Sunday, April 04, 2010

Fleshing out NEM may not be possible

As expected, Malaysian Prime Minister Najib Tun Razak unveiled his New Economic Model in an 8,000 word speech to a national investor conference in Kuala Lumpur.

And, as expected, despite the hype and favourable news stories in the international press, it contained virtually nothing of substance.
Najib remains caught between the need to eliminate costly subsidies enshrined in 40 years of economic policy that benefit ethnic Malays and the fact that eliminating them would alienate a major part of his United Malays National Organisation (Umno) political base.

His pledge in the speech to eliminate rent-seeking is fraught with political danger, since Umno has largely been built on party cadres who have made fortunes on government contracts or other arrangements.

As Lim Kit Siang, the leader of the opposition Democratic Action Party, pointed out to Asia Sentinel, Najib's promise to end rent-seeking echoed speeches by his predecessor, former Prime Minister Abdullah Ahmad Badawi, who was unable to make any progress whatsoever in the face of implacable opposition from Umno cronies.

The premier has been trying to walk the fine line between economic liberalization and alienating his base virtually since he took office a year ago, offering to unveil policies and then delaying.

The details now have been delayed until the release of the 10th Malaysia plan, probably in June.

Is it possible?

Some, including veteran Umno politician-turned-reformer Tengku Razaleigh Hamzah, have questioned whether it is possible to split the difference.

Last year, Najib quickly stoked ethnic Malay anger by removing a long-standing requirement mandating ethnic Malay participation in 27 economic sub-sectors as well as removing a requirement that 30 % of shares in IPOs go to ethnic Malays.

That, along with rising irritation in other ethnic parties, led to rallies across the country put on by the Malay Consultative Council, an umbrella group of 50 ethnic Malay non-government organizations, and its most active voice, an NGO called Perkasa.

While there has been no open break between Najib and the splenetic former Prime Minister Mahathir Mohamad, Mahathir has appeared several times at rallies to defend ketuanan Melayu, or Malay superiority.

Some of the rallies have turned into near riots and have been likened to the Tea Party rallies in the United States that have roiled American politics.

Mahathir is also close to Ibrahim Ali, a former Umno wheel-horse who is a major force in Perkasa, leading some to believe Ibrahim is Mahathir's spear-carrier.

The widening gap between what Najib wants to do and what a major portion of his constituency wants is putting in jeopardy his so-called 1Malaysia campaign, designed to bring the country's alienated and fractious ethnic groups together, and to rebuild the Barisan Nasional, the ruling national coalition of ethnic political parties.

Much needed boost

In his speech, Najib said the country could no longer rely on a few sectors like oil palm plantations and crude oil sales to drive growth. He called for the country to diversify and provide incentives in new strategic industries.

The education system - which critics say now gives ethnic Malays virtually blanket passes with little academic rigor - must be revaluated and improved, he said, to reward excellence and nurture talented graduates who excel in strategic and creative thinking, and entrepreneurial and leadership skills that will drive success in the decades ahead.

Najib does have an improving economy working in his behalf.

As he told the Invest Malaysia conference Monday, fourth-quarter 2009 Gross domestic product grew by a higher-than-expected 4.5 %, that exports have rebounded, and foreign direct investment is picking up. The Industrial Production Index, he said, rebounded to 12.7 % growth in January with exports, which traditionally have comprised more than 100 % of GDP, exports rose 37 % to RM52 billion and imports increased by 31 % to RM40 billion.

His decision last year to inject RM67 billion of stimulus funding provided a much-needed boost to the economy.

The government, he said, "can no longer tolerate practices that support the behavior of rent-seeking and patronage, which have long tarnished the altruistic aims of the New Economic Policy.
Inclusiveness, where all Malaysians contribute and benefit from economic growth - must be a fundamental element of any new economic approach." — Asia Sentinel

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