All political parties are gearing up for the next general election which is widely expected in the middle of 2011. It looks like the state of the country’s economy and its impact on social conditions will be the determinant of the winner - whether the Barisan Nasional (BN or National Front) can hold power or whether the Pakatan Rakyat (PR) coalition can end the 53 years rule of BN. Over the last two and a half years since the last election, people have not been able to differentiate much between the politics of these parties. Nor are they convinced how their MP or State Assemblyman can enhance their living standards and their rights that they promised in 2008.
Most of the social and democratic issues that angered the ordinary people in 2008, that caused big losses for BN, remain. The Pakatan could not come out with convincing solutions and alternatives other than blaming the BN federal government. Meanwhile the BN manicured by adopting some of Pakatan’s agenda in the name of reforming the economy and government administration. Nevertheless, at this stage BN has the advantage to retain power with its ’3Ms’ (Money, Machinery, Media). But it is expected that Pakatan would go all out to try and match them, especially in the states that are ruled by them, as shown by the Hulu Selangor by-election, where they used the state machinery to counter the ’3M’ might of BN and only narrowly lost.
The ruling regime in Malaysia has been alarmed by the economic catastrophe that developed from 2008, engulfing the United States and then Europe. There was a warning from a cabinet minister that by 2019 Malaysia could also face a Greece-style economic crisis if it does not take immediate steps to restructure its export-dependent economy. With the US as its main trading partner, Malaysia’s GDP growth in 2008 and 2009 was reduced to 4.7% and -1.7%. This shattered the ’vision 2020’ that was formulated in 1991 saying that Malaysia would become a developed country by 2020 with an annual GDP growth of 7% for a 30 year period. In fact, in 1997, the Asian financial crisis devastated this vision of Malaysia being a so-called tiger economy. It had also instigated the ‘reformasi’ movement that shook the autocratic ruling regime of Mahathir at that time. Since then, the Malaysian economy’s growth has not reached that of the pre-1997 period.
However, the stimulus package of almost US$20 billion injected into the economy in the last two years has spurred domestic spending to some extent. With this and increased trading with China (which is the main trading partner at the present time) and other regional markets, so far any further impact in the economy has been avoided. GDP growth this year is expected to be around 6-7%. This development in the country’s economy has so far assisted the ruling government under Najib to improve its standing to a certain extent after the political tsunami in the 2008 General Election in which BN lost its 2/3 majority in parliament as well as losing power in some of the richest states such as Selangor and Penang after almost 40 years. Prime Minister Najib can capitalise on the enhanced GDP growth this year as well as the ongoing internal political conflict in the opposition coalition of Pakatan Rakyat to strengthen his power and the BN government by calling early elections, although he could continue to rule until March 2013.
Recently, Najib reiterated that Malaysia would become a developed country by 2020 with a high income economy, setting a goal of tripling GDP to US$550 billion by 2020. He unveiled the Economic Transformation Programme (ETP) to attract investment worth of US$444 billion, but, with the continuing uncertainties in the global economy this goal could be further undermined.
Malaysia is facing huge competition to attract Foreign Direct Investment (FDI) into the country, and recent reports show that last year FDI inflow even fell 81% compared to the figure in 2008. In 2009 Malaysia was the only country in Southeast Asia that registered a net negative FDI flow. For the first time ever in its history, Malaysia attracted less FDI than the Philippines, and mainly lost it to countries like China and Vietnam that have far cheaper labour. Even Singapore, which is almost 500 times smaller in size than Malaysia and with far less raw materials and resources, is poised to overtake Malaysia as the third largest economy in Southeast Asia after Indonesia and Thailand. This poor performance casts further doubts on whether the New Economic Model, the 10th Malaysia Plan, the Government Transformation Programme (GTP) and the ETP that was designed as the road-map to build Malaysia as a high income economy after the last General Election, are attainable.
The lack of skilled workers, research and development and of technological capabilities have also dampened the inflow of FDI that was based on high-tech or bio-tech industry. Malaysia has only 300 to 400 science and technology workers for every 100,000 persons, as compared to 3,000 in countries that have moved from middle income to high income status. Even the local capitalists do not seem to be interested in investing in Malaysia with these unattractive economic fundamentals and are looking towards other regional markets. The government is hoping for greater involvement of the private sector to strengthen domestic markets. Currently private sector investment is around 10% of GDP compared with 30% in the 1990s. Meanwhile, government has also unveiled a plan to build a 100-story tower in the middle of Kuala Lumpur, as well as other huge property and infrastructure projects to spur on the domestic markets.
