Foreign Policy: Najib courts China


November 12, 2016

Foreign Policy: Najib courts China and Abandons traditional ties with the United States and its allies

by James Chin

Image result for Najib in China

Najib Razak on Ego Boosting Jet setting Trip to China

Malaysia’s scandal-plagued Prime Minister is finding old friends in Beijing after wearing out his welcome in the West. James Chin looks at whether this is a path more ASEAN countries are likely to follow. 

The Malaysian Prime Minister, Najib Tun Razak, last week took his third official visit to the People’s Republic of China. These sort of official trips do not normally attract much attention, but this one is generating prominent coverage in highly influential newspapers such as the New York Times, Washington Post and Financial Times.

The reasons are obvious – Najib’s arrival comes immediately after the controversial visit of Rodrigo Duterte, the new Filipino president. Duterte made a series of pronouncements in Beijing that caught the Americans off-guard, including his comments about a “separation” from the United States. Many were surprised by Duterte’s statements given that before touching down in Beijing, he was criticising China for its aggressive behaviour in the South China Sea. In fact, the Philippines took China to the International Court of Arbitration over the issue.

Malaysia and the Philippines have overlapping claims with China in the South China Sea and both countries are unhappy with China’s de facto policy of building islands for military use in the disputed waters and using Chinese coast guard vessels to harass fishermen from their countries. It’s well-known that Chinese coast guard vessels regularly sail within 50 miles of Bintulu, the gas-rich town in Malaysian Borneo. Malaysia has sent several diplomatic notes to Beijing on the matter.

Image result for Najib in China

Selling Malaysian Assets to cash rich China for political survival while the Malaysian Ringgit takes a beating against the Greenback (Rm4.5 to 1 Usd)

Despite this, Najib has just signed multi-billion dollar deals in Beijing, including the purchase of Chinese-made military equipment for the first time in Malaysian history. Chinese state-owned enterprises will also buy into key Malaysian assets and provide funding for new infrastructure projects such as a new railway line.

Even more surprising was his interview with Xinhua, Beijing’s official mouthpiece, in which he said he was seeking closer military ties. In an editorial in The China Daily, Najib was quoted as saying former colonial powers should not lecture nations they once exploited as colonies, a clear reference to the West.

So, the question is, are we seeing a tilt in Malaysian foreign policy to China from the previous pro-Western position? The short answer is “Yes”, as long as Najib is in power.

Malaysian insiders will tell you that this was the only position Najib could have taken in light of recent events. To understand Najib’s move, one must look towards domestic politics.

Image result for 1MDB

Malaysia’s Watchdogs

For the past four years, Najib has been mired in a massive corruption scandal called 1MDB. The story is complicated, but suffice to say that there is credible evidence that huge amounts of money, in the region of US$10 to 15 billion, was scammed off 1MDB, a sovereign wealth fund, and part of the amount, in the region of US$1 to 2 billion, allegedly ended up in Najib’s personal bank account. Earlier this year, the US Department of Justice’s Kleptocracy Asset Recovery Initiative filed court action to recover more than US$1 billion in assets tied to 1MBD. The Department named Najib’s stepson and indirectly named Najib as “Malaysian Public Official No 1” in the proceedings. Several other countries such as Singapore, Switzerland and Luxembourg are also pursuing money laundering charges related to 1MDB. The consequence of all these legal actions is that Najib is longer welcome in Western capitals and some are calling on the US administration to ‘distance’ itself from Najib. Prior to the scandal, Najib could boast that he was the only Asian leader invited to golf with Obama in Hawaii, the President’s home state.

Related to the political fallout is investment from the West. The ringgit has fallen more than any other currency in the region against the US dollar in the past three years. It is obvious that a major part of the reason for this is a lack of confidence in the Najib administration. To restore confidence in the economy and kick-start foreign direct investment, Najib can only turn to one country: China.

