MySay: Perfecting the federation of Malaysia

This article first appeared in Forum, The Edge Malaysia Weekly, on May 21, 2018 - May 27, 2018.
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The founding of countries is always accompanied by aspirations couched in idealised phrases and imagined communities. For Malaysia, when Malaya gained independence in 1957, Tunku Abdul Rahman proclaimed that the federation “shall be for ever a sovereign democratic and independent State founded upon the principles of liberty and justice and ever seeking the welfare and happiness of its people and the maintenance of a just peace among all nations”. An aspiration in the form of an imagination.

The last general election will be recorded as that juncture in our history when we move forward towards this imagined state. It is something to feel very proud of. We went against the global trend of rising sectarianism and identity politics and showed remarkable maturity in effecting a transition of power — the first time since independence — through the ballot box without any untoward incidents.

I have always believed that Malaysia’s openness as an economy, its demographics and location at the crossroads between two great civilisations give it not just the diversity and cosmopolitanism but also the global benchmarking that comes from an awareness of “what is out there”. Fanatic Malaysian football fans know how bad the state of Malaysian football is on and off the field and they know the reasons why.

Malaysians know exactly the state of government and public governance in Malaysia, and despite all kinds of curtailing of freedoms, especially by the likes of the Malaysian Communications and Multimedia Commission (MCMC) in recent years, the public knows how to separate the rice from chaff and distinguish right from wrong, but we are a tolerant bunch. Yet public officials, perhaps buoyed by Malaysians’ seeming acquiescence, became arrogant to the point of being contemptuous of the public.

The audacity of the whole 1Malaysia Development Bhd scandal and the lackadaisical attitude in the commission of the scandal say it all. Even the conduct of the recent elections was rife with incompetence if not outright connivance. All of which points to multiple failures of the institutions in this country. A boiling point was thus reached and as if in unison, Malaysians overwhelmingly voted out the government by more than a two to one ratio in popular votes. Just deserts. And Malaysia made history.

The lesson for public officials is that the public office, with its powers and privileges, belongs to the public and one occupies it so long as one has the confidence of the public— an obvious statement but one usually lost in the headiness of incumbency. Without that realisation, political exits can be undignified and humiliating. History has shown that repeatedly, but it is a lesson typically not learned while holding office.

The focus now should be on fulfilling the promises made and the new government must be made accountable to that. With its comfortable majority, politics can and should be put in abeyance to focus on the business of government.

An immediate concern is the state of public finances. It is not that they are in bad shape now but that it is deteriorating rather worryingly, and something must be done before things get to be really bad. Removing the Goods and Services Tax will put pressure on government revenue while the removal of tolls and re-introducing subsidies will add to expenditure. While the budget is not balanced, liabilities will continue to increase.

The mistake with the GST was not the GST itself but the manner in which it was introduced and communicated. Its objective should not have been just about revenue enhancement; it should have been about formalising the economy and, as with all taxes, it should have been a fiscal tool together with other tools to achieve distributional as well as revenue objectives. Instead, it became almost a revenue filler.

The need for fiscal consolidation will also force a serious reassessment of large lumpy commitments and putting in place a more sophisticated treasury operation at the Treasury. The ongoing adoption of the accrual accounting standards presents an opportunity to obtain a true picture of the government’s balance sheet to better manage its fiscal tools going forward.

The second challenge is a longer-term one — on the structure of the economy and its lack of transformation. The attempt at crafting a New Economic Model by Datuk Seri Najib Razak at the beginning of his tenure was the right step but its eventual rollout in the Economic Transformation Programme was project-driven instead of focusing on changing economic incentives to affect decisions and, therefore, resource allocations, in a transformational manner.

Transforming an economy dependent on commodities and natural resources on the one hand, and foreign capital and increasingly foreign labour on the other, is not easy. It would be like trying to fix something that is not broken. It still works but transformation is about changing before change is necessary. At the same time, the problem with inequality persists and in some ways, it has worsened with deeper integration of the economy with global markets — not just the markets for goods and services but also for inputs, capital and labour.

Besides boosting confidence through improving governance and strengthening institutions, the key to Malaysia’s economic transformation lies in the labour markets. It covers the whole range from improving schools, universities and research institutes right to issues around women’s participation in the labour market and migrant labour. A more competitive and innovative Malaysia, the key levers for transformation, depends on sorting out labour market issues.

Despite the landslide victory of the incoming government, there are patterns of voting that I find intriguing, especially among the Malay population. Such a sizeable and diverse group will demonstrate the observed variability but differences in how the Malays voted in Johor and Selangor compared with how they voted in Kelantan and Terengganu raised a lot of questions whose answers have significance for the overall national development agenda. Political parties and social scientists should understand this phenomenon better.

Fundamental constitutional questions such as the nature of the Malaysian state — a secular state that recognises Islam as the official religion but one that guarantees and protects the freedoms of other religions — is at the heart of the Malaysian raison d’etre. There must be honest conversation about individual spirituality, group identity and the Malaysian state as it is quite clear from the election that for some, religion and politics are one and the same which, if extrapolated, leads to a theocracy.

I was a MP (Balik Pulau) from Umno during the ninth parliament when Tun Dr Mahathir Mohamad was prime minister, Datuk Seri Anwar Ibrahim the deputy and Lim Kit Siang was the opposition leader. That was before the 1997/98 Asian financial crisis eventually led to a political crisis and the reform movement that Anwar started.

Twenty years later, two jail terms later and a royal pardon, Anwar again joins Mahathir who led a coalition to oust a government led by a party he once headed, a party they both belonged to — something made possible by Anwar’s rebellion against Mahathir two decades ago. And the three protagonists are now on the same side, on the side of reform. No one could have imagined this script.

The tenacity and the sacrifices of these individuals can only be driven by their deep love for the country, not identical in their interpretations of that love, but love Malaysia they all do. Younger Malaysians have much to learn from and emulate in these individuals but the cake has to go to the oldest elected prime minister in the world, a historical figure for many Malaysians, who displayed courage and discipline at his advanced age to move the country closer to its imagined aspiration.

This made us happy and proud to be Malaysians and we are optimistic about the future, the challenges in front of us notwithstanding. But we must be vigilant and hold them to their word!

Dr Nungsari Radhi is an economist and managing director of Prokhas Sdn Bhd, a Ministry of Finance advisory company. The views expressed here are his own.

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