Now, with the reasonable GDP growth this year and interest rates at 2.75%, hot money has flowed into the Malaysia bond market for high returns, reversing FDI outflows. This trend has appreciated the ringgit to a 13 year high against the dollar. If this phenomenon continues, it could create asset bubbles in currency, property and stock markets as well as higher inflation. This has the potential of destabilising the economy and financial system as experienced in the 1997 Asian Financial Crisis. Meanwhile, the ringgit’s appreciation could lead to further decline in exports and further loss of competitiveness and retrenchment in export sectors. The government has not imposed the specific capital controls at this stage that have been been carried through by developing countries such as China, Indonesia, Thailand, Brazil and South Korea. It aims mainly to take advantage of capital inflows into the economy as a way to maintain growth to face the upcoming general election.
However, Malaysia has not fully avoided the impact of the global economic crisis. The global economy has still not recovered from the great recession, which some economists believe could become worse. It could stagnate for a long time before it manages to stabilise. The Malaysian government has been zig-zagging from one policy to another because of the many uncertainties in the global economy and the increasing competition among the regional economies as well as the main economic players like the US and China. It looks as if another crisis such as the 1997 financial crisis is looming in this region if this trend continues or becomes worse in the coming period.
Since 2008, the government has been under pressure to reduce the growing deficit in the economy, to contain inflation and to remove distortionary price controls, advancing liberalisation mainly in service sectors to attract investment from the private sector and multinationals. The government has also planned to readjust the labour laws, cut subsidies and introduce a Goods and Services Tax (GST), as well as to reduce government and administration expenditure by encouraging ‘Private Public Initiatives’ (another term for privatisation) especially in public education and the health system, aiming towards facilitating a well functioning market economy for the benefit of national and international capitalists.
As a start, this year the government has reduced the subsidies on petrol, sugar and gas though it has not carried them into full force yet, as well as deferring the introduction of the GST and the readjustment of the labour laws, fearing it would anger the ordinary people and loose their support in the coming general election. However, it is widely expected that the government would go all out with public spending cuts and other austerity measures after winning the next general election, if the global economy is not improving much. These measures would severely affect the 75% of the population that earn less than RM3,000 per month as well as the 25% of the population that earns less than RM1,000 per month, who mainly are the working class and middle class. This also would further increase the gap between the rich and poor which, in Malaysia, is already the worst among the Southeast Asia countries.
Barisan Nasional and the United Malay National Organisation
United Malay National Organisation (UMNO) is the dominant force in the BN racially based coalition and has been going all out to regain the support of the Malay as well as the non-Malays since the last general election, after most of its coalition partners were badly defeated. On the one hand they indirectly use PERKASA - the Malay ultra-right group that champions Malay supremacy - to increase Malay support. On the other hand they have used ’One Malaysia’ propaganda to regain Chinese and India supports.
UMNO is still enjoying the support mainly of the conservative, rural and some middle class Malays who are very much dependent on the special privileges and benefits accorded by the government to them. Although the government has liberalised around 27 service sub-sectors by removing the 30% bumiputra/Malay equity requirement, it has not much affected the Small and Medium Enterprises (SMEs) controlled by this layer, due to other protective measures and incentives designed to safeguard their interests and privileges. This is mainly to continue to maintain this critical vote bank of Malays in UMNO. The PERKASA, which has been supported by Mahathir and other prominent leaders in UMNO, was initiated to safeguard Malay rights. It is aimed at strengthening the Malay support base of UMNO by instigating Malay sentiments and privileges.
Najib has tried to regain the non-Malays’ support by his ’One Malaysia’ propaganda but it turned out to be counter-productive when PERKASA attacks Chinese and Indian rights. Many see Najib does not ‘walk the talk’ that he propagated with his ‘One Malaysia’ policy to unite different races, and regarded the propaganda merely as another political manoeuvre to gain votes for the next general elections. At the same time, the suspicions and dissatisfaction among different races over social/economic and cultural/racial discrimination is still common. In a situation where a severe worsening of social and economic conditions happens, racial tensions could lead to sectarian unrest.
However, with reasonable economic growth at this stage, the weaknesses in the Pakatan Rakyat’s ability to put itself forward as a formidable alternative to BN could increase support for Najib.