Image result for 1MDB

China has the money to invest heavily in Malaysia, but more importantly, it does not care about Najib’s alleged corruption allegations or governance issues. For the Chinese, the bigger picture is the ongoing rivalry with the US for influence in the ASEAN region. The Chinese see the US as trying to block their influence by pursuing the Trans-Pacific Partnership Agreement and pushing ASEAN to collectively confront China over the South China Sea. China has consistently refused to deal with ASEAN on the South China Sea issue, insisting that the solution lies in bilateral negotiations between the claimant countries. China also scored a victory-of-sorts when many ASEAN countries signed up for the China-founded Asian Infrastructure Investment Bank despite the US openly lobbying against it.

China’s investments, including buying 1MDB assets, will allow the controversial company to partly square its accounts and the shortfall from the missing money.

Image result for 1MDB

The added bonus for Najib is that he can show the domestic Malaysian audience that the “next” Superpower, China, will give him a red carpet treatment even if the West has side-lined him over the corruption allegations. Najib and the Chinese are also going to great pains to remind the international audience that it was Najib’s father, Tun Razak, Malaysia’s second prime minister, who opened-up diplomatic relations with China. Thus, according to Beijing, Razak’s son Najib, easily qualifies as China’s “old friend”. In turn, Najib has described China as a “true friend and strategic partner”.

With such “old friends” who needs the meddling West with its “lectures” on good governance, human rights and corruption?

The long-term winner in the current saga will be Beijing. As the south-east Asian region becomes more and more dependent on China for its development funds, tourism and trade, more and more ASEAN countries will start to tilt towards Beijing. This is especially true if Donald Trump becomes President on Tuesday.

Professor James Chin is Director of Asia Institute, University of Tasmania. He is also a Senior Fellow at the Jeffrey Cheah Institute in Malaysia.

This article is published in collaboration with Policy Forum — Asia and the Pacific’s leading platform for policy discussion and analysis.

http://www.newmandala.org/najibs-china-legacy/

 

Haris Ibrahim of ABU Fame


September 1, 2016

My Superman: Haris Ibrahim of ABU Fame

by FA Abdul

http://www.freemalaysiatoday.com

haris-ibrahim-1

Haris Ibrahim of ABU (Anything but UMNO) Fame

A few weeks ago, during one of my usual breakfast get-togethers with my close friends, I saw a familiar face walking towards an empty table next to us. It was Haris Ibrahim, a social activist whom I have a very high regard for. For a moment, our gazes crossed and I took the opportunity to smile at him – he nodded and returned my smile.

Throughout my conversation with my girlfriends, I kept an eye on Haris, for I am truly and utterly in awe of him and his incredible personality. Truth be told, I secretly hoped he would turn to look at me too – which he never did (total potong stim on my part).

Image result for Haris Ibrahim and Bernard Zorro Khoo

Anyway, being a Facebook queen, on my way home, I updated my status. It read: “Met Haris Ibrahim at my usual breakfast place and I feel like a little girl who just met Superman.”

In a matter of a few seconds, comments started pouring in. Many of my Facebook friends had very nice things to say about Haris while others shared stories about his dedication to his cause and his courage. One friend, who claimed not to know Haris, was ‘educated’ by means of a long thread of comments on who this ABU champ was.

What happened next totally blew me away. “Ting!”

A few notifications on Messenger informed me about screen shots of my status that had been sent to Haris! Apparently some of them were mutual friends of his. Ayoo kadavuleh, this is gonna be a major embarrassment, I thought.

An hour later, a text message arrived: “Fa, Haris is asking for your convenient time for tosai meet up.” I almost died. And so we did meet up for tosai one fine morning.

Haris was not as gregarious as I thought he’d be – he was a lot more. Star-struck, I utilised our breakfast time to ask him everything I wished to know. This was not going to be an encounter I would waste. We spoke about a lot of things that morning. Race, religion, education, discrimination, corruption, power abuse, hypocrisy, bigotry, faith, trust and hope.

