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Malaysia’s election provides a chance for long-overdue change; At stake in Sunday’s poll is governance based on race and patronage

May 1, 2013 6:15 pm

Malaysia’s election provides a chance for long-overdue change

By David Pilling

At stake in Sunday’s poll is governance based on race and patronage

Will it be 13th time lucky for Malaysia’s opposition? Malaysians vote this Sunday in the 13th general election since the country gained independence in 1957. This time, just for novelty value, there is actually some doubt about who will win.

Ever since independence, Malaysia has been run by a coalition dominated by the United Malays National Organisation, which represents the interests of ethnic Malays, who make up 60 per cent of the 29m population. (Ethnic Chinese form 24 per cent, Indians 8 per cent, and there are an estimated 3m migrant workers.) Until now, the arrangement has gone roughly like this. Chinese and Indian communities, who have historically been better off, have allowed the government to hand out preferential treatment to Malays. In return, they are left alone to prosper in a half-decently run economy. Umno administers the system through a policy of affirmative action known as bumiputra, which literally means “sons of the soil”. The system provides Malays with preferential access to everything from schools, universities and civil service jobs to lucrative government contracts and even car imports. Public companies must reserve part of their share allocation for indigenous Malays, who also get a discount on housing.All this can be a bit galling for Chinese and Indian minorities, an estimated 1m of whom have fanned out abroad in search of better education and jobs. Still, two things have kept Umno (and its coalition partners) in power. One is the magic of incumbency. After more than 50 years of one-party rule, the line between government and the state has blurred. Electoral constituencies have been gerrymandered to give disproportionate voting power to rural areas where Umno and its allies are strongest. Large sections of the media are controlled and freedom of speech has been curtailed with harsh sedition laws. The Internal Security Act, which has recently been replaced, allowed for detention without trial. Anwar Ibrahim, a government defector who now leads the opposition, was jailed for six years on what look like trumped-up charges of transgressing the country’s archaic sodomy laws.

Aside from repression, Umno has prospered because Malaysia has not been a demonstrable failure. It has even been possible to call it a success. Its brand of Islam is moderate. There has been no repeat of the 1969 race riots, a prelude to bumiputra affirmative action, when many ethnic Chinese were killed.

Economically, the country has not fared too badly. Once known as a “tiger cub economy” – with hopes to follow in the paw-steps of tigers such as South Korea – it grew very quickly in the 1970s, and more or less respectably after that. Today, it has an average per capita income of $10,300. In the cities, many Malays have joined the middle class, though they do less well in the countryside.

Yet the arrangement is fracturing. In the last election, in 2008, the Umno-led coalition got the shock of its life when it lost its two-thirds parliamentary majority for the first time. There are several causes. Voters are increasingly urban and sophisticated. This year alone, 2.3m young people, many of them internet-savvy and less wedded to tradition, will join the electorate. There is huge anger at entrenched corruption and buddy-buddy crony capitalism. Many Malaysians have come to the conclusion, almost certainly correct, that affirmative action has outlived its purpose and is holding the country back.

There is increasing recognition, too, that economic performance is not all it might have been. It could have done worse, as in the Philippines. But equally it could have done much better, as in, say, Taiwan, where per capita income is at least double that of Malaysia. Manufacturing exports have stalled for years and attempts to build an indigenous steel and car industry have flopped. It has been easier for cosseted businessmen to jostle for lucrative state contracts than to compete internationally.

There are then two broad issues at stake in Sunday’s election. The first is the simple national exercise of transferring power from one party to another without provoking a crisis. Any self-proclaimed democracy ought to be able to manage that. Much of the region, from Indonesia to South Korea and from India to Taiwan, has done it. Malaysia has not.

The second is the need to roll back a system based on race and patronage in favour of one rooted in competition and merit. Mr Anwar, associated with the system when he was in government, says that is what’s needed. (Even Umno has been watering downbumiputra provisions.) But Mr Anwar’s broad-based coalition is vague about economic policy. It also includes an Islamic party that advocates the implementation of sharia law. Many who vote for the opposition will do so not because they have great faith in its policies but in the spirit of “anyone-but-Umno”.

The election is likely to be decided by a thin margin of votes, bought or otherwise. The benefits of incumbency may still help Umno scrape through. Yet it is hard to escape the conclusion that Malaysia is long overdue a change. The question, far from resolved, is just what that change might look like.

  • May 1, 2013, 2:16 p.m. ET

Malaysia Vote Gives Anwar a Chance for a Comeback

By JAMES HOOKWAY

KUCHING, Malaysia—Opposition leader Anwar Ibrahim is trying to pull off the biggest election shock in Malaysia’s history this weekend by defeating the National Front coalition, which has ruled for more than half a century, and shaking up the country’s tightly-controlled, race-based politics.

