Asia Times Online (http://atimes.com)
Najib takes a brick from the wall, 1 May 2009
by Simon Roughneen
SINGAPORE - As Najib Razak, Malaysia's new prime minister, marks his first month in power, a dramatic policy change announced last week could mark the start the dissolution of Malaysia's debilitating race-based politics. The promised policy shift ticks a couple of important boxes as Najib bids to contain mounting economic problems and overhaul the increasingly negative image his ruling United Malays Nasional Organization (UMNO) has among young voters and non-Malay minorities.
On April 22, Najib told reporters that foreigners investing in parts of the service sector will no longer be required to take on ethnic-Malays as business partners, as has been required by the New Economic Policy (NEP). The partially deregulated sectors will include health, tourism and business and technology services. His government also said this week it will allow foreigners to hold 70% of local insurers and non-commercial investment banks, up from the previous 49% cap.
The changes indicate how a central tenet of Malaysia's race-based political and economic system has come under pressure as the country struggles to cope with the global economic crisis and attract more foreign investment.
Ooi Kee Beng, a Malaysia expert at the Institute for Southeast Asians Studies in Singapore, told Asia Times Online that addressing economic problems will be crucial for Najib's political survival. Official forecasts suggest the Malaysian economy will contract in the first half of this year, while private economists suggest the full-year contraction could be as much as 3.5%.
Politically, the NEP reforms could be transformative. The policy was implemented nearly 40 years ago after aggrieved ethnic Malays murdered, by some estimates, more than 1,000 Chinese-Malaysians in race riots. One of the NEP stipulations required that foreign investors must collaborate with ethnic Malays, tailoring foreign direct investments to favor the demographically dominant, but economically less well-off Malays, who make up around 60% of the population.
Or so goes the official narrative. The European Union's representative in Malaysia caused ructions in mid-2007 by claiming that the NEP was an impediment to transparent foreign investment, and joined calls by some Chinese and Indian-Malaysians to have the policy scrapped. The controversy was fueled further by academic reports that suggested the NEP had long since met its target of enabling ethnic Malays to achieve a 30% share of the country's total equity, which Najib's UMNO has argued remained unmet.
The question remains whether Najib's suggested unpicking of the NEP sets a reform precedent or merely means that he will dismantle regulations in a piecemeal fashion and within the limits of what his party's ethnic Malay support base will tolerate. As Bridget Welsh, associate professor of Southeast Asia Studies at the Johns Hopkins School of Advanced International Studies, told Asia Times Online, Najib must implement reforms to win support from cynical or disaffected voters, but he is challenged by an inherently conservative system that resists change.
Meanwhile, there is much skepticism surrounding Najib as he takes over the premiership. Aside from the politics of reviving UMNO in a prohibitive political and economic context, and withstanding the growing challenge from the opposition coalition led by Anwar Ibrahim, Najib is dogged by a murder controversy involving a Mongolian model and interpreter, who was executed with explosives outside Kuala Lumpur in October 2006. Two policemen have been sentenced to death for her murder.
Some observers fear the fallout from the case will include further limits on media freedom in Malaysia, including restrictions on the increasing numbers of bloggers and others who use the Internet, where commentators have openly linked Najib to the case. Raja Petra Raja Kamarudin, who runs the popular Malaysia Today website, is one of the most prominent of Najib's critics.
The critical blogger recently skipped a court hearing for a sedition charge based on an article he wrote that allegedly implied the prime minister was involved in the murder of the aforementioned Mongolian model. Raja Petra wrote on his site on Thursday that he feared he would be arrested again under the colonial-era Internal Security Act (ISA), which allows for indefinite detention without trial of suspects who are believed to threaten national security. The writer was previously jailed under the ISA for allegedly stoking "ethnic tensions".
