Malaysia extends controversial affirmative action

Malaysian Prime Minister Najib Razak on Saturday announced fresh measures to benefit the country's ethnic Malay majority despite an earlier pledge to reform the controversial affirmative action policy.

Analysts said the announcement, made live on national television, aimed to rally Najib's United Malays National Organisation (UMNO) ahead of party elections but could hurt an already slowing economy.

Najib announced a series of measures aimed at offering more business and training opportunities and affordable housing for Muslim Malays and other indigenous groups, collectively known as "bumiputra" or "sons of the soil", who make up 68 percent of the country's 28 million people.

"If we do not bring up the economic participation of the bumiputras, the country will not be able to achieve developed nation status by 2020," Najib said.

"Certainly we are doing what is fair, we are doing what is right and we are doing what is equitable."

Malays and other indigenous groups have benefited from privileges, including reserved university slots and government jobs and contracts, since the 1970s, introduced to close a wealth gap with the Chinese minority.

But critics, including a growing number of Malays, say the affirmative action policy reduces the competitiveness of Southeast Asia's third largest economy and is abused by the elites to benefit themselves.

In 2010, a year after taking office, Najib vowed an overhaul of racial preferences as part of wider economic reforms.

But since then, he has only made limited moves, including some changes to liberalise the banking and services sectors, as he faces resistance, especially from his own Malay-based party.

Ibrahim Suffian of independent pollster Merdeka Centre said Saturday's announcement showed any deeper reforms were further "postponed".

"He is shoring up support of the Malays, particularly business people and contractors," he told AFP. "He's appealing to the base."

Najib is not expected to face a leadership challenge in the UMNO elections next month but is under pressure from hardliners to stand up for Muslim Malay rights.

The mostly non-Muslim Chinese, who account for 25 percent of the population, continued to vote against Najib's Barisan Nasional coalition in the May general election -- a trend that began in 2008.

UMNO is the dominant party in the multi-racial Barisan coalition which has ruled the country since independence in 1957 but whose performance in the last two elections has slipped.

Wan Saiful Wan Jan of the Institute for Democracy and Economic Affairs said Najib's reluctance to dismantle the affirmative action policy would harm Malaysia's economy in the long-run.

"It will definitely have a negative impact on the economy," he said. "The announcement today further enhances the role of government in the economy."

Last month, Malaysia lowered its economic growth forecast for the year to 4.5-5.0 percent, down from 5.0-6.0 percent, amid weak export data.