EU envoy: Malay policy ‘discriminatory’ – ISN

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EU envoy’s comments on Malaysian economic and social policies cause furor and focus attention on alleged discrimination in advance of trade talks and parliamentary elections.

By Simon Roughneen in Kuala Lumpur

The senior European Commssion (EC) representative in Malaysia has become embroiled in a row with government ministers over critical remarks made about the country’s economic policy. The remarks have heightened tensions and focused minds on internal Malaysian political and economic issues in the run-up to the EU-ASEAN trade negotiations and are seen as an implicit intervention in Malaysian party politics in the lead-up to elections, which could be held later this year.

Thierry Rommel, head of the EC Delegation to Malaysia, accused the Malaysian government of maintaining a discriminatory and protectionist economic policy. In a widely reported speech made on 21 June to the EU-Malaysia Chamber of Commerce and Industry, Rommel asserted that: “Malaysia claims that these are infant industries that need to be protected […] but is the Malay-centered policy that drives protectionist polices.”

The “Malay-centered” policy Rommel referred to is the New Economic Policy (NEP), a sensitive political and economic issue in the country’s multiethnic society. Instituted after race riots in Kuala Lumpur in 1969, it favors ethnic Malays, collectively known as the bumiputera, over Malaysia’s two other main ethnic groups: Chinese and Indians (mainly Tamils). The intention was – and remains – to reduce poverty among Malays – who comprise 52 percent of the Malaysian population – and other indigenous groups, by developing affirmative action business and social welfare policies designed to bring socio-economic status to the level of Chinese- and Indian-Malaysians.

Critics argue that the NEP is no longer necessary due to the emergence of a Malay middle class in the 1980s. This view was echoed by a controversial report issued last year by a local think tank, the Centre for Public Policy Studies, which claimed that the bumiputera’s share of the country’s total equity could now be as high as 45 percent, well in excess of the NEP target of 30 percent. The United Malays National Organisation (UNMO), the Malay component of the country’s governing coalition, and the multiethnic Barisan National (BN) retorted that the bumiputera owned no more than 18.9 percent of Malaysia’s total equity, which would justify maintaining the NEP. However a cynic might argue that if the official statistics were true, then the NEP might need revising, given the slow progress toward the NEP’s 30 percent target.

Rommel described the Policy as discriminatory and a serious hindrance to any hoped-for trade deal, saying that “there is no level playing field for foreign companies even when in partnership with bumis (bumiputeras)” and that “European companies will want to seize the trade and investment opportunities Malaysia might offer […] as it becomes more open, rule-based and fair-competition-oriented market economy.” The clear implication is that Malaysia is none of the above at present. Preferential treatment afforded to ethnic Malays contributed to the scuttling of a proposed US-Malaysia trade deal earlier in 2007.

EU-ASEAN free trade talks are due to take place later this month. Rommel’s speech demonstrated his belief that a free trade agreement (FTA) with the EU would benefit Malaysia – and the EU has underwritten the ASEAN economic integration process with a EUR7.2 million (US$9.8 million) program to help ASEAN create a common market by 2015. He stated that an EU-ASEAN FTA would see ASEAN country exports to the EU 27 member states increase by 20 percent. But whether or not this would be the case is unclear. For example, Mexico’s trade deficit with the EU has grown from US$9.4 billion to US$16.9 billion since a FTA was signed in 2000.

Rommel asserted that the NEP facilitates protectionism and forces foreign companies to operate in a lopsided playing field, with rules forcing them to take on ethnic Malays as business partners. He also mentioned corruption briefly in his 21 June speech. Malaysia’s corporate governance image has taken some hefty hits in recent months. In the most recent and high-profile example, air cargo firm Transmile was forced to rewrite and downgrade its reported profits for the past 2 years after a special audit uncovered false statements of revenue and asset purchases going as far back as 2004. Malaysia ranks 44th out of 163 countries on Transparency International’s 2006 Corruption Perception Index.

The debate has shifted from the relative merits of and interests involved in Malaysia opening its domestic market up to European business, to Malaysia’s domestic inter-ethnic and inter-religious relations.

Although officially discontinued in 1990, in practical terms the NEP remains in place. While the NEP was never simply about economics, its “economic” aspects are becoming increasingly embroiled in Malaysia’s inter-ethnic and inter-religious relations, and is poised to be a pivotal issue in Malaysian elections scheduled for 2009, but possible by the end of this year.

Anwar Ibrahim – a would-be Malaysian opposition leader, and after Prime Minister Abdullah Badawi and former PM Dr Mohamed Mahathir, Malaysia’s most prominent political figure, bases his political comeback and possible electoral challenge on challenging the NEP, and its chief proponents, the BN and particularly UNMO.

