The Objectives of the Second Malaysia Plan

Speech by DAP Secretary-General and Ketua Pembangkang, Mr. Lim Kit Siang, at a forum on “The Objectives of the Second Malaysia Plan” organised by the Universiti Sains Malaysia Students’ Union on Friday, 7th December 1973 at 8 p.m.

The Objectives of the Second Malaysia Plan

The Second Malaysia Plan declares that the overriding objective of the New Economic Policy is the promotion of national unity through the two-pronged strategy of:

(a) eradicating poverty by raising income levels and increasing employment opportunities for all Malaysians, regardless of race;

(b) accelerating the process of restructuring Malaysian society to correct economic imbalance, so as to reduce and eventually eliminate the identification of race with economic function.

Let us make an appraisal of both these objectives and the progress achieved so far.

1. Eradication of Poverty, regardless of race

For the past two weeks, Malaysians have been flooded with government figures and boasts about the Plan’s achievements and over-achievements during the Mid-Term Review.

According to the Mid-Term Review, the GNP expanded by 11% annually at current prices during 1971-73. This was brought about by the fortuitous high prices for Malaysia’s export commodities such as rubber, timber, tin, palm oil, which caused the high growth rate of 20.4% in 1973. Two days ago, when the Finance Minister presented the 1974 Budget, we are told that the increasing boom prices for our exports will result in our GNP in current prices to go up higher and may reach 22%. This stands in contrast to the moderate expansion on 1971 and 1972 when the GNP grew by 5.6% and 7.5% respectively.

The Mid-Term Review computes the output in real terms as 6.9% per year, on the basis of an average of 4.1% price increase per year, as compared to the Plan target of 6.8%

Real per capita income is estimated to have grown by 2.8%, reaching $1,166 in 1973, largely as a result of the exceptionally high growth in 1973.

Such figures and statistics can only be meaningful if the economic gains and increased per capita income have percolated down to all the disadvantaged groups, and not waylaid and siphoned off by the privileged and affluent strata.

Despite Malaysia’s economic growth, all indications point to the widening of the gap between the haves and the have-nots, and the goal of the eradication of poverty, regardless of race, is as remote as during Merdeka.

The magnitude of the inequalities and mal-distribution of income and wealth is graphically given by the Post Enumeration Survey of the 1970 Census of Population.

The survey shows that 27% of households in Peninsular Malaysia had incomes below $100 per month, while a further 31% had incomes between $100 and $200. This means that 58.5% of West Malaysian families had income below $200 per month.

If we take an average of six persons per household, this means that 27% of Malaysians subsist on a per capita income of below $200 a year, while 58.5% of Malaysians subsist on a per capita income of below $400 a year, a far cry from the magic figure of $1,166 per capita income.

The Survey shows that the top one-tenth of all households accounted for nearly 40% of the total income earned in the economy, while the share of the lowest two-fifths, or lowest forty per cent, of the households amounted to only about 12% of total income.

Such a great disparity between the haves and have-nots is completely unacceptable and indefensible, 16 years after Independence.

Alliance policies are not designed to narrow the gap between the haves and have-nots, let alone to eradicate poverty regardless of race, but to develop a new Malay capitalist class to keep company with the MCA compradors and tycoons.

The widening disparity between the haves and have-nots in Malaysia is clearly shown when we compare the findings of the 1957/58 Household Budget Survey and the 1970 Post Enumeration Survey.

In 1957/58, the top one-tenth of the households accounted for 34% of the total income, increasing progressive to 40% in 1970. In 1957/58, the lowest 40 per cent of the households accounted for a meager 16% of the incomes, but this has shrunk to 12% after sixteen years of Alliance progress and achievements.

If we take into further consideration the living conditions of the poor in Malaysia, their plight is even more pathetic. Thus, 16 years after Independence, 52.5% of the households are without piped water, 31% without adequate toilet facilities and 57% without electricity. The poor also suffers from poor nutrition, lack of access to adequate health, housing, education and transportation facilities.

