Malaysia’s political malaise

Malaysia’s leadership troubles could provide a valuable lesson for other middle-income countries on the importance of effective leadership to sustain long term growth. Malaysian Prime Minister Najib Razak has denied allegations of corruption made by The Wall Street Journal. But can a leader and his administration that has been rejected by the electorate drive long term growth?

In May 2008, the United Nations Commission on Growth and Development issued a report that attempted to distil the strategies and policies that produced sustained high growth in developing countries. It is clear from the report that politics and leadership are key to successful development. In particular, there are four cross-cutting issues that good leadership delivered: promoting national unity; building high quality institutions; choosing innovative and localised policies; and creating political consensus for long-run policy implementation.

Malaysia is among 13 nations (Botswana, Brazil, China, Hong Kong, Indonesia, Japan, South Korea, Malta, Oman, Singapore, Taiwan and Thailand) that the report identified as having sustained growth rates of above 7 per cent for 25 years or more. These 13 countries had five strikingly similar characteristics: they fully exploited global economic opportunities; they maintained macroeconomic stability; they mustered high rates of savings and investment; they let markets allocate resources; and they had committed, credible, capable governments.

Malaysia has been governed by the same ruling coalition since independence in 1957. This coalition provided capable leadership to address the four cross-cutting issues that enabled high and sustainable growth. But the Najib Razak administration appears not only to be faltering in managing these challenges but is actively undermining these achievements to remain in power.

At the 13th Malaysian general elections, the Barisan Nasional coalition only managed to secure 47.4 per cent of the popular vote while the opposition coalition secured 50.9 per cent. This is the first time that the ruling coalition has lost the support of the majority of Malaysians. Najib took a presidential approach to the election and committed to spending an estimated US$17.6 billion of targeted development pledges and 1 Malaysia Programs. So it was a shock when the majority of Malaysians opted for a ragtag coalition that included an Islamist party and a socialist party led by a discredited leader.

Najib’s popularity had been on a downward trend, from a high of 72 per cent in May 2010 to below 50 per cent in January 2015. But the series of damaging allegations has not only damaged his reputation irrevocably, it has also cemented a negative perception of the government. The majority of Malaysians no longer look favourably upon their government and its institutions. The most recent survey — polled in October 2015 after Najib admitted receiving a US$700 million ‘donation’ into his private bank account — found that 4 out 5 Malaysians were unhappy with the current government.

More damaging perhaps is the fact that only 31 per cent of Malays — the bedrock of support for the United Malays’ National Organisation (UMNO), the dominant party in the ruling Barisan Nasional coalition — were happy with the government’s current performance. The fall among Malays is drastic. It stood at 52 per cent in January 2015 and had never gone below 50 per cent since the independent pollster Merdeka Centre began tracking this data in February 2012. More Malaysians are also of the opinion that the country is heading in the wrong direction. Significantly, this change in sentiment began in the beginning of 2014, several months after the 13th general elections.

In response, Najib has taken several measures to protect his leadership position. These measures have further undermined Malaysia’s national unity, institutions and policy process.

Despite the rhetoric of being the leader of all Malaysians, Najib has actively pursued a ‘Malay and Islamic’ supremacy strategy. And he has cosied up with UMNO’s mortal enemy, the Pan-Malaysian Islamic Party. The rise of fundamentalist Islam — as in the rest of the world — is a threat in Malaysia. But Najib has sought to bolster his credentials by appealing to conservative Muslims. This has empowered and emboldened the conservative Islamic elements within Malaysia.

Policy making and implementation have been insulated from public scrutiny since the government of long-serving former prime minister Mahathir Mohamed. But under Najib it has even been insulated from scrutiny by the cabinet, let alone the parliament. All major decisions are made by the prime minister and implemented through a hybrid organisation within the Prime Minister’s Department.

Despite Najib’s active pursuit of policies that are detrimental to Malaysian foundations, his economic track record appears to be sound. Malaysia could become a high income country by 2020. Yet Malaysians remain unimpressed by Najib Razak.

Institutions are not built in a day and the impact of Najib’s measures on Malaysia’s longer term growth prospects remain to be seen. For now, other countries caught in the middle-income trap should closely observe the developments in Malaysia.

Greg Lopez is a lecturer with Murdoch University Executive Education Centre, Western Australia. His research interests are in the interaction between states, societies and markets in the ASEAN region.