ABSTRACT
Malaysian fiscal policy did not go beyond the traditional role of generating revenues and providing expenditures to support basic infrastructure and maintaining law and order until the late 1960s (MIER 1987: 3). Post-independence growth had come largely from the private sector which was dominated by Chinese Malaysians and foreign interests, leaving out the politically dominant Malays from the economic mainstream. This triggered a violent backlash involving the Malays and Chinese in May 1969. The New Economic Policy (NEP) was announced in 1970 to address this imbalance. The NEP was a twenty-year plan meant to “eradicate poverty regardless of race” and “restructure the economy so that race was no longer identifiable with economic function” (Malaysia 1971). To achieve both functions, the government enlarged its role in the economy and in so doing, the form and function of fiscal policy changed dramatically.
