Best wishes for Umno and the nation
28 September, 2013
As appeared in TheStar.com.my
Avoid economics+politics double whammy
WITH the shine coming off many emerging markets, economic commentators locate the different economies in different orders of risk.
Malaysia does relatively well. We do not suffer from the dreaded twin deficit, fiscal and current account. But exports are coming off as are commodity prices. And the fiscal deficit is sticky in the downward direction, although the Government understands the need to bring it down, evidenced by the reduction in fuel subsidies.
Government revenues are healthy but over one third is derived from Petronas. The oil price is softening even if held up by international crises such as the situation in Syria. Expenditures will have to be watched, and indeed will be watched by the markets, to ensure good investment and return, not wasteful handouts.
Debt, the main cause of the unending Western financial crisis, is under control, although total public debt as a percentage of GDP is rising. Household debt is also rising, but non-performing loans are only 2% of total loan assets. The financial sector is well policed, much improved after the ravages of the 1997-98 Asian financial crisis and further tightened following the Western financial crisis since 2008, whose second main cause is widely accepted to have been poor regulation.
However, any mismanagement of the structural macro-economic balances could cause stresses in the financial markets, and performance of the real economy would be challenged, as interest rates will have to be raised and non-performing loans will rise.
So the picture for the Malaysian economy as a whole is mixed. It is better placed than most emerging economies, but it could be on a knife’s edge if our macro-economic management goes wrong.
Our being better than most emerging economies, however, can get to become worse than them if developments are analysed as leading the country to political imbalance. Economic imbalance coupled with political imbalance will be a double whammy that will hit the country hard.
That is why the happenings in Umno this year are so important, from the elections for the various posts now in process to the general assembly in December. They come at a critical juncture for the Malaysian political economy.
When nominations closed last Saturday, the two top posts were uncontested, which is a good thing for the reason there is less uncertainty. Markets hate that. But there is a crowded contest for all other party positions right up to the three posts of party vice-president. The outcomes will reflect the future as this is the team, especially at the national level, that will be leading the party into 2016.
Umno is the leader of Malaysian politics. The tone it sets will shape the future of the country. There is a Malay backlash against the outcome of this year’s general election that has to be contained. It is all too easy to ride the crest of that backlash to win popular support. It is frightening just to imagine what might be said or promised to get elected. And then… ?
More important than who gets elected is the tone that is set. This is leadership. It will define Malaysia’s medium-term future. Hopefully, there would have been a catharsis in the long run-in to the December assembly.
Umno has always come good at critical times in Malaysia’s history. On the cusp of independence in 1957. Through the formation of Malaysia and the Indonesian confrontation in 1963. In the aftermath of the 1969 riots. Will it show the same wisdom and composure following this year’s general election when it felt abandoned and betrayed by the Chinese? After all that’s been done for them.
Let’s face it. The jolt from the election result is how close Umno came to losing power. Its partners, the MCA and Gerakan, absolutely did not deliver the Chinese vote to the Barisan Nasional coalition.
There should be calm analysis of the election result, not a knee jerk reaction. Umno actually got more seats in the Dewan Rakyat than the last time around. This is no mean achievement against an opposition onslaught, sometimes called a Chinese tsunami but including substantial young urban Malay support. Umno would do well to look into why young urban Malays have turned away.
The crux of the matter is the loss of Chinese support. There are two issues here. First, the machinery to garner that support. Second, the Chinese concerns to be addressed to gain that support. They are of course related.
The leadership of the Chinese parties in the coalition had been poor and weak. They have been divided. How can they even begin to get organised, let alone address effectively the concerns of the Chinese electorate? And have they fared any better since the elections?
If it moves in that direction, however, Umno has itself to examine how Chinese concerns can be addressed, and with what kind of machinery or organisation. What more do the Chinese want? But they are citizens, not supplicants. Handouts may be the stuff of electoral politics but they do not constitute policies or address issues.
The Chinese in turn have to realise there is something called the art of the possible. They are known to be practical people. They have to show it in politics. There can be close negotiation of issues without excitement.
The recent announcement of bumiputra economic empowerment gave rise to negative comment. It is, however, not a new policy but an attempt, not unrelated to the Malay mood after the elections, to assuage aroused anger. It would have been better if two other things had accompanied the initiative: KPIs to measure and report on performance; and further measures to address the needs of the poor. Both would have taken the thunder out of a Malay political announcement however. It would be good if they were incorporated in the Budget on Oct 25. Not better late than never, but at the right time and place.
On the big political issues facing the country, it will be better not to have big circuses and to have grand designs. We have had them before. They did not achieve much. We don’t need public glare and grand notions that would be torn to shreds before anything has even taken place. Economic logic without political nous will not work. This is true in any society, what more in Malaysia.
Better patient hard graft with concerned parties to achieve what is possible. Best through third party non-political intermediation. Quiet diplomacy is not only applicable in international politics.
But all this is not possible if the message from Umno to the Chinese is there is no hope, no chance. Sometimes, in the politics of our country, almost every issue seems to involve a fight to the death. If we do not watch out, that is where we will get. The media, both new and conventional, does not help. They feed on each other to get everyone worked up.
The political parties do not help either. It would be an act of great statesmanship if Umno leaders signal the party can truly lead the nation, not orchestrate a chorus of political anger. That message will also be heard by the markets.
However, if there were to be a convergence of macro-economic pressures and vengeful political management, it will spell serious danger for Malaysia.