Malaysia's New Economic Policy (NEP) policy has helped to reduce the income gap between the highest and lowest earners. As measured by the Gini Co-efficient, Malaysia's level of 0.40 has fallen marginally from the 1990s to the 2000s. This is in contrast to most other Asian countries, where it has risen over that time period; signifying an increase in income inequality.

However, this relative success has come with severe unintended consequences. Since it's based on affirmative action for one race over others, it has grown into a well-spring of resentment and weighed heavily on racial relations. It has also led to a severe ‘brain drain’ of the country's best minds who are unable or unwilling to work within a system that is not merit-based.

Much has been made of Umno's gradual rise to prominence to the detriment of the other coalition partners within the ruling government coalition. The main reason for this is simple demographics. The Malay population has grown at a much faster rate than the Chinese or Indians.

Given the growing disaffection with the racial quota-based NEP, what could be a replacement for it?

The Chinese hold a disproportionate amount of wealth in the country. They own more than 40% of the share capital of Malaysian companies while the much more numerous Malays own less than 20%. The same can be said for other assets such as real estate and bonds.

A revamp of the tax regime to a more progressive tax system would nominally be based on income levels. However, because of the distribution of wealth between the races, it would effectively be a large tax increase on the Chinese.

The additional revenues could be used to fund more university seats, giving non-bumiputera students a greater chance of being admitted and arresting the migration of talent overseas; all the while maintaining the number of bumiputera seats.

It could be used to increase social spending and to fund programmess to help the poor. The education system could be improved.

A high tax-and-spend system assumes the government uses the money well and efficiently, without it disappearing into a black hole of corruption. That is far from a given. It is also a step away from free-market capitalism which most economists believe leads to a strong economic growth. A more progressive tax regime would stifle entrepreneurship and lead to slower long-run growth of the economy.

But even given these drawbacks, it is still superior to the antiquated racial quota system that discriminates based on race. It is better to be taxed for success than on the colour of your skin.

Here are a few examples of more progressive taxes regimes that can be found abroad. Top marginal tax rate of more than 50% in the UK. Capital gains tax on shares and property of 30% in France. A 55% estate tax in the US, where the value of your estate is taxed at death before being transferred to the heirs.

No one likes to have their taxes raised. But it's still the lesser of two evils when compared with the NEP.