As we spoke about our family and children, I asked him how he separated his time for his children with that of his struggle to fight for what he believes in.

“I have always found it tough to carry out my responsibility as a mother and still be able to find time to do my part in fighting for what’s right for the country. How do you do it, Haris, how do you find the time to be a good father to your children?” I asked while he took a sip of his kopi.

With his natural charm, Haris replied: “I have 10 million children…”

In just one short sentence, he answered a very tough question. Clearly, not everybody is capable of doing what my Superman does. To dedicate your entire being for one single purpose takes a lot. And to be ready to give away your freedom for your struggle is a whole different thing.

Image result for Haris Ibrahim and Bernard Zorro Khoo

Yes, Haris is currently waiting for his appeal following his eight-month prison sentence by the Kuala Lumpur Sessions Court for allegedly delivering a seditious speech in 2013.

I tried imagining being in his shoes – I could think of a thousand things I would be doing before I ended-up facing four walls for eight long months. Spending time with my family, friends, traveling within the country, watching movies, going for a karaoke session, hitting the beach, eating all the food I love – the list would never end.

But there he was, answering calls in between our conversation, still attending to people who needed his expertise as a lawyer. Clearly, this man never gives up fighting.

Talking to him, time flew by. After a few more rounds of drinks, it was time to leave – and I managed to ask him one final question.

“I don’t believe in our current government,” I said, “and I fear our Opposition is no different. So what do we do?”

Haris tilted his head, raised his eyebrows and while looking sharply at me, he said, “Look to your right. Look to your left. If the one on your right is not reliable and so is the one on your left – then it is time to take a step forward.”

Profound words indeed. Profound words from my Superman.

Malaysia: No end to discrimination of the Other


August 19, 2016

Malaysia: No end to discrimination of the Other

by Farouk A. Peru

http://www.themalaymailonline.com

One of the most despairing things I dread reading every year is news on how members of the rakyat are denied their rightful places at local universities.

They do everything right, tick all the boxes but when it comes to reaping the fruits of their labour, they are short changed. Instead, their rightful places are given to Bumiputera students. Those whose grades are good but not comparable to those who score stellar grades but are not of Bumiputera status. My question to my fellow Bumis is this: Can we live with ourselves while supporting this policy?

I was moved last Saturday when I read the plight of a young Indian woman. She scored straight As in her UPSR and PMR. In her SPM, she did equally well and she was also a high achiever in her extracurricular activities. Yet she was denied a place to do dentistry and was offered a place to do bio-medical engineering.

Some may say she has a lot to be grateful for and I would agree but that is hardly the point. The point is rather to ask the question: “Is she getting what she deserves?” Would she get the same offer if she was a Bumiputera?

If we are indeed practising pure meritocracy, then the only way this young woman would be denied her place is if there were other candidates with equally perfect scores and who did equally well in extracurricular activities. This is highly doubtful. What is probably the case here is that she is the victim of the racially segregating quota system. Her non-Bumi status had put her at a disadvantage.

As a Malay-Muslim, I am appalled by such policies. It is not because I do not want people of my own socio-culture to progress. Of course I do and we have over the decades. There is now a clear strata in Malay-Muslim society who are highly educated professionals and clearly above and beyond the abysmal politics of UMNO and PAS.

However, the majority of us are still clinging to the crutches to which we have acclimatised ourselves over this time. Remember the protest by UITM students when it was suggested non-Bumis be allowed entry? It is that kind of mentality that impedes Malay-Muslims from achieving further progress.

Then there is the matter of religion. As Malay-Muslims, our Islamic identity is becoming increasingly important to us.

In Malaysia, we are proud of our high place in the Islamic index. We have grand mosques and our lifestyles are becoming more and more Arabicised (or Islamised, as the priesthood would have us believe). But are segregating Bumiputera policies actually Islamic?

