Malaysia: Growing political uncertainty amid global economic slowdown

Independent working class policies vital

Growing political uncertainty amid global economic slowdown

Will the Malaysian government collapse or can it overcome an attempt by the opposition to take power? The ruling Barisan Nasional (BN – National Front) is a coalition of communal and racially based parties dominated by UMNO (United Malay Nationalist Organisation) and is increasingly challenged by an emboldened coalition of opposition parties, the Pakatan Rakyat (PR – People’s Alliance). Could Anwar Ibrahim, the main leader of the opposition, become the next Prime Minister with the Pakatan Rakyat in government? These are the two big questions that have been revolving in the minds of most Malaysians since the 8 March general election.

The three PR parties are the Malay-led multi-racial Parti Keadilan Rakyat (People’s Justice Party), the Chinese-dominated DAP (Democratic Action Party) and the Islamic PAS (Pan-Malaysian Islamic Party). They humbled the governing BN coalition with unprecedented gains in the election (See previous articles). Rallied by Anwar, the parties won more than a third of parliamentary seats and five of the 13 states in the general election, delivering BN its worst result in fifty years. Since these unprecedented election setbacks to the rule of the BN government, Malaysian politics have been in continual disarray.

On the one hand, the ruling government of BN, under Abdullah Badawi with its weakest position ever, has been going all out with every opportunity, using the state’s apparatus, to undermine the chances of the PR and its leader Anwar Ibrahim from getting into power. On the other hand, Anwar Ibrahim, with the opposition parties’ strongest parliamentary position ever, has been advocating that the PR would eventually take over the government by mid-September when some of the MPs from the BN jump over into the opposition camp. At present the BN and PR have 140 and 82 MPs respectively and Anwar and Pakatan would only need another 30 MPs to get a simple majority.

Nonetheless, who the ultimate winner will be and how long this political drama will go on very much depend on the economic performance of the country and that is very much determined by circumstances in the global economy.

In reality the ‘powers’ which direct this political drama are none other than the national and the multinational capitalists. The former, mainly comprised of the Malay capitalists and the political elite who have been groomed by crony capitalism, support protectionist economic measures such as the New Economy Policy (NEP), a four-decade-old affirmative-action programme favouring the predominant Malay community. The latter is pushing for a level playing field in winning opportunities to get a share in the Malaysian economic cake. This is only possible if the special advantages accorded through the government’s policies to the Malay capitalists, as well as the Government-linked companies (GLCs), are dismantled. In order to avoid this, the Malay capitalists and political elites are going all out to safeguard their interests by supporting UMNO/BN. Meanwhile, the multinationals and ultra free-market apologists, especially in the Middle East, the US and Europe, are supporting Anwar Ibrahim’s ‘New Economic Agenda’, which promises economic liberalisation and competition in the natural resource-rich economy of Malaysia.

Worsening crisis in UMNO and BN

Although the BN has a majority, with 60% of the parliamentary seats, its historical defeat has demoralised its most ardent supporters who are mainly careerists and privilege-oriented leaders and members. This phenomenon has been weakening it. It has a leadership crisis and internal bickering in almost all of its component parties. The Malaysian Chinese Association (MCA), Malaysian Indian Congress (MIC), GERAKAN (Movement) and the People’s Progressive Party (PPP) – the major components of the BN besides UMNO – have almost lost their grassroots support in the election, and are effectively overshadowed by the opposition parties. Meanwhile, UMNO, which still has significant support in certain states, especially among the Malay rural population because of its Malay supremacy, has been forced to call for Abdullah Badawi to resign the premiership in order to recover from the humiliating defeats and prevent it from losing the political grip of Malay hegemony.

The BN majority was sustained mainly by the victory of its component parties in East Malaysia (Sabah and Sarawak). Because of that, the government has been pressured by BN component parties in these states to award more goodies and promises to these states to keep them in the BN fold and to prevent them jumping over to the Anwar opposition camp. However, these parties in East Malaysia could cross over to PR if the BN coalition is further weakening.

Food and fuel price hike

Since the political tsunami of March 8, the parties in the ruling BN are trying to consolidate its loosened grip by advocating more reforms to improve its reputation. Some of the reforms announced were in relation to the judiciary, the Anti-Corruption Agency (ACA), and the University/College Act. However these reforms are in a limited form and have not challenged much the government bureaucracy and autocracy. However the reform attempts have been welcomed, especially by some middle class and professional people who wanted more integrity, transparency and democratic rights in the running of the government. But for the majority of working and middle class people, the reforms have been insignificant when set against the increasing inflation due to exorbitant fuel and food price hikes which is severely affecting their day-to-day life; disposable incomes have fallen and many are finding it hard to make ends meet. The number one issue for Malaysians at present is the economy and some say the economic situation today is worse than at the height of the financial crisis in 1997/98.

