Reality Check: Malaysia’s Economic Prospects

Updated On: Nov 16, 2007

After the announcement of new economic corridors and the UMNO annual meetings, Malaysian leaders now face some reality check.

A Bloomberg report by William Pesek opined that Malaysia’s prospects in the next fifty years would be more challenging than the previous fifty. Despite having much potential, Malaysia continues to grapple with serious political issues.  Mr Pesek gave the example of the obstacles faced by one of the most successful businessmen, Tony Fernandes to substantiate his prognosis. 

Fernandez started AirAsia and introduced budget air travel to Asia. Yet his plans to have budget air-travel between Singapore and Malaysia have been thwarted due to the Malaysian government’s concern for protecting national champions.  Fernandes pleaded, “I’m asking this for national interest, not MAS’ [Malaysia Airlines] interest or that of anything else…. The consumers have suffered enough.”

The challenges faced by Malaysia are not only domestic but also external. Ms Chrisanne Chin from MIMS Business School, Malaysian Institute of Management and INTI University College, puts it this way: “It’s not so much what Malaysia is lacking, but that China, India, Vietnam and even Thailand and Indonesia have improved so much they are capable of leapfrogging Malaysia in another five years because of specific comparative advantages, from low costs to human capital to technology.”

Mr Ramon Navaratnam, president of anti-corruption group Transparency International Malaysia and author of the book, Where to, Malaysia?, agreed saying, “The future is bright, but only if we are honest with ourselves that we have a lot of difficult work to do ... Otherwise, we will see the rest of Asia pulling ahead and Malaysia walking in place.”

Nonetheless, the domestic hurdles pose as the most serious challenges. In particular, Malaysia’s bumiputra policy which is an affirmative-action programme favouring the predominant Malay community. Unfortunately, this issue remains too sensitive for the government to tackle.

One diplomat, who undiplomatically criticised the policy has in effect been made persona non grata. The head of the European Commission delegation to Malaysia, Thierry Rommel criticised the bumiputra policy in June. As an indication of the Malaysian government’s displeasure, he was denied a farewell audience with the Malaysian King.

Nonetheless, Rommel stood by his criticism till the last day of his office. He told Singapore’s Business Times that while his message could have been conveyed quietly, behind closed doors, he did not think that such an approach would have been fruitful.  He explained, “I had been trying to see how we can pursue the agenda of deepening trade and investment relationship between the EU and Malaysiaobjectively, but there have been obstacles to this.”

He added, “The extension of Bumiputra-based discrimination and preference in public procurement -- which is massive in the Malaysian economy -- has worked to the disadvantage of foreign players in particular and has become a vehicle for officially acknowledged corruption.”  

The affirmative action policy was not the only policy criticised by Rommel. He told Reuters in a phone interview, “Today, this country still lives under emergency”, referring to the existence of the internal security laws. These laws had been introduced during the colonial days at a time when the government was fighting against Communist movements and racial riots.

He also noted that the demands of protestors in a demonstration last week were justified. He said, “It’s not a secret that elections are not fair... It is public knowledge that local Malay vested interests, with powerful political or administration connections, want to see this mechanism maintained.” The demonstration was organised by the electoral reform group Bersih. The protestors claimed that election campaigns were too short and that the media was biased toward government campaigning.

Deputy Prime Minister Najib Tun Razak dismissed the criticisms. Najib said, “An envoy cannot interfere in the domestic affairs of the country he has been assigned to and cannot express personal opinions.”

As annoyed as Najib and the other Malaysian leaders are by Rommel, their attention should now turn to the recommendations of the panel held to investigate claims of corruption within the judicial. A video clip featuring senior lawyer V.K. Lingam discussing judicial appointment was released by opposition leader Anwar Ibrahim. A panel headed by former chief judge of Malaya Tan Sri Haidar Mohd Noor and made up of former Court of Appeal judge Datuk Mahadev Shankar and social activist Tan Sri Lee Lam Thye, was formed in September to investigate the clip.

The panel concluded that the video clip was authentic and that the issue warranted further investigation. The panel had apparently recommended a Royal Commission of Inquiry be set up but no details were confirmed by the government.  (15 November 2007)


Panel Favours A Royal Commission (New Straits Times, 15 November 2007)

Outgoing EU Ambassador Slams Malaysia (Straits Times, 15 November 2007)

Rommel Leaves Behind An Unchanged Message (Business Times Singapore14 November 2007)

Interview-Malaysia Lives Under State Of Emergency - Eu Envoy (Reuters, 13 November 2007