Malaysia’s era of political stability ends
By John Burton in Singapore, The Financial Times
Published: June 2 2008 16:45


Malaysia used to be known for its stable politics and orderly leadership under the long-ruling National Front coalition government. No longer.

“No one knows who will be prime minister by the end of the year. It’s a very fluid situation and changes day by day,??? says Raja Petra Kamarudin, editor of Malaysia Today, an influential political website.

Political stability wavered when the long-ruling National Front coalition, dominated by the United Malays National Organisation party, headed by Abdullah Badawi, suffered the worst setback for the government in 50 years in elections in March.

Now Mr Abdullah, the prime minister, must await the outcome of a series of events and will learn whether he will stay in office, be displaced by another Umno leader, or be forced to hand power to the opposition leader, Anwar Ibrahim.

Mr Abdullah must face Umno party elections in December when his leadership mandate is up for renewal. Umno members are seething with anger over the government’s loss of its two-thirds parliamentary majority and an unprecedented five of 13 state governments.

Any rival from within Umno must attract the support of at least 30 per cent of local division heads to be nominated for the party leadership. But observers say such an outcome – once unthinkable – is now looking possible.

“Abdullah still remains very vulnerable. Umno will shortly begin holding local division elections for delegates at the party conference and Abdullah’s support appears to be eroding at the grassroots,??? says a foreign diplomat in Kuala Lumpur.

If Mr Abdullah becomes convinced that he does not have the numbers to survive, he is expected to set a schedule for handing over power to the deputy prime minister, Najib Razak.

Mr Najib is seen as an Umno old guard politician who favours the government’s preferential treatment of ethnic Malays, a popular cause within Umno. The policy has been criticised by the ethnic Chinese and Indian minorities and was a main reason for the government’s electoral setback. But Mr Najib also has weaknesses. He is being blamed for the government’s poor election performance because he was in charge of the campaign. His image has also been harmed by allegations of corruption involving the award of contracts by the defence ministry, which he heads. Mr Najib has denied any wrongdoing.

Mr Anwar says he would welcome Mr Najib as Umno leader since it would give a boost to the opposition at a time when the public mood has become more critical about alleged government corruption. “It’s easier for us to deal with Najib because he is tainted,??? Mr Anwar said.

With this in mind, some observers think Mr Najib’s troubles could persuade Umno delegates to support instead Muhyiddin Yassin, the number three Umno official, as the next leader. A moderate from the southern state of Johor, the party’s biggest stronghold, Mr Muyhidden is already favoured as becoming deputy prime minister if Mr Najib succeeds Mr Abdullah.

But Umno calculations in trying to hold on to power by selecting a new leader could be upset if Mr Anwar carries out his threat to topple the government by mid-September by calling for a no-confidence vote. With 82 of the 222 parliamentary seats, the three-party opposition alliance needs to persuade 30 government members of parliament to defect to form a new government.

Political analysts say that Mr Anwar is targeting more than 40 government MPs to defect, which would give him a majority of 22. Most of the defectors would come from Umno’s allies in the National Front coalition from the Borneo states of Sarawak and Sabah, which have long complained about being marginalised by the central government. Mr Anwar claims that he already has enough MPs to bring down the government.

At the weekend, Mr Abdullah flew to Sabah and offered important concessions to local leaders, including handing over central government funds to the state for local development.

One problem that Mr Anwar has in relying on the Borneo MPs to help form a new government is that many of them are non-Malays, which would make the new administration the first in Malaysia’s history to be dominated by ethnic minorities. That could anger the Malay majority and perhaps lead to racial polarisation and ethnic violence.

To avoid such a situation, Mr Anwar has held informal talks with supporters of Razaleigh Hamzah, an Umno grandee and former finance minister, who has announced that he will challenge Mr Abdullah for the party leadership.

Mr Anwar has suggested that he would allow Mr Razaleigh, 71, to serve as a transition prime minister if he defects to the opposition and brings along other ethnic Malay MPs to redress the opposition’s racial balance, according to people close to the situation. “Razaleigh has a lot of credibility,??? said the diplomat. An aide said Mr Razaleigh so far has resisted the idea out of loyalty to Umno, but added: “Who knows what can happen????

? Malaysia will embark on a revamp of its fuel subsidy scheme on Wednesday that may lead to higher petrol and diesel prices later in the year, a government minister said on Tuesday, reports Reuters in Kuala Lumpur. “This announcement is an incremental step towards the total restructuring in fuel subsidies in August,??? Shahrir Samad, domestic trade minister, said. “The announcement will be an indication of the direction we will take.??? He declined to give details.

