia: Need for a paradigm shift. Institutions and Economies, 7(3), 96–123.

Peng Tey, N., Li Lai, S., Tho Ng, S., Leng Goh, K., & Osman, A. F. (2019). Income Inequality Across States in Malaysia. Planning Malaysia Journal, 17(10), 13–26.