Per capita government expenditure in Malaysia is much higher than in neighboring countries. For example, the Federal government per capita expenditure in Malaysia is almost ten times, that in Indonesia, five times that in the Philippines and three times that in Thailand (Chee (1990)). Chee believes that non-economic factors have been more important in explaining the growth of public expenditure in Malaysia than economic factors. Among the economic factors, Chee considers the relative openness of the Malaysian economy one of the important reasons for the growth. The political activation of ethnicity has been the most important non-economic factor according to Chee. First, the