Thus data in 1971 shows that our per head calories availability per day is 2,028 with a protein content of about 48 grams of which 29.6% is derived from animal sources and 70.4% from vegetable sources. These figures, which are well below the figures pertaining to 1969, are below the optimum which is about 2,500 calories with protein content of about 55-60 grams of which at least 40% should be from animal sources. The present galloping inflation forcing up the prices of foodstuffs, especially meat, would have aggravated the problem of malnutrition among the poor.

There are all sorts of targets and objectives under the Second Malaysia Plan, but there is conspicuously missing any target or objective to show how the government propose to narrow the gap between the haves and have-nots, or how it proposed to immediate check the growing disparity between the haves and have-nots, despite its first prong objective under the Second Malaysia Plan to eradicate poverty regardless of race.

This is why I suggested in Parliament during the Mid-Term Review that the government should have a programme and a target in 20 years to ensure that the poorest 40 per cent of Malaysians account for at least 30 per cent of total income.

That the government Ministers, in their summing up of the debate, chose to ignore this proposal of mine, I submit, is eloquent testimony of the hollowness of the first prong objective of the Second Malaysia Plan, namely to eradicate poverty irrespective of race.

Rural Poverty

Poverty is a socio-economic problem which transcends race, religion and culture.

There are poor in all races, whether Malays, Chinese or Indians, just as there are poor in both urban and rural areas, which are located in the low-income, low-productivity traditional agricultural and urban sectors.

In the traditional agricultural sector, where one of the main causes of rural poverty is landlessness and uneconomic sized holdings, the Alliance Government lacks the will to launch radical land reforms to ensure that every peasant is an owner of the land that he tills, and end the scandalous position, for instance, where 54 per cent of the padi farms are under 2 ¼ acres, and 80 per cent of them not owned by the cultivators. This was the position in 1960, and it must have become worse by now, with further fragmentation and dispossession.

In the absence of radical land reforms and structural changes in the agrarian economy, the hundreds of millions of dollars which the government spends on the rural infrastructure as the multi-million dollar Muda Irrigation Schemes, can only benefit the absentee landlords and widen the economic disparity between the rich and the poor.

The government’s Felda schemes cannot break the back of the problem of rural poverty and landlessness, because it can only settle a fraction of the landless in the country.

Urban Poverty

Urban poverty is no less acute, with higher unemployment rate in urban than in the rural areas. In fact the social and physical hardships of urban poverty are more severe than those of rural poverty.

In any assault on urban poverty, low-cost housing must form a central plank in the strategy of action, but in the Second Malaysia Plan, housing has been relegated to a very insignificant place. Thus in 1971-73, only 6,557 units were built by the government, when this should be increased by 15 times to provide cheap housing to the low-incomes in the country.


The plight of the Malaysian poor have been aggravated in the past two years, with unchecked inflation wiping out large chunks of purchasing power from the low, but hard-earned, incomes. Inflation is high inequitable and unjust as it bears heavily on those getting low and fixed incomes, thus further widening the disparity between the haves and have-nots.

If we study the Consumer Price Index prepared by the Department of Statistics, we find that as between September 1972 and September 1973, the Consumer Price Index as a whole has increased from 106.6 to 121.9 which gives a percentage rise of 15%.

As between Sept. 1972 and September 1973, the price index for rice, bread and other cereals rose by 34%; meat by 31%; fish by 23%; oils and fats by 25% and fruits and vegetables by 20%.

Overall, food items which comprise 46.8% of the total Consumer Price Index, rose from 104 to 128, an increase of 25%.

For the same period, the price index for clothing and footwear rose from 106 to 135, an increase of 26%; while that of household goods, from 115 to 134, an increase of 17%.

In his budget speech, the Finance Minister continued to put the blame for price increases on imported inflation. He said he found it difficult to understand why goods from countries whose currencies have depreciated substantially against the Malaysian dollar have only been obtainable at prices which do not reflect these substantial parity changes.

What I find it difficult to understand is why the Finance Ministry finds it so beyond its ability to check profiteering, even to the extent of exceeding 100% profits, at the importer level?