Let us consider the following: The Quran is replete with commands to believers to perform acts of goodness. In no less than four places (Chapter 2 Verse 83, 4/36, 6/151 and 17/23), this command is connected with the actual worship of Allah which is the main point of the Quran.

Yet, in not a single of these commands is there a pre-condition that good deeds be towards believers or even Muslims. Rather, good deeds are generally to parents (not one’s own necessarily but parents in general), near neighbours, orphans, the socially stagnant and travellers.

Not only that, there is an entire chapter of the Quran (Chapter 83, Al-Muthaffifeen) which is dedicated to the event in which all our deeds is accounted for. The eponymous “muthaffifeen” is a unique word used only once in the first verse of this chapter.

It refers to people who extract a particular measure of benefit but refuse to give the full measure of effort required. Needless to say, the Quran is against such an act. It tells us that we will made to pay for this sin on Judgement Day.

So while we expect non-Muslim Malaysians to contribute to the development of the nation, we refuse to give them equal rights. We will have to answer for this disparity on the day of reckoning, according to the Quran.

It is very clear from these and numerous other principles from the Quran that there is simply no justification for racialised policies. Yet, we have not even heard a peep from the Islamic priesthood about them.

While they are busy pronouncing Pokemon Go as forbidden and making sure wives submit to their husbands even while riding on camels, they are deafeningly silent on this very fundamental teaching of the Quran. I urge Malay Muslims to ask these priests at every opportunity.

Malay Muslims need to realise that these preferential policies not only hurt our relationship with the rakyat, they also compromise our religion as well as our capacity for competition. The sooner we let go of these policies, the sooner we can take our place as members of the rakyat alongside the others.

Message from a Friend overseas for 2016


December 19, 2015

Message from a Friend overseas for 2016

sarawak--malaysia

Sarawak–The New Political Battleground

I thought I should share this note I got from a dear old Malaysian friend and contemporary after I responded to his message for Christmas and the Near Year (2016). I asked him to tell me what is happening in our country which used to be an oasis of racial harmony (apart from May 13, 1969) and a high-flying geese economy. I wanted his professional views because being some distance away from negara ku tersayang, he can be balanced and less angry than I. Here is it is for your consideration and comment. –Din Merican

Dear Din,

On Politics, Race and Religion

The current scene and trends are troubling. The use of draconian laws to silence everyone who does conform has become most common; nothing shocks anymore. The latest effort to silence Farida of G25 is a step too far. The passing of the NSC bill is a most far reaching action. Its membership establishes Ketuanan Melayu in both name and practice. Najib has essentially staged a coup in order to hang on at all costs. He has bought over the UMNO Party chiefs with presumably the proceeds from the “donation”. They are silenced.

NAJIB_HADI_171215_TMI_MULTAQA_PROGRAM

The Pinkees

The NSC composition also sends another message: it is a one race body. It would seem that advocates of Ketuanan and the Ugama purists in JAKIM are  now the hand maidens aiding him to buy over the older generation of rural dwellers. The seduction and co-option of  PAS President Ustza Hadi  Awang further closes the circle.  Nothing now stands in the way of acquiring total power.

I am quite pessimistic about GE 14.  The Pakatan Harapan have blown their chances with their petty squabbles. The so-called strategists in Parti KeADILan Rakyat (PKR)  and Democratic Action Party are going to sell the store by agreeing to further gerrymandering – they are totally naïve in believing that additional seats if created will come way. Here the first time  politician Dr. Ong Kian Meng and his boys are to blame.

This latest cryptic call to plan ahead beyond 2020 is also ominous. It smacks of constitutional changes not of economic adjustment. Civil society is much too weak to provide checks and balances while media have been muted. Those who naively believe that Barack Obama or the United States will apply pressure are mistaken. The US are content to leave the man in power so long as he locks up a few of the ISIS types and indulges in remaining on their side over the South China Sea issues.

The Economy Stupid

BNM Governor Zeti

The fundamentals are strong- What Fundamentals?

