Malaysia’s Ongoing Domestic Problems

Updated On: Sep 14, 2007

Malaysian Prime Minister Abdullah Badawi’s ongoing efforts to sell the Iskandar Development Region (IDR) project have brought international attention and some success.

However, he continues to face domestic dissent over his policies and seems to be struggling to keep a lid on possible racial tensions.  

The Wall Street Journal noted that, in the first sign of large-scale international interest in the plan, Abu Dhabi's state investment company Mubadala Development Co., the Kuwait Finance House, and a unit of Saraya Holdings, which is an investment company headed by the son of the late Lebanese Prime Minister Rafik Hariri, announced in September that they will invest an initial $1.2 billion in IDR projects, building new infrastructure and a financial-services hub.

Mr Abdullah addressed over 500 global business leaders at the Forbes CEO Conference on Tuesday (11 September) evening in SentosaSingapore, saying, “The setting up of multinational businesses in the IDR and its proximity to Singaporesuggests an exciting development, namely, the rise of a new regional metropolis in AsiaSingapore and IDR represent the cosmopolitan access point to ASEAN as well as the crossroads between India and China. This has tremendous significance to the global services industries, particularly in the context of China+1, or India+1 strategy.”

The Prime Minister also said at the conference that these developmental projects would be driven primarily by the private sector, departing from its previous practice of “putting government agencies and civil servants in charge”.  Nonetheless, the government would set aside money for a facilitation fund, the Private Financial Initiative (PFI). The fund could be used to acquire land, build roads and help link utilities to the projects. Moreover, if foreign firms needed workers, the Malaysian government would train them at its own cost.

Other incentives include Malaysia not enforcing any ‘bumiputera conditions’ in the IDR, reducing corporate taxes, and allowing 100 per cent foreign ownership of companies and full repatriation of profits.  

The outlook for the IDR is not all-rosy. The chief executive of the Kuala Lumpur-based Capital Dynamics Asset Management, Tan Teng Boo said, “The trouble with Malaysian projects is that they look very good on paper, but when it comes to execution and implementation, it looks quite different.”

Moreover, Badawi’s willingness to involve Singapore in the IDR has not been shared by others. In particular, the former Prime Minister Mahathir has been vehement in opposing it. In an interview with Siasah, a local political tabloid published in the Aug 26 to Sept 1 issue, Mahathir warned, “We will once again lose Malay territory to the Chinese, as had happened with Singapore previously.”

Mahathir described Singapore as ‘not a good neighbour’ and sarcastically added that during his 22-year tenure he had never sought foreign advice on how to develop the country. He added, “Don't involve the Singapore government. We do it ourselves. If they wish to invest in the IDR, we can study and consider their participation, but there's no need to seek their advice. We have our own capabilities.”  

Malaysia’s former Deputy Prime Minister Anwar Ibrahim has also been a fierce critic of Badawi. Anwar is currently an advisor to the opposition People's Justice Party, also known as Keadilan. Most recently, he spoke at a gathering with Chinese supporters in Pahang, saying that the country had very little to be happy about despite the commemoration of its 50th year of independence. Anwar said that the country's development is lagging behind its regional neighbours, and its reputation and standing in the international community had fallen because the government had failed to tackle issues of corruption seriously. Instead, the only areas in which Malaysia surpassed its neighbours are its ‘political wayang’ (shows) and the waving of flags on National Day.

More troubling for Badawi is the increasing domestic political agitation. 23 protestors were arrested and 2 others wounded when police opened fire on a group of protestors to disperse them in Terengganu on Saturday (8 September). The police claimed that the protestors were participating in an illegal rally (which was organised by some opposition parties and non-governmental organisations to campaign for fair elections).

On the other hand, the Datuk Mustafa Ali, Terengganu chief for conservative Parti Islam SeMalaysia (PAS), told a news conference, “There must be a thorough investigation by an independent body, because we believe what happened was planned and premeditated by the government and the police.” He alleged that Umno leaders, increasingly under pressure from PAS, had staged the riot with police help. He also accused Umno leaders of trying to tarnish PAS’ image ahead of an expected tough fight for Terengganu in the upcoming general election, widely expected to be held early next year.

The incident shocked many people as it was the most violent demonstration against the authorities since the Reformasi streetprotests of 1998 in support of former deputy premier Anwar Ibrahim.

In a separate incident, the Malaccan state government had to call for a temporary halt to the culling of pigs after meeting with strong resistance from the Chinese farmers. Earlier, the Malacca state government said Tuesday (4 September) that some 50,000 pigs on unlicensed farms would be culled, arguing that the stench and pollution from the illegal sites had become unbearable.

The Deputy Prime Minister Najib Tun Razak insisted that the furore was not a racial issue. The state government also assured that the primary concern was to limit the number of pigs to a total of 48,000. The farms currently have 100,000 pigs.

However, the Opposition leader Lim Kit Siang called for the culling order to be revoked immediately, condemning the operations as ‘arbitrary, unreasonable and inconsiderate.’ The culling action was also seen as an indication of pressure from the Malay residents who regard pigs as unclean. In April, the independent news Web site Malaysiakini.com reported that the Islamic International College in the region feared pollution from pig farms could affect its student intake.  

A proposal in the 2008 budget which is seen as the “election budget” with the government handing out “goodies” to its constitutents, has however unsettled the Malaysian Chinese Association (MCA) a partner of the ruling coalition Barisan Nasional. Two of its grassroot leaders have come to oppose the ruling that all public listed companies give a breakdown of their staff by race.  They feared that non-Malays would be further sideline by the proposal. The MCA Youth Economic Bureau also released a statement that the business community is uneasy about this new ruling. (14 September 2007)


Racial disclosure rule for listed firms sparks outcry (Straits Times, 14 September 2007)

Economic zones will stay under KL’s control (Straits Times, 13 September 2007)

Anwar slams government amid Merdeka celebrations (Today [Singapore], 12 September 2007)

Real-Estate Finance: Johor Bahru Gets Attention With Malaysian Developers Set to Transform Urban Area, Land Prices Could Soon Soar (The Wall Street Journal, 12 September 2007)

KL wants private sector to drive growth corridors (Business Times Singapore, 12 September 2007)

Malaysia's private sector will drive development projects: Abdullah (Straits Times, 12 September 2007)

Singapore and IDR are access points to ASEAN: Malaysian PM (ChannelNewsAsia, 11 September 2007)

Violent rally: PAS, govt blame each other (Straits Times, 11 September 2007)

Malaysian govt urges peaceful solution to pig row (Agence France Presse, 7 September 2007

Pig farmers flouting rule (New Straits Times, 6 September 2007)

Malaysia calls off pig cull, denies racial tension (Reuters News, 5 September 2007)

Don't involve S'pore govt in IDR: Mahathir (Straits Times, 5 September 2007)