One Missing Jet, One Sunken Ferry, Two Responses

MAY 1, 2014 6:03 PM EDT

By William Pesek

There are no ideologues in a financial crisis, former Federal Reserve Chairman Ben Bernanke once said. Clearly the same doesn’t hold true for political crises, as a comparison of Malaysia and South Korea very quickly reveals.

Tragedy has struck both nations in recent weeks, their travails played out in horrifying detail on the world’s television screens. Fairly or unfairly, the hunt for a missing Malaysian airliner and the desperate attempt to rescue and now recover victims from the sunken Sewol ferry are being viewed as tests of the governments in Putrajaya and Seoul, if not of Malaysian and South Korean societies. The grades so far? I’d give Korea an A-, Malaysia a D.

In the two weeks since the Sewol tipped over and sank -- almost certainly killing 302 passengers, most of them high school students -- Korea has been gripped by a paroxysm of self-questioning, shame and official penitence. President Park Geun Hye issued a dramatic and heartfelt apology. Her No. 2, Prime Minister Chung Hong Won, resigned outright. Prosecutors hauled in the ship’s entire crew and raided the offices of its owners and shipping regulators. Citizens and the media are demanding speedy convictions and long-term reforms.

And Malaysia, 55 days after Malaysia Airlines Flight MH370 vanished? Nothing. No officials have quit. Prime Minister Najib Razak seems more defiant than contrite. The docile local news media has focused more on international criticism of Malaysia's leaders rather than on any missteps by those leaders themselves.

Both countries are democracies -- Malaysia’s even older than South Korea’s. The key difference, though, is the relative openness of their political systems. One party has dominated Malaysia since independence, while Korea, for all its growing pains and occasional tumultuousness, has seen several peaceful transfers of power over the past quarter-century. Unused to having to answer critics, Malaysia’s government has responded defensively. Korean officials, on the other hand, are reflecting, addressing the anger of citizens, and delving into what went wrong with the shipping industry’s regulatory checks and balances.

That’s why Korea is likely to come out of this crisis stronger than ever, unlike Malaysia. The two nations responded similarly after the 1997 Asian financial crisis, too. Malaysia’s then-Prime Minister Mahathir Mohamad sought to prove Bernanke’s axiom wrong, bizarrely blaming some shadowy Jewish cabal headed by George Soros for the ringgit's plunge. Malaysia didn't internalize what had gone wrong or look in the mirror. It didn't admit it had been using capital inflows unproductively and that coddling state champions -- including Malaysia Airlines -- was killing competitiveness. Never did the ruling United Malays National Organization consider it might be part of the problem.

Contrast that with Korea's response to 1997. The government forced weak companies and banks to fail, accepting tens of thousands of job losses. Authorities clamped down on reckless investing and lending and addressed moral hazard head-on. Koreans felt such shame that millions lined up to donate gold, jewelry, art and other heirlooms to the national treasury.

South Korea's response wasn't perfect. I worry, for example, that the family-run conglomerates, or chaebol, that helped precipitate the crisis are still too dominant a decade and a half later. But the country’s economic performance since then speaks for itself.

Now as then, Korea’s open and accountable system is forcing its leaders to look beyond an immediate crisis. Ordinary Koreans are calling for a national catharsis that will reshape their society and its attitude toward safety. Park’s government has no choice but to respond.

Malaysia’s government, on the other hand, appears to be lost in its own propaganda. To the outside world, acting Transport Minister Hishammuddin Hussein performed dismally as a government spokesman: He was combative, defensive and so opaque that even China complained. Yet Hishammuddin is now seen as prime-minister material for standing up to pesky foreign journalists and their rude questions. The government seems intent on ensuring that nothing changes as a result of this tragedy.

As hard as it seems now, South Korea will move past this tragedy, rejuvenated. Malaysia? I'm not so sure.

To contact the writer of this article: 
William Pesek at wpesek@bloomberg.net.

To contact the editor responsible for this article: 
Nisid Hajari at nhajari@bloomberg.net.