Beyond the political mess, there is the problem with the economy. We are once again a commodity producer and thus truly stuck in the middle-income trap. We are no longer competitive in manufacturing; nor do we have any means to move up the value chain as we lack human capital to get into high value added activities.  In any event the GLCs are like dinosaurs  that stifle innovation and are themselves unable to move forward. Their corporate honchos  are quite happy to engage in  rent seeking while enjoying their very generous perks of office. Other domestic investors are unable to lead; FDI is not coming in given the political and economic scene.  In the meanwhile indebtedness is becoming dangerous. The Federal Government debt may be at 55% of GDP with another 30% or so being off budget. To this one needs to add the contingent liabilities— not clearly announced. The corporate sector too has large debt liabilities. On top of all this household debt is of the order of 88%. And yet  that disappointing Bank Negara Governor Dr. Zeti Aziz says: “The fundamentals are strong!!”

Will we get out of this hole that we have dug? The only hope – somewhat dim—is that the Rulers may take matters into their hands. However they will need to be encouraged. They are likely to be responsive to urgings from the middle urban ground (G25? BERSIH, and like-minded groups?). Civil society could play a role in this regard.

2016 may mark a turning point. Perhaps things will get worse before they get better.  Let us prayer that we shall avoid a collapse. Selamat Hari Natal dan Tahun Baru to you, Dr. Kamsiah, and all your friends and associates on this blog.–Your Kawan Lama.

My Songs of Defiance-Thanks, Sammy Davies Jr.

 

MALAYSIA–Parliamentary Approval for 2016 People’s Budget


November 17, 2015

COMMENT: The fight for change continues. The much anticipateddin-merican-and-dr-kamsiah1 move to reject Malaysia’s 2016 Budget did not materialise since the Opposition failed to garner biparisan support to defeat it. 128 votes in favour of it were convincing enough and our country is spared a fiscal crisis. It is  relief that our government can continue to function with money approved for its programmes in 2016.

While I have been critical of the Prime Minister’s misdemeanors, especially the USD 700 million that went into his personal bank, his lack of transparency and accountability on 1MDB, and his lavish spending ways, I am never comfortable at the prospect of our public administration and security services (defense and police) grinding to a halt at a time of global terrorism just because a disgruntled opposition is trying to use us Malaysians as pawns in their desire to cause the collapse of an elected government.

My message to our Prime Minister cum Finance Minister is that he must be be prudent and smart in spending our taxes. May I also remind him that every tax dollar spent must produce a satisfactory rate of return which is equal to the cost of our sovereign debt. Otherwise, we as citizens will be burdened with  more taxes. That is Fiscal 101 and pure common sense.

Confidence in our Prime Minister’s leadership may not return any time soon. However, if he comes clean on the 1MDB financial scandal, ceases using draconian laws against his critics and stops playing race and religion for his political ends by pandering to racist pressure  groups and religious extremists within and outside UMNO, there is a possibility for the ringgit to bounce back and for much-needed capital inflows to return. –Din Merican

MALAYSIA–Parliamentary Approval for 2016 People’s Budget

by Arfa Yunus

http://www.freemalaysiatoday.com

MOF Najib Razak

Prime Minister Najib Razak may still have the support of Barisan Nasional (BN) lawmakers, evident from the success of the vote on Budget 2016 last night, says UMNO veteran Tengku Razaleigh Hamzah.

He said he himself, voted for Budget 2016 to go through despite talks of him being part of a movement to bring Najib down.Tengku Razaleigh, speaking to reporters at the Parliament lobby here today, said that he had voted in favour of the Budget as he “believed in the government’s plan for the year.”

He, however, was coy when asked if his vote meant that he also supported Najib as the nation’s Prime Minister.“No, that means we support the government programme for the (next) year (as) it was presented by the Minister of Finance, who is also the Prime Minister,” said the Gua Musang Member of Parliament.

