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Malaysia's future: inevitable doom or economic boom?

The (1MDB) 1 Malaysia Development Berhad scandal and the passing of the National Security Council Act push Malaysia away from economic growth and towards the path of corrupt political authoritarianism. But while the future looks bleak, a brief look at the past may provide hope, displaying Malaysia as a country capable of creating remarkable solutions to national crises.

The 1MDB scandal, which has seen $700 million flow into the private account of Prime Minister Najib Razak, and the passing of the National Security Council Act, to silence inquirers, positions Malaysia as one of the world’s most corrupt nations.

Corruption exacerbates income inequality. The average Malaysian household has not seen their monthly income rise above RM 1,847 in the last two decades. Meanwhile, politicians receive increasingly prodigious sums of money. The National Security Council Act and the Sedition Act cushion the elite against accountability and limit citizens’ capacity to contest corruption.

Will this descent towards political authoritarianism continue? Reflecting upon the Malaysian solution to the Asian Financial Crisis suggests that the country ought not to be underestimated in its ability to tackle national crises.

The Asian Financial Crisis: Survival of the Smartest

Untangling the current web of political corruption is an ambitious challenge. However, challenges are nothing new for Malaysia, a country that was victim to the Asian Financial Crisis.

In 1997, the Malaysian Ringgit (RM) suffered a 50% devaluation, the first shot in the battle we have all come to know as the Asian Financial Crisis. Prime Minister Dr Mahatir adopted a controversial approach that would see Malaysia surviving the Asian Financial Crisis better than its neighbours, Thailand and Indonesia.

The plan to ensure Malaysia’s economic sustainability did not come without resistance. Mahatir resisted international pressure by rejecting the (IMF) International Monetary Foundation’s loan agreement. Mahatir publicly denounced the IMF as a neo-colonial scheme to reward western interests. With no endorsement from the United States, Mahatir pegged the Malaysian Ringgit to the US dollar to avoid further currency devaluation. Foreign transactions of the Malaysian Ringgit were frozen, angering 100,000 Singaporean investors who were now unable to avoid potential losses by selling a collective RM 4billion worth of shares. These policies compromised diplomatic relations between Malaysia and economically developed nations - a risk for a country that could not afford to take any.

The strategy involved a risk that could only be mitigated by the support of Malaysian citizens. Mahatir appealed to Malaysians living abroad to send money back to their relatives to boost the Malaysian Ringgit. This was achieved by evoking feelings of patriotism and resentment towards western institutions for the demarcation of the Malaysian Ringgit. In return for their support, banks were instructed not to foreclose homes of owners who had lost their jobs because of the crisis. Strong local approval of Mahatir’s strategy and government provided financial security, paved the way for a people’s movement that would protect the country through economic tragedy.

By 2005, the frozen RM 4 billion in shares had appreciated to RM 14 billion and the IMF acknowledged that Mahatir’s unconventional strategy was indeed the right one. Malaysia had survived the Asian Financial Crisis on its own terms.

The New Battle from Within

In 1997, Mahatir argued how external factors such as western facilitation of financial crises and the IMF’s unethical loan conditions caused the Asian Financial Crisis. Now, Malaysia faces a political crises caused by internal factors. It is not IMF policies but rather Malaysia’s own Sedition Act and National Security Council Act that affirm how, in a bid to implement laws for self-preservation, the Malaysian government no longer provides for its people.

Politicians use religious and racial issues to shift attention away from escalating corruption. Key government officials endorsed the pro-malay rally last year. The Red Shirts movement aims to counter Malaysia’s pro-democratic ‘Bersih’ movement. This is done through protests asserting that Bersih’s demands for the resignation of Prime Minister Najib Razak are indeed racist and islamophobic. The grassroots solidarity that enabled the success of Mahatir’s strategy in 1997 is unlikely to resurrect itself in an environment of religious intolerance that dominates political debate at the expense of pertinent issues such as income inequality and the failings in national governance.

The crisis of political corruption demands a prompt and effective resolution. As different as this internal crisis is from the Asian Financial Crisis, the two are linked in that they both require solutions backed by civilian solidarity in order to succeed. Malaysian citizens and intelligent leaders united over the common goal of transparent governance and the eradication of corruption may see the nation surviving this crisis much like how it did the last. For this is a unique country with an underestimated potential for innovative solutions to big problems. History shows us that it may have what it takes to tackle political corruption and to come back stronger.

Diana Batchelor holds Bachelor of Commerce from the University of Western Australia, is originally from Malaysia, and is interested in the nexus between innovation, governance and sustainability.

Image credit: takeaway (Wikipedia: creative commons)

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