The internal power struggles in the Pakatan coalition, especially in PKR (People’s Justice Party) and DAP (Democratic Action Party), have given a bad impression to the masses over their politics, which are seen as nothing much different from BN other than rhetoric. Since the last election, the Pakatan Rakyat also failed to come out with clear alternative solutions and policies to counter BN economic and social policies and agendas other than succumbing to the agenda of free market systems. This has further undermined their credibility especially among the youth and working class that are looking for a genuine alternative. In fact, the Pakatan coalition is still glued together only to face the next general election, in an attempt to defeat the BN and capture the Federal government. It is also dependent on the popularity of Anwar Ibrahim nationally and internationally, portraying him as the prime minister if Pakatan wins. However, the politically motivated second sodomy case against him, which it is believed will be concluded some time next year, could be used by the BN government to undermine his political activeness. However, a guilty verdict that leads to imprisonment could anger Anwar’s supporters and escalate political tensions that could be capitalised on by Pakatan to enrage people against the BN government.
Pakatan has started to consolidate its forces to face the next election and could agitate the masses to create the kind of situation as pre-2008 with populist agendas as well as protests, especially on electoral reform and democratic rights. Nevertheless, Pakatan still could not enhance its support in the two Borneo states of Malaysia -Sabah and Sarawak- where BN still has the upper hand, even though there are many social and economic dissatisfactions among the different peoples living in these states. However, the fissures in the state ruling parties could create favourable conditions for Pakatan to enhance its status, with some of those regional parties joining them.
The Socialist Party of Malaysia (PSM), with its activism, has been supporting the Pakatan coalition to defeat the “main enemy - the BN”, though some of its members questioned this move in their last Congress. Although it is clearly supporting Pakatan, there will be displeasure from some of Pakatan leaders and supporters to give way for PSM to contest one to one as the only candidate from the opposition to contest against the candidate of BN in the next general elections. As a result of that, the PSM could compete to maintain the seats they contested last time or to gain new seats they have planned to contest under their own logo, which could create more conflicts with Pakatan. The PSM could manoeuvre with their Pakatan ‘friends’ to avoid three-cornered fights but there will be intense competition among the Pakatan parties themselves which could isolate the PSM.
Some trade union leaders in the Malaysia Trade Union Congress (MTUC), are aligning with Pakatan with the hope that there would be more democratic rights including trade union and workers’ rights under a Pakatan government, without questioning the opportunistic and, in some respects, reactionary politics of Pakatan.
The failure of PSM and trade unions leaders to put forward a perspective for building a clear independent working class force with the support of the youth, students and others that are oppressed by the system, create confusion over the character of the ’third force’.
Zahid Ibrahim, the defeated contender for the PKR deputy presidential position, who resigned over the accusation of massive irregularities in the party, has initiated a new party - KITA (People’s Welfare Party) - that has been regarded as a ’third force’. Others, like the Human Rights Party (the HINDRAF-Hindu Rights Action Force- splinter) and the Malaysian Civil Liberties Movement (MCLM) that are not satisfied with Pakatan politics, are now proposing building the third force. The layer that is not satisfied with Pakatan politics could look towards this ’third force’ for the time being, but they will soon get disillusioned with their politics that have nothing much different from Pakatan politics or a Non-governmental Organisation type of political activism.
Some of these groups and other splinters from Pakatan could come together to contest the next general election under their own banner but it looks more likely that they would negotiate with Pakatan for one to one contests. There will three-cornered fights if no compromise is achieved and this could be favourable to BN.
Building working class force
The working class, middle class, students and others that are oppressed by neo-liberalism and other pro-capitalist measures embodied in the BN regime have seen the continuous undermining of their living standards and democratic rights. But Pakatan, which also supports the free market, capitalist system, has not much differed in their economic policies and political solutions. Meanwhile, the ‘third force’ is being formed as a way to express the dissatisfaction with the Pakatan leadership and its policies, rather than putting forward an alternative to the pro-market agenda of BN and Pakatan. This shows that the policies of these parties are not designed to solve the economic or social rights of the working class and youths but to achieve their own pro-market political agenda. An independent working class political entity to represent the aspirations and needs of the working class and youth is needed as the alternative to pro-market political parties as a way to build a mass working class alternative.
The period before and after the next general election could see an increasing layer of youth and working class people distancing themselves from the reactionary and opportunistic policies of the mainstream parties. They will approach different ideas for genuine alternatives including socialist ideas. New political formations initiated by this layer could also not be ruled out. Malaysia is moving into another crucial era of economic and political uncertainty, and this will further reinforce the need for building an independent mass working class force with socialist ideas.