Anwar was jailed in 1999 after being found guilty of corruption and sodomy, but was released in 2004 after the sodomy conviction was reversed. Banned from participating in party politics until April 2008, he is consultant to the Peoples Justice Party (PKR) co-founded by his wife after he was incarcerated. However he is regarded as leader-in-waiting, and will likely assume this role once the ban on his participation in politics ends. It is thought that Badawi may call snap elections before next April to undermine an Anwar-led opposition campaign, which could center around revising the NEP.

A still-born attempt to create an opposition coalition comprising the secular Chinese Democratic Action Party (DAP) and the Malaysian Islamic Party (PAS), together with the PKR, failed in 2004 due to the PAS stated agenda of establishing an Islamic state, which it now claims to have relented on. Anwar’s own Islamist past means that he will have to work hard to convince older Chinese and Indian voters of his inclusive credentials, while trying too hard may alienate the Malay masses. Revising the NEP will be key to this, and will almost certainly be the centerpiece of the Anwar-PKR led attempt to remove the UMNO-led coalition.

Rommel’s speech was not received well by Malaysia’s governing party. In response, Datuk Syed Hamid, Malaysia’s foreign minister, took Rommel to task for “interfering in the internal affairs and politics of a country.” Hamid’s views were echoed by the deputy prime minister Najib Razik.

Malaysian political leaders are renowned for their prickly attitude toward the West, and this is partly rooted in the Malaysian self-image as Islamic-but-tolerant, developing-but-stable. Mahathir frequently lectured on the relative merit of “Asian values” and the relative stability maintained in Malaysia’s multi-ethnic industrializing economy, over what he saw as the secular decadence, commercialism and socio-economic stratification of western societies.

The 1969 riots aside, when hundreds of Chinese were killed, Malaysia has kept the lid on ethnic and religious tension, a source of immense pride to the political elites and NEP-proponents. In Kuala Lumpur and elsewhere, the three main ethnic groups are ubiquitous and mix freely. Malaysia has long been held-up as a relatively successful example of inter-faith pluralism in a majority Muslim country, as well as having a viable practical application of both Sharia and secular civil law.

However Badawi has relented to pressures from Islamists on stopping the establishment of an inter-faith commission And while the PAS may join Anwar’s coalition and drive to disestablish NEP, its newly-elected deputy President Masharudin Mat Isa stated recently that “I am still very much an Islamist.”

Malay Muslim separatists in southern Thailand operate across the porous border from Malaysia and former Thai PM Thaksin Shinawatra argued that these fighters trained in Malaysia’s Kelantan state, which Kuala Lumpur consistently refuted. Singapore alleges that one of five suspected members of Jemaah Islamiyah (JI) arrested there in late June received training in Malaysia.

JI is a mainly Indonesian al-Qaida affiliate infamous for the Bali bombing in 2002 and intent on establishing an Islamic state comprising Indonesia, Malaysia and the southern parts of Thailand and the Philippines. The allegations were defiantly refuted by Kuala Lumpur, which seeks to maintain the image of Malaysia as a harmonious plural society, with no place for Islamist extremism or militancy. This zeal has gone right down to denying the PAS media access and withholding state funds, merely fueling resentment among Malaysians who may or may not have an Islamist agenda.

But many Malays are open to revising the NEP, and such examples merely mean that Malaysia is not the spotless exemplar of universal moderation that its leaders have promoted in an almost-Orwellian fashion, even though neighboring states such as Indonesia, the Phillippines and Singapore have all, to varying degrees and for different reasons, acknowledged the presence of militant Islamists on their soil.

Malaysia’s High Court recently ruled that a Malay woman could not have her citizenship status altered to recognize her conversion to Christianity. According to citizenship laws, ethnic Malays are all classed as Muslim, irrespective of whether this is the case or not. The High Court stated that the case was a matter for the Sharia courts – which decide on civil cases for Muslims in Malaysia. Given that Sharia law prohibits conversion, the case was effectively closed by the ruling. Moreover the ruling apparently privileges Islamic law over the parallel civil system in operation for Malaysia’s non-Muslims, effectively Malaysia’s non-Malay citizens.

On 21 June, Rommel described Malaysia as a ‘moderate Islamic country’. But the NEP is designed to benefit Malays and the bumiputera, who are almost all Muslim, while Chinese and Indian-Malaysians are almost all non-Muslim. With the NEP issue conflated with issues of religion and identity, and increasingly politicized as elections loom, Malaysia’s affirmative action may be seen in a different light, and inter-religious and inter-ethnic good relations may not be assured.

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