Obviously, the people’s resentment against the BN government has been further enraged following the deeply unpopular hike in petrol and diesel prices by 41 and 63 per cent respectively in June. The government off-loaded its responsibility by blaming global economic circumstances. The Abdullah Badawi and BN government’s popularity further diminished with this untimely act of slashing the fuel subsidies consumers were entitled to. Many people have questioned the rationale behind the fuel hike, pushed through despite the fact that Malaysia is a net exporter of fuel. Petronas – one of the GLCs – is among the ten most profitable oil multinationals.

In the face of immense pressure from below in society, the government announced early this month that a windfall profits tax will be imposed on oil palm plantation operators and independent power producers (IPPs) who are making huge profits through the increased price of fuel and palm oil. Although the quantity of the tax is not great, these companies have already demanded that the government withdraw the tax, warning that it would affect the overall economy. Socialists support this taxation measure but it should also be implemented to other sectors of the economy such as banking, finance capital, GLCs, multinationals and others who are also making huge profits. However, this should be a first step towards the nationalisation of these assets, to be run as public companies under workers’ control and management, to meet the needs of the majority of society.

Inflation and economic slowdown

According to the recent report of the Asian Development Bank (ADB), “The external economic outlook for emerging East Asia has dimmed amid prospects for slower growth, tighter credit conditions and higher inflation…Heightened inflationary pressures will require more decisive tightening of monetary policies across much of emerging East Asia”.

The Malaysian inflation rate has soared to a 26-year high at 7.7 percent when transport costs and food prices have increased by 41 percent. According to the central bank, the Bank Negara Malaysia (BNM), for the next 12 months the country could risk a further slow-down in growth and higher inflation. It indicates that the Malaysian economy will not be immune to any of the major slowdowns in the regional and global economy.

There are already many signs of global effects on the local economy. For instance the construction industry is facing the impact of the rising price of building materials such as steel bars and cement to an all-time high even with the Price Control Act. The Real Estate Housing and Developers’/Builders’ Association has warned that, “Contractors may be forced to stop work, delay or even abandon projects as a result of the costlier building materials…This will cause a lot of hardship to many people – clients, designers, suppliers, sub-contractors and 140 other related industries, including the financial system”.

At this juncture, the central bank said it would hold its interest rates at 3.5%. This could be due to the low interest rates in America, making it harder for BNM to raise its rates. However, raising interest rates, although it would make Malaysia more attractive for FDI, it could result in rapid appreciation of the Malaysian Ringgit (RM). A stronger RM would lower the cost locally of importing goods but would also reduce the competitiveness of exports “at the time when demand for Asian goods is weakening in the US”. Nevertheless, it is expected that the BNM will have to raise its rates if it cannot stem growing inflation in the same way that India, Indonesia, Thailand, Philippines, Vietnam and Taiwan have all raised interest rates this year under the immense pressure of inflation speeding up globally.

All this is happening while the strong demand for commodities such as fuel, palm oil, rubber and tin has to some extent insulated the economy which has been able to grow at the rate of about 5 per cent. However, the demand for these commodities very much depends on the economy of the US, China, Japan, India and Europe, as shown by the recent drop in the price of crude palm oil (CPO) this week. The Business Times has reported that, “A sharp drop in the price of CPO on the international front has raised alarm bells in Malaysia as the government had targeted this vital edible oil to bring in up to RM60 billion in revenue this year…Early this year, CPO fetched up to RM4,000 per tonne…now it is RM3,095 per tonne”.

On the other hand, “Malaysia’s economic prospects have weakened as global demand for the country’s key hi-tech exports falters”. This is mainly because of the slowing down in the US, the main importer of Malaysian electronic goods. In early July, Nikko Electronics, a multinational company operating in Penang for 20 years, had been losing money for last three consecutive years. Increasing operating costs, as well as a slump in demand, forced the company to shut up shop unexpectedly. Nine hundred and fifty employees, mostly over 40, lost their jobs. Turning up at the factory they were met with a surprise – receiving termination letters instead of resuming their duties! This trend could spread to other manufacturing and electronic companies in Malaysia if the slowdown in the US and global economies worsens. The consequent slowdown in economic growth undoubtedly could lead to higher unemployment as currently there are already half a million unemployed.

