Politics in Malaysia: Bumi, not booming; The ruling party returns to its old habits of race-based handouts

Politics in Malaysia: Bumi, not booming; The ruling party returns to its old habits of race-based handouts

Sep 28th 2013 | KUALA LUMPUR |From the print edition

THE United Malays National Organisation (UMNO) is the dominant party in the coalition that has ruled Malaysia since independence in 1957. Only now, however, is it parading its democratic credentials, so far as its internal appointments go. Nominations have just closed for elections to a broad range of party posts, to be decided in the middle of October by 146,000-odd party delegates at local level. Previously, a mere 2,600 members, those who attended the party’s convention, had a say. UMNO’s boosters claim that these new elections will restore vim to an ageing organisation. They say it will make it the most genuinely democratic party in the country. Not bad for an outfit with a past reputation as a ruthless political machine.Yet what might be therapeutic for UMNO could prove the reverse for Malaysia. For what has emerged during the electoral process is that the so-called “warlords” who run the party are determined to shift the country in a conservative, indeed reactionary, direction. They want to reassert the supremacy of ethnic Malays. UMNO was formed to represent these and other “indigenous” groups who make up a majority in this multiracial country. They were favoured over other ethnic groups, principally the Chinese, who account for about 25% of the population and run much of Malaysia’s business, and Indians, with 7% of the population and a disproportionate presence in the professions. A return to race-tinged policies represents a repudiation of much of what the head of UMNO and prime minister, Najib Razak (pictured above), claimed to stand for during a general election in May.

How distant that poll now seems. Indeed, UMNO’s regression is a direct response to the election’s outcome. Though the UMNO-led ruling coalition, Barisan Nasional (BN), won the election, its performance was its worst ever. The BN’s share of the popular vote fell to just 47%. UMNO blamed what it saw as a near calamity on the defection of a large share of the Chinese vote to the opposition, led by Anwar Ibrahim, a political veteran—despite Mr Najib’s concerted efforts to woo Chinese and Indian voters. The lesson that UMNO has now drawn is that the more inclusive and liberal style of politics promoted by Mr Najib does not work. So the party has reverted to the bad old ways of race-based politics to shore up the Malay base, at the expense of those who were ungrateful enough to vote for the opposition.

The main casualty of this retreat is Mr Najib himself. Before the election he had come to be seen as a great reformer, winning the centre ground of politics. He repealed outdated security legislation and was slowly rolling back the system of ethnic preferences, begun in 1971, that give Malays a leg-up over Chinese and Indians considered to have benefited unfairly from the colonial economy of the British.

Yet to survive an onslaught from his conservative wing, Mr Najib has been forced to backtrack abruptly. On September 14th he announced a raft of initiatives privileging ethnic Malays. Known as the Bumiputera Economic Empowerment (BEE) programme, they are worth approaching $10 billion and will benefit only ethnic Malays and other indigenous peoples (bumiputera, meaning “sons of the soil”, make up 68% of the population). The BEE will dish out loans for entrepreneurs, for instance, and will require every government ministry to carve out contracts from big projects to award to bumiputera-owned businesses. In future state companies will have to establish targets for bumiputera participation.

Mr Najib couched his extraordinary about-turn in terms of fairness and “equity” for ethnic Malays. But it was also a blatant attempt to please party critics who feel that he abandoned Malays at the election. His government threw those critics more red meat when the attorney-general’s office said it was appealing against the acquittal earlier this year of Mr Anwar on charges of sodomy, a politically motivated case that had dragged on for years.

However cynical, these moves seem to have saved Mr Najib’s skin, at least for the moment. He will not face a leadership challenge in the UMNO elections. The prime minister has been helped by the fact that, in the end, UMNO hardliners could find no sufficiently weighty figure to take him on. Yet that hardly matters to them, since they have forced Mr Najib to shift direction. There is no denying the damage to Mr Najib’s credibility. To many Malaysians, even ethnic Malays, Mr Najib has sacrificed political principles to save his job. His campaigning slogan of “1Malaysia”, emphasising racial harmony, now rings hollow.

What is more, says Kadir Jasin, an UMNO critic of Mr Najib, it might prove only a temporary respite for the prime minister. The conservative wing is contesting many of the UMNO posts up for grabs, including the three influential positions of vice-president. One candidate, Mukhriz Mahathir, the governor of Kedah state, is a particular threat. He is the youngest son of Mahathir Mohamad, who dominated Malaysian politics as prime minister from 1981 to 2003. The champion of bumiputerapolicies remains a hero to many Malays, and his lustre rubs off on his son. Should Mr Mukhriz win, the anti-Najib forces could coalesce around him as a proxy for his father. A weakened prime minister could then be ousted in an internal putsch, a fate that befell Mr Najib’s predecessor, Abdullah Ahmad Badawi, who also failed to deliver at the polls.

Meanwhile a stuttering Malaysian economy will somehow have to raise the necessary billions for the new BEE programme. A brain drain abroad of talented Chinese- and Indian-Malaysians, disgusted by the overt racism of it all, will continue. And the country’s stated goal of becoming a prosperous economy by 2020 will recede further. So much for Mr Najib’s great reforms.

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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