Globalization and National Autonomy: The Experience of Malaysia

5. Poverty Eradication, Development, and Policy Space in Malaysia by Ragayah Haji Mat Zin

116 5 POVERTY฀ERADICATION,฀ DEVELOPMENT,฀AND฀POLICY฀ SPACE฀IN฀MALAYSIA Ragayah฀Haji฀Mat฀Zin INTRODUCTION One strand of the globalization debate focuses on the negative impact of globalization on the autonomy of a nation state, where autonomy is defined as the ability to exercise self-determination in economic affairs. For example, Yu (2005, p. 2) summarized the views of Chinese scholars, whereby many believe that “globalization brings Westernization, and above all, Americanization of China. Such a development is equated with the loss of autonomy.” Webb and Sinclair (n.d., p. 1) note that “Economic globalization is often blamed for forcing governments to cut or alter social welfare programmes, and thereby also for limiting the autonomy of the political institutions (that is, nation-states) that are primarily responsible for achieving social welfare goals.” In Malaysia, Tun Dr Mahathir, former prime minister of Malaysia, argued that “…for most of the developing countries, globalisation means not more freedom but less freedom from rules, regulations, laws and policies. Worse still, these uniform rules, regulations, laws and policies disregard their particular weaknesses and problems” (Mahathir 2002, p. 14). Similarly, Dato’ Mustapa Mohamed, currently minister of higher education, notes that “Globalisation is encroaching into national sovereignty and eroding the role of the State in national policy making functions.” Moreover, 05฀GlobalNAn.indd฀฀฀116 7/23/08฀฀฀11:00:28฀AM POVERTY฀ERADICATION,฀DEVELOPMENT,฀AND฀POLICY฀SPACE฀ 117 What we want to see is globalization with a human face. Globalization must benefit everyone. It must especially benefit the poor. There must be a level playing field for all players. Globalization must not erode the independence, sovereignty and dignity of nations and their peoples. The free flow of ideas, people, resources and capital across borders must not result in new forms of colonization or harm the poor countries. (Mustapa Mohamed, 2002) This chapter considers how and if globalization forces have affected Malaysia’s drive to eliminate poverty over the last three and a half decades. More specifically: i. What were the trends and patterns of poverty incidence in Malaysia between 1970 and 2004? To what extent were poverty goals achieved by 2005? ii. How have globalization forces affected Malaysia’s persistent and long-term drive to eliminate poverty? iii. What additional factors limit policy space or autonomy with regard to poverty reduction in Malaysia? The next section provides the background leading to the introduction of the New Economic Policy (NEP). Section 3 describes trends and patterns of poverty incidence in Malaysia between 1970 and 2004 while Section 4 examines the main drivers of poverty reduction. Section 5 assesses the impact of business-cycle swings on poverty eradication, while Section 6 looks at other factors that limit Malaysia’s policy space or autonomy in addressing poverty. The final section includes highlights from the analysis and several tentative policy recommendations. A฀PREAMBLE฀TO฀THE฀NEW฀ECONOMIC฀POLICY At Independence, Malaysia faced massive poverty and racial inequality as a consequence of the historical development of the country. When the British came, they found that the Central West Coast was rich in tin deposits and the environment was particularly suitable for rubber cultivation. To exploit these lucrative resources, they encouraged immigration of Chinese and Indian labourers, leading to the creation of the Malaysian plural society. These immigrants were concentrated in 05฀GlobalNAn.indd฀฀฀117 7/23/08฀฀฀11:00:28฀AM 118 RAGAYAH HAJI MAT ZIN what became the fast-growing states, where wider and better opportunities were available while most of the indigenous population was left in states which remain undeveloped. At the same time, measures were also taken to prevent the entry of non-Malays into the paddy industry so as to maintain its Malay character, and to ensure the nation’s food supply. Thus, the seed of regional and racial imbalances was sown. From Independence to 1970, the new government pursued laissezfaire policies for industrial development, but intervened extensively to promote rural development and provide social and physical infrastructure. In agriculture, policies encouraged diversification including measures to influence prices, subsidies on agricultural inputs, the provision of extension services, and technological and research support. An additional objective was to reduce Malaysia’s dependence on rubber and tin by provision of infrastructure and amenities that would promote other forms of private sector production. Interventions including agricultural and infrastructure projects were biased towards the rural areas where a large proportion of the bumiputeras dwelt...