Quote:KUALA LUMPUR - ETHNIC Malays have made poor use of the 36-year-old affirmative action policy and will regress economically if it is taken away, former Malaysian prime minister Mahathir Mohamad said.

The New Economic Policy (NEP) gives Malays and other bumiputeras quota privileges over ethnic Chinese and Indians for government contracts, homes and company shares in a bid to redistribute wealth.

'The Malays have not responded to the efforts made by the government and because of that, the disparity remains,' said Tun Dr Mahathir in an interview.

'When you're coming up from behind to catch up, you have to run faster, you have to make more effort,' he added.

But without the NEP, the Malays will slip further behind and the country risked a return to racial violence, he warned.

The NEP was implemented after bloody street clashes between Malays and Chinese in 1969. The policy laid down targets including eradicating poverty and ending the identification of an ethnic group by an occupation.

A 30 per cent quota system was also introduced under the NEP.

Bumiputeras get more places in public universities and discounts when buying homes.

The government in 2004 revealed that the poverty rate among bumiputeras was 8.3 per cent, compared with 2.9 per cent for ethnic Indians and 0.6 per cent for Chinese.

The Malays owned 19 per cent of the nation's corporate equity that year, while the Chinese had 39 per cent and Indians 1.2 per cent.

Tun Dr Mahathir blamed the poor showing on Malays who failed to develop their own business expertise or chose to sell to other races the government contracts set aside for them.

He and his successor, Datuk Seri Abdullah Badawi, have scrapped some elements of the 1971 NEP programme to woo investment.

But to its critics, these have not been enough.

The policy hindered Malaysia's trade talks with the United States this year, while opposition parties and some analysts say the rules crimp competition and should be dropped completely.

It also provoked a diplomatic tempest last month after Mr Thierry Rommel, the European Commission's envoy to Malaysia, criticised it for the protectionism found in sectors such as automobiles, agriculture and government procurement contracts.

Tun Dr Mahathir in the interview said that for him the greatest failure of Malaysia, which this year marks 50 years of independence from British rule, is not correcting the economic disparity.

The former premier who stoked controversy when he wrote about the same disparity in his 1970 book, The Malay Dilemma, lays out the new dilemma facing Malaysia 37 years on.

To pursue the affirmative action policy risks angering local Chinese and Indians, he said.

And yet without it, Malays, who account for about 60 per cent of the 27 million population, may be left struggling.

'That is the dilemma,' said Tun Dr Mahathir.

'We can say let's take it away, then I'm quite sure they will regress. One way or the other, we are going to get bad results.'