Public discussion of the New Economic Policy (NEP) and its subsequent permutations has in the past weeks been heated, especially following attacks against a report by the Asian Strategy and Leadership Institute (Asli)'s Centre for Public Policy Studies on corporate equity ownership. Using new methodologies and data, the centre's report disputes the government's 18.9% figure of Malay share ownership, saying it could be as high as 45%. Since the report was publicised in the media, Umno leaders including the prime minister and former premier Tun Dr Mahathir Mohamad, and other Malay groups, have called the centre's findings irresponsible and baseless. Last Tuesday, Asli's president Mirzan Mahathir publicly distanced the think-tank from the report, saying the research and conclusions were flawed and could not be "vigorously justified". A day later, the centre's director Dr Lim Teck Ghee resigned to "defend the position and integrity of independent and non-partisan scholarship". JACQUELINE ANN SURIN and PAULINE PUAH spoke to Lim - a former United Nations regional adviser and World Bank senior social scientist, and the recipient of numerous international academic awards - at his office on Oct 4 at the height of the attacks on the centre's report. In an additional e-mail interview after his resignation, Lim also talks about the lessons learnt and his future plans.

theSun: What's the name of the report that your centre prepared on the 9th Malaysia Plan (9MP) that was submitted to government?

Dr Lim Teck Ghee: It's called Proposals for the Ninth Malaysia Plan. And the report has five main chapters focusing on what the centre regards as priority issues that need to be taken into account in framing the 9th (Malaysia) Plan. And this related to the civil service, educational reform, the plight of the low-income communities, the plight of our Malaysian marginalised communities living in the forest focusing on the Penan, and finally that on corporate equity.

And, what's happened is, although this was widely circulated, we did not get very much of a feedback until the corporate equity issue was taken up recently by one of the (news) websites, Malaysiakini.

And so, then now, there is ...

And, now there is this great interest but as I was saying to colleagues, we are glad that there is this interest in the work of the centre. But to us, the corporate equity issue (pauses) is not the major focus (chuckles) that the public and policy-makers should be focused on.

Although that is important and the country needs to move forward in terms of that issue, there are other very important priorities: poverty alleviation, taking care of the most marginalised in society, the composition of the civil service, and how to ensure (a) representative and world-class civil service, educational reform based on need and merit. All these urgently need new policy directions.

In one sense, civil service reform is at the heart of (pauses) many of the objectives that (are) set out in Vision 2020.

We know that political interests and politicians are very important in framing issues and in decision-making. But, to me, the more potent player in the making and the moulding of our society, of our economy, is the civil service.

And what's happened over the last 30 years is the increasingly unrepresentative civil service. (pauses) And the centre has undertaken a very substantial study on this problem, and has come out with a solution on how this change can come about. We have a solution which we believe will not upset the status quo (pauses) dramatically. We have forwarded a proposal for a gradualist, incrementalist approach to recruiting more non-Malays, more bumiputra non-Malays into the civil service, which will at the same time retain the dominance of the Malay bureaucracy.

So, would you say that the reform in the civil service is, for the centre, a far more important focal point than the corporate equity issue?

From my personal viewpoint, yes, yes, absolutely.

But, unfortunately, it has been overshadowed because of the report (on corporate equity ownership). It has been overshadowed because of the way the media and politicians have highlighted the corporate equity issue.

But having said that, corporate equity is still an important component?

Yes, it is an important one. It's one which, if you talk to investors, bankers, people in the economic spheres, you will hear a great deal of concern. So, this is not an academic issue. It's an issue which has been articulated by many quarters for a long time, since this target was set.

The 30% target (for bumiputra equity ownership)?

Yes. And what we did in our study was we focused on new data, new methodologies and we've arrived at a number of findings which we thought would be of interest to policy makers.

Have you gotten any feedback at all from any of the people that you've sent this report out to?

No.

Not even from government?

Not yet and perhaps we never will as I do not think it is government policy to directly respond to academic studies. But there is clear interest. For example, we have responded to a request from an officer of the Economic Intelligence Division of the Royal Malaysian Police for a copy of our report.

We will be happy to brief relevant agencies on our findings and recommendations, including those related to public concerns on access to official data and ensuring transparency in explaining why various methodologies are used, how data have been gathered, the sampling basis and so on.