In relation to the current political situation, the Centre for Public Policy Studies has warned that, “Investors are already considering the situation as unstable…They are already reconsidering their options in the country. The new investors are possibly not looking at Malaysia as a viable option, and previous investors would be thinking of extracting their funds to be put in more stable and viable locations".

The Pakatan Rakyat’s performance and reforms

After almost five months administrating the state governments in four states, the PR could claim they have done better in certain areas than the previous BN state governments. Many community and local government issues have been highlighted and brought to the PR state governments. Even in certain cases, some PR MPs and ADUN (State Assembly Representatives) were involved in confronting the BN federal government on ordinary people’s concerns such as the Bandar Mahkota Cheras tolls in which the residents in the areas affected defeated the private company, Grand Saga, from closing the access roads to their residential areas after big struggles. People are also seeing some differences in the approach of some of the MPs and ADUN in PR in dealing with people’s immediate problems. In short, these PR governments have reduced corruption and bureaucracy, as well improving transparency in state administrations to a certain extent. But in most other matters or policies of running the governments there is not much difference.

This is mainly because there is not much participation of ordinary people in the decision-making process. While in certain cases like selecting councilors in district administrations, the top down approach used has caused much dissatisfaction among ordinary people. This has also led to a racial or religious-centered approach practiced by the BN being repeated by the PR for electing people’s representatives or solving people’s issues. In the meantime there is not much idea of elevating the social and economic needs of workers and ordinary people or concrete solutions from PR governments. In most cases these governments are using the same excuses as the BN such as lack of funds and economic uncertainty.

This will be the justification for these governments not challenging the status quo and pro-capitalist system of the BN government. For instance, recently the PR governments in Penang and Perak launched propaganda magazines, just as the previous BN governments had done and which they had earlier criticised. Civil society groups in the two states blasted them saying: “The Pakatan Rakyat governments are no different from the previous ones after all. They are hypocrites by copying BN media policy to serve their cynical self interests…Even if a state government funds and publishes a state magazine, it should be run by an independent editorial board to provide free and fair news coverage”.

Sometimes these Pakatan governments have to go against the wishes of the people under the pressure of capitalism. One such thing was the adamant attitude of the Pakatan Chief Minister of Kedah state, led by PAS, to go on with his plan of logging a forest area in the state to “add more funds to government coffers”. This was despite some 63,000 farmers and environmental groups warning of the impact on the environment and the livelihoods of ordinary people if the plan was implemented. In fact, he was against the BN government when he was in opposition, when they wanted to implement such a plan. One reader of the New Straits Times wrote, “It is shocking how quickly the politicians from PR forget their election manifestos and promises…It is not just that this action goes against the principles of good governance and would cause an environmental disaster, there appears to be a lack of transparency with the MB (Chief Minister) deciding on the awards of the concession without an open tender”.

On the other hand, the methods or approaches used by the PR state governments are not much different in finding solutions to workers or ordinary people’s issues. For instance, there were not any concrete solutions on behalf of workers by the DAP-led Penang government over the closure of Nikko Electronics. They only promised to find alternative jobs for the retrenched workers and not much pressure was given to the employer to save the plant and the jobs of the workers. On the other hand, although the state government of Selangor, led by the PKR, pledged to give the first 20 cubic feet of water free to the people of Selangor, the Chief Minister could not even pressure the private company, SYABAS, to offset the cost from its profits. On the contrary, SYABAS has succeeded in forcing the state government to pay the cost by using the state’s own income.

In short, all these state governments of the PR, have all this while been avoiding collisions with investors or the business community and have been adjusting rather than confronting the needs of these capitalists. These approaches are in line with their pro-capitalist agenda as highlighted in their propaganda – to manage capitalism or the free market system better than the BN governments. Nonetheless, as proven by the way they run the state governments, the PR parties did not have a programme for challenging and mobilising against central government and exposing the exploitative nature of capitalism itself.

Fragile opposition…PAS sidelined

Although, from outside, the PR coalition looks somewhat intact, there are contradictions and disagreements internally between the parties. This is only to be expected, given their different positions and approaches on some issues. The most recent one was when the PAS leaders announced that there have been secret meetings between PAS and UMNO since the General Election to discuss about ‘Malay and Islam’. This attempt by PAS was mainly to indirectly warn the PKR and DAP, which are secular in their approach, to stop sidelining the Islamic agenda of PAS in the state governments of PR. However, this opportunistic act of PAS has enraged non-Malays who voted for PAS in the last general election and some of them who have joined the PAS Supporters Clubs, which were created for non-Muslims. This action shows more clearly that, even though certain social activists considered PAS to have grassroots support or an ability to mobilise people, when it comes to ‘Malay or Islam’, PAS leaders are prepared to abandon the multi-racial wishes or rights of workers and ordinary Malaysians in relation to religion.