Umno's jumbo missteps
By Singapore Straits Times senior writer Cheong Suk-Wai


SINGAPORE, May 29 - Malays are fond of likening the powerful to elephants, in proverbs such as "gajah sama gajah berjuang, pelanduk mati di engah-tengah" - when elephants joust, the mousedeer caught in the middle die.

The United Malays National Organisation (Umno) remains for now the "gajah" in Malaysian politics. But an elephant is only as powerful as others say it is - and judging from recent comments in the Malay media, Malays are no longer sure what manner of "gajah" Umno is.

This calls to mind a 19th-century parable by John Godfrey Saxe:
It was six men of Indostan
To learning much inclined,
Who went to see the Elephant
(Though all of them were blind),
That each by observation
Might satisfy his mind

Now, nobody would say Malaysia's Malays are blind to what ails their country, especially since it was their 5 per cent swing to the opposition coalition Pakatan Rakyat (PR) that put the latter just 30 seats away from power.

But the Malays are certainly wondering how Umno can protect their interests.  Just like the six men in Saxe's The Blind Men And The Elephant - who, in
turn, mistook the creature for a wall, a spear, a snake, a tree, a fan and rope - the Malays are groping for an answer.

During a talk at the Institute of Southeast Asian Studies here last week, Rita Sim of Malaysia's Institute of Strategic Analysis and Policy Research (Insap) noted that Malaysia's Malays are a majority that behave as though they were a minority.

But can anyone blame them? One of Saxe's six men, upon bumping into the elephant, thought he had run into a wall. Many Malays today would point to the mansions of their local Umno representatives, whose high gates are rarely - if ever - opened to their hut-nestled neighbours.

An elephant uses its tusk to defend itself only when provoked. But someone new to the animal might mistake the sharp protrusion as a weapon - like, say, the keris that Umno Youth chief Hishammuddin Hussein has unsheathed, kissed and stabbed the air with at every Umno general assembly since 2004.

Does it really serve Malay interests to make such gestures against the non-Malays? Sim's number-crunching showed that Umno does best in states with a multiracial mix, like Johor. The mostly-Malay rural heartland tends to vote for Parti Islam SeMalaysia (PAS), now a PR component.

Indeed, as Sim and her colleagues at Insap - the think-tank of the Malaysian Chinese Association, the BN's second-largest component party - found, between 36 and 40 per cent of all Malay voters have voted for the opposition in every election since 1959.

Will Umno's young leaders put their keris down long enough to work on the most basic needs of Malays?

In 2004, when the BN enjoyed its biggest-ever general election win, Malaysia's National Economic Action Council (NEAC) found that the wage ratio of a Malay to a Chinese was 1:1.64, while that of a Malay to an Indian was 1:1.27. The NEAC concluded that it would take Malays a good 150 years to catch up with their non-Malay countrymen.

There are certainly plenty of pressing problems to keep Umno busy. Instead, it focuses on whether the Chinese can keep pig farms, Indian Muslims can continue to live with their Hindu spouses, or Singapore is trying to take over Johor by investing in the BN's showpiece Iskandar Malaysia.

It might not seem fair to lay all Malay woes on Umno's doorstep. But then the party has always held the biggest wedge of power in government, and the civil service, military and police forces are more than 90 per cent Malay.

An elephant uses its trunk to pluck low as well as not-so-low-hanging fruit for itself and its kin. But just like one of Saxe's Indostanis, the poorest Malays today wonder if Umno's trunk resembles a snake more.

On May 15, the front-page story of the Terengganu edition of Sinar Harian was of former Terengganu Menteri Besar Datuk Idris Jusoh claiming that his mostly-Malay state - among Malaysia's most destitute - had received only RM1.3 billion in petroleum royalties, and not RM7.3 billion as claimed by the Minister in the Prime Minister's Department, Datuk Amirsham Aziz, in Parliament earlier this month.

Idris' retort? "(The allocation) is administered by the federal government.. ., and the state government does not control all the spending made by the ministry in question."

Few in Malaysia find such finger-pointing helpful, except as a reminder of the endemic corruption and cronyism in the country. And just last Friday, Selangor's new Menteri Besar, Tan Sri Abdul Khalid Ibrahim, revealed that BN assemblymen had already spent 90.6 per cent, or RM26.6million, of the state's total budget allocations for this fiscal year by February, leaving only RM2.9million for the rest of the year.

Khalid added that his investigations showed that tens of thousands of ringgit went to dinners and souvenirs for "VVIPs", including RM279,000 worth of sports attire for BN politicians' wives.

