Thursday, November 27, 2003

"Mr. Right"

Malaysia banks on Mr Right
Keith Andrew Bettinger

WASHINGTON - As the torch of Malaysian leadership passes from Mahathir Mohamad to Abdullah Ahmad Badawi, pundits are scrambling to figure out what to make of the new prime minister. Abdullah, it has been decided, has a number of hurdles to overcome, and while not possessed with the unique attributes of his predecessor, he does have certain qualities that could help him steer Malaysia nearer its lofty "Vision 2020" goals.

While doubters keep pen and paper at the ready to chronicle any signs of behind-the-scenes manipulation by Mahathir, challenges from Islamic fundamentalists or any economic indicators that would doom Abdullah's administration in its infancy, the new prime minister has indicated that his ascendancy will be measured and calculated. It will have to be if he is to balance trends toward fundamentalism in his country against Malaysia's relationship with its No 1 trading partner, the United States. He inherits criticism from abroad for Malaysia's draconian Internal Security Act (ISA), but any moves toward liberalization could strengthen the opposition and weaken his grip on power. Malaysia is indeed at a crossroads; Abdullah will make or break his career with the decisions he makes as Mahathir fades into the background.

In terms of economics, Malaysia is on the brink of a new phase of development. Malaysia was the grand Southeast Asian success story of the 1990s - the great hope for the developing world. Bucking conventional wisdom and eschewing the Washington Consensus, Malaysia emerged relatively undamaged from the Asian financial crisis, poised to continue its meteoric rise through middle-income nationhood. Malaysia's growing affluence stemmed from its export-oriented economy and its success in transforming itself from reliance on commodities to finished goods and high-tech products. During the 1990s Malaysia benefited from its relatively cheap labor force and became a hub for silicon chips.

Now Malaysia faces greater competition from abroad. Many observers have pointed to China as a threat to Malaysia. In the mid-1990s, Malaysia was attracting US$5 billion to $7 billion a year in foreign direct investment (FDI). While China's FDI is approaching $50 billion annually, Malaysia's has dipped below $1 billion. Some analysts warn of a great sucking sound as jobs move out of Malaysia to take advantage of cheap, abundant labor and a liberalizing business environment. However, with balanced policies and a sensible eye toward the future, Malaysia may be able to increase its fortunes in tandem with the People's Republic. Things have been looking positive for Malaysia; the stock market is up, and the economy has experienced 4.5 percent growth this year and is projected to grow by another 5-6 percent in 2004. These figures are down from the average 7 percent pre-meltdown growth rates experienced in the 1990s, but Malaysia's economy has entered a new phase in which the goal should be slower, sustained growth.

Dr Arvind Panagariya, former chief economist for the Asian Development Bank, focused on China by explaining how its rise could benefit other nations as well. "It's a big opportunity," he said. "The Chinese market is evolving in such a way that other countries, if their policies are right, can do well. China's market is not closed." Panagariya then added: "If Malaysia can compete with China now, they will able to compete later."

Specialization would improve Malaysia's position. As China continues to develop, wages will need to rise, as people desire a higher standard of living. Panagariya said that unfettered markets in Malaysia will enable experienced entrepreneurs to take advantage of opportunities in China. One current example is palm oil, one of Malaysia's most abundant commodities, which is selling briskly in India and China, where consumers are choosing vegetable over animal oils.

Abdullah Badawi has said publicly that he will continue Mahathir's economic policies. But this by itself is a vague statement providing few clues for international investors; Mahathir was praised for his handling of the 1997 Asian financial crisis but has been jeered for rewarding friends and "picking winners". However, Abdullah has railed against the cronyism and corruption so ingrained in the Mahathir regime, and as time goes by, he should feel more comfortable in criticizing his former boss. He will seek to make Malaysia more attractive to foreign investors by cracking down on corruption and mindless bureaucracy while improving the efficiency of the civil service.

One early test of his ability will be how Abdullah handles the recent imbroglio over a contract to improve a stretch of railway; the multibillion-dollar contract had been awarded to a Indian-Chinese partnership, but just 10 days before he retired, Mahathir reneged on the promise, instead awarding it to Syed Mokijtar al-Bukhary, a reclusive Malay tycoon with personal ties to Mahathir. This type of contract is an example of the type of cronyism that marred the Mahathir years; critics often assailed the administration over billions of dollars spent on megaprojects, such as the Putrajaya capital district, the Kuala Lumpur International Airport and the KL monorail.

Abdullah has indicated that he will move away from big-ticket spending and will instead focus on agricultural and small business development. This may have the serendipitous bonus of discouraging cronyism because agricultural development and small businesses are harder to skim huge amounts of money off the top of, and these types of projects will be less accessible and less attractive to the old-guard tycoons. Then Malaysia may enjoy the best of both worlds - increased transparency and competitiveness to go along with the lure of a well-developed infrastructure. Abdullah does not have the solid hold on the reigns of power that will allow him to be perceived as favoring one group over the others. If he allows cronyism to flourish anew, he risks losing credibility with younger Malaysians still forming their political loyalties.

Abdullah's reputation as a consensus-builder should further soothe the misgivings of international investors. In addition to the aforementioned criticisms, Mahathir has also been attacked for his autocratic management style. K S Jomo, economics professor at University Malaya, wrote recently in the Far Eastern Economic Review that "the quality of Malaysian policymaking would have been considerably enhanced by genuine popular consultation in the national interest, rather than presuming to know what was best for the nation. There are few instances when greater consultation, transparency, and accountability would not have helped."