Nonetheless, Anwar is the mediator who maintains this coalition intact by promising that the PR has the ability to be brought in as a government. At the same time, this fragile coalition could break up if Anwar’s intention to come into power does not materialise as soon as promised.

Anwar against corruption and cronyism

The main agenda of Anwar is to clean up the system that has been corrupted and to dismantle cronyism in order to get the free market system into better shape. He is also advocating the need to build ‘civil society’ to guarantee more democratic rights. Although some people are still suspicious with his role over 16 years in BN government, his populist agenda such as ‘to reduce the price of oil the day after he becomes prime minister’ has garnered him further support.

At the same time, Anwar is cautious in his statements regarding capitalist policies. In a recent live debate on TV between him and the Information Minister on fuel, Anwar blamed corruption and cronyism for mismanagement of the income the government gains from Petronas but praised the ‘professional’ way that Petronas has invested and managed the billions of profit it has accumulated.

Since the election, Anwar has continually announced that he will come into power by mid-September. This has made the Abdullah and UMNO/BN government nervous and uneasy. Since then, they have been using the PR’s weaknesses and have attempted to frame up accusations against Anwar to tarnish his reputation. Last month an aide to Anwar lodged a police report alleging that he was sodomised by Anwar. Subsequently police arrested Anwar but released him the next day following some international pressure from government leaders and capitalist leaders. Recently a medical report revealed that the sodomy did not happen but the government was still adamant to go on charging Anwar in court. It is expected that the government would use this issue to discredit Anwar politically. But, given that this is an exact repeat of the treatment meted out to him when he posed a threat to Mahathir Mohammed at the head of the BN government in 1998, this attempt will only increase the sympathetic support for Anwar locally and internationally.

The UMNO/BN government is worried about the threat of Anwar because if he managed to take the premiership, Malay hegemony and crony capitalism will be in jeopardy. Furthermore, they are afraid that their past wrongdoings will be brought back into the limelight and this will ultimately destroy their political careers.

Since being released from prison in 2004, Anwar has revealed some of the BN’s political scandals. One of them was that of case-fixing in the judiciary. A businessmen’s son videotaped a government-linked lawyer brokering a deal with a chief judge. The videotape later was widely distributed on the internet and seriously tarnished the image of the judiciary and the government. Following intense pressure from the Bar Council and the public, the government was forced to appoint a commission to investigate the scandal. Subsequently, amongst those implicated by the investigation’s results were chief judges, a billionaire and former Prime Minister, Mahathir.

Recently, Anwar with the help of a private investigator, revealed the involvement of Najib, the Deputy Prime Minister and his wife, in the killing of a Mongolian model who was blown-up by police when she was in Malaysia and the attempt to remove all traces of the body with special explosives. The private investigator also alleged that Najib had an affair with this woman. Anwar has also exposed the involvement of the present Attorney General and Inspector General of Police in the framing-up of cases against him during the conflict with Mahathir in 1998.

Is crossing over from BN possible?

At this juncture, Anwar would have enough MPs from the BN camp to jump over to help form a PR government, abandoning the weakened UMNO/BN coalition. But these MPs are reluctant to publicly announce their intentions until they are certain that this new majority will materialise. Last week Anwar started his by-election campaign to be elected as an MP after five years of suspension from eligibility to stand. If he succeeds, this will further enhance the possibility of fulfilling his ambitions. Although he has a clear chance of winning the by-election, it is expected that the BN/UMNO machinery will go into full swing using every possible fraudulent practice to defeat him.

The UMNO/BN could also mount a desperate fight to ensure its own survival by intensifying its racial and religious rhetoric; too many of its people have got too much to lose. There have been some signs of a move in this direction. The first was last Saturday when a forum organised by Malaysia’s Bar Council to discuss the overlapping jurisdictions of civil and shariah courts was stopped abruptly as some protesters from Muslim organisations barged into the hall. About 1,000 demonstrators, including activists from UMNO and PAS, gathered outside the Bar Council’s building holding placards that read ‘Don’t challenge Islam!’, ‘Long live Islam!’ and ‘Bar Council, don’t play with fire!’. Racial slurs like ‘Pig!’, ‘Traitor!’ and ‘Go back to China!’ were also thrown about. Following this in another event, hundreds of ethnic Malay students demonstrated at the office of Selangor State Chief Minister, Khalid Ibrahim, a member of the opposition PKR, after he suggested that 10 per cent of the quota for Universitie Technologi Mara (a university that only caters for Malay students) be opened to non-Malay and foreign students. The demonstrations which accused Khalid of selling out the Malay race, were further ignited by UMNO. The incident was used by Prime Minister Abdullah Badawi to threaten the use of the Sedition Act and the draconian Internal Security Act, which allows for detention without trial, on those who discuss ‘sensitive’ matters of race and religion.

