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Najib-Mahathir feud masks Malaysia’s bad budgetary priorities

William Pesek says behind the dispute between current and former prime ministers, poor economic choices threaten to leave Malaysia trailing in a rapidly evolving region

PUBLISHED : Wednesday, 06 December, 2017, 3:22pm
UPDATED : Wednesday, 06 December, 2017, 7:51pm

Malaysians could be excused for wondering if it’s still 1997 going on 1998. Mahathir Mohamad is now the rival and target of Prime Minister Najib Razak, just as 20 years ago it was Mahathir jailing opponents. The melee is a reminder of how many problems – starting with an unproductive economy – remain for the Southeast Asian nation two decades down the road.

That’s not the spin from Najib going into next year’s election. The buzz from Team Najib is of revival, epochal reform and Malaysia zooming towards the ranks of top-20 economies. Just look at the numbers, Najib claims. Malaysia may grow at 5.7 per cent next year.

But the problem today, just as 20 years ago, is the quality of gross domestic product gains, not the quantity. The upswing in demand is driven by a populist, election-year budget, which Najib rightfully calls the “mother” of all stimulus plans. It’s also the father of continued complacency – a US$1.5 billion treat for farmers, rubber traders, fishermen and other vested interests that does not raise competitiveness.

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What connects Najib’s spending burst today with Mahathir’s two decades ago is corruption. Najib is overcompensating for – and diverting attention from – the multibillion-dollar 1Malaysia Development Berhad scandal, which has Mahathir demanding his resignation. In 2009, Najib created the state-owned fund to raise Kuala Lumpur’s status as a global business hub. The alleged corruption surrounding it depicted an insular system ill-prepared for prime time.

Cronyism was surely a problem in Mahathir’s day. The patronage system he perfected during his 1981-2003 tenure fell like a house of cards in 1997 and 1998. Rather than rebuild transparently, level playing fields and hone competitiveness, the ruling United Malays National Organisation circled the wagons.

Instead of dismantling a decades-old affirmative action programme benefiting ethnic Malays, the party doubled down. In place of the reforms sweeping Indonesia, the Philippines and Vietnam, Umno served up budgetary sugar highs. Don’t take my word for it. Ask Transparency International, downgrading Malaysia year after year in their corruption perceptions index. Today, Malaysia is 23 rungs below where it was in the bad old days of 1997 (32nd then, 55th now).

Fast-forward 20 years, and the ghosts of cronyism past – Mahathir’s people – are returning to take on a leader scrambling to divert attention from his own controversies. Najib’s people are pushing back with a questionable inquiry into foreign exchange losses at the central bank on Mahathir’s watch. But this focus on the 1990s says much about Malaysia’s plight.

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Najib’s latest budget, for example, lavishes goodies on politically contested districts. Political gimmicks, like eliminating tolls on highways, won’t increase innovation or boost incomes.

China, Indonesia and other neighbours work to transport economies into the future. Malaysia is trending backwards. It’s now two rungs lower on the World Economic Forum’s competitiveness report than when Najib took the reins. Nor has Najib dismantled affirmative-action policies instituted in 1971 by his prime minister father. This scheme, giving Malays first dibs on government jobs, housing and universities, turns off foreign investors, curbs productivity and deadens the nation’s animal spirits.

That headwind is bearing down on Southeast Asia’s third-biggest economy. If Najib’s henchmen manage to pin 20-year-old currency losses on Mahathir, those headwinds will gain force. In the unlikely event Mahathir unseated Najib, is a 92-year-old firebrand with political baggage the outsider the nation needs?

Neither outcome means Malaysia will raise its game globally. Neither result raises the odds that Malaysia will beat the middle-income curse. Neither aftermath keeps Malaysia from losing ground in an increasingly dynamic region that China remakes every 12 months. And neither ending will happily extricate Malaysia’s 31 million people from the late 1990s.

Malaysia needs a course correction towards a more open and vibrant future, and at warp speed. It doesn’t seem that next year’s election will provide one.

William Pesek is a Tokyo-based journalist and the author of Japanization: What the World Can Learn from Japan’s Lost Decades. Twitter: @williampesek