Business unusual in Malaysia
Businesses and investors are still coming to grips with the new political order in Malaysia, where the government led by Mahathir Mohamad is moving quickly to place its stamp on the economy and also bring to justice those accused of corruption, including former prime minister Najib Razak. Trading was volatile last Monday when the stock market reopened in Kuala Lumpur, but the market has proved resilient and even gained 0.4% last Friday.
Sentiment appears positive as local funds and businesses alike seem to be welcoming the comeback of 92-year-old Dr Mahathir, who headed the coalition that ousted the Barisan Nasional (BN) regime on May 9.
He has already moved to keep a major campaign promise, saying the 6% goods and services tax (GST) would be scrapped on June 1. The economic impact will be cushioned by a surge in oil prices, which benefits Malaysia, a net oil exporter.
During his first term, Dr Mahathir championed Vision 2020 — a pledge that Malaysia would join the club of developed countries by 2020. But gross national income per capita of US$9,660 last year was still well below the World Bank threshold of $12,236 to qualify.
As he charts a new course, Dr Mahathir should be aware of the need for sweeping change in order to restore the reputation of the country’s business sector.
Malaysia was second only to Russia in the “crony capitalism” index published two years ago by The Economist, showing how closely business fortunes have relied on political connections in the Southeast Asian economy.
State-linked companies, which account for a third of the top 100 listed firms, will be in focus. One major change expected is the removal of politicians who sit on their boards.
“There are simply too many BN-linked companies and consumers have long understood that businesses need political affiliations in Malaysia,” said Corrine Png, head of the Singapore-based transport research firm Crucial Perspective.
Among the high-profile business figures wrong-footed by the stunning election outcome was AirAsia founder Tony Fernandes, who praised the Najib-led coalition in a video ahead of the polls. He was also pictured with Mr Najib in an AirAsia plane painted with the BN slogan: “Make My Country Greater.”
Four days after the poll, he posted a video apology on Facebook, saying he had come under “intense” pressure from the Najib sides.
He said he was asked to cancel extra flights on polling day, which would have made it easier for people to get home to vote. He said he was also pressured to fire the chairman of long-haul affiliate AirAsia X, who had expressed support for Dr Mahathir.
“Under the intense pressure, I buckled. It wasn’t right; I will forever regret it,” he said. The Malaysian Aviation Commission has denied his claims and has filed a police complaint.
At a briefing last week in Bangkok, Mr Fernandes applied a more positive spin: “My political stance is always the same. … I’m not a politician, I’m a businessman. Government should facilitate business, government should provide good and free competition, and that’s all I want.
“We are living in a fantastic environment for Malaysia now and it is only going to get better. We did it through the ballot box and the government that was in power for the past 60 years has now changed. And there is going to be a rocky period for sure as it is the first time in 60 years that you have a new government, but they are going to do a lot of good things. I am really confident.”
In any case, Mr Fernandes has learned his lesson and now his airline needs to win back trust from the public. It should have steered clear of politics in the first place.
“Tony Fernandes is a major businessman who did what many have done. He went along with the flow and the polls that picked BN to win a narrow victory,” academic Thitinan Pongsudhirak told Asia Focus.
“When the results turned the other way, he came out to apologise. It’s understandable. At least he addressed the issue of his wayward leaning, especially because the vote outcome was an indictment against Mr Najib’s corruption.
“Mr Fernandes would have been best served by staying away and above the cut and thrust. Thai big business does this as a matter of routine in an omnidirectional fashion, approaching all and favouring none in particular.”
In the bigger picture, the new regime in Malaysia should also take a second look at government-business ties and work to promote fairness and impartiality toward all.