The State of Democracy & Economy

in Malaysia

Wan Saiful Wan Jan

Presented at the Rotary Club of Taguig Fort Bonifacio

RI District 3830

Metro Club, Rockwell, Makati City

Monday, 9 September 2013

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About IDEAS

• Launched on 8 February 2010

• The only independent free market think tank in

Malaysia

• Key aim: “making markets work for the poor”

• Key principles:

o Rule of law

o Limited government

o Free market

o Individual liberty and responsibility

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Where is Malaysia?

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Malaysia – key facts Area 329,847 square km

Population 29.5 mil

Capital Kuala Lumpur (pop: 1.5 mil)

Urban population 73%

Political system Constitutional monarchy, Parliamentary democracy

Voting system Constituency-based first-past the post (Westminster style)

Independence 31 August 1957 from Great Britain

Ruling party Barisan Nasional (National Front), a coalition of 12 mainly ethnic based political parties, led by Najib Razak (Prime Minister and Chairman of BN)

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Malaysian Politics

• Mainly between two coalitions

• Dominated by ethnic politics

• Top-heavy, with most big decisions made by the

top leader

Barisan Nasional (BN) Pakatan Rakyat (PR)

Najib Razak (Prime Minister) Anwar Ibrahim (Oppos. Leader)

12 mainly ethnic based parties 3 very different parties (Centre left, Islamist, ???)

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What did Najib propose?

• Liberalise the economy (New Economic Model)

o Reduce number of SOE

o Reduce subsidies and handouts

o Reduce Malay dependency on government

o Move out from middle-income trap

o High-income nation (>USD15,000 per capita) by 2020

• Reduce the influence of ethnicity

o Promote 1Malaysia

o Allow direct membership into BN (instead of into the

ethnic-baed parties)

o Make merit a key criteria

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The recent GE13

• Before 2008, BN always had 2/3 majority – crucial to

make constitutional amendments

• Losing the 2/3 majority contributed to Abdullah

Badawi being forced to step down from PM

• GE13 (5 May 2013) was the toughest for BN, they

performed worst than 2008 (133 seats vs 140 seats)

• BN won 60% of seats but only 47% of popular votes

• These put Najib under pressure from his own party,

and many reforms are at risk

• There were many abuses of state machineries

during the election (GLCs and PLCs)

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Key Observation Findings • GE13 was partially free

but not fair • Many abuses of state

machineries and state operated enterprises (SOEs)

• Media was heavily one-sided

• The problems were entrenched in key institutions, not so much a problem with the Election Commission

Has Najib succeeded? • 1Malaysia has become a welfare programme

• Subsidy costs 16% of total annual budget (MYR 14bn from USD 85bn)

• Govt debt is higher than ever (54% of GDP in 2011)

• Continuous budget deficit since 1997

• Malay business lobby has become stronger

• Government continues to intervene in the economy

• Ethnic relation is not improving

All due to the ethnic structure of our political parties, especially in BN, and the desire to win GE13

Ethnic politics is disrupting reform, and strengthening dependency

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What alternative does Anwar offer?

• Free university education

• Higher minimum wage

• “Bonus” for senior citizens above 60

• Greater control on price of fuel, electricity and water

• Legally mandated payment from husband to wife

• Many more redistribution programmes by creating a welfare benefit system

In other words, Anwar will take Malaysia firmly to the left

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What does the future look like?

• Najib may be forced to step down by 2016 by his own party

• To reduce pressure, Najib will have to slow down the pace of reform

• Who replaces Najib is unclear, but likely to be less liberal

• Anwar will not be Prime Minister

• But if Anwar can hold PR together, PR could become government in GE14 (2018)

The challenge is therefore to embed sustainable and competitive policies now, before Najib goes

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Key lessons

• Ethnic-based politics is very difficult to end

o Hence better not to allow ethnic-based politics to gain

ground

• Welfarist policies are very difficult to stop once

started

o Hence better not to start one in the first place

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