Monday, March 17, 2008

A new beginning for Malaysia

The dust has yet to fully settle in Malaysia following the shocking election results on March 8.

Many pundits, analysts and investors are still digesting the news and grappling with the most surreal political landscape since the country’s independence in 1957. They are still coming to terms with the reality that the national ruling coalition Barisan Nasional, which has ruled the roost since 1974, scraped through with its smallest parliamentary majority ever.

And there were many collateral damages that were unprecedented since the watershed year of 1969, which saw bloody racial riots. BN or the National Front lost five state legislatures to the Opposition – the coalition of the Democratic Action Party, Parti Keadilan Rakyat and Parti Islam SeMalaysia. BN also failed to retain the crucial two-thirds mandate needed to amend the constitution.

Political heavyweights – such as Malaysian Indian Congress president S Samy Vellu, Penang chief minister Koh Tsu Koon and Information Minister Zainuddin Maidin – had to make way to political newbies. And the elections saw the political debut of Jeff Ooi, the first blogger to make it to Parliament in Malaysia and possibly Asia. Former deputy PM Anwar Ibrahim has emerged as the kingpin in the opposition camp.

Political pundits correctly described the outcome as ‘revolutionary’, a ‘sea-change’ in Malaysian politics and a ‘political tsunami’. The Malaysian stock market was quick to react too. The stock market barometer tumbled over 10 per cent and triggered a trading halt when trading resumed.

It’s obviously not business as usual in Malaysia.

But is the new political landscape bad for Malaysia? Should foreign investors give Malaysia a wide berth now?

The answer is no, but investors should wait for the dust to settle first.

Many investors are naturally concerned that the new political landscape will result in policy paralysis due to expected political squabbles at both the federal and state levels. This is inevitable as both the establishment and the resurgent Opposition will clash on many key issues and policies.

In particular, as pointed out by academic Yang Razali Kassim in The Straits Times today, Malaysian politics will be in a state of flux. This is based on the writer's valid concern that the Opposition's attempt at undoing the New Economic Policy will be a tricky task. The NEP is the country's affirmative action programme to help the predominant Malay community following the racial riots of 13 May 1969.

"How the NEP is handled - or mishandled - can unravel the peace that we now see," the writer said.

The political drama is still unfolding. According to The Malaysian Insider tonight, de-facto Opposition leader Anwar Ibrahim told Singapore’s Berita Harian that the Opposition will formalise their alliance in a few days and will then replace the NEP with a landmark Malaysian Economic Agenda, a new initiative aimed at lifting the fortunes of all Malaysians.

There is also growing talk that Anwar may eventually become the new PM, should he succeed in securing the cross-over of over 30 BN lawmakers to the Opposition camp. He must also secure a seat in Parliament via a by-election.

While the political landscape is still evolving in Malaysia, the Opposition clearly has the upper hand in five states. They are Selangor (the richest state in the country) Penang (the Silicon Valley of Malaysia), Perak (resource rich state), Kedah (the rice bowl of the country) and Kelantan (the de facto Islamic state in Malaysia).

Decisions made at the state legislatures will have serious ramifications for both local and foreign corporations in the longer term. This is because the state governments have the final say on major issues such as land matters, apart from religious issues and water resources.

This means that the state governments can decide the fate of many development projects, licenses and even manufacturing outfits in their backyard. But the Opposition must tread gingerly as well. They have to downplay the rhetoric to remove the entire NEP as it is a politically and emotionally charged issue in Malaysia.

Instead, it will be politically wiser for them to call for the removal of certain components of NEP. For instance, the DAP has said that it will resort to an open tender system for all government procurements and contracts following its takeover of the state government in Penang.

If implemented correctly, an open tender system will gradually inject greater meritocracy in the Malaysian business sector. Many Malaysian companies have long thrived on the political patronage system: Many contracts were negotiated in the opaque and so-called closed tender exercise or even awarded to politically well-connected companies that didn’t have the necessary track record.

The election outcome has therefore given Malaysia the rare opportunity to chip away the deep-rooted patronage system. This could be the first step to wipe out widespread corruption, cronyism and nepotism in Malaysia.

Even the embattled PM Abdullah Ahmad Badawi could not push through the open tender system on a wide scale since he came into power in 2003. The patronage system was too entrenched. Hence, any attempt to resort to more a competitive and market-driven government tender system will be good for the business climate of the country in the long run.

But investors should also note that state governments are highly dependent on funding from the Federal Government, which is led by BN, as they cannot collect taxes.

Will the Federal Government turn off funding to Opposition-controlled states as part of the new power play? The scenario is not unfathomable, as seen in BN’s attempt to deprive the state of Terangganu from the oil revenue of national oil giant Petronas Nasional following the loss of the state to the theocratic PAS in 1999.

But it will be foolhardy to do so in the current climate. Such an attempt will further alienate voters in the next general election. All parties in the political divide will need to work hard and show that they are friendly to businesses and the population. And both sides must not play the race card so frequently.

Malaysia will emerge stronger, but only when the current political sandstorm blows over.


Anonymous said...

Great read. I believe the brotherhood press is also doing a similar report. That was what I was told at least by kawan-kawan.

I only wish, I knew where they are right now. The last time, I checked, they blasted off from this site called dotseng.

Oh well, nonetheless good read and really appreciate it!

Anonymous said...

Hi there,

It seems that u have done lot of research on M'sia politics, quite impressed.

Months before the Election, we witnessed police used excessive force to crack down protests BERSIH and HINDRAF. The rest of the M'sians remained silent.

Finally the silent majority has voted against BN as a way of protesting.

The majority of M'sians are not Opposition supporters, they merely wanted to vote against BN to make it a point that they could not tolerate inflation, rising crimes and etc. The Election result has taken all of us by surprise.

Nonetheless, it is a blessing for Malaysia. I sincerely hope there will be a two-party system being formed in M'sia, and I hope this is just the beginning.

Understandably that each party of the Opposition Coalition has its own agenda, the PAS wishes to establish an Islamic M'sia, Anwar wishes to be PM. DAP remains as a Chinese-based party and its focus will be on establishing Penang as its fortress, just as PAS uses Kelantan as its strong base. PKR is the only party which can unite PAS and DAP. No matter how deep their differences are, PKR, PAS & DAP share a common goal, that is to end the corruption and inject more transparency.

This is the beginning of two-party system, let us hope it works well for M'sia.

Btw, NEP is a very broad topic, it basically affects every aspect of life in M'sia. NEP is a very sensitive issue in M'sia as it concerns Malay privilege. The goal of NEP is to help the Malay community as a whole to achieve economic success; however since its implementation, the NEP only enriches the few Malay elites. What the Opposition is trying to do, is to stop the very few Malay elites from continually benefiting from NEP. We should help all M'sians, not only a particular race, not especially the elites of a particular race.


Anonymous said...

You are absolutely right in the analysis. After the landslide election victory in 2004, the Prime Minister vowed to eradicate corruption but was unable to achieve much because of strong objection from his own UNMO party elites who had been the greatest beneficiaries of the NEP.

The NEP did not benefit much the really poor Malay Bumiputras. The major government contracts were given to those well connected Malays without tender and transparency, as all government contracts were classified as government secrets under the OSA - the Official Secret Act. The corruption came from the fact that the project cost could be hugely overstated without any tender and comparison.

Hopefully with this election results, it has awakened these elites to the fact that unless they do so in the next few years, the next general election will see them lose the control of the federal government and perhaps more states.