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Home > Articles > Malaysia's Economic History

Malaysia's Economic History : New Economic Policy (Part 6)



(3) Implications of the NEP on the Malaysian society
So far, i Capital has dealt with the implications of the NEP on: (i) National unity; and (ii) Economic growth. In this issue, i Capital addresses the social dimension of the NEP, in relation to the points raised in section (ii), which discussed the implications of the NEP on economic growth. If the economic costs of the NEP have not been fully studied, the social cost of the NEP is even less talked about, let alone researched into.

(a) Social costs arising from deprivation of education
As mentioned in Part 14, the NEP deprives deserving Malaysians of education. In that section, we argued that although non-Bumiputra students performed better than their Bumiputra counterparts academically, the existence of university quotas hampered deserving non-Bumiputras from obtaining entrance into universities. Furthermore, only 1 in 5 scholarships was awarded to a non-Bumiputra. What made the problem worse was that scholarships were granted in an extremely regressive manner, with the rich receiving 21, 13 and 10 scholarships for every one scholarship granted to students from poor households in the Bumiputra, Chinese and Indian communities respectively. Such factors inevitably increased the probability of bright, deserving students being deprived of higher education altogether.

To ascertain the social costs of such a phenomenon, we will first examine the social benefits of higher education and make our deduction thereafter. An empirical study conducted by an American university confirmed a common finding, that is, regions with higher proportion of graduates experience:

  • Lower crime rates.
    Crime statistics suggest that higher educational attainment is positively correlated with a lower incidence of crime. The main factor behind this is that higher education provides individuals with better opportunities and higher income. On average, annual earnings of individuals who possess a Bachelor's degree are 75% higher than the earnings of high school graduates, a point that can be seen almost anywhere in the world. As a result, the opportunity costs of incarceration are raised in terms of earnings foregone, raising the risk of committing crime when a person possesses higher education. In addition, since higher education increases the chances of an individual being financially stable, educated individuals have less necessity to commit crimes. Hence, it is unsurprising that empirical evidence shows less criminal behaviour and lower incarceration rates among the highly educated.

    In Malaysia, crime rates have risen substantially in recent years. The Malaysian Life Quality Index in 2002 revealed notable deterioration in the public safety index by 19.9%, with the crime rate measured by per 1,000 persons almost doubling from 3.8 in 1990 to 7.1 in 2000. In 2002, statistics released by the Royal Malaysian Police Force showed that Malaysia had more than 125,000 cases of "hard" crimes in 2002 alone and this figure did not decline over the next 2 years, despite the fact that the size of the police force had been increased tremendously. In addition, a disturbing trend is emerging, whereby the assailants are now much younger, resulting in the number of younger girls targeted rising.

    The fact that assailants are now much younger supports our hypothesis that the NEP has indeed deprived Malaysians of education and the social cost of that is the rising crime rate. This is because those who are unable to have access to higher education are unlikely to have a steady stream of income and thereby, increases the necessity to commit vices to make ends meet. In addition, because their income is likely to be lower than that of the educated, the opportunity costs of incarceration are significantly reduced.

  • Greater intergenerational social benefits
    Inter-generational social benefits arising from education have proven to be substantial, as the pursuit of higher education in today's generation almost always translates into higher probabilities of higher education attainment of future generations. Moreover, the educational attainment and development of children are positively affected by the education attainment of their parents (what is known as first-generation effects).

    On the contrary, while education leads to greater inter-generational benefits, the deprivation of education also enhances the vicious cycle of poverty. In a nutshell, this vicious cycle arises when poor families are unable to provide their children with education, which almost certainly lifts poor families out of poverty. As a result of being deprived of education, they remain poor, resulting in the children almost always being the worst sufferers of trans-generational poverty. Therefore, since scholarships are granted in an extremely regressive manner under the NEP, the NEP is much more likely to enhance the vicious cycle of poverty than mitigate it.

  • Greater civic participation
    Social and behavioural statistics suggest that higher education attainment is positively associated with greater civic participation, ranging from working with local civic groups to greater voter participation. According to Milton Friedman, the well-known economist, public support for the laissez-faire approach in managing an economy could be achieved by increasing the educational level of the population. This is because individuals who are better educated are less influenced by populist rhetoric (often from politicians), and tend to make more informed, rational decisions in voting behaviour.

    A survey conducted by the Institute of Malaysian and International Studies (IKMAS) in Dec 2003 as part of the IKMAS Electoral System Research Project, which surveyed the characteristics of Malaysian voters amongst other issues, supports Friedman's view. The said study revealed that Bumiputras, in particular, the Malays, were twice as likely to be interested in politics. A likely contributor to this factor could be the fact that university quotas were allocated disproportionately, favouring Bumiputra applicants. Also, the study showed that voters living in higher income households tended to be more interested in politics. Hence, it is unsurprising that the IKMAS study revealed that almost 2 out of every 3 persons interviewed claimed that they were "not really or not at all interested" in politics. The implication here is that the social cost of the NEP is an increase in the proportion of society that is indifferent towards politics. Hence, the benefits arising from greater civic participation (mentioned above) are diminished, if not foregone, due to the NEP.
In short, the social costs arising from the NEP with respect to depriving deserving Malaysians of education are higher crime rates, enhancement of the vicious cycle of poverty and a higher number of Malaysian voters who are indifferent towards politics and policies, which have far reaching effects on their lives.

(b) Social costs arising from emigration

In Part 4, it wrote that the NEP has been a major contributor to the high rate of brain drain in Malaysia and that the outflow of skilled Malaysians has resulted in loss of economic growth and development. As a recapitulation, based on an IMF study, until 1990, Malaysia ranked the highest (as a percentage of population) in terms of persons with tertiary education migrating to OECD countries. She registered a staggering figure of 29.4%. Also, tables 39 and 40 show the statistics previously published in the said issue of i Capital, showing that after the NEP was implemented, there was a sudden surge in the number of Malaysian immigrants into Australia and the US.

Table 39: Inflow of Malaysian immigrants into Australia

Table 40: Inflow of Malaysian immigrants into the US

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