“Why these questions? You decide for yourself ok,” he added, refusing to comment further. The UMNO veteran has been linked to a group allegedly led by former Prime Minister Dr Mahathir Mohamad, who aims to have Najib removed from his top post.

Budget 2016 passed the policy stage last night after successfully garnering 128 votes. All BN legislators present, including former Deputy Prime Minister Muhyiddin Yassin voted in favour of it.

This came as a surprise to most as both Razaleigh and Muhyiddin were rumoured to be on the list of seven UMNO leaders currently under the party’s watch for openly criticising Najib.

Malaysia’s Politics of Survival by Elimination


October 23, 2015

Malaysia’s Politics of Survival  by Elimination

by stratfor

https://www.stratfor.com/analysis/malaysias-eventual-fall-grace

Forecast

  • In the near term, Malaysian Prime Minister Najib Razak will survive efforts to oust him over mounting corruption allegations.
  • Whether or not Najib holds onto power longer, the years leading up to the next general elections will be turbulent ones.
  • Political stability, crucial to Malaysia’s economic rise, will be challenged by demographic changes that stress the country’s delicate ethnic balance. 

Analysis

Gandhi-great-quote

A deepening political crisis in Malaysia is highlighting the country’s longstanding ethnic divides and its uncertain road ahead. Since early this year, Prime Minister Najib Razak has been caught in a scandal surrounding the heavily indebted 1Malaysia Development Berhad (1MDB) sovereign wealth fund. Among other points of controversy, Najib is struggling to explain the source of nearly $700 million deposited in his personal account.

This week, with Malaysia’s Parliament back in session, the opposition is renewing its efforts to oust the Prime Minister through a no-confidence vote — a measure that will succeed only in the unlikely event that Najib’s tightly consolidated party apparatus comes apart. Indeed, Najib is likely to remain entrenched in power for the foreseeable future. In the process, however, the political crisis in Kuala Lumpur will both expose and exacerbate broader challenges confronting Malaysia, particularly regarding divisions between the politically influential “Bumiputera” (the umbrella term for ethnic Malays and indigenous groups) and the economically powerful ethnic Chinese and Indian populations. At risk is the carefully balanced status quo that has enabled the Malaysian economy to flourish without communal disruptions.

A Well-Entrenched Man

On the surface, at least, the hits keep piling up for Najib: A steady drip of leaked documents has magnified scrutiny on the Prime Minister and spawned official investigations both in Malaysia and in countries where 1MDB has been active, including Switzerland and the United States. Najib, who also serves as Finance Minister, has come under fire from the country’s central bank chief, powerful figures from within his own ruling United Malays National Organisation (UMNO), and Malaysia’s nine state sultans — whose power is largely ceremonial but who are perceived as guardians of Malay heritage and religion. Most notably, longtime Prime Minister and UMNO boss Mahathir Mohammad, Najib’s former mentor, has gone on the warpath. Since publicly withdrawing support for Najib in mid-2014, Mahathir, who governed for 22 years, has called for more intensive probes, joined a major opposition rally in August, and urged his former adversaries in Malaysia’s long-beleaguered opposition to table a no-confidence vote. (Najib’s predecessor, Abdullah Badawi, resigned in 2009 at Mahathir’s behest.)

But the Opposition, with just 87 of the Parliament’s 221 seats, does not have the numbers to muster the two-thirds majority needed to remove Najib, even if it peels off disaffected lawmakers from the ruling Barisan Nasional coalition’s ethnic Chinese and Indian parties. Moreover, the opposition alliance collapsed this summer, and certain factions are noncommittal at most about ousting Najib — particularly the conservative, Malay Muslim-dominated Pan-Malaysian Islamic Party, which sat out the anti-Najib rally in August.

