Ethnic Nationalism and Income Distribution in Malaysia

Abstract

The need for the social inclusion of all ethnic groups is highlighted in discussions on development. That is an important point, but this paper urges caution about placing an exclusive focus on ethnicity in the formulation of policy. This argument is illustrated by way of an examination of the income distribution policies promulgated in Malaysia to improve the economic conditions of the Malay community after a series of race riots in 1969.

Notes

S.P. Chakravarty is a Professor at the School of Business, University of Wales, Bangor, Gwynedd LL57 2DG, UK; Email: [email protected]. A.H. Roslan is an Associate Professor at the Faculty of Economics, Universiti Utara Malaysia, 06010 UUM Sintok, Kedah Darul Aman, Malaysia. We are grateful to Yener Altunbas, Alvaro Angeriz, David Hojman, R. Ross Mackay, M. Mustafa, the editors of this journal and an anonymous referee for helpful comments. Support from the British Council (Grant ARC 1184) to one of the authors (SPC) is also gratefully acknowledged.

 1. She also talks about the Jews in Russia, but the context is far too different from the one we are concerned with here in this paper on Malaysia. The case of the British in Zimbabwe is also different from that of the Chinese in Malaysia in that there was a legally-sanctioned policy of racial exclusion in Zimbabwe. The situation in Zimbabwe is better captured by Segal [1967], in his analysis of imperialism. He forecast that a race war was probable: ‘The economic may well be the dominant cause; but the racial may become the dominant identification’ [Segal, 1967:10].

 2. Chua glosses over this period, and concentrates instead on the rise of the Chinese business houses since the 1960s: ‘…a new market-dominant minority has taken their place, far wealthier than the Indians ever were’ [Chua, 2003: 23].

 3. For example, Chua refers to the ‘market dominant’ Chinese community that has emerged in Burma under the military junta since the 1960s. There is a big difference between the anti-Indian sentiments during the inter-war years and any anti-Chinese sentiments that might be unleashed if and when the current ruling junta falls from power. See, for example, Chakravarti [1971] about the plight of the Indians in Burma during the inter-war years.

 4. This is not an argument against affirmative action, but an argument for a policy that is exclusively focused on affirmative action.

 5. The word Bumiputera translates as ‘son of the soil’, and thus confers a prior claim to the wealth of the nation. The word generates a connotation of occupation of the land from time immemorial. It is interesting to note, however, that the word itself derives from the Sanskrit words Bhumi (earth) and Putra (son). The claim to eternal possession of the land is thus compromised by a language which indicates arrival of ancestors at some earlier time from a distant land. This irony appears to have escaped attention. The nation state of Malaysia consists of the Malay Peninsula and the islands of Sabah and Sarawak. The communities descended from pre-colonial people are not all called Malays, but they are regarded as Bumipateras in law. Since this paper concerns developments in Peninsular Malaysia, the words Bumiputera and Malay will be used interchangeably.

 6. There was a perception, even decades after their first arrival and at the time of independence in 1957, that the descendants of the newcomers would return to the homelands of their ancestors, China and India, after accumulating enough savings [Gomez and Jomo, 1997:11]. It is only the Bumiputeras who would continue to live for ever, especially in peninsular Malaysia. It was forgotten that the Malay Peninsula stood at a thoroughfare of human movements in Asia over centuries. Waves of immigrants, including those from China, must have settled in the peninsula well before the British arrived as colonial rulers.

 7. See Faaland et al. [1990] for an explanation of Faaland's views.

 8. See Table 8 for data on the mean income of different income groups, broken down by ethnic groups, for the years 1995 and 1999.

 9. Article 89 of the constitution empowered the government to declare Malay reservations over common land. Article 153 specified reservations for the Bumipuetras of ‘positions in the public service and of scholarships, exhibitions and other educational or training privileges…’ However, all pre-existing property rights are honoured. It was agreed that in return for the acceptance by the non-Bumiputeras of the political primacy of the Bumiputeras, the Bumiputeras recognized full citizenship rights and a voice in the government of the non-Bumiputeras [Snodgrass, 1980: 45–7].

10. Also see Jomo [1989, 1991 and 1998] for details.

11. The groups are Bumiputeras, Chinese and Indians.

12. See Von der Mehden [1975] for the urban–rural distribution by ethnic groups.

13. It appears that religious differences were sidelined. Political parties along the ethnic divide were formed after the re-occupation of Malaysia following the defeat of Japan in World War II. Important among them were United Malay National Organsation (UMNO), Malaya Indian Congress (MIC) and Malayan Chinese Association (MCA). UMNO and MCA formed a coalition in the 1952 municipal elections. MIC later joined the coalition. The Islamicists were isolated. In the 1955 Federal Legislative Council Election, held in 1955 immediately prior to independence, the coalition bagged 52 out of the 53 seats in the Council. The Islamicists (Pan Malayan Islamic Party) gained only one seat.

14. This is true also elsewhere in the erstwhile British Empire in the East. For example, the Whyte Committee (Burma Reforms Committee) recommended representation based on communal identity in government advisory bodies. Sir P.P. Ginwala, a self-appointed (rather government-selected) Indian member of the Committee said: ‘I feel that my community has put forward and in my opinion established on the evidence an overwhelming case for communal representation pure and simple’, quoted in Chakravarti [1971: 113]. Sir Ginwala, a rich businessman, had little in common with the Indian labourers on whose behalf he claimed to speak.