We are ready and willing to take part in any discussion, any examination of this issue. And we'll be happy to share our findings and to clarify. I think it's high time that the government convenes an independent review of this issue.

On the corporate equity issue?

Ya, the corporate equity issue, bringing in stakeholders from academia, from the business community, foreign investors (chuckles), and to have an open and rational discussion. But perhaps this needs to be done away from the media's scrutiny. Away from the political noise. What we are getting on this issue is largely political noise which, unfortunately focuses on (pauses), which unfortunately gets irrationally focused on, the issue of race.

Let's talk a little bit about the criticisms, in particular, to the corporate equity report. Some have questioned the motives of the study, others have challenged the methodology. Firstly, were you surprised by the reactions? And secondly, do you think these criticisms are, in any way, constructive?

Frankly, yes. Our report was first circulated in February this year, and we received little feedback until it first appeared on the Internet two weeks or so ago. Since then, unfortunately, many of the responses have come from people who have not read our report but have reacted solely to the finding on bumiputra share which was played up by the media.

We have clarified that we stand by our findings and that the government's success - and the government should be proud of it - is evident by the bumi share of present market value of listed companies. This is because of the considerable bumiputra stake which is found in nominee companies and GLCs (government-linked companies). We take note of the reservations expressed on our methodology but we should point out that there is a large consensus of expert opinion that the existing government methodology is narrow, outdated and unrealistic.

So, to go forward, let's have further discussion. But fruitful discussion will require that the authorities release the underlying data it has collected, explains fully the methodologies it uses to calculate the equity shares and how its estimates are derived, etc. We believe that greater transparency will permit a fruitful and informed discussion.

I must say that, we were not expecting the, er, furore. Ours was an objective academic study. We undertook the study (pauses) with the best of intentions. We are not the cat's paw of any interest or group.

The centre is an independent, non-racial, non-partisan body. (Pauses) We stand by our findings and we stand by the methodology that we used.

I should end by pointing out that the centre is focused on providing solutions to issues of national priority through rigorous scholarship. One thing I learned from my years with the UN and World Bank is not to focus so much on the problem and the associated noise but to provide solutions based on best practice and empirically sound research. 'Don't tell me about the problem; give me the solution' is what we say to colleagues who work with us.

If there were three main areas that you think the government needs to reconsider about the New Economic Policy (NEP) and its subsequent permutations, what would they be?

Two areas where reforms can be quickly initiated. One, means testing based on income and assets to ensure that access to development programmes and public goodies such as scholarships, entry to elite schools, agricultural subsidies and the like are skewed in favour of deserving poor and disadvantaged is well established in many countries. Racially-blind affirmative action programmes using means tests would ensure that the Malay poor and needy would remain the main target, main beneficiary group but would result in inclusion of deserving poor non-Malays.

Two, reforms in national and national-type primary schools to ensure they reflect our cultural and racial diversity. There was a recent speech by the Raja Muda of Perak on this subject which we feel should be an urgent wake-up call to the nation.

The longer the country delays the reform of our educational system to enable our young to interact directly and build friendships cutting across race, the more the nation is laying down the seeds of polarisation and social breakdown. In this connection, we applaud the recent move by the Ministry of Education to improve the standard of mother tongue education in national schools as this will help encourage a more balanced student intake. Much more needs to be done.

A third key area is deregulation. We all know over-regulation is affecting our investment climate and causing the cost of doing business to be higher than in neighbouring countries. It also creates a fertile ground for rent seeking and corruption.

Malaysia does not rank well in the various indices, for example, the TI (Transparency International) index on perceptions about corruption, the World Bank's index on the cost of doing business, etc.

The PM (prime minister) has rightly emphasised the need for the private sector to play the role of 'engine of growth' and the government has granted numerous incentives. Yet, public investment has outweighed private investment at 55.5% of total investment. Clearly, the private sector is put off by over-regulation.

There is another area which requires a longer term approach. This is the trend towards a mono-ethnic civil service which must be reversed in the interest of national unity and to give all races a meaningful stake in government. We have provided suggestions on how this can come about through a gradualist policy which can also improve service and performance standards.

Look beyond the issue of race

Do you think it is politically possible at all for Malaysia to do away with the current implementation of wealth redistribution, and to restructure it so that we can move towards an affirmative action policy that redistributes wealth and eradicates poverty for all ethnic groups?

