The New Economic Policy (NEP) was a economic policy implemented in Malaysia from 1971 to 1990, which aimed to reduce the country’s economic dependence on agriculture and to promote rapid industrialization. The NEP was introduced by the Malaysian government, led by Prime Minister Tunku Abdul Rahman, with the goal of reducing poverty, improving income distribution, and promoting economic growth.

Impact of the NEP:

1. Poverty reduction: The NEP helped to reduce poverty in Malaysia by providing opportunities for low-income groups to access education and employment in the industrial sector.
2. Industrialization: The NEP led to the development of a manufacturing sector, which helped to reduce the country’s dependence on agriculture and increase its economic growth.
3. Income distribution: The NEP aimed to improve income distribution by promoting the participation of Bumiputeras (indigenous Malaysians) in the economy. This was achieved through policies such as affirmative action programs and quotas for Bumiputera-owned businesses.
4. Infrastructure development: The NEP led to significant investments in infrastructure, including transportation networks, power generation, and telecommunications.

Abandonment of the NEP:

1. Rapid industrialization: By the 1990s, Malaysia’s economy had grown rapidly, and the government felt that it was no longer necessary to continue with the NEP’s emphasis on poverty reduction and social equity.
2. Globalization: Malaysia’s economy had become increasingly integrated into the global economy, and the government felt that it needed to focus on attracting foreign investment and promoting exports in order to compete globally.
3. Changes in government priorities: The Malaysian government’s priorities had shifted from poverty reduction and social equity to economic growth and competitiveness.

Consequences of abandoning the NEP:

1. Widening income inequality: The abandonment of the NEP led to a widening income gap between the rich and poor, as well as a decline in social mobility for low-income groups.
2. Increased inequality in education and employment: The abandonment of the NEP led to a decline in education and employment opportunities for low-income groups, particularly Bumiputeras.
3. Loss of industrial capacity: The rapid industrialization policy pursued by the government after the abandonment of the NEP led to a loss of industrial capacity in certain sectors, such as manufacturing.
4. Dependence on oil exports: Malaysia’s economy became increasingly dependent on oil exports, which made it vulnerable to fluctuations in global oil prices.