By Jalil Hamid
KUALA LUMPUR (Reuters) - Malaysia's prime minister blamed greedy "rent-seekers" on Thursday for the failure of three decades of affirmative action to close a yawning wealth gap for the country's majority ethnic Malays.
Abdullah Ahmad Badawi told an annual assembly of his ruling party, the United Malays National Organisation (UMNO), that Malays had made major economic strides since the start of affirmative action, born out of deadly race riots in 1969.
But he said some selfish profiteers had abused these policies, which have fallen well short of their target for Malays to raise their share of Malaysian equity holdings to 30 percent.
After 35 years of costly affirmative action, with billions of dollars in state contracts and concessions handed out to Malay businesses, Malays now own 19 percent of the economy, well behind minority ethnic Chinese who dominate business and commerce.
"This is because of the actions of rent-seekers who prioritise short-term gains," Abdullah told thousands of party faithful in remarks greeted by government critics and analysts.
"They sell permits, contracts and licences allocated to Bumiputras to others for quick gains. After that, they ask for more."
Malays, known as Bumiputras, or sons of the soil, think of themselves as the country's native race, live mainly in the countryside and make up just over half the population.
Ethnic Chinese, whose ancestors came centuries ago as traders or as mine workers shipped in by colonial rulers, make up a quarter but hold about 40 percent of the nation's wealth.
FROM RIOTS TO RENT-SEEKERS
In the 1960s, the wealth gap was so large that it fed racial hatred, which flared in May 1969 into riots between Malays and Chinese and set the tone for government policy ever since. Even now, political leaders do not take racial stability for granted.
The gap has narrowed since then, with UMNO-led governments handing out large state contracts to Malay businesses and setting aside Malay quotas for equity in IPOs and places in university.
In critics eyes, this has also created cronyism and a dependency that governments dare not break. UMNO, the political vehicle for Malays and leader of government since independence in 1957, is itself a beneficiary, with a senior party post viewed as a stepping stone for Malay businessmen seeking state contracts.
Abdullah's criticism of Malay "rent-seekers" on Thursday echoed his call at last year's assembly for Malays to put down their crutches because "we may eventually end up in wheelchairs" -- and it met the same mixed response in the corridors later.
Within UMNO, there is tension between delegates who fear losing government work and those who have not received any and feel the spoils of affirmative action are not shared around.
The latter complain about an auto import policy which gives Malay firms a lucrative monopoly over importing cars. Some UMNO delegates have accused the government of awarding most of these import permits to firms controlled by a few select Malays.
"If this practice continues, the rich will become richer and the poor become poorer," delegate Mohamad Zein Ismail said in a debate on Abdullah's speech.
Abdullah sought to soothe fears of a cut-back in government contracts and spoke of 22 billion ringgit in state spending this year on construction, which is struggling after he shelved major projects on taking power in late 2003.
But he hinted that he would not be drawn into pump-priming the economy -- a practice economists believe went on too long under Abdullah's predecessor, Mahathir Mohamad -- and said he would continue to trim the country's chronic budget deficit.
"The government cannot play the role of Santa Claus, perpetually handing out gifts," Abdullah said. "The government has been asked, prompted and even threatened to pump-prime as it has done in the past, but every cycle runs its course," he said.