It is clear from this that the UMNO/BN machinery, with the support of some of the crony capitalists, will utilise every means to stop Anwar. However, if UMNO is further weakened by internal power struggles or the economy suffers more severely, this in turn could favour Anwar. In that situation, more national capitalists would look to Anwar as a saviour from economic catastrophe. Meanwhile, the international capitalists, among them former IMF and World Bank leaders, and most of the world leaders would lend him support directly or indirectly to advocate liberal capitalism in Malaysia.

Two party system only favours capitalism

The workers and ordinary Malaysians that are facing the heavy burden due to the food and fuel price hike are looking for an alternative to the BN. Intellectuals, NGOs, opposition party leaders as well as some activists are proposing that a two party system is the only way to create a healthy democracy in Malaysia. Some have suggested that workers’ organisations should “ally with the people” to defend the PR as the PR was a phenomenon “created by the people” and have advocated that workers should first support the PR to counter BN/UMNO and only at a second stage fight for implementation of their own programme.

While Anwar and the PR advocate ‘clean’ government, other aspects of their policies are clearly reactionary. They are pro-profit but with an agenda of reducing corruption, red-tape, and cronyism and to increase transparency and democratic space in order to make the system look better. Their populist rhetoric during elections is merely to get themselves elected and they most probably would surrender under the pressure of capitalism for the benefit of the profit system. The few reforms enacted by the PR state governments are limited in form and have not endangered the exploitative system of capitalism. Sometimes they have succumbed to the pressure of capitalism. This shows that reforms under capitalism are unsustainable and can be revoked if they endanger the business class.

On the other hand, the ordinary people and workers were pushed to support this PR when there was not any credible mass workers’ party as an alternative. The populist rhetoric of the PR has given them some illusions. The attitude adopted by ordinary people and workers was not much different from that seen in most countries where there has been no independent mass party of the working class.

It has been ten years since thousands of students and workers ousted Suharto’s autocratic regime, paving the way to turn Indonesia into the world’s third largest ‘democracy’. When Indonesia held its first free election in more than three decades in 1999, some 86% of the population came out to vote, reflecting their euphoria and hopes that democracy would improve their lives. However, since then, four new governments have come into power, but the so-called ‘democratic space’ has not alleviated the suffering of the majority of workers and poor people. According to Azyumardi Azra, professor of history at the State Islamic University, “In the last few years, many people have begun to lose faith in democracy as it has not been able to improve their economic and social lives”. It is expected that the voter turnout for next year’s general election in Indonesia could be 50% or less which symbolises their disillusion with the political system. The people’s disappointment is being exploited by Muslim radicals to push for an Islamic state, arguing that democracy is a Western product which has failed the people. Hasyim Wahid, an opposition politician is predicting that “the people will distrust the civilian government…Indonesia will become a collapsing state and just a step away from anarchy”.

Elsewhere, the Left forces in the Philippines supported a so-called progressive capitalist party which in turn had to be overthrown by another ‘people power’ movement when it became corrupted. Even in advanced countries such as the US, the UK and Australia, the two-party system only safeguards the ruling class. The working class in those countries is also marginalised by the anti-working class policies of these governments.

At this juncture it is crucial for socialists and trade unions in Malaysia to campaign among workers and youth for an independent party of the working class as an alternative to reactionary and pro-capitalist parties. But in reality some who try to act as “an opposition inside the opposition coalitions” have merely disappointed workers and young people. They base themselves on the inadequate idea that ‘the enemy of my enemy is my friend’ and do not judge objectively the need for a clear independent working class alternative at this crucial juncture of Malaysian politics. Even now, many ordinary people in ‘Makkal Shakthi’ (a ‘people power’ movement formed by supporters of the Hindu Rights Action Group), the PAS Supporters’ Club and even workers and youth that are disgusted with the ‘political games’ between UMNO/BN and PR are looking for other alternatives.

In this respect, with the unfolding crisis in global capitalism, socialist ideas and the need for a party of the working class will become attractive. Socialists should aim to educate these young people and workers along those lines towards fighting for and achieving a socialist society.

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August 2008