A Sober Prediction of Malaysian Competitiveness

Growing Pains

Putrajaya’s one-party policy and its 40-year-old pro-Malay affirmative action program will spell trouble for the country’s economy, effectively turning Malaysia into the weakest link in Asia, a Bloomberg columnist said today.

Citing Putrajaya’s poor handling of opposition politicians and the search for MH370, William Pesek said Malaysia will continue to don headlines for all the wrong reasons if Putrajaya continues to be complacent in economic matters.

“Its 40-year-old, pro-Malay affirmative-action program chips away at the country's competitiveness more and more each passing year.

Quota System and a Unruly Taximen Protest

“The scheme, which disenfranchises Malaysia's Chinese and Indian minorities, is a productivity and innovation killer. It also has a corrupting influence on the political and business culture,” Pesek said.

Pesek based his observations on a new report from Sarah Fowler of UK-based Oxford Economics, which ranks Malaysia the "riskiest country in Asia of those we consider," more so than India, Indonesia and even coup-ridden Thailand.

In the report, Fowler said: “Prompted by its high levels of public debt, rising external debt and shrinking current account surplus, there has been a shift in the perception of risks towards Malaysia and away from Indonesia”

Pesek added that current-account surplus is dwindling, from 16 percent of GDP in 2008 to 3.7% last year, while household debt, according to Fowler, is "worryingly high" at more than 80% of GDP compared to less than 60% in 2008.

Fowler’s also wrote that Putrajaya’s “climate of entitlement amongst the Malay community limits entrepreneurialism and vested interests within the UMNO still resist change.”

Pesek said that the only thing holding Malaysia back is its insular political culture.

“The government's handling of Malaysia Airlines flight 370 said it all. Its deer-in-the-headlights response to the plane's disappearance was the product of an insular political culture.

“The trouble is, that insularity is holding back a resource-rich economy that should be among Asia's superstars, not its weakest links.” – June 5, 2014.