Clearly, yes. Which Malaysian, whatever the race or religion - if the equation is put to him in a rational and non-partisan way - is going to contest the need to tax the rich - whatever their race - on a higher scale and use the proceeds to help the poor, irrespective of race, with improved social safety nets and the like? Very few, I would think.

Similarly, most thinking Malaysians will not dispute that the country needs racially-blind affirmative action and merit-oriented policies to ensure our deserving, brightest and most capable benefit.

Whatever blinkers exist are very much politically engineered to feed on alarmist racial prejudices and stereotypes and unfortunately, they are regularly trotted out by opportunistic political elites. However, I am confident that support for distorted social and economic policies has reached its high tide and is receding. In this respect, a strategy based on apportioning employment, educational places, equity, etc by racial proportion is out of tune with what the country needs.

There is no country in the world using a similar race-based approach to development. It is a formula built for disaster, especially for deserving groups of all races that are marginalised, and perhaps, especially more for the apparently favoured racial groups. I hope the government recognises the limitations of this approach and rectifies it in the mid-term review of the 9th (Malaysia) Plan.

Do you think there is the political will for changes to happen?

I think political will depends, to some extent, on the larger environment. And, if there is a great deal of public concern and sustained consciousness about the issue, whatever issue it is, then that political will has to take it into account.

But that public concern must be consistent and sustained and the stakeholders that are in the know need to speak up, they cannot remain passive and compliant.

Who are these stakeholders that you are referring to?

Well, we talked about the investment community, businessmen who have tried to get their companies listed and have had to comply with regulations. (Pauses) I would say, all Malaysians who are interested in, (pauses) ensuring that our economy remains vibrant and competitive.

The report also points out that even though the government has been effective in moving Malays forward economically, the disparity amongst Malays themselves has actually grown, and hence that could be seen as one of the failures of a policy such as the NEP and its different permutations. What do you think needs to be done to reform this kind of redistribution of wealth so that even things like disparity within the same racial group can be addressed?

Well, one simple way forward on this is the allocation of a certain percentage of equity, if this is going to be continued, this could be allocated to trust funds that are mobilised to provide returns to the poorest groups. And I would say that, let's open these trust funds to poor Malays and non-Malays.

Poor Malays and non-Malays?

That's right. I think that you'd still have a very large number, a large majority of the beneficiaries of such trust funds coming from the Malay community. But, we need to move beyond (our) racial-based approach. I think, er, no fair-minded Malaysian, whatever the racial origin, is going to argue against this opening up of the benefits from share allocation to those that are deserving and needy.

Regardless of ethnicity, right?

Regardless of ethnicity. After all, we've had this for 30 years now. And the rich Malays and non-Malays who've benefitted from this system no longer need crutches. Some of them are already fabulously rich (chuckles) and, to continue with the system unchanged just flies against all social, economic, even religious, justice.

In fact, the centre recently co-organised a seminar - we called it 'bringing the poorest states into the mainstream' with the Yayasan Kajian dan Strategi Melayu, a leading Malay think-tank, where we had papers on how the poor from states such as Kelantan, Terengganu, Sabah and Sarawak needed to be prioritised in poverty eradication and development work.

I can't recall any one of the speakers and audience disagreeing with a non-racial approach, or at least I did not hear of it.

What do you think the country stands to gain if we are willing to make this review and change of the current system?

(Pauses) Well, hopefully, a great deal. I think, we will stem the outflow of our best and brightest out of the country. Vision 2020 talks about all the important ends for ourselves and our children: a liberal, mature, resilient, tolerant, ethical and prosperous society, at peace with itself and made up of one Bangsa Malaysia.

I believe the reduction, if not elimination, of the racial factor in our development policies can make the big difference between where we are and the brighter future that lies ahead.

I think everyone realises that a competitive Malaysia would be better placed to meet the challenges posed by globalisation. Failure to regain the competitive edge will push us into the backwaters and hurt all Malaysians, irrespective of race.

And if our political masters choose not to review and restructure this, what will we stand to lose?

Lots! They include a falling back in the global market place and in our standing amongst nations; the blunting of our competitive edge; outflow of our best and brightest; continuing distortions in our incentive system leading to mediocrity and rent seeking; and a further concentration of wealth in the hands of those politically-connected and compliant.

A longer term fallout would be the impact on social cohesion - when our oil resources run out and jobs are lost - there will be more finger-pointing and less unity and tolerance. We will have a great deal of (pauses) social and racial animosities that could kindle out of control. (Pauses) I think we will be bequeathing to our young generation a divided and broken country.

