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Malaysia’s Free Trade Agreement With USA November 6, 2006

Posted by ummahonline in Islam Bi La Hudud, Kolum.
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By: Farish A NoorSince the late 1960s, Malaysian politics has been demarcated and shaped by considerations of race and ethnicity above all else. When Malaysia (then known as the Federation of Malaya) came into being in 1957 its founders envisaged the country to be a secular constitutional democracy.

‘Secular’ here meant not only a state that stood neutral in regards to religious differences, but also racial and ethnic ones. While it was still the case that the majority Malay community were accorded certain constitutional privileges then, the notion of an abstract Malaysian citizenship that united and equalised all Malaysians based on the idea of universal citizenship was still there. All that came to an end in 1969, and when the political culture of the country was altered on the basis of a new ‘inter-elite ethnic compromise’ that was inaugurated by the New Economic Policy (NEP) that favoured the Malay-Muslims of the country.

Malaysia-watchers would know by now that since the 1970s Malaysia’s political and economic development has been driven by local political demands; chief of which was the apparent need to ensure that the comfort zone of the Malay-Muslims would not be threatened by other competing forces in and out of the country. The New Economic Policy was then used to ensure that Malay-Muslims were given extra incentives and opportunities to get a bigger share of the economic pie, on the basis that they were among the poorest citizens of the country.

What became embarrassingly obvious by the late 1970s however was the fact that such race-based preferential treatment was being rapidly exploited by the Malay elites themselves, many of whom belonged to the newly created statist-bourgeoisie who came under the patronage of the ruling United Malays National Organisation (UMNO). During the era of former Prime Minister Mahathir Mohamad, Malay entrepreneurs were given extra advantages to get them to the top via the fast track, and the measures used to protect and expand the Malay comfort zone included policies designed to protect Malay-owned businesses and new industries.

For decades the NEP and its subsequent avatars have been the subject of intense criticism in the country. Critics of the NEP point to the blatant instances of abuse which range from contracts being given out to Malay businessmen known to have close links to the UMNO party to the fact that the sons and daughters of Malay politicians and millionaires were being given scholarships to continue their studies abroad. Yet the nature of racialised capitalism and race-based politics in Malaysia protected UMNO and its followers from criticism within, and few corrective measures were taken to deal with the dependency complex that had set in as a result of the NEP.

That may, however, come to an end soon: Malaysia has not been able to isolate itself from the wider trend of economic globalisation and the need to open up its economy to direct foreign investment (FDI), notably from major capitalist powers like the United States of America and the rising economies of Asia like China. Malaysia is now in the process of negotiating a free trade agreement (FTA) with the USA, which ranks as its most important trading partner, with more than US $ 44 billion going in terms of bilateral trade last year alone.

One of the major stumbling blocks to the FTA deal between Malaysia and the USA is the persistence of governmental policies that protect Malay economic interests and remain uncompetitive. The American government insists that the deal can only go through if the Malaysian government relents in the area of protection of its local banks and government procurement procedures- both of which happen to be ‘hot’ subjects of contention as they strike directly at the heart of the Malaysian government’s pro-Malay policies. To grease the deal, the Americans have stated bluntly that Malaysia stands to gain (or lose) a potential sum of US$ 250 billion in US government procurement of goods and services in the country, including the all-important electronics industry which is one of the pillars of the Malaysian economy.

More conservative political voices in Malaysia, such as that of former Prime Minister Mahathir Mohamad, argue that to concede to the demands of the Americans would mean selling the country short and to undermine all the protective measures that previous administrations have put into place. Right-wing Malay organisations have also argued that a free trade agreement would effectively end the good old days when Malay-owned businesses would have a first stab at government tenders and other projects that may be dished out, forcing them to compete with local non-Malay as well as foreign companies.

So the current establishment under Prime Minister Abdullah Ahmad Badawi is caught between a rock and a hard place: Cognisant of the fact that Malaysia cannot afford to close its doors to foreign investment in the business climate of today, it nonetheless fears the prospect of angering the majority-Malay electoral constituency. What then is to be done?

Perhaps the answer lies in the simple truth that the world does not owe the Malays of Malaysia a living after all. Over the past three decades many of the success stories of Malaysia have actually come from the non-Malay business community and independent enterprises that went out into the harsh world of business on their own, not expecting state support or protection.

The fall out of the 1997-98 economic crisis showed just how vulnerable the Malay sector of the Malaysian economy had become, thanks to the culture of patronage that had been ingrained in UMNO’s race based politics all along.

Today, with the prospects of a dominant China (and India) looming over the horizon, Malaysia’s Malay leaders and politicians may well have to contemplate the very thing they have been avoiding all along: to tell the truth as it is, and to remind the Malays of Malaysia that they can no longer expect the state to play nanny to their erstwhile ambitions. Freedom to trade also means freedom to compete, and in the harsh world of globalised economics there are no free meals or second chances for anyone.

Note: Dr Farish A. Noor is a Malaysian political scientist and human rights activist. He can be contacted via www.othermalaysia.org.

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