Source: http://www.bloombergview.com/articles/2014-05-01/one-missing-jet-one-sunken-ferry-two-responses

Malaysia Needs to Get Off the Road to Mediocrity

By William Pesek Apr 23, 2013 10:00 AM GMT+0800

In his bid for re-election, Malaysian Prime Minister Najib Razak has dispensed with all shame. Vote for me, he has essentially declared, or Malaysia will suffer “catastrophic ruin” and an “Arab Winter” of the kind that has undone economies from Egypt to Libya.

Both warnings are ludicrous -- signs of how worried Najib’s National Front coalition is of losing power for the first time since 1957. They speak to the desperation of a government that has come to serve itself, not Malaysia’s 29 million people. And they are emblematic of a leader whose talk of bold change hasn’t been matched by action.

About William Pesek»

William Pesek is based in Tokyo and writes on economics, markets and politics throughout the Asia-Pacific region. ... MORE

FOLLOW ON TWITTER

More from William Pesek:

• Stuck in a Trap? Escape-Artist Korea Has Pointers
  Q
• Australia Must Wean Itself From China
  Q
• China’s Unlikely Rival: Japan
  Q

Najib’s claim is this: Giving the opposition, led by former Finance Minister Anwar Ibrahim, a chance to lead on May 5 would reverse all the gains Malaysia has made since the 2008 financial crisis. The economy would crater, stocks and the currency would plunge, and chaos would reign.

Change through the ballot box in a democracy should never be disruptive or chaotic, and rhetoric suggesting otherwise is disingenuous. Najib likes to say: “The time has come for Malaysians to make a decision.” Actually, the time has come for Malaysia’s government to grow up.

Najib’s scaremongering, some of which came out of an April 17 Bloomberg News interview, smacks of the re-election campaign run almost a decade ago by then U.S. President George W. Bush. Instead of this vote-for-me-or-you’re-in-danger appeal, Najib should scare up some headline-grabbing reforms that leave Malaysia better off in the future.

Developing Complacency

The country’s biggest problem is complacency. Malaysia Inc. can be a slow-moving, change-resistant animal in a very dynamic neighborhood. Nations as diverse as China, Indonesia, the Philippines, Thailand and Vietnam are evolving in ways that have enabled them to leapfrog peers in a few years. They are all competing for the same infrastructure dollars, factory projects, bond deals and stock issues. Singapore, meanwhile, has become the beneficiary of many of Malaysia’s best and brightest, who have emigrated in search of a more merit-based economy.

Malaysia is a resource-rich nation with huge potential. But it remains shackled to a four-decade-old affirmative-action program -- favoring ethnic Malays -- that turns off foreign investors and undermines national productivity. This so-called New Economic Policy was devised by Najib’s father, Abdul Razak Hussein, the country’s second prime minister.

Najib, 59, has indeed rolled back some of those preferences to encourage investment. He did away with a requirement that foreign companies investing in Malaysia and locally listed businesses set aside 30 percent of their equity for ethnic Malays and indigenous peoples known as “bumiputera.” It’s time to go much further and dismantle all race-based policies.

Little Difference

When, for example, can more ethnic Chinese expect to start winning the really big government contracts? Here, Najib’s real quarrel may be with his own government. Anwar is pro-markets and pro-investment, too. When you look at the core of what Najib is promising voters -- less corruption and higher living standards -- it’s not wildly different from the opposition’s message. The trouble is, Najib is navigating a 13-party coalition whose interests are as entrenched as any in the world. His partners are pushing back quite assertively, afraid of losing the Malay vote they could once take for granted.

Money Politics

The opposition has gained traction with its claims that Malay-run companies, from power producers to toll-road operators, unfairly benefit from their ties to the government. Najib’s pledges to clamp down on crony capitalism and to instill greater transparency have been undercut by measures such as the ban on street protests that passed on his watch. Now, many voters hope to wipe the slate clean.

When he’s not trying to frighten voters, Najib is touting Malaysia’s 6.4 percent growth as proof he is a radical-change agent. In fact, much of Southeast Asia also is booming, and the government is helping to artificially fuel growth with populist handouts. Even more than the $444 billion of private sector-led projects ranging from oil storage to a mass-transit railway that Najib has championed, the country needs reforms that will revitalize the system as a whole. The government should be encouraging more startup companies, widening the tax base and hacking away at subsidies that institutionalize complacency.