You know how we like others to consider our country as a successful experiment in multi-racial living. I fear we are like the emperor walking around with no clothes, well, maybe with few clothes. For we are in reality really, really a deeply polarised country with cracks developing everywhere we look, and the situation is getting worse.

You know, earlier, you were talking about the need for political will having to address this call for change but only if there is a sustained call among stakeholders. Do you see that happening, this call for change being sustainable and sustained?

Yes! I am hopeful. I think that we have a younger generation that is refusing to, er, that is asking questions about where we are going and about whether the formulas and the past solutions really work.

And many of them, from all communities, know that these past solutions, the present system that we have needs a major overhaul. (Pauses) I think, we can see this in our vibrant NGO movement, muzzled as they are. We see the stirrings of this in the mass media, what's been written in some of the newspapers. What's been written today differs considerably from that which was trotted out in the past.

I am hopeful. And I hope the centre can be amongst the channels, through our independent and rigorous research work, that we can be one of the channels for showing the changes that need to be taken. (And) where are the solutions to our problems.

On the minus side, there is the collective opportunism, shortsightedness, hypocrisy of the dominant political elites and their hangers-on within the system. Their inertia will - has - cost the country dearly.

The study has at least one hopeful conclusion - the emergence of inter-ethnic partnerships that are not government policy-driven, and that are based on real entrepreneurial skills and expertise. Why do you think this bodes well for the country?

(Pauses) Well, this bodes well in a number of ways. One, is, these are actually inter-ethnic, multiracial partnerships, and given the obsession with race, this represents some kind of a breakthrough.

Secondly, these partnerships have emerged with very little support from the government. They have emerged through their ability to compete in the marketplace. (Pauses) So, my sense of it is, there is a trend out there happening.

(The) government needs to facilitate this trend. Politics needs to stay out of it. (Long pause) And, (pauses) we've not done a full study of this very important phenomenon taking place but we'll be happy to undertake work on how inter-ethnic business partnerships, standing on their own feet, can be nurtured.

These partnerships are critical to enabling the country to meet regional and global challenges in the market; they are also critical to changing the notion that one ethnic group controls the economy.

There is an untested hypothesis that racial harmony can advance with more multi-ethnic economic partnerships; I am not sure this is true but if this is correct, then it could bode well for the country's racial peace.

Do these inter-ethnic business partnerships also suggest that Malaysians are capable of being competitive without having to rely on government patronage? That there isn't really a need for so much patronage?

That's absolutely right. We (pauses), we have to recognise that it's important to reduce, if not eliminate, patronage in our business structure. Patronage is a cancer. And, and it needs to be uprooted.

And there's clear evidence that there is a lot of patronage going on?

Um, yes, certainly. Some of this is discussed in our paper without naming names and the government is itself well aware of this, but to date, the actions taken have been meagre and disappointing.

I believe that the government needs to act quickly and decisively on the issue of patronage and its associated phenomenon of corruption. We have heard the talk but there's been hardly any follow up. There's so much cynicism now about the government commitment to its anti-corruption drive, and for good reason.

In fact, in our note to the prime minister accompanying the report, we emphasised the need for the anti-corruption drive to be, to be, how did we put it?

We said that there was a need for the government to move decisively and firmly on anti-corruption and we said that this should be a very important part of the work of the 9th (Malaysia) Plan.

If I could go on this a little bit, there are estimates that corruption and the inefficiencies and wastage caused by patronage are resulting in an increase in cost of doing business by as much as 30%.

Are these your centre's own estimates or ...?

These are estimates based on talking with businessmen and market observers. But the government should do an annual survey - commission a reputable independent organisation - and come out into the open with what this is costing the country, and how to stem the haemorrhage.

What measures need to be taken to encourage these inter-ethnic business partnerships?

Several measures. These could include more liberal access to credit from government-backed facilities. Such partnerships should be given some partial exemptions and permitted to compete for government procurement. In addition, strong signals should be sent by ministers and other public officials that such ventures are welcomed and fit within the framework of national objectives.

When the 9th Malaysia Plan was unveiled, did you see any of your suggestions or proposals in the plan at all? Were any of your ideas or suggestions adopted in any way?

(Chuckles) Um, (pauses), let's see. That's a difficult question to answer.