His style not withstanding, Abdullah does not have the political capital to dictate his terms. He will need to be more open to other views and will need support of other leaders to buttress his administration. In the long run, this will provide stability and more enlightened policymaking. As Abdullah follows a moderate path, institutions that were cowed under Mahathir may slowly reassert their constitutional purview. This will increase transparency and improve governance, enhancing Malaysia's image among human-rights watchers.

The new prime minister will have ample opportunity to prove himself in international politics as well. Malaysia's geostrategic location makes it a key variable in the international calculus of power politics. Abdullah's predecessor has been somewhat of an enigma for global-minded statesmen. Mahathir's anti-Semitic rantings and periodic outbursts aimed at the West have won him few friends, and have perhaps hindered Malaysia's relations with the West, preventing it from taking a greater role in regional affairs.

Dr Bridget Welsh of Johns Hopkins University's School for Advanced International Studies said that since Abdullah is a more consensus-oriented leader he may be able to soothe the recently rocky relations between his country and Australia and the US. In the past there were "leadership issues causing needless negative energy", Welsh said, adding that the United States should give Abdullah and other leaders some time to consolidate their positions and suggested patience.

So far, though, Abdullah is making progress. Welsh cited the recent release of prisoners jailed under the controversial ISA as an example. Releasing former deputy prime minister Anwar Ibrahim, whose health is deteriorating, would be a further sign of goodwill and would "show that Badawi is standing on his own ... that he is different". Welsh, the editor of Reflections: The Mahathir Years, cautioned that it is still too early to make judgments on Abdullah's chances.

Abdullah is well equipped to deal with international issues. In addition to a term as finance minister, he served as foreign minister for eight years. He will have a chance to define himself quickly, as Malaysia is the chair of the 114-member Non-Aligned Movement and the 57-member Organization of Islamic Conference (OIC). Abdullah, though seen as a moderate, has excellent credentials with his country's Bumiputra (Malay) majority; he was trained as an Islamic scholar. This should enhance his credibility in the OIC. Thus, while Mahathir was lauded by some Muslims for his remarks about the Jews, Abdullah's background will enable him to be more of a model, leading by actions rather than words.

Abdullah has a chance to be the prototype of a new kind of Islamic statesman, rather than a fiery demagogue. This could woo supporters away from the Parti Islam SeMalaysia (PAS), although he may have difficulty in reconciling Malaysia's relationship with the United States with his political imperative of appealing to the Muslim majority, among whom US foreign policy has not been well received. Abdullah has shown promise, though. This year, while Mahathir was on a two-month vacation, Abdullah had a "dry run" as acting prime minister and diplomatically voiced Malaysia's opposition to the US-led campaign in Iraq while keeping internal protests manageable.

He will also have an opportunity to reinvigorate the Association of Southeast Asian Nations (ASEAN), which many analysts have claimed is mired in a procedural swamp that prevents its members from getting anything done. With the recent debacle in Cancun, Mexico, and protests in the streets wherever the carnival that is the World Trade Organization sinks its stakes for a meeting, regional trade agreements have a great deal of appeal.

India and China have both expressed interest in forging ahead with a free-trade area in Southeast Asia; if Malaysia can move these projects forward it would enhance its prestige in ASEAN. Abdullah's Islamic credibility and his diplomatic manner would serve him well as a regional leader; if he plays his hand well he could be a bridge between ASEAN and the United States, interpreting and guiding US policies toward the region while steering regional initiatives in a direction that is amenable to the heterogeneous populations of the ASEAN nations and to the US as well.

Southeast Asia is an important nexus in the "war on terror"; while it is becoming more obvious to the administration of US President George W Bush that terrorism is a global problem, it seems apparent to other nations that US policies are shortsighted and ignorant of local realities. And though it would be down the road a bit, given the realities of the current world, Abdullah may be able to cultivate "soft power", that is influence over other nations, especially by making friends in Washington and subtly informing the leadership there while making monetary and manpower contributions to international reconstruction efforts in Iraq and Afghanistan.

The United States will be eyeing Abdullah's policies vis-a-vis the PAS, which now controls two states, Terengganu and Kelantan. Under Mahathir, Islamic extremism never had the chance to thrive, but in the past few years the PAS has gained ground on Abdullah's United Malays National Organization (UMNO), much to the consternation of the US. The PAS has declared jihad against the United States, and PAS demonstrators clad in Osama bin Laden shirts protested the campaign in Afghanistan outside the US Embassy in Kuala Lumpur. While the running joke at the US State Department is that the United States had no problem with Malaysia, just one particular Malaysian, Mahathir has been the only Muslim leader in Asia with the courage to take on Islamic schools that are hotbeds of teaching hatred and terror. Abdullah will be watched like a hawk for any sign that he favors a relaxation of Mahathir's policies against fundamentalism.

Mahathir has been synonymous with Malaysia. He has been labeled a visionary and will go down as a national hero in Malaysia. There is good reason for this. During his tenure, Malaysia's per capita income grew from RM4,630 in 1982 to RM$14,877 ($3,915) in 2003; a true middle class developed and now most citizens have houses and cars. Regardless of his eccentricities, this is a marvelous feat; the "Malaysian Dream" has become a reality.

Now Abdullah Badawi takes over. No one has accused him of being a visionary, but he may be exactly what the doctor ordered: a steady hand to guide Malaysia into a new millennium, using a "nip-and-tuck" style of modifications to improve the country's governance. Abdullah will face the difficulty of moving away from Mahathir's shadow and asserting himself, while not arousing the ire of the former prime minister. Abdullah has shown that he is politically skilled, but he will need support and a certain amount of luck to succeed.

While the challenges are formidable, Abdullah Ahmad Badawi just might be the right man at the right time for Malaysia.

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