The presentation discusses Malaysia's political landscape, emphasizing the dominance of ethnic-based politics and the challenges faced by Prime Minister Najib Razak in implementing economic reforms and responding to the results of the 2013 general elections. It highlights the proposals for economic liberalization and measures to reduce ethnic influence, while pointing out the difficulties of achieving fair elections and addressing entrenched political issues. The future remains uncertain, with potential changes in leadership and the need for sustainable economic policies.

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
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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
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3. Where is Malaysia?
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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)
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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, ???)
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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
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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)
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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. 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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11. 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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12. 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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13. 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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