But, if I may share with you my concern that the plan was very much a civil service cum political-driven plan which, took, which took very little into account the inputs of important stakeholders, including NGOs, independent think-tanks and the business community.

So, I hope that in the review of the 9th Plan, the government can revisit the proposals that we put up as well as the proposals from other important stakeholders.

What kind of national debate, do you think, needs to take place for us to move this discussion forward constructively? What areas do you think public debate should focus on?

I am not sure a national debate in the full glare of the media is helpful. Perhaps, an initial discussion of stakeholders from academia, the private sector, the investor community, NGOs and relevant agencies exchanging views is the best way forward. There would be much to focus on besides the question of whether the targets set in 1970 have been exceeded or not. One of the most important is how the government can revamp the present system to benefit the great majority of non-share-owning Malaysians rather than those already wealthy and privileged.

Other issues would include methodology, valuations and classifications used and how we can improve on the present official data - including on poverty in which, incidentally, we also challenged government estimates in our other reports - and arrive at more credible and accurate figures.

One key concern is to ensure a high quality of official data and statistics - besides ensuring their independence and integrity - as the basis for better policy making and to promote public confidence.

The following was done in an e-mail interview after Lim announced his resignation on Oct 11.

theSun: Was the decision to step down as director a difficult one? Why did you finally decide to resign?

Absolutely. You know, sleepless nights and all that, and especially taking into account how this may impact not only the centre but (also) Asli - we are a small part of Asli - which does good work in many ways. But when the president of Asli (Mirzan Mahathir) came out with his statement, well, I had no choice.

Were you disappointed at the way the whole issue was debated in the public sphere?

Actually, if you go to the websites where much more public feedback can be viewed and gauged, there's much that's positive. There, you get sober questions asked, thoughtful analysis and rational discussion, though some of the language can be rough.

My disappointment is with the initial political response that chose to demonise and denigrate the research, without offering any useful answers to the important issues raised. I guess those that wanted to put a political or racial spin did not expect that they would be met by such strong public outrage and concern for transparency and accountability.

Were you disappointed that Asli did not stand by the centre and its research?

No, not really. You have to be prepared when the chips are down to stand alone.

What are some of the lessons that you've learnt from this episode? What are some lessons the country needs to learn from this?

Well, the main lesson I have learnt is that this issue transcends Asli and the corporate equity paper. You know someone from high within our political elite called me privately and said 'You have done something on the transparency issue which we have not managed to do for over 30 years.'

In a sense, we may be contributing to breaking the spell of the 'sacrosanct' and 'unquestionable' nature and authority of official data and by implication, the policies that flow from them. There is still a long road ahead but I think we have made dents in the culture of fear and passivity, too. Much of the support for us seems to be coming from the knowledgeable man in the street!

What signals, do you think, the political attacks on the centre have sent to other researchers and think-tanks?

I hope other researchers and think-tanks will be emboldened by what has taken place rather than be discouraged. At the same time, we have to recognise the heavy price that has to be paid. There is a saying that 'truth and roses have thorns about them.' We must be prepared to be scratched and bloodied to arrive at the truth.

Do you think the release of the report could have been better managed so that the other chapters and recommendations would also have been highlighted, instead of currently being overshadowed by this incident?

I don't know if we could have done better. You know, we provided government the first access to the report together with the other chapters and recommendations on marginalised communities, education, the civil service, poverty measurement, the rural and urban poor, etc, though we were not bound to do so. And, by the way, we used the term "marginalised" well ahead of LKY (Singapore minister mentor Lee Kuan Yew) and our reference was not to Malaysian Chinese! There was no request to withhold the report or questions on any of our findings or methodology or to say, 'Hey, this is too sensitive to be put out'.

Many weeks, months later we circulated it more widely. The report now belongs to the public domain.

What are your future plans?

Retreat into obscurity, I hope. I'll continue researching and would like to teach at one of our universities. But it could be that they may not find my presence and expertise convenient or appropriate. Let's see; if things don't work out, I will probably leave the country again.

Finding another job and leaving the country for me - like for many Malaysians presently abroad - is really the last option. We cherish our country, we are in for the long haul and want to contribute to a better society.

(And) I'd like to return to researching issues of Malay poverty and under-development, an area which I worked on in the 70s and 80s in Malaysia, which I've left aside for some years now.