NEP Is Internationally Condemned. Whose Idea Was It?

Ah, now the European Union also think that we make a huge blunder via NEP

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EU Envoy Blasts Malaysia's NEP

By EILEEN NG Associated Press Writer
© 2007 The Associated Press

KUALA LUMPUR, Malaysia — Europe's top envoy to Malaysia Thursday urged the government to roll back its affirmative action policy for majority Malays, saying it is discriminatory and amounts to protectionism against foreign companies.

In unusually frank comments that ignored diplomatic niceties, Thierry Rommel openly criticized Malaysia's 37-year-old New Economic Policy, or NEP, that gives a host of privileges in jobs, education, business and other areas to ethnic Malays.

"In a dominant part of the domestic economy, there is no level playing field for foreign companies," Rommel, the ambassador and head of the European Commission Delegation to Malaysia, said in a speech to local and foreign businessmen.

Ethnic Malays and other indigenous groups, known as Bumiputras, comprise more than 60 percent of Malaysia's 26 million people. The government says they have a disproportionately low share of the corporate wealth compared to the minority Chinese, and need the NEP to increase their standard of living.

The government did not immediately respond to Rommel's comments.

Rommel said the government is using the NEP as an excuse to practice "significant protectionism of its own market," including the automotive sector, steel, consumer goods, agricultural products, services and government contracts.

Malaysia claims these are "infant" industries that need to be protected but "in reality .. it is the Malay-centered Bumiputra policy that drives protectionist policies," Rommel said.

As part of the NEP, all public-listed companies are required to allocate 30 percent of their shares to Malays. Companies without Malay directors or employees are excluded from lucrative government contracts. Employers have quotas for hiring Malays.

Eric Reuter, sales and marketing director of freight forwarder ABX Logistics, said the Belgium-based company has a 51 percent Bumiputra partner and is required to work with local companies on government-related projects.

The limitations have eroded his profit margin, he said.

"We cannot be as flexible as we want to be and chances that corruption comes into play is higher. It is an interruption to the free market," Reuter told The Associated Press.

Besides foreigners, minority ethnic Chinese and Indians also see the NEP as a discriminatory tool. Many Malays also have complained the policy has benefited only a few well-connected people.

NEP was started in 1970 when the Malays' corporate ownership was 2 percent. The aim was to raise it to 30 percent by 2010, from 19 percent now. Chinese, who form a quarter of the population, control 40 percent of corporate wealth.

Rommel stopped short of saying the NEP should be scrapped but told reporters separately: "We (in Europe) have bitten the bullet on a number of sensitive issues, why can't you?"

He warned the NEP could "lead to problems" in free trade negotiations between the EU and the 10-member Association of Southeast Asian Nations, of which Malaysia is a key member.

The two groups agreed last month to launch free trade talks, which could raise ASEAN's exports to the EU by up to 20 percent, Rommel said. Senior officials are expected to hold their first meeting in Vietnam next month, he added.

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Now, what will the Government do? Scrap the whole thing? Modify it, and go on? Or will Malaysia stop trading with the EU (will have to leave the country if Pak Lah decides that Thierry Rommel is an inbecile, and goes for option 3).