Affirmative Policies in Zimbabwe and Malaysia

I am presently working on a growth diagnostic project for the Malaysian economy. As with any diagnostic, an appreciation of the growth history of the country under study is necessary for one to say anything meaningful about growth prospects. (The outcome of the diagnosis will be published later this year). During the course of my research, I have discovered interesting parallels in the origins of Malaysia and Zimbabwe's redistribution policies after independence.

Several years after independence from Britain (Malaysia in 1957 and Zimbabwe in 1980) both countries went through violent racial strife brought about by unresolved issues from their decolonization processes. Malaysia had gotten independence from the British but the Malay majority still had poor economic prospects compared to their Chinese counterparts and, to a lesser extent, their Indian compatriots. This is not to say there were no Malays among Malaysia's elite at the time. After all, the constitution had assured Malay dominance in politics. In the lead-up to independence, British colonial authorities repressed left-wing nationalist groups and instead encouraged the formation of ethnic-based political parties led by conservative, pro-British middle class elements. This was a theme in many independence negotiations whereby independence was conditioned on self perpetuation by the outgoing political elite.

In Malaysia, the pro-British groups were represented mainly by Malay aristocrats (in UMNO) and the Chinese (in the Malaysian Chinese Association, MCA), and Indian bourgeoisie  (in the Malaysian Indian Congress, MIC). Power was handed to these three parties as part of the Alliance Party, with Independence conditional on British economic interests being guaranteed (Jeff Tan, 2007). The majority Malay population retained political power and special privileges in return for citizenship rights and economic freedom for non-Malays. In Zimbabwe, independence negotiations guaranteed that a fifth of the seats in parliament would be reserved for Whites. Furthermore, it was agreed that there would be no government-orchestrated land transfers to Black Zimbabweans until 10 years after independence. As a result, independence in either country did not alter the pattern of economic control by the British, with the government’s policies committed to free enterprise and attracting foreign investment. 

This state of affairs could not be sustained as the majority remained economically repressed. The origins of the post-independence conflicts in both countries can be traced back to British colonial rule which emasculated the majority (Malay in Malaysia and the Blacks in Zimbabwe) groups' political and economic power, enabling British companies to dominate commerce, banking and services, and to own almost all the major mines and plantations. In Malaysia, the Chinese were prominent only in SMEs including retail trade, construction, restaurants, with Malays confined to agriculture, where they remained economically weak. In Zimbabwe, successive legislation codified discrimination and economic repression. For example, the 1930 Land Apportionment Act was a segregationist measure that governed land allocation and acquisition prior to independence. The Act made no provision for blacks who chose an urban life, because towns were designated as white areas.

In post-independence Malaysia, emerging inequalities were perceived along ethnic lines, partly because Chinese businesses were conspicuous in the countryside where they took over rural transportation and rice milling, and acted as intermediaries between British capital and the Malay peasantry (Jeff Tan, 2007). The race riots in 1969 culminated in the New Economic Policy (NEP), an affirmative action policy designed to eliminate the identification of race with economic welfare. This involved the redistribution of wealth to the Malay middle class through substantial increases in education, employment and business opportunities, and the ownership of share capital in the corporate sector, with the aim of creating Malay capitalists.

In post-independence Zimbabwe, inequalities were black and white (no pun intended). Some Blacks had ascended to commanding heights creating a "cappuccino economy". This is a phrase coined by Morgan Stanley's Ruchir Sharma in his 2012 book Breakout Nations: In Pursuit of Next Economic Miracles to characterize the South African economy which –like a cappuccino– is composed of "white cream over a black mass sprinkled with some chocolate on top". At the turn of the millennium part of that black mass in Zimbabwe, namely the war veterans, started demanding payment for their efforts in the war for independence. This would later bankrupt the treasury and send inflation sky-rocketing. The war vets also demanded land reform and ultimately invaded white owned farms in the country. Much like Malaysia, Zimbabwe would later implement an affirmative action policy dubbed the Indigenization and Economic Empowerment Act to address the inequities.

The objective of this post has been to draw attention to the resemblance in the policy direction of the two countries. Much else needs to be taken into account to comment on the results of either country's redistribution policy. Malaysia is today a diversified economy well on track to becoming a high income country by 2020. Zimbabwe, on the other hand is still healing from the hyperinflation that accompanied the Land Reform program.  

Reference; 

Jeffrey Tan, 2007. Privatization in Malaysia: Regulation, Rent-Seeking and Policy Failure. Routledge, Taylor Francis Group

Check out each country's exports basket from MIT's Observatory of Economic Complexity