Religious waves
While Najib has tackled the NEP, the ISA will not likely be reformed anytime soon. Some of its most prominent victims include representatives of the Hindu Rights Action (HINDRAF) lobby group, which protested against the UMNO-led government's alleged discrimination in November 2007. Five of the group's leaders were detained under the ISA and three remain under lock and key. Najib released two of the leaders soon after becoming prime minister, and the pressure group has signaled a willingness to talk.
Other minorities are making high-profile waves. The Catholic Herald, Malaysia's main Catholic newspaper, has been at loggerheads with the government in recent months over the use of the word "Allah" by Malaysian Christians. Editor Father Lawrence Andrew told this reporter that Malaysian Christians have used "Allah" as their term for God for centuries. In its most recent edition, the Herald slated a new locally produced Bible, which perhaps even more controversially uses the Hebrew word Elohim instead of "Allah" for God.
The issue looks set to go to court, with Malaysian authorities arguing that the word should be used only by Muslims, who form the bulk of the country's multicultural population. (All ethnic Malays are designated as Muslim by the state.) In a possible concession to religious pressure, Legal Affairs Minister Nazri Aziz last week banned the conversion of children to Islam without the consent of both parents.
The decision follows the highly publicized case of a 34-year-old Hindu woman - named Indira Gandhi, no less - whose estranged husband embraced Islam then converted their children to the same religion. The minister said minors were to be bound by the common religion of their parents at the time of marriage, even if one parent were later to become a Muslim.
Rights-based issues are of less concern to the business elites close to Najib's government, who are doubtless excited at a US$16 billion stimulus package announced by Najib as a means to cope with trade-oriented Malaysia's vulnerability to global recession.
Cynics see the old UMNO cronies as likely beneficiaries, with some grandiose building projects being revived, among them an enlarged bridge linking Malaysia with Singapore. This was read by some as an indication that former premier Mahathir Mohamed is reinvigorating his influence within the party, as the bridge was a pet project of his later stalled by his successor and Najib's predecessor as prime minister, Abdullah Badawi.
After loosening some of the NEP's regulations, Najib this week announced a liberalization of the financial sector, promising to issue licenses for up to nine financial institutions by 2011 and allowing higher foreign-equity participation in select sectors - with a particular focus on sharia banking - that is, banking consistent with the principles of Islamic law - which Malaysia sees as an opportunity for fast growth by offering services to Muslims from the oil-rich Gulf and beyond.
Doubtless the moves will please the country's bankers, including the prime minister's younger brother, Datuk Nizar, 41, who is chief executive of financial services firm CIMB and its parent company, Bumiputra Commerce Holdings. But they could also fuel cynicism and opposition criticism about UMNO-led politics. Those criticisms could offset whatever feel-good spin might come from the initial dismantling of the NEP, particularly given the low levels of popularity that greeted Najib when he took over as essentially Abdullah's hand-picked successor.
Najib's UMNO and Barisan Nasional governing coalition suffered a setback at last year's general elections, when the coalition lost its traditional two-thirds majority in parliament and control over five of the country's 13 states. Two days into Najib's premiership, the government lost two by-elections, with Chinese Christian and Indian Hindu Malaysians preferring to vote for Islamist opposition candidates rather than the UMNO-backed runners.
The octogenarian former premier Mahathir, moving back into the public eye, was asked in China on Tuesday, by a Malaysian student, if the present economic crisis would lead to political crisis back home.
The advice he proffered to Malaysia's new leadership - and to governments across Asia - sounded wearily familiar, a call for a strong hand and an aversion to any form of dissent. He said a government without a strong majority and beset with street demonstrations would not be able effectively to tackle an economic crisis when it was being attacked and uncertain of its position.
He added: "It is important that we try to return to a situation where the government is strong, where the government can have a two-thirds majority.” That, many feel, is the political motivation behind Najib's early efforts to overhaul the NEP and his party's declining popularity.
Simon Roughneen is a roving freelance journalist. He has reported from over 20 countries, and is currently based in Southeast Asia.
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