Wanted: New Malaysian PM, Part 2

Which former Malaysian Finance Minister will succeed in toppling embattled Prime Minister Abdullah Ahmad Badawi?

In one corner is Anwar Ibrahim, who was the Finance Minister between 1991 and 1998. He was once tipped to be the next premier but his ascent was cut short by former Malaysian PM Mahathir Mohamad.

Anwar has since emerged as the de facto leader of the much-stronger Opposition coalition. The Opposition managed to deny the ruling coalition Barisan Nasional the two-thirds majority it had held since 1969.

And Anwar could still become the new premier. But he must win in an upcoming by-election after April 15 -- he can only run for public office after the expiry of his 5-year ban following his release from jail -- and secure 30 BN defections. Some BN parliamentarians are said to be ready to hop over to the Opposition bandwagon.

The Opposition will end the reign of BN and form the new government should it secure just 30 defections.

In the other corner is Tengku Razaleigh Hamzah, who was Finance Minister during the 1980s. He offered himself for the presidency of the United Malays National Organization (Umno). The president of Umno has traditionally been the Prime Minister of the country. So far, there is resonance to his clarion call although it's still unclear whether he will eventually get a shot at the Umno presidency again.

Of course, one cannot dismiss the ever-so-slick Deputy PM Najib Razak, who has been waiting patiently for his 'heavenly mandate' to run the country like his late father -- the country's second PM, Tun Abdul Razak.

Whatever the scenario, the likelihood of Badawi's political demise is no longer unthinkable since the watershed elections on Mar 8.

The challenges came after BN, which is led by Umno, lost its long-held two-thirds majority in parliament, lost five states to the Opposition, and saw the casualties of many heavyweights. BN and Umno seem to be disarray with the departure of so many disgruntled political bigwigs. Other component parties of BN -- Malaysian Chinese Association, Malaysian Indian Congress and Parti Gerakan Rakyat Malaysia -- are also in a soul-searching mode.

And it doesn't help that two other strong forces are against Badawi. Dr Mahathir has backed Tengku Razaleigh's call for a party post-mortem, while two royal families have openly rebuffed Badawi in his choice of Chief Ministers in BN-controlled Perlis and Terengganu.

It will take a real miracle for the besieged Malaysian premier and his son-in-law to cling on to power.

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.

Malaysia's election drama begins!

As widely expected, Malaysia will hold its national election in March following move in dissolving the parliament today.

According to conventional wisdom, the administration of Abdullah Ahmad Badawi, who inherited the premiership from popular Mahathir Mohamad in 2003, is eager to secure another electoral mandate before things get worse next year.

Polls are not due until May 16, 2009. Reuters correctly pointed out that analysts had expected him to seek a fresh mandate before the economy begins to slow and inflation picks up steam.

Another plausible reason is the need to prevent former deputy premier Anwar Ibrahim from taking part in the elections. Due to his past criminal case, charismatic Anwar is not allowed to run for public office until April.

The reasons all sound plausible. It's almost a foregone conclusion that the ruling National Front coalition will form the government again. It's just a matter of the margin of victory.

Reuters puts it elegantly: Opposition parties complain that the electorate is gerrymandered in favor of mainly rural Malays, that the pro-government media gives them short shrift and campaigning rules favor the incumbents.

But there will always be drama in Malaysia's political theatre.

Malaysian maverick blogger arrested

While Singapore has been abuzz over the Li Hongyi incident, the Malaysian blogosphere has been spooked by the arrest of a maverick blogger.

The blogger is Nathaniel Tan (left in the pix on polytikus (right), who is his close friend). He is known to be an aide of Parti Keadilan Rakyat Anwar Ibrahim and the man in charge of the Opposition party's website.

The Star said the arrest was believed to be in connection with a doctored picture of Deputy Prime Minister which was posted on the Internet.

Malaysian bloggers have launched a petition urging the release of Nat.