Why the policy was needed
The New Economic Policy (NEP / Dasar Ekonomi Baru, DEB) was introduced in 1971 as part of the Second Malaysia Plan (1971–1975). Its immediate trigger was the 13 May 1969 incident, when racial violence exposed deep economic imbalances. At independence, income was distributed very unevenly between ethnic groups, poverty was widespread especially in rural Malay areas, and economic activity was closely tied to race. Leaders concluded that lasting national unity could not exist without economic fairness.
The policy was designed under Prime Minister Tun Abdul Razak and placed within the framework of the Rukun Negara, the national ideology proclaimed in 1970. It was to run for twenty years, from 1971 to 1990, guided by the First Outline Perspective Plan (OPP1).
The two-pronged strategy
The NEP followed a famous two-pronged strategy (strategi serampang dua mata):
- Eradicate poverty among all Malaysians, regardless of ethnic group, by raising incomes and expanding opportunities.
- Restructure society to remove the identification of race with economic function, so that no ethnic group would be tied to one type of job or region.
A key measurable target was to raise Bumiputera ownership of share capital to 30% by 1990, with other Malaysians holding 40% and foreigners 30%. Crucially, this was to be achieved through economic growth so that no group would lose its existing wealth.
Key idea
The NEP aimed to build unity by growing the economic pie for everyone rather than redistributing a fixed one, using its twin goals of eradicating poverty and restructuring society.
Remember
- Launched 1971, running 1971–1990.
- Trigger: the 13 May 1969 incident.
- Framed by the Rukun Negara under Tun Abdul Razak.
- Two prongs: eradicate poverty and restructure society; 30% Bumiputera equity target.