The legs of an elephant can, at first touch, seem like tree trunks. If Umno remains unmoved by the plight of Malaysia's poorest, those who cling to the party's legs may soon find themselves in an economic quagmire. The five opposition states - Selangor, Penang, Perak, Kedah and Kelantan - together generated 57 per cent of Malaysia's gross domestic product in 2005, and today attract about 48 per cent of all investments in the country. Which is why PR's de facto leader Datuk Seri Anwar Ibrahim can now speak of improving the lives of all Malaysians.

The elephant has wide ears to listen with, but a blind man touching one might mistake it for a fan. Is Umno bending its ears to the Malays or fanning the flames of mistrust?

When one considers that Umno members' loudest grouse during the party's election post-mortem in Sungai Petani, Kedah, last month was that its leaders had largely dismissed their list of nominees for polls, the gajah's ears do seem to have fanned discontent unnecessarily, instead of listening intently.

And though an elephant flicks its tail to swish away petty irritants, to the uninitiated, its tail can seem like a rope with which to throttle anyone who challenges it.

As the chief of Umno's women's wing, Datuk Seri Rafidah Aziz, put it late last week: "There are so many hypocrites in Umno, and that is why the ship captain does not know where to go. He thinks that everyone is going in the same direction because in front of him, they all say 'yes'. They will not criticise but will say different things behind his back.

"When problems crop up, they ask for the captain to be replaced... Each time the ship is about to sink, (they) throw the captain into the sea."

More than ever in its 62-year history, Umno's 3.4 million members have to decide what they want the party to be - a body using its tusks, trunk, legs, ears and tail for the common good, or something which the Malays continue to mistake for a wall, keris, snake, tree, fan and rope.

With so many of Malaysia's 13 million Malays having hopped over to PR's camp recently, they had better not take too long to decide.

Plugging leaks in fuel subsidies
By S JAYASANKARAN
KL CORRESPONDENT
Business Times
May 05, 2008

KL can take steps to beef up revenue, stop leakages to rich

KUALA Lumpur is between a rock and a hard place.

Last year, when global oil prices averaged around US$70 a barrel, the government spent almost RM$53 billion (S$22.8 billion) subsidising fuel and gas so that Malaysians could continue being the beneficiaries of the cheapest fuel in the region.

But here's the rub - global oil prices have since climbed one and a half times and one shudders at the dent continuing subsidies will make to the government's balance sheet. In 2007, its revenues were around RM$140 billion.

The results of the March 8 general election showed that voters weren't happy with rising oil and food prices. In short, the ruling National Front is leery about any measure that might make it even more unpopular. What's a beleaguered Prime Minister to do?

There are a few things he might consider immediately. One, of course, is the scrapping of completely unnecessary projects. Why does the country need another palace for His Majesty the King when the present palace isn't even 50 years old?

Windsor Castle is a great deal older but the British actually take pride in the tradition implicit in that longevity. We might want to ponder that. And while we are at it, why even think of a RM$1 billion space programme for a country that's classified by the World Bank as a 'middle income developing country'?

We are sure the Prime Minister will find more wasteful projects around. He should halt them immediately for that way lies penury.

The next thing to contemplate is the issue of 'leakages' - the amount of money that's leaked out of an economy via things such as savings, imports and taxes. In many cases, these 'savings' and 'imports' are much more than they should be because the projects from which they were derived were grossly over-inflated.

In the go-go 1990s, for instance, economists were puzzled by Malaysia's growth figures (around 8 per cent on average) because, at the then rates of total investment (over 70 per cent of gross domestic product), growth rates should have been far higher (over 10 per cent, for instance).

Making bids for projects open and transparent would be the best way to stop giving any company excess profits. The practice of 'privatising profits and socialising cost' should also be curtailed as far as possible. Indeed, if these so-called 'leakages' could be cut by, say, 30 per cent, the government's budget deficit could just vanish.

Everyone agrees that the rich, and even the middle class, should not receive subsidies. It is completely inequitable from an economic point of view. But fuel subsidies do not just benefit all Malaysians, rich and poor, but other nations - Singapore and Thailand, for instance - whose citizens frequently cross the border to buy cheaper fuel, rice or milk.

That is not to mention the enormous arbitrage opportunities inherent in huge price differentials across borders, like smuggling. So long as there is opportunity, there will be smuggling.

One way out of this is the use of the MyKad (the national identity card) which is only issued to citizens and which comes with an electronic chip that can be utilised for other services such as e-banking. If it can be used for such things, what's to stop the government from using the Mykad for fuel purchases or, say, rice buys?

Every Malaysian is wired to some government agency through his MyKad in any case, so the government, through the Income Tax Department or the Employees Provident Fund, would know who is rich and who is poor. Put the best brains to this task and subsidising the rich could well become a thing of the past.