Mr. Anwar has been on the brink of power before. Now 65 years old, he appeared set to become Malaysia’s leader in the 1990s. Deputy prime minister at the time, he was sacked after falling out with his then-boss, Mahathir Mohamad, spending six years in prison on what he says were trumped up charges of having sex with another man. Mr. Anwar eventually was acquitted of the charges.

Now, Mr. Anwar is making a comeback ahead of the May 5 vote, leading a sometimes fractious multiracial opposition alliance and battling a government that is fighting him by mirroring some of his own election platform.

The race is expected to be tight. Even if Mr. Anwar loses to 59-year-old Prime Minister Najib Razak, who was appointed to his post in 2009 and is fighting his first election, analysts say he will have left his mark by nudging the conservative National Front to think up new ways to grow the economy and ease back decades of affirmative action policies designed to help the majority ethnic-Malay Muslim population catch up with the wealthier ethnic-Chinese minority.

“Good governance is necessary,” Mr. Anwar said recently. “There can be distributive justice, yes. But you must not shy away from pushing market reform and helping everybody to perform better regardless of their race.”

Mr. Anwar’s speeches also often concern corruption, which plagues Malaysia despite Mr. Najib’s moves to introduce whistleblower protections and other measures to limit graft.

Sunday’s vote will resonate beyond Malaysia’s shores. This tropical country of 28 million people is applauded by Muslim nations for developing strong manufacturing and service industries instead of relying on natural resources. It is often viewed as a model of a modern, tolerant Islamic state.

“Other Muslim countries see Malaysia as a country that has absorbed Western and Asian values,” says James Chin, a Malaysian political analyst who is a visiting fellow at the Institute for Southeast Asian Studies in Singapore.

On the Borneo island state of Sarawak recently, Mr. Anwar said he senses the mood in the country shifting after nearly 60 years of unbroken rule by the National Front, which is dominated by the ethnic-Malay United Malays National Organization and smaller ethnic-Chinese and Indian parties. “You can taste the appetite for change,” he said.

A recent opinion poll from the University of Malaya found 43% of respondents saying Mr. Anwar was qualified to be prime minister compared with 39% for Mr. Najib, although Mr. Najib and other government officials have questioned the survey’s credibility.

The odds may still be stacked against Mr. Anwar. Despite the National Front losing its customary two-thirds majority in parliament in 2008, the United Malays National Organization at the hub of the ruling coalition remains a potent force, with Mr. Najib and Mr. Anwar offering similarly vote-grabbing policies, including promises of cash incentives such as cheaper fuel and more spending on infrastructure.

Key battlegrounds are the states of Sarawak and Sabah on Borneo, where there are enough seats—56—to potentially determine who controls the 222-seat parliament. Parties allied with the National Front have dominated the region and Mr. Anwar’s supporters made few inroads in the last elections in 2008.

But on the campaign trail, Mr. Anwar draws large crowds. He hopes to win over urban Malays who sense affirmative action policies may no longer work, while gaining the confidence of ethnic-Chinese voters.

There are signs the strategy may be working. In Kuching, Mr. Anwar visited tea-shops and noodle restaurants in a predominantly-Chinese neighborhood, explaining how he aims to build a more competitive, transparent economy, where everyone has an equal chance to secure government contracts or win coveted university places without worrying about racial quotas. “Last time, I voted for SUPP,” the pro-government Sarawak United People’s Party, said Yong Wing Hoon, as other residents chanted “reformasi,” Malay for reform. “Now I think it is time for a change.”

But patronage networks run deep in Borneo, making it difficult for opposition parties. “Loyalty is something that counts for a lot here,” says retired general Ghafir Hamid, an opposition candidate.

Another concern is the stability of Mr. Anwar’s opposition pact, which binds the Pan-Malaysian Islamic Party and the ethnic-Chinese-oriented Democratic Action Party with his own People’s Justice Party in a sometimes fractious alliance.

So far, Mr. Anwar has helped mediate disputes between the parties. Pro-government figures such as Dr. Mahathir, who ran Malaysia for 22 years, are skeptical about Mr. Anwar keeping his alliance together.

The National Front has preyed on this weakness, running advertisements in Borneo-based Chinese-language newspapers suggesting the Islamist party will prevent voters from drinking beer or eating pork, as well as applying strict Islamic laws on Muslims. One ad shows a man getting a haircut from an attractive woman in one picture, then from a grisly-looking man in another—an apparent reference to moves to outlaw unisex hair salons in Islamist-controlled Kelantan state in northern Malaysia.

Nonetheless, Mr. Anwar says he is gaining traction among voters, and his election platform concerns economics more than ideology.

“That is the dynamic Mr. Anwar is trying to tap into—corruption and frustration,” says Bridget Welsh, a professor at Singapore Management University and a longtime observer of Malaysian politics. “If he succeeds, it could be over for the government.”

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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