UMNO is similarly divided. Several powerful party leaders who have publicly criticized Najib’s role in the 1MDB scandal and expressed concern about damage to the party’s credibility still oppose the no-confidence vote. Even with the opposition at odds with itself and its charismatic leader, Anwar Ibrahim, behind bars, UMNO does not want to chance a snap election with the 1MDB affair still unresolved. It narrowly held onto power after losing the popular vote in 2013, after all. Whatever the Prime Minister’s sins, UMNO lawmakers naturally do not want to see the party fall as a result. The leaked documents have implicated essentially Najib and his wife alone, largely sparing other major UMNO figures. This suggests an orchestrated effort designed to oust the Prime Minister without sinking the entire party.

An internal putsch against Najib is more likely sometime after the parliamentary session ends. But even this is unlikely. Earlier this year, Najib postponed the next party elections to 2018 and purged some of his most powerful detractors. An emergency vote would take two-thirds of UMNO’s Supreme Council or a majority of the party’s 191 divisional chiefs, and Najib reportedly maintains strong support in both of these blocs. Nearly all UMNO lawmakers and leaders have benefitted from his largesse, and the fact that Najib’s political machine has proved resilient testifies to the power of his patronage network. Party dissent will need to reach a much higher pitch to oust him. Despite Mahathir’s best efforts, this has not happened — yet.

Economic Complications

The crisis in the capital comes at a particularly bad time for Malaysia. With or without Najib at the helm (but particularly if he holds on), the years leading up to next elections, currently expected to take place in 2018, will be turbulent. In particular, an array of challenges is threatening Malaysia’s economic dynamism and the delicate ethnic balance that has undergirded the country’s remarkable rise. The political uncertainty is likely to exacerbate both issues, and vice versa.

A leading concern is that the scandal is diminishing Malaysia’s credibility with investors and driving down the value of its currency, the ringgit, which hit a 17-year low this month. Investors reportedly pulled around more than $4.5 billion from Malaysian stocks and bonds in the third quarter of 2015, while approved foreign direct investment declined by more than 40 percent through the first half of the year. Currencies have been racing downward across Southeast Asia, but the ringgit has performed worse than its regional counterparts — despite Malaysia having generally more favorable economic fundamentals and substantial foreign exchange reserves available to buoy it.

The country’s economic woes cannot be blamed solely on the political uncertainty. Even without the political crisis, Malaysia is facing economic headwinds because of low commodity prices and a looming interest rate hike by the U.S. Federal Reserve. But the scandal is certainly playing a role. Malaysia’s once globally esteemed financial institutions are now in question, and 1MDB is involved in nearly every key sector of the Malaysian economy, including energy, agriculture, tourism and real estate. Meanwhile, Najib’s influence over those purportedly investigating the sovereign wealth fund (in July, for example, he fired the Attorney-General) has raised questions about regulatory transparency and rule of law in the country.

UMNO in Power

Moreover, Malaysia’s reliance on semi-conductors and commodities such as oil, natural gas and palm oil leave it fairly vulnerable to global shifts. State investment funds like 1MDB and Khazanah Nasional Berhad (which Najib also chairs) were designed, in part, to give Malaysia additional economic buffer and allow it to use capital in a manner similar to neighboring Singapore. The success of such investment vehicles will become particularly important as China begins to focus on higher-value exports such as semi-conductors. Inversely, the economic woes have magnified the scandal. The commodities collapse, for example, has inflated 1MDB’s debts and shrunk the revenues available for UMNO to dole out to keep the coalition more firmly intact.

There is reason for optimism. Malaysia has relatively low debt and inflation, as well as a healthy resource base on which it can continue to build. Its membership in the Trans-Pacific Partnership would, at minimum, help the country diversify, gain an edge over rising regional competition, and position it at the center of global trade flows. So Malaysia’s economic slump alone may not be prolonged enough to sink the ruling party — UMNO survived even the 1997 Asian financial crisis. Nonetheless, Malaysia’s underlying strengths have given traction to the opposition’s assertion that graft and mismanagement must then be playing a singular role in dragging down the economy. This argument will gain strength if the slide continues.

