The State of Democracy and Economy in Malaysia

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Presdented by Wan Saiful Wan Jan, CEO of IDEAS, at the Rotary Club of Taguig Fort Bonifacio, RI District 3830, 09 September 2013 in Manila

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The State of Democracy and Economy in Malaysia

  1. 1. 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 www.IDEAS.org.my
  2. 2. 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 www.IDEAS.org.my
  3. 3. Where is Malaysia? www.IDEAS.org.my
  4. 4. 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) www.IDEAS.org.my
  5. 5. 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, ???) www.IDEAS.org.my
  6. 6. 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 www.IDEAS.org.my
  7. 7. 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) www.IDEAS.org.my
  8. 8. 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
  9. 9. 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 www.IDEAS.org.my
  10. 10. 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 www.IDEAS.org.my
  11. 11. 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 www.IDEAS.org.my
  12. 12. 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 www.IDEAS.org.my

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