It is almost impossible to discuss present institutions prevalent in Malaysia’s political economy without mentioning the New Economic Policy (NEP). It is an institution that has consumed the mental make up of most Malaysians and created a fair amount of discourses amongst observers. For the critics, especially neo liberals, the NEP is seen as costly as it blunts Malaysia’s competitive edge. However, what has blunted most arguments on the NEP and introduced circumspection on the part of observers is that despite the NEP’s state centred and ethnic laced development posturing, Malaysia’s overall development has been far from unimpressive. The paper is not about attempting to bridge this paradox. Rather it is an attempt at adding to the discussion by providing an institutional perspective in appraising the New Economic Policy. Applying ideas of path dependence, critical junctures, institutional change and historical significance, the paper views the NEP as an institution that must be appraised from Malaysia’s particular historical, economic and socio-political complexities. Change if there is to be a durable one, must come from the expected payoffs or rewards viewed by various societal actors and it is a function of Malaysia’s political economy dynamics and prevailing institutional arrangements.
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