Presdented by Wan Saiful Wan Jan, CEO of IDEAS, at the Rotary Club of Taguig Fort Bonifacio, RI District 3830, 09 September 2013 in Manila

1. The State of
Democracy & Economy
in Malaysia
Wan Saiful Wan Jan
Presented at the Rotary Club of Taguig Fort Bonifacio
RI District 3830
Metro Club, Rockwell, Makati City
Monday, 9 September 2013
www.IDEAS.org.my

2. About IDEAS
• Launched on 8 February 2010
• The only independent free market think tank in
Malaysia
• Key aim: “making markets work for the poor”
• Key principles:
o Rule of law
o Limited government
o Free market
o Individual liberty and responsibility
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3. Where is Malaysia?
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4. Malaysia – key facts
Area 329,847 square km
Population 29.5 mil
Capital Kuala Lumpur (pop: 1.5 mil)
Urban population 73%
Political system Constitutional monarchy,
Parliamentary democracy
Voting system Constituency-based first-past the post (Westminster
style)
Independence 31 August 1957 from Great Britain
Ruling party Barisan Nasional (National Front), a coalition of 12
mainly ethnic based political parties, led by Najib
Razak (Prime Minister and Chairman of BN)
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5. Malaysian Politics
• Mainly between two coalitions
• Dominated by ethnic politics
• Top-heavy, with most big decisions made by the
top leader
Barisan Nasional (BN) Pakatan Rakyat (PR)
Najib Razak (Prime Minister) Anwar Ibrahim (Oppos. Leader)
12 mainly ethnic based parties 3 very different parties (Centre
left, Islamist, ???)
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6. What did Najib propose?
• Liberalise the economy (New Economic Model)
o Reduce number of SOE
o Reduce subsidies and handouts
o Reduce Malay dependency on government
o Move out from middle-income trap
o High-income nation (>USD15,000 per capita) by 2020
• Reduce the influence of ethnicity
o Promote 1Malaysia
o Allow direct membership into BN (instead of into the
ethnic-baed parties)
o Make merit a key criteria
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7. The recent GE13
• Before 2008, BN always had 2/3 majority – crucial to
make constitutional amendments
• Losing the 2/3 majority contributed to Abdullah
Badawi being forced to step down from PM
• GE13 (5 May 2013) was the toughest for BN, they
performed worst than 2008 (133 seats vs 140 seats)
• BN won 60% of seats but only 47% of popular votes
• These put Najib under pressure from his own party,
and many reforms are at risk
• There were many abuses of state machineries
during the election (GLCs and PLCs)
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8. Key Observation Findings
• GE13 was partially free
but not fair
• Many abuses of state
machineries and state
operated enterprises
(SOEs)
• Media was heavily one-
sided
• The problems were
entrenched in key
institutions, not so much a
problem with the Election
Commission

9. Has Najib succeeded?
• 1Malaysia has become a welfare programme
• Subsidy costs 16% of total annual budget (MYR 14bn
from USD 85bn)
• Govt debt is higher than ever (54% of GDP in 2011)
• Continuous budget deficit since 1997
• Malay business lobby has become stronger
• Government continues to intervene in the economy
• Ethnic relation is not improving
 All due to the ethnic structure of our political parties,
especially in BN, and the desire to win GE13
 Ethnic politics is disrupting reform, and strengthening
dependency
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11. What alternative does Anwar
offer?
• Free university education
• Higher minimum wage
• “Bonus” for senior citizens above 60
• Greater control on price of fuel, electricity and
water
• Legally mandated payment from husband to wife
• Many more redistribution programmes by creating
a welfare benefit system
 In other words, Anwar will take Malaysia firmly to the
left
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12. What does the future look like?
• Najib may be forced to step down by 2016 by his
own party
• To reduce pressure, Najib will have to slow down the
pace of reform
• Who replaces Najib is unclear, but likely to be less
liberal
• Anwar will not be Prime Minister
• But if Anwar can hold PR together, PR could
become government in GE14 (2018)
 The challenge is therefore to embed sustainable
and competitive policies now, before Najib goes
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13. Key lessons
• Ethnic-based politics is very difficult to end
o Hence better not to allow ethnic-based politics to gain
ground
• Welfarist policies are very difficult to stop once
started
o Hence better not to start one in the first place
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