Second Malaysia Plan
The Second Malaysia Plan was an economic development plan introduced by the government of Malaysia with the goal of implementing the Malaysian New Economic Policy. It lasted from 1971 to 1975 and aimed to "restructure" the society of Malaysia and reduce Malaysian Chinese and foreign dominance in the economy of Malaysia so as to improve the economic position of the Malays. It was the successor to the First Malaysia Plan, which was also intended to specifically tackle the problem of poverty among the Malays. However, the First Malaysia Plan had limited success, which may have been a factor in the 13 May Incident in 1969 when race riots broke out in Kuala Lumpur. The Second Malaysia Plan had been regarded as excessive in its zeal to increase Malay participation in the economy, and the government accordingly scaled back the emphasis on restructuring the economy when the plan ended.
Background
Although the Malays have nearly always comprised a majority of the Malaysian population, their economic power has rarely been commensurate. In 1970, the Bumiputra controlled only 1.9% of the Malaysian economy, while the non-Malays held 37.4%, with the rest in foreign hands. Due to this wide disparity, Article 153 of the Constitution requires the government to set quotas for the dispensation of scholarships, employment in the civil service, etc. targeted at improving the economic status of the Malays.However, the First Malaysia Plan—whose approach had been dependent on the Malays "availing themselves of these facilities and services and putting them to good use"—failed in addressing the economic imbalance. Its policies also resulted in discontent among the non-Malays, who mostly supported the opposition parties that favoured reducing or eliminating affirmative action for the Bumiputra in the 1969 general election. A victory parade held on 12 May 1969 by supporters of the opposition led to a retaliatory rally on 13 May by the United Malays National Organisation, a major party in the governing Alliance coalition. However, the rally soon turned into a riot which lasted two days, an incident later known as the 13 May Incident. Officially, around 200 people died—although others have given much larger estimates—with thousands left homeless, the majority of them Chinese. A state of emergency was declared, and Parliament was suspended. The National Operations Council governed until 1971, when Parliament reconvened.
The Second Malayan Five Year Plan was an economic development plan launched by the government of Malaya, and continued by the government of Malaysia. This plan followed the First Malayan Five Year Plan, which ran from 1956 to 1960. The Second Malayan Five Year Plan increased expenditure for the development of agriculture and rural areas. Funding was markedly increased for land development schemes, physical infrastructure, and social services. The Plan's stated objective was "to provide facilities and opportunities for the rural population to improve its level of economic and social wellbeing." Some have attributed the greater expenditure of the Plan to the governing Alliance political coalition's political woes; the coalition had only narrowly won the 1969 general elections due to discontent among the rural Malay electorate over the lack of economic progress.
While it held the reins of power, the NOC set out the NEP, with the ultimate aim of eradicating poverty and eliminating "the identification of race with economic function" through a "rapidly expanding economy"; the NEP aimed for a Bumiputra share of 30% of the economy within 20 years. The Outline Perspective Plan was also approved, with similar goals to the NEP. Both the NEP and the Outline Perspective Plan were set to expire in 1990, and the Second Malaysia Plan was passed by Parliament to implement the goals of these policies.
Economic restructuring
The Second Malaysia Plan stepped up government involvement in the economy, with the main goal of increasing Malay economic interests, especially in the areas of manufacturing and mining. To avoid directly hurting Chinese economic interests, the plan focused on huge economic growth, with the goal of expanding both the Malay and non-Malay shares of the economy in absolute terms, while increasing the Malay share in relative terms as well.A sum of M$7.25 billion in total was allocated for the Second Malaysia Plan. Although this constituted a decrease from the First Malaysia Plan's allocation of M$10.5 billion, the Second Malaysia Plan hoped to achieve greater reduction in poverty and increase the involvement of the Malays in the private sector by imposing certain restrictions on private firms that would benefit Malay employment and economic ownership.
At the time the plan was announced, the non-Malays had, in the words of one commentator, "a virtual monopoly of private industrial and commercial employment", and were concentrated in the urban areas. However, foreign interests controlled most modern industries, including manufacturing, banking, finance, rubber, and tin. The Malays were largely involved in rural occupations such as rice farming, fishing, tending to rubber or oil palm smallholdings, and so on. They were conspicuously absent from even minor white collar jobs, such as clerical work, and only in the civil service, where they were guaranteed 80% of all government jobs, were they present in the upper portion of the hierarchy. Most members of some professions, such as medicine and law, were non-Malay. Ironically, government policies, such as those set out by Article 153, appeared to hinder Malay involvement in the private sector by giving them preference in only the public sector. Unemployment among all races was also rampant, largely due to poor education, with about 70% of the 275,000 unemployed in 1970 being aged between 15 and 25 years. It was all this that the NEP and the Second Malaysia Plan set out to change.
