Najib Faces Conservatives in Post-Election Test: Southeast Asia

Najib Faces Conservatives in Post-Election Test: Southeast Asia

As the son of a pencil factory worker, Abdul Wahid Omar grew up in poverty in Malaysia’s southern state of Johor with 10 siblings after his family left Singapore in 1969. Good test scores won him a place in a boarding school with a bed of his own, helped also by a national policy to boost the lot of ethnic Malays and indigenous people, who are about 60 percent of the population. A government scholarship led to a British accounting degree, as Abdul Wahid went on to run Malaysia’s biggest bank and become the government minister overseeing economic planning.“There are so many other examples like myself, people brought out of poverty by giving them a good education,” Abdul Wahid, 49, said in an interview Dec. 2. “For any country that wants to achieve development, you must make sure that the development is inclusive and benefits everybody.”

Abdul Wahid is among the defenders of the four decades of affirmative action policies that Prime Minister Najib Razak has sought in recent months to further entrench, and which Bank of America Merrill Lynch says could deter foreign investment. When addressing the ruling United Malays National Organisation’s annual assembly this week, Najib will seek support from his Malay base after the government was re-elected in May by its narrowest margin since independence.

“He’s facing pressure internally from his own party,” said Wan Saiful Wan Jan, chief executive officer of the Institute for Democracy and Economic Affairs. “He has no choice but to entertain the demands from those who are supporting him. UMNO is drifting more and more to the right.”

Religious Conservatism

UMNO was formed during British rule in 1946 to uphold Malay culture and defend Islam. While Najib holds up Malaysia as a model of a moderate Muslim nation on the international stage, his government is considering arming religious police and is locked in a legal battle with Catholics to prevent them using the word “Allah” to refer to God in non-Muslim texts.

In another sign of rising religious conservatism, Johor, the state where UMNO was founded and which lies next to major trading partner Singapore, will change its working week next year to start on Sundays in order to respect Fridays as an Islamic day of worship.

Najib, 60, was a teenager when riots erupted between Muslim Malays and ethnic Chinese in Kuala Lumpur in 1969. His father Abdul Razak Hussein became prime minister the following year and responded with a program to reduce Chinese dominance in business by giving preferential treatment to people collectively known as Bumiputeras.

Rolling Back

Najib dismantled some preferences after becoming leader in 2009, including doing away with a requirement that foreign companies investing in Malaysia and locally listed businesses set aside 30 percent of equity for this group. After the May election, where an UMNO-led coalition failed to secure a majority of the popular vote for the first time, he drafted Abdul Wahid into the cabinet to oversee Bumiputera policy.

“It’s not a U-turn, because one of the cornerstones of our policy is to help marginalized people,” Najib said in an Oct. 11 interview. “It so happens in Malaysia the people who are in a way not doing as well constitute the majority of the people — the Bumiputeras.”

Najib announced additional steps in September, including a 10 billion ringgit ($3.1 billion) unit trust to support training, education and home ownership. Government-linked companies were urged to give more contracts to ethnic Malays on merit, with energy company Petroliam Nasional Bhd. naming more approved Bumiputera contractors in November.

Distorted Markets

“The preferential policy distorts the labor and equity markets,” Chua Hak Bin, a Singapore-based Bank of America economist, said by e-mail Nov. 25. “Malaysia risks being stuck in a middle-income trap if talent cannot be retained and foreign investments are discouraged by race requirements.”

The World Bank issued a report two years ago that said policies favoring the ethnic-Malay majority held the economy back by spurring a brain drain and limiting foreign investment.

While Bumiputeras make up the majority of Malaysia’s population, they held 23.5 percent of equity ownership based on par value in 2011, the Bernama news service reported Sept. 10, citing Abdul Wahid. The government aims to raise this to 30 percent by 2020, which is also its target date for being declared a high-income nation.

‘Not Jealous’

“The entire country is populated by successful stories of non-Bumiputeras,” said Moehamad Izat Emir, president of the Kuala Lumpur-based Malay Businessmen and Industrialist Association of Malaysia. “We’re not jealous at all. We envy them and respect them, but we want to have a venue to enable ourselves to work hard and achieve some rate of success.”

Four of Malaysia’s five richest people are Chinese, with the fifth Indian, according to the Bloomberg Billionaires Index. Syed Mokhtar Al-Bukhary, who controls companies including MMC Corp. and DRB-Hicom Bhd. (DRB), is one of a few Malay billionaires in the country.

While affirmative action helps secure the Malay vote for UMNO, it puts the future of the economy at risk, according to James Chin, professor of political science at the Malaysian campus of Australia’s Monash University.

“This is simply an UMNO incentive scheme,” Chin said by phone Nov. 22. “UMNO will try as hard as possible not only to keep it but also to expand it. That’s the real reason why Malaysia cannot get out of the middle-income trap.”

Bumiputeras have failed to meet the 30 percent goal because of a lack of experience and capital, said Ibrahim Ali, a conservative politician who heads the Malay-rights group Perkasa. The government needs to ensure there is no abuse of its policy, he said in a Nov. 22 interview.

Chinese Businesses

“The Chinese are good in business, you cannot deny that,” said Ibrahim. “Malaysia has to be competitive because it’s a globalized world, a borderless world. At the same time, the government has to find ways to help the Bumiputeras.”

In any society, proceeding with development while ignoring certain segments of society isn’t sustainable, Abdul Wahid said.

“I got a scholarship because we came from a poor family then and I excelled in my studies,” he said. “Meritocracy should not be based purely on absolute excellence alone, but it must also be based on relative performance taking into account socio-economic background and needs.”

To contact the reporters on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net; Barry Porter in Kuala Lumpur at bporter10@bloomberg.net