Inflation cannot be blamed solely on external factors, for we know that many local products have shot up in prices, and a good instance are oils and fats, which have shot up by 25% between September 1972 and September 1973 although Malaysia dominates two-thirds of the world’s exports of palm oil and timber. Other contributory factors are Tun Tan’s fiscal and taxation policies, like the Sales Tax, surtax and the series of high tariff walls, and the lack of political will and courage on Tun Tan’s part to abolish Sales Tax and surtax on Budget Day is most regrettable.

I do not wish to go further into the question of inflation, as I think I have illustrated how seriously inflation has reduced the poor and low incomes into greater hardships and poverty.

Boom prices not eternal

It is fortunate that the Mid-Term Review was conducted in a year of boom prices for all our exports, which were strongly stimulated by the exceptional growth in the industrialised economies, namely U.S., Western Europe, and Japan, which were all experiencing boom conditions at the same time.

Malaysian exports soared by 42% in 1973 over 1972, with rubber providing the lead with the record export performance with a jump of 73% in export earnings over 1972; timber exports were up by no less than 15%; tin prices also soared reaching their highest level ever.

The industrialised countries, however, have reached the crest of the present boom, and world-wide recession is expected to set in. Thus Japan, the fastest growing economy in the past decade and Malaysia’s leading trading partner, may record zero real growth during 1974.

Compounded by the growing energy crisis, production in the industrialised economies would be restrained further.

Malaysia cannot escape from the slower economic growth and continued high rates of inflation in the industrialised countries, as our exports and economy are at present very closely linked with theirs. Recession in the industrialised economies would mean lower prices for our exports, which would mean greater unemployment and lay-offs.

In such a situation, the poor would be the worst hit, for they would be caught between falling incomes and high prices.

The prospects for the poor in Malaysia therefore, are to be even poorer than now.

Furthermore, the rest of the projections for the latter half of the Second Malaysia Plan and the Perspective Plan till 1990, are based on the exceptional economic growth in 1973 due completely to the fortuitous boom prices for our exports, which is unrealistic and unsound.

2. Restructuring of Malaysian Society

I would like now to come to the second prong of the NEP which is to accelerate the process of restructuring Malaysian society to correct economic imbalance, so as to reduce and eventually eliminate the identification of race with economic function.

The New Economic Policy to restructure society will be objectionable if it is used to benefit not the poor, have-nots Malays, but the rich, affluent Malays.

Thus, the present practice of giving scholarships, bursaries, taxi licences, land, timber and mining concessions to Malays with proper connections and monetary influence instead of to the poor, needy Malays must stop, if this restructuring prong is not to be a cover to develop a small elite capitalist Malay class at the expense of both the poor Malays and non-Malays.

Secondly, the restructuring programme must not be seen as a racial programme to the benefit of one race only.

The philosophy behind the restructuring of society is to end the identification of one ethnic group with a particular vocation. This means that in all sectors of national endeavour, serious efforts must be made to decompartmentalise the various racial groups, including Felda schemes armed forces, government services like recruitment of nurses and assistant nurses, etc.

Foreign ownership and control

Under this prong, we must explode the myth of the Second Malaysia Plan that the Chinese and Indians are rich while the Malays are poor. In fact, the overwhelming majority of the Chinese, Malays and Indians are poor. Furthermore, the real wealth of the country is not in the hands of the Chinese, Indians or Malays, but in foreign hands.

There is a clear dominance by foreign interests in the ownership and control of the Malaysian economy. In 1970, they accounted for about 61% of the total share capital of all limited companies, with the Chinese having 22%, Malays 2% and Indians 1%.
Foreign participation is especially dominate in modern agriculture and mining, (in rubber, it has a 75.3% stake while in mining 72.4%), while it amount to about 50% to 60% of the total in manufacturing, commerce and finance.

The greater imbalance, therefore, is between Malaysians and foreigners, rather than Malays and non-Malays, and this imbalance must be rectified to ensure that Malaysians are full economic masters of their own country.

Summing Up

To sum up, it would appear form the three years’ progress of the Second Malaysia Plan that what the Alliance Government is aiming to achieve is a small capitalist Malay class so as to restructure the Malaysian capitalists, while leaving the poor of all races in greater poverty and backwardness.

As it stands, it is not a plan either to eradicate poverty, irrespective of race, or to truly restructure Malaysian society to multi-racialise every sector of national endeavour.