Effectiveness of economic policies at NU

Question 1

Economic policies that were accomodative in maintaining interests of the populace helped to minimise disparities across racial groups and ensured social stability (S,M)

Answer 1

[M] 1971 New Economic Programme
- 1975: Industrial Coordination Act → Firms screened for ‘NEP characteristics’ to be registered
- 1980s: State trusts and agencies to provide interest-free finance for bumiputera e.g. National Tradition Corporation (PERNAS)

⇒ Malay share of the economy increased from 3% to 20%, percentage of those below poverty line reduced from 49% to 15% (1981-1990)
⇒ No large ethnic flare-ups since after NEP

[S] Commitment to meritocracy and equal economic opportunity
- Meritocracy to grant equal opportunities for all ethnicities and be visibly fair in the allocation of rewards
- Self-help groups like MENDAKI working with the Association of Muslim professionals to promote the socioeconomic uplift of the Malay community
⇒ Also no large ethnic flare-ups since 1964

Question 2

Economic policies were effective in achieving NU insofar as they were the source of NU given the broad-based support it lent the government of the day as it ensured greater standard of living (S, I)

Answer 2

[S] Survival motif
- Economic performance as sine qua non for the nation state’s survival Shift in the 1960s away from political contests to redirecting national energies towards economic development
- 1961: Economic Development Board Lead and coordinate economic industrialisation
- 1968: EDB economic bodies like DBS and JTC sprung up + a host of investment incentives and manpower training initiatives
⇒ Impressive growth

[I] Rapid economic growth under Suharto
⇒ Indonesia’s per capita income rose twofold from US$260 to more than US$500 in the 1970s → Rapid development as a source for unity vs economic collapse under Sukarno

Question 3

However, the exploitative nature of certain economic policies would widen inequality and increase minority resentment as the state would benefit at the expense of them which threatened territorial unity (I, B)

Answer 3

[I] Aceh
- Economic development and growth of the massive oil and natural gas zone in North Aceh → Perception that Acehnese natural wealth was being drained out of the province
- Acehnese resources contribute close to 11% of national wealth, but remains one of the poorest provinces
⇒ Recurrent outbreaks, from Darul Islam (1953) to GAM

[B] Shan
- Rich in teak, oil, gems and silver
- however, the Shan people have lacked the expertise, infrastructure and funds to exploit these resources
aid from the regime has been lacking
- benefits from the resources have largely gone to the armies operating in the area
⇒ Gradual radicalisation, Shan uprising (1960) and Shan state army (1964)

Question 4

Further, racial preference in economic policies would exacerbate racial differences and lead to resentment and backlash which threatened social stability (I, M)

Answer 4

[I] Cronyism that benefitted the Chinese
- Only 4% of the population but held much of country’s wealth
- Usefulness of Chinese in economic development → Business acumen and capital, and no real political threat
Sudono Salim → One of the biggest tycoons, financial favours from Suharto including monopolies, state bank loans and special licenses
- AFC → pogroms against Chinese businesses as Chinese community was perceived to have established business relations with Suharto, contributing to crony capitalism/corruption, as well as economic collapse

[M] Social Contract
Chinese may not have had political power, but they were more or less guaranteed economic advantages
⇒ 1971: Non-Malays owned 34% of Malaysian economy; Malays less than 3%
⇒ Unrest and majority-minority tensions