EU envoy blasts Malaysia's NEP

By EILEEN NG

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 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, known as Bumiputras, comprise nearly 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.

It is not just foreigners who chaff at the New Economic Policy. At home, ethnic Chinese and Indians, who are minorities, also see it as a discriminatory tool. Many Malays also have complained that the policy has benefited only a few well-connected people in their community while the rest continue to languish in relative poverty. The issue has become a source of friction in this ethnically and racially diverse country.

The NEP was started in 1970 when the Malays' corporate ownership was 2 percent. The aim was to raise it to 30 percent by 2010. The government says it stands at present at 19 percent while ethnic 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?"