Industrialisation
Several government agencies that had been established prior to the advent of the Second Malaysia Plan increased their participation in the economy during the Second Malaysia Plan. These agencies included the Malaysian Industrial Development Authority and Majlis Amanah Rakyat. Several more were also established under the plan, including the Perbadanan Nasional, State Economic Development Corporation and the Urban Development Authority.Image:Trishaw malacca.jpg|thumb|At the beginning of the Second Malaysia Plan, the private sector employed mostly Malaysian Chinese; however, they had no real ownership stake in modern industries.
PERNAS was established to purchase businesses and participate in joint ventures with private companies, as well as to develop nascent industries to be held in trust until the Malays held sufficient capital to take them over. By the end of the plan's tenure, PERNAS owned 100% of eight companies involved in insurance, trading, construction, properties, engineering, securities, and mining. Joint ventures had also been formed with the private sector to develop the mining, containerisation, tourism and consulting industries.
Parliament passed the Industrial Coordination Act during the Second Malaysia Plan, which required all new manufacturing enterprises with M$100,000, or twenty-five or more workers, to be licensed by the Minister of Trade and Industry. To obtain such a licence, each firm had to meet certain conditions set by the Ministry, which could vary. Malaysian Chinese manufacturers were concerned about the act, as they had operated with minimal control from the government before. Nevertheless, the government stated the act was not meant to be detrimental towards any group, and went ahead with its implementation. Under the act, firms were divided into three categories: firms approved after 1 January 1972, firms approved before then, and firms operating without approval from the Ministry. All firms subject to the act were required to submit a proposal to the Ministry stating how they planned to achieve the long-term target of achieving 30% Malay and 70% non-Malay Malaysian ownership in the company. Proposals that were accepted then became the guidelines for how the relevant company would operate.
Until the Second Malaysia Plan, industry was concentrated on the west coast of Peninsular Malaysia. The plan thus moved to establish new industrial estates on the east coast, in order to curb rural-urban migration—the east coast was considerably less urbanised than the west coast.
By 1975, manufacturing activities constituted 16% of the Malaysian Gross Domestic Product, one per cent short of the target of the Second Malaysia Plan. Manufacturing grew negligibly in 1975, attributed by the government to the global recession that year. This contrasted with the 15% growth achieved in 1974, which well exceeded the target of 12.5% growth per year during the Second Malaysia Plan. Food, wood products, and chemical products made up the majority of the manufacturing sector. The substantial growth in manufacturing during this period has been attributed to the government's establishment of free trade zones, where any goods brought in would not be subject to customs duties, and goods could be freely exported abroad or transferred to another free trade zone. In 1974, such zones were declared in the states of Penang, Selangor, and Malacca. The industries located in these zones were mostly electronics-, rubber product- and textile-based.
Mining
Until the late 1970s, Malaysia was the world's foremost producer of tin, supplying roughly 40% of the non-communist world's tin. Nevertheless, tin reserves were declining; mining's contribution to the GDP was projected to fall 13% over the course of the Second Malaysia Plan, due to the exhaustion of tin and iron reserves. However, bauxite and copper continued to contribute to the mining sector in the early 1970s. Malay participation in the mining sector was minimal, and as much as 70% of the industry remained under foreign control. This was a legacy of the British colonial era; many British firms, which had arrived in the 19th century to exploit Malaysian mineral resources, had not departed yet. Malay participation in the mining sector—especially in tin—was further hampered by the British tendency in the 19th century to bring in cheap Chinese labour; most of those employed in mining were still Chinese as late as 1970.Petroleum or crude oil began to significantly contribute to the Malaysian economy in the 1970s, as new oil rigs and refineries were set up. By 1975, total production of crude oil stood at, most of it produced by Shell. In 1974, the exclusive right to own, explore and exploit petroleum in Malaysia was vested in the government enterprise of Petronas. The following year, Petronas was granted sole rights over the marketing and distribution of all petroleum products and a provision to control other companies without taking an ownership stake in them, through the issuance of management shares to Petronas.
The number of Malays employed in the mining sector soared from 1970 onwards, as the government's restructuring policies came into force. When the Second Malaysia Plan began, less than 200,000 Malays were employed in the mining industry. By 1990, they numbered nearly a million, well ahead of the target numbers originally outlined. Licences for mining operations were specially reserved for Malays as part of the drive to increase their ownership level in the mining industry. The government also ostensibly increased Bumiputra ownership by nationalising several formerly foreign mining companies—by 1989, state corporations controlled 60% of the mining industry. The government was also aided by the fact that petroleum soon eclipsed other minerals in the mining sector—as Petronas was a state-owned corporation, it was also considered a Bumiputra enterprise. However, the government has been criticised for this practice, as it is argued nationalised corporations belong to the public at large, and not only to the Bumiputra.