July seems to have been a watershed month in the
administration of Malaysia's low-key prime minister, Abdullah
Badawi. After months of growing gripes that his good reformist
intentions were not matched by decisiveness or willingness to take
on vested interests in the governing United Malays National
Organization (UMNO), there is now a sense that fundamental changes
are taking place. The merit of Abdullah's Fabian tactics is becoming
clearer as symbols and personalities of the Mahathir bin Mohamad era
slowly fade into history.
Many positive things had
already happened in the previous 20 months since he came to office.
The courts were left free to release jailed former Deputy Prime
Minister Anwar Ibrahim; a report on the police pulled no punches in
its descriptions of corruption and abuse of power; a senior UMNO
minister was suspended and investigated for corruption; the news
media became slightly more open to opposition views; backbench
members of Parliament were not discouraged from querying government
deals; new senior appointments appeared to go to people with clean,
professional reputations; relations with America, Australia and
Singapore were patched up.
Nonetheless, there was a
sense that Abdullah remained the captive of the party. The cabinet
remained largely unchanged, and he was under constant pressure from
Mahathir-era interests. His preference for delegating authority
slowed decision making and upset those in the business community who
relied on government contracts. He left power in hands of people who
did not always share his enthusiasm for clean, institution-led
administration by strong institutions. He was evidently more popular
with the public than with the party.
However, he emerged from
the party's annual assembly last month with flying colors. He
declined to back off his pursuit of clean government and his
admonitions of Malays for not appreciating the opportunities offered
to their community to raise their wealth and educational levels and
remaining too reliant on preferential status. He should have enough
party power to get his supporters in place for the next UMNO
leadership elections in 2007. Meanwhile in the Ninth Malaysia Plan
2006-2010, due out this year, he will have the opportunity to put
his personal stamp on Malay and Malaysian goals.
The assembly also
coincided with an unseemly row between Mahathir and a former close
ally, Trade Minister Rafidah Aziz, over car import permits. This
left the old guard divided and being seen as having distributed
favors meant for Malays generally to a small elite. Abdullah on the
other hand appeared clean and to be promoting ministerial
accountability and open government. This episode has helped pave the
way for major cabinet changes likely in the next few months.
The permits issue has
also helped smooth the government-approved sacking of the head of
Proton, the national car maker and a pet Mahathir project. Earlier
he had been backed by Mahathir in opposing selling a large minority
to a foreign automaker.
Proton is important not
just because it is a huge enterprise in a car-obsessed nation.
Proton is key to a shakeup of the whole auto industry, to enable it
to compete with Thai and Chinese cars as tariffs come down under
various trade agreements. It is also a symbol of a drive for
efficiency throughout the government-linked companies that make up
some 35 percent of the capitalization of Malaysia's stock exchange.
That will mean treading on the toes of some over-protected Malay
businesses. But the new head of Khazanah, the state holding company,
has the right agenda of disposals and closures of companies acquired
during the Asian crisis.
Change will also be
driven by the ending of the ringgit peg to the dollar, which has
been a form of protection for inefficient industries and held back
both corporate reform and consumption. The currency has been
seriously undervalued. A current account surplus that was running at
8 percent of gross domestic product even before the commodity price
boom has ballooned to nearly 20 percent.
High commodity prices
can be either a crutch supporting hand-outs and extravagant schemes,
or used to spur productivity and a shift toward a higher-wage,
service-oriented economy. The chances now are better that the end of
the peg will help Abdullah's strategy to reduce the links between
government and business.
The July watershed did
not touch all issues confronting Abdullah. For example, a
significant start has yet to be made re-orienting the state's role
in religious affairs to make it more responsive to the kind of
modern, inclusive Islam necessary for a well functioning
multiethnic, trade-dependent nation. But if anyone can do it without
offending Malay Muslim sensibilities, it should be Abdullah, who is
seen to embody an Islam focused on ethics, not rituals.
Do not expect fast
progress, showdowns or confrontations. Economic growth will likely
be 5 percent, not the 8 percent of the heady pre-crisis days. The
inefficiencies and bureaucracy associated with pro-Malay policies
will mostly remain. But if Abdullah is given the time by UMNO, he
will do a lot to repair the social and institutional damage done by
Mahathir without destroying his predecessor's positive legacy.