Malaysian PM’s battles have only just begun

Malaysian Prime Minister Najib Razak was cleared by the country’s attorney general this week of any wrongdoing after nearly $700m was discovered in his personal bank account. The money was a “personal donation” from the Saudi Royal Family, according to the ruling.

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Prime Minister Najib Razak must be commended for his ability to remain composed under pressure and stick to his story. But it is uncertain if those associated with him can do the same. The systematic nature of the leaks that are damaging him and his party, the United Malays National Organisation (UMNO), must certainly come from those in the highest echelons of power.

The leaks continue, despite the sacking of the previous deputy prime minister, Muhyiddin Yassin, and the previous attorney general, Abdul Gani Patail, as well as the reshuffling of cabinet ministers. Added to this is the gruesome murder of the deputy public prosecutor,Anthony Kevin Morais, who was investigating corruption in 1MDB [a strategic state fund $11 billion in debt] and the pressure on Malaysia’s top civil servants investigating 1MDB not to mention the direct intervention in investigations into 1MDB. This must certainly be unnerving even for seasoned warriors.

The Sarawak Report and, more recently, the Wall Street Journal have alleged that Najib is involved in activities that are illegal under Malaysian laws and, possibly, international laws. The systematic nature of these allegations as reported by [those newspapers] appears to be built on good journalism, robust investigation and, after Attorney General Mohamed Apandi Ali’s press conference, authentic data and information.

The government of Malaysia, and certainly the new attorney general, never questioned the veracity of the data and information used by Sarawak Report and the Wall Street Journal. So the question then becomes: who is feeding these organisations such highly classified information?

It is certainly not the opposition. The opposition does not have the connections within the public sector at such high levels. Neither does it have connections with individuals within government-linked corporations (GLCs) at such high levels. It is common knowledge that only individuals who… UMNO find not objectionable reach the highest echelons of the public sector or GLCs.

The real issue for UMNO is not about resolving corruption. This is a political party built on patronage and that thrives in a political system that relies on patronage. The real issue is whether they can win the next general election and if Najib can be the one to deliver that win.

Judging by the systematic nature of the leaks, it is almost certain that there are groups within UMNO who are not confident that Najib can lead them to electoral success. There are sound reasons for this assessment. Although the electoral system is stacked in their favour, Barisan Nasional (BN) [the ruling coalition] has done badly at the past two general elections – in 2008, by losing the psychologically important two-thirds majority and, in 2013, unbelievably losing the majority of the popular vote. And projections suggest that ­– if there is no further gerrymandering – the BN will lose at the next elections. Most worrying is perhaps that even among Malays, Najib’s approval ratings are now at 31% – the lowest ever in his seven-year administration, with approval ratings for the BN below 50%.

It is entirely plausible that it is groups within UMNO that are hostile to Najib, with access to senior civil servants, who are providing the damaging evidence to Sarawak Report and the Wall Street Journal. Why are they doing it? The answer is simple: there is simply no room within UMNO to democratically replace its leader. Ever since Razaleigh Hamzah’s unsuccessful challenge for the leadership of UMNO in 1987, there has been no contest for the top post. A succession of changes to the rules by the incumbent has made it impossible for challengers, especially those who lack the adequate resources, to go for the top post.

Najib has also successfully fended off other democratic options such as a vote of no confidence in parliament, here with the abetment of the opposition. They would rather face him than another UMNO candidate not linked to the 1MDB scandal.

Yet, because the leaks are now so damaging, it is impossible to find an exit strategy for Najib. Hence his battle cry of “No retreat, no surrender” is not about saving face, but about ensuring that he is not convicted.

The important question now is how far Najib will go to stop the leaks.

Greg Lopez is a Malaysian research fellow at Murdoch University’s Asia Research Centre in Perth, Australia.

This article first appeared in Southeast Asia Globe

 

 

Global, not Asian, focus is the key to growth

Australia’s success in the Asian Century should come from unilateral domestic reforms of trade policy, not preferential deals.

Asians love fireworks. So it was hoped the government’s Asian White Paper (WP) would be a cracker. Instead we got a fizzer, long on vague aspirations but short on good ideas.

Australia’s growing trade links with Asia are good. But so are our links with non-Asia. We should not be focusing policy attention in any particular direction, especially as the basis of reform. Our interests are to continue as a global player. Regional economic integration should be based on commercialism, and not be at the expense of global integration nor of policies that “place regional economic integration at the centre of decision-making processes”.

Remember the Asian financial crisis in the late 1990s. Our openness to the whole world enabled us to weather that storm as Australian exporters faced with declining regional competitiveness as the dollar appreciated against Asian currencies thankfully turned to non-Asian markets e.g. North America.

This global openness also undoubtedly contributed to Australia’s resilience to the GFC. When the next regional or global crisis occurs, or relative competitive positions change, Australian traders will hopefully again be able to respond accordingly. It is imperative that our businesses can quickly change markets globally as economic conditions change.

The WP’s national objective that “Australia’s trade links with Asia will be at least one-third of GDP by 2025” lacks sense.

Good trade policy is the opposite of that espoused in the WP, namely opening our market on a non-discriminatory (MFN) basis. That approach underpinned the Hawke-Keating unilateral trade-related economic reforms in the 1980s and 1990s which turned around our economic performance. MFN liberalisation is also the core of the WTO, which has stagnated as members, including Australia, rapidly embrace preferentialism.

Alarmingly, the WP drives yet another nail into the Hawke/Keating approach by endorsing discriminatory reform via preferential trade agreements (PTAs). The WP refers to the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) as a “high-quality, truly liberalising agreement”. Where is the evidence for this?

It also endorses the ultimate goal of regional integration to be an APEC free-trade area, which the Trans-Pacific Partnership (TPP) and the Regional Economic Cooperation Agreement (RECA) could become. This would depart from the non-discriminatory foundation on which Australia formed APEC. Worse still, the TPP is being negotiated under US influence in a way to ensure China will not join.

The WP’s prescription for Australia to become “more open and integrated with Asia through comprehensive regional agreements” shifts the responsibility for decision making away from our domestic institutions towards a non-transparent bargaining process with other countries which the record shows will not deliver genuine liberalisation.

Instead, it will slow our domestic reform by generating new excuses to do nothing e.g. to retain tariffs as “bargaining coin” in PTAs. The government’s willingness to surrender our domestic policy to foreigners is evident in the WP stating that tariffs will only be reduced on a non-MFN basis as part of negotiating future PTAs.

This ignores the Productivity Commission’s (PC) policy advice in 2010 that PTAs do not work as advertised and are oversold. It urged Australia to revive unilateral (MFN) reforms since these provide larger, more certain gains.

Instead, the WP has endorsed the “competitive liberalisation” model of the US, using PTAs as the basis of reform without any credible policy evaluation. It also calls for more PTAs, including possibly joining the Pacific Alliance. The inefficiencies of creating such a “noodle bowl” of overlapping PTAs with multiple memberships are obvious.

Sadly, the WP seems unaware that PTAs undermine the WTO’s effectiveness. With the WP further supporting PTAs, it is not credible for the WP to claim as it does that the “WTO is the government’s preferred vehicle for pursuing trade liberalisation”.

The mockery of WTO principles is extended by the WP’s enthusiasm for Australia and the US co-chairing efforts to form an International Services Agreement. As the US will insist this be non-MFN, Australia should “walk away” from the whole idea.

Australia will handle the 21st Century (in Asia and elsewhere) if it focuses its trade policy on unilateral domestic reforms. Unfortunately, the WP advocates a trade policy that takes us as far away from that strategy as is imaginable.

This article first appeared in the Australian Financial Review.