15. This was a laudable goal of policy which was also successful in reaching the goal of reducing social exclusion by increasing educational opportunities to children in the rural areas. However, one of the goals of wider participation was the transfer of the ownership of capital on ethnic grounds. The problem of identifying the ethnicity of owners and the problem of selecting the beneficiaries among the intended community, the Malay community, were not properly anticipated, leading to charges of crony capitalism. This point is not pursued here because it is beyond the scope of this paper.

16. An imagined community [Anderson, 1983] of Bumiputeras comprising Malaysia began to take shape. This is not much different from the intellectual thrust of nationalist movements elsewhere [Hobsbawm, 1993].

17. The index of real output rose from 100 to 126. By applying the share accruing to the bottom 40 per cent, we find that their income declined from 15.9 in 1957 to 14.6 in 1970. This was a decline of eight per cent.

18. Ikemoto [1985] breaks down the rural and urban households into three ethnic groups, and calculates the relevant Gini coefficients. He then demonstrates that within-group inequality worsened most for the Bumiputeras, in both the rural and urban areas.

19. We can calculate from the data in Table 2 that, for the Malay community, the ratio of the share of the total income accruing to the bottom 40 per cent to the top 20 per cent of the population was 0.459 in 1957/58. That is, the total income accruing to the poorest 40 per cent of the Malay population was slightly less than half (about 45.9 per cent) of the total income accruing to the top 20 per cent of that community. By 1970, this share had fallen to only a quarter (24.2 per cent). The corresponding drop for the Chinese was from 39.3 to 26.4 per cent. For the Indian community, the fall was from 45.1 to 26.4 per cent.

20. It might be noted that nationalism, with its emphasis on exclusion, has been a resurgent phenomenon of the twentieth century [Berlin, 1991].

21. The expression is a paraphrase of Freud's observation about the ‘narcissism of minor differences’, quoted in Judt [1994: 44].

22. A breakdown of the data by the ethnic distribution of registered professional can be constructed from data published in Jomo [1991: 498, Table 6]; Malaysia [1996: 84, Table 3.4]; MAPEN II [2001: 197, Table 2.60] and Malaysia [2001: 69, Table3–9]. The picture is the same. Much of the gain for the Bumiputeras was already made by 1990.

23. Milne [1992] examines the distribution of benefits through privatisation programmes in the ASEAN states, including Malaysia. See also Jomo [1989], and Bowie [1988].

24. Source: (i) Snodgrass [1980]; (ii) Shari and Zin [1990]; (iii) Malaysia [1991, 1996]. The data beyond 1990 are less readily available presumably because the government has become concerned about criticism about intra-Malay dispersion in income. However, a glimpse of the developments during the 1990s is given in the conlusion.

25. There are different measures of inequality. We use the Shorrocks index because it allows for an examination of the contribution of different sources of income to the dispersion in the total income. Suppose that household income arises from two sources, wages and dividends. Then the Shorrocks index of inequality in the distribution of the total income among households can be shown to be the sum of two components, inequality that can be attributed to the wage distribution and inequality that can be attributed to the distribution of dividends among households..

26. Another way of looking at the data is to note that the above ratio has gone up by 6.2 per cent for the Chinese but only 1.7 per cent for the Malays.

27. The idea of belonging entails the creation of myths. For examples, see Hobsbawm [1993]. Even the word Bumiputera is has roots in the language of a distant land (see note 5).

28. There are considerable limits to what can be gleaned about income distribution, but especially about poverty, by looking at mean income data. For example, an increase in the mean income of the poor, say those at the bottom 20 per cent of the distributional ladder, does not tell us whether extreme poverty has also decreased. For example, there has been considerable reduction in poverty among families with children in the UK in recent years. However, a closer examination of the Family Resources Survey data suggests that mostly the poor who were near the poverty datum line have benefited [see Angeriz and Chakravrty, 2003].

29. See Table 6 for the sources of income in 1988/89, the latest year for which we have detailed survey data on household income, for different ethnic groups.

30. The policy prescriptions in Chua [2003: 278–80] are inadequate in that they perpetuate the obsession with race at the expense of the wider picture. She suggests that the market-dominant minorities should ‘learn from recent example of a number of wealthy businesspeople in the United States, who, in several highly publicized gestures, have donated tens of millions of dollars toward scholarship funds for inner-city children’ [Chua, 2003: 285]. This is naive at best and misleading at worst. In the absence of a moral stand against racism, whether directed against the rich or the poor, the policy becomes incoherent. It also becomes ineffective. The assimilated Jews in Germany, notwithstanding their contribution to philanthropy by many of their counterparts, were not spared by the Nazi regime. The point to ram home, whether in Africa or in Asia or in any other place, is that poverty and inequality are caused by economic structures, even if the identification appears to be racial. To recognize this identification may be important, but to base redistribution policy on that identification alone is to abandon the goal of economic equality to placate racism.

Additional information

Notes on contributors

Abdul-Hakim Roslan

S.P. Chakravarty is a Professor at the School of Business, University of Wales, Bangor, Gwynedd LL57 2DG, UK; Email: [email protected]. A.H. Roslan is an Associate Professor at the Faculty of Economics, Universiti Utara Malaysia, 06010 UUM Sintok, Kedah Darul Aman, Malaysia. We are grateful to Yener Altunbas, Alvaro Angeriz, David Hojman, R. Ross Mackay, M. Mustafa, the editors of this journal and an anonymous referee for helpful comments. Support from the British Council (Grant ARC 1184) to one of the authors (SPC) is also gratefully acknowledged.