Tuesday, October 10, 2006

Can Malaysia move on?

The Business Times published an article today about an "acrimonious debate" which has broken out in Malaysia over a think tank's claim that the ethnic Malay share of corporate equity had reached 45% by Sep 2005. The current figure, according to the government, is 19%. The think tank's claim is controversial because since 1971, the government has always pushed for Malays to own at least 30% of the country's corporate equity. The article goes to some length to discuss the various methodologies which are employed by both sides to derive their stated results.

One may debate the details, but Manu Bhaskaran, an economist whom I admire a lot, cuts to the chase, saying:
'What strikes me as surprising are all these old stories. The world is moving on and talking about globalisation, of attracting the best talent - and Malaysia is still obsessing about the ethnic division of spoils.'
So the question, I think, is this: can Malaysia move beyond its racial politics and plug in to the world? Or will it be left behind, bickering over who gets what of the pie, and yet ignoring the fact the the pie is in fact shrinking, no, getting eaten, by global competitors?

Going by what PM Adbullah has said, one would think that the Malaysian government is in fact quite aware of the issue at hand. In a speech in Apr 2006 to the KL Business Club, he said:
'We have seen increased competition from our neighbours and from other regions. We have seen foreign direct investments chase new development opportunities elsewhere... With everything that is happening in the world – escalating oil prices, the rise of China and India, a continued global macroeconomic imbalance – the next five years will probably determine whether we’ll make it... The sense of purpose and urgency that it has created is not without basis. I am not an economic historian but as someone who has studied the rise and fall of civilisations, I am under no illusion that this is one of those turning points in our history.'
On the realities of racial politics, he goes on to say:
'If my government had to politically rely solely on a constituency represented by this audience here tonight, we will be out of business. Although you move and shake the world of business, you are in a minority. The mission will only work if i have the support of the majority... The economic philosophy that has allowed for this to be accepted as a national mission is that growth must be accompanied by distribution… Without a solid social foundation created by a distributive policy, we will not have the stability to stay relevant. Policies to help the bumiputera – a cornerstone of our social contract – will continue but will be designed to bring the best out of the community rather than consigning them to a culture of dependency. These socioeconomic priorities are uniquely Malaysian and are firmly non-negotiable.'
Which all sounds very first-world and yet sensitive to local realities. But yet nothing much has actually changed. So where's the disconnect? In all probability, it boils down to the necessities of staying in power, made all the more troublesome by the criticisms of an ex-PM, no less. And the fear is that Malaysia will not be able to get with the big picture, take the tough medicine and move on from the way things have been for the last 35 years...

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