All too often, rapid gross-domestic-product growth is used as a smoke screen to hide underlying cracks in an economy’s long-run potential. In Malaysia’s case, the numbers mask a government too focused on staying in power to do its job. If anything should be scaring Malaysian voters, it’s that.

(William Pesek is a Bloomberg View columnist. The opinions expressed are his own.)

To contact the writer of this article: William Pesek in Tokyo at wpesek@bloomberg.net

To contact the editor responsible for this article: Nisid Hajari at nhajari@bloomberg.net

Source: http://www.bloomberg.com/news/2013-04-23/malaysia-needs-to-get-off-the-road-to-mediocrity.html

Dr M warns Najib against alienating BN members in run-up to polls

August 09, 2012

KUALA LUMPUR, Aug 9 — Prime Minister Datuk Seri Najib Razak should be careful not to further estrange members of his Barisan Nasional (BN) coalition that could cause them to lose power at polls due next April, Tun Dr Mahathir Mohamad told Bloomberg in a report published today.

The still influential former prime minister, who is seen to be Najib’s mentor, was quoted by the business wire as saying any defections from the ruling coalition could “result in BN losing the next election.”

Dr Mahathir said Najib is leading a weak government. — File pic

The BN had just weeks earlier lost two senior federal lawmakers from Sabah — regarded as its safety deposit box for votes — after they pledged allegiance to the opposition Pakatan Rakyat (PR) pact in the run-up to key national polls that could see a regime change in Southeast Asia’s third largest economy for the first time in 55 years.

Datuk Seri Anwar Ibrahim, a deputy prime minister-turned-opposition leader, has also hinted at the possibility of more defections from BN in the next few weeks.

The move appears to be shaking the BN’s grip on power despite Najib’s personal popularity, based on the latest survey by independent pollster Merdeka Center in June, that saw the sixth PM’s ratings at 64 per cent even as the government he leads slipped six percentage points to 42 per cent for the same period.

“The problem here is not Najib — he is a leader of a weak government,” Dr Mahathir told Bloomberg.

Najib has previously fuelled speculation of snap polls as early as last year but the delay in calling for elections appears to be motivated by his desire to win by a bigger margin than the BN did in Election 2008 when it lost its customary two-thirds control of the 222-seat Dewan Rakyat and four states to opposition parties.

Political analysts weighing in on the disparate ratings for Najib and his BN told Bloomberg the delay in calling for polls may be detrimental to the both the PM and his coalition.

Farish Ahmad Noor of the S. Rajaratnam School of International Studies in Singapore told Bloomberg that Najib is unlikely to claw back a bigger victory for the BN despite the delay.

“I doubt that either side will be able to win an overwhelming victory.

“Under such circumstances, Najib’s delay may serve the opposition better as they have more time to campaign among the young and the fence-sitters, which they are doing already,” he was reported as saying.

Another political analyst, Ong Kian Ming who lectures at the UCSI University here, told Bloomberg Najib appeared to be distancing himself from his Umno party, which is the BN lynchpin, citing the PM’s campaigns “that is more presidential in nature” than one that bats for the team.

“Umno is a party that is seen as corrupt and that has a lot of warlords with vested interests.

“He’s effectively saying ‘come and vote for me even if you don’t like these things’,” Ong was quoted as saying.

Ibrahim Suffian, who is director of the Merdeka Center that carried out the electoral surveys on Najib’s and the BN’s performances, was reported saying the government “is weak because it has to continuously relent to demands.” 

Najib appears to have styled himself a reformist and has introduced various economic, social and government policy changes in a bid to rocket Malaysia out of the middle-income trap and into the ranks of high-income nations by 2020, but has been seen to backtrack on some merit-based policies due to resistance from hawks within his party.

Since taking over office from Tun Abdullah Ahmad Badawi in April 2009, Najib has delayed rolling back state subsidies on essential items and implementing a goods and services tax.

Source: http://www.themalaysianinsider.com/malaysia/article/dr-m-warns-najib-against-alienating-bn-members-in-run-up-to-poll/