UMNO’s Ethnic Gamble

More problematic over the long-term is the ongoing shift in Malaysia’s ethnic demographics. As in Singapore, Malaysia’s favorable investment climate has long relied on the country maintaining at least superficial political harmony. This is an innate challenge for a geographically fragmented country where the Bumiputera, or “Sons of the Soil,” have stood in contrast to the ethnic Chinese and South Asians, who wield economic influence disproportionate to their numbers.

Malaysia’s political stability has revolved largely around the dominance of the UMNO-led coalitions that have ruled every year since independence in 1957. These coalitions have ensured high-level representation from all major ethnic groups and the farther-flung regions of Sarawak and Sabah on the island of Borneo, facilitating flows of patronage to all corners of society and preventing a repeat of the 1969 communal riots or revival of pre-independence racial strife. The effective one-party rule has generally enabled policy continuity and targeted infrastructure and industrial development, minimizing uncertainty for investors and giving Malaysia a leg up over regional rivals. This environment, combined with Malaysia’s resource abundance and fortuitous position as a trade hub in a high-growth region, fueled a steady economic rise and the growth of a robust middle class.

Petaling Street 2

Tan-Sri-Mohd Ali Rastam

But the prospect of ethnic strife and resentment fueled by Malaysia’s affirmative action policies has continued to pose a risk to the country’s economic success. Mahathir, when still in power, tried unsuccessfully to peel back these policies, and it is unlikely that others will be able to do so. And throughout Southeast Asia, economic turmoil tends to lead to a push back against the ethnic Chinese populations. In Indonesia, for example, this has often led to violence. This issue is part of why Singapore is not still a part of the Malay Federation.

The ethnic balance underpinning Malaysia’s stability began to noticeably unravel in the 2008 general elections. Ethnic Chinese and Indian voters began to defect from the ruling coalition, upset with ossifying policies meant to cement the pre-eminence of Malays in political and economic life, as well as anti-minority rhetoric and occasional violence. Barisan Nasional lost 58 seats and its seemingly perpetual two-thirds majority. The shift became more pronounced in 2013, when a multi-ethnic opposition coalition won the popular vote. Today, the main Chinese party in the ruling coalition, the Malaysian Chinese Association, holds just seven seats (down from 31 in 2008) and no Cabinet posts. The main Indian party holds four.

Najib has increasingly sought to frame the 1MDB affair in ethnic terms. In this he has taken a cue from Mahathir, whose own rise was fueled by exploiting Malay and indigenous fears of, for example, “the Chinese tsunami.” UMNO has funded and helped organize the Malay nationalist “Red Shirt” movement, whose mass rally in September was narrowly prevented by police from storming a prominent ethnic Chinese business district in Kuala Lumpur. As political strategies go, this may appear exceedingly base, but it also reflects a recognition that Malaysia’s fundamental demographic makeup is changing, most notably among the Chinese. Since 1983, their share of Malaysia’s total population has dropped more than 8 percent, and birthrates among ethnic Chinese are by far the lowest of Malaysia’s main ethnic groups. For political purposes then, rather than wooing back minority voters, UMNO will increasingly work to secure its base and keep the opposition divided along ethnic lines.

This heralds a widening of ethnic divisions — punctuated by growing public unrest more common to Malaysia’s northern neighbors Myanmar and Thailand — that will challenge the core integrity of what is a particularly manufactured form of the modern nation-state. Lacking geographical or ethnic coherence, Malaysia’s solidarity has long stemmed from shrewd, inclusive policy making, with plentiful resource wealth available to grease away any frictions. A broad remaking of this political system — if it fails to preserve the ties binding Malaysia’s far-flung and disparate parts to the state — would thus prove unsustainable. To a degree, this risk will limit how far Najib and UMNO will be willing to push their ethnic advantage. But with the 1MDB scandal and the economic stresses drawing the ruling party into a protracted fight for survival, Malaysia is likely to slip further into an environment of new uncertainties.