Professor Edmund Terence Gomez, Professor of Political Economy, Dean, Faculty of Economics and Administration, University of Malaya
Redistributing wealth: Institutions or individuals?
This mode of policy implementation, with a shift in focus from institutions to individuals, marked the beginning of a patronage system in business that became a central feature of Malaysia’s political economy. Malaysia’s hive of privatizations from the 1980s aided the rapid creation of Bumiputera-owned business groups, leading to the development of a ‘new rich’ section of society.
However, the government’s plan to create a corporate system dominated by globally recognized Bumiputera-owned business groups was disrupted by the 1997 Asian financial crisis. Most of these enterprises were controlled through a pyramid of holding companies supported by government-owned financial institutions that had liberally dispensed huge loans. This crisis hurt such companies badly, and some were bailed out by being nationalized. Just before Mahathir retired as Prime Minister in 2003, he admitted that affirmative action–based patronage had led to a debilitating ‘crutch’ mentality.
New inequities, indefinite duration, societal response
Shared prosperity
50 years on: Lessons learned
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