The paper provides a detailed analysis of Malaysia's New Economic Policy (NEP) that was announced in 1970 as the principal policy response to the race riots of May 1969. It suggests that the events of May 1969 also involved a widespread rejection of the ruling Alliance coalition as well as a "palace coup" within UMNO. A brief review of the background to the NEP is followed by a survey examining the extent to which the NEP's declared aims have been achieved. Subsequently, the implications of the legacy of the ethnic divide and its pre-eminence in the public imagination are examined. While there is little doubt that specific socioeconomic targets of the NEP have been largely achieved, it is not clear that such achievement has led to national unity.

The NEP's premise associates achieving national unity almost exclusively with reduced interethnic disparities among the respective business communities and middle classes. In fact, many policies to these ends have generated greater ethnic resentment and suspicion on both sides. Ethnic affirmative action policies as implemented and enforced in Malaysia have associated the interests of entire ethnic groups with their respective elites, thus generalizing resentments associated with inter-ethnic, intra-class competition. Therefore, it is unlikely that the means of ethnic affirmative action will achieve the end of improved interethnic relations. An alternative approach needs to be found to create more lasting conditions for improved interethnic relations.