Asia Times: Malaysia: 'Politics is like that'



	February 5, 2000	atimes.com

Editorials

Malaysia: 'Politics is like that'

That somewhat ambiguous comment by Trade Minister Rafidah Aziz came in late January when she announced that foreign direct investment in Malaysia had declined by 28 percent in 1999 to just over 9 billion ringgit (US$2.4 billion). The decline, she said, had nothing to do with the sacking and jailing of former deputy prime minister Anwar Ibrahim and subsequent political turmoil: ''Genuine investors know the real story and they know that politics is like that.''

We are inclined to think that she's right. Sitting in a sidewalk cafe in the evening beneath the beautifully illuminated Petronas Twin Towers (of recent Sean Connery movie fame) one observes a peaceful and relaxed Kuala Lumpur scene, with political or economic worries almost certainly not on the minds of passers-by. On the sidelines of a conference co-organized by the Malaysian Strategic Research Center and the German Konrad Adenauer Foundation and addressed by Malaysia's current number 2, Abdullah Badawi, things aren't much different. The ongoing second Anwar trial is not a point of discussion. Even a recent crackdown on the political opposition and the sacking of a newspaper editor are issues discussed only in passing. Compare all that to the tense atmosphere in neighboring Jakarta swirling with military coup rumors and the echo of fanatical calls for jihad still in everyone's ears, and you can't really blame Malaysians for being ready to take a measure of restriction on political freedoms in stride, anxious to get on with making money and enjoying their lives. Like Rafidah, they say that politics is like that; let Anwar and Mahathir fight it out if that's how they get their kicks.

Meanwhile, the economy is humming along and that by itself smoothes political frictions. The Kuala Lumpur stock market index, after a lackluster performance in the second half of 1999 and dropping to just above 700 in December, is pushing the 1,000 mark. Malaysia's trade surplus in 1999 expanded 23.8 percent to 72.3 billion ringgit (US$19.07 billion) from 58.4 billion ringgit the previous year as exports grew by 12.1 percent to 321.2 billion ringgit, while imports increased 9.1 percent to 248.9 billion ringgit. Better yet, exports in December rose 30.9 percent while imports grew 31.8 percent, the highest monthly export and import levels ever recorded. So, be happy, Malaysia, enjoy.

Well, not really. On the economic side, a closer look at the figures provides plenty of reasons for discomfort. Electrical and electronic products accounted for 58.2 percent of total exports in the record December counts. Imports of intermediate and consumption goods represented 73.2 percent and 6.2 percent of total imports, respectively. But imports of capital goods contracted by 6.7 percent from a year earlier - and that combination of numbers is not a pretty picture. Higher demand for electronic products is cyclical and volatile. Decline in capital goods imports compared to already miserable1998 figures indicates contraction in critical investment sectors, a contraction equally indicated by the foreign investment decline. Cyclical export growth concentrated in one market area is not the way to build a secure economic future and can easily lead to precipitous reversal.

As we said above, Rafidah is probably right that politics had little to do with the decline in foreign investment. But that should worry her rather than be a cause for smug satisfaction. It means that the economic incentives for investment in Malaysia are lacking and that's more difficult to fix than calming investors' political nerves. Like in the other East Asian crisis economies, only in-depth industrial restructuring and reform will assure Malaysia of a secure economic future. A cyclical upturn within the old mode of doing things must not blind economic policymakers to that need.

On the political side, while a measure of calm perhaps prevails at the moment, reform to further enfranchise the new middle classes while at the same time building down the political and economic affirmative action policies favoring majority Malays and shielding them from competition are absolute necessities. Try as it may (and try as Mahathir may), Malaysia cannot exist in political and economic isolation and shield itself from that big bad outside world.

So, we'd like to see the usually ebullient and outspoken Rafidah clarify her ''that's politics'' statement. Is that - the Anwar-Mahathir wrangle, the repressive action against the opposition and the enforcement of restrictions on press freedom that make the Malaysian press easily the most boring and uninformative in the region - not perhaps bad politics and not just to be dismissed with a shrug? Or did she mean to indicate sotto voce that it WAS bad politics, but something which for the time being she had to live with? We won't put words in her mouth beyond what she has said. Unfortunately, in light of Badawi's comments at the conference referenced above that the Indonesian example shows that opening ''the floodgates of liberal democracy [does] not necessarily usher in prosperity'', we must conclude that Rafidah, along with the ruling Umno majority, is still a long ways from seeing current Mahathir political precepts as in need of a serious overhaul.