Citizens versus crony capitalists

Ibrahim Ali (below) blames the Chinese for the ‘problems’ that the Malays are facing but conveniently forgets that the actual problem is ‘crony capitalism’. The term describes the close relationship between the state and big business.

More specifically crony capitalists are ‘private-sector entrepreneurs who benefit from close relationships’ with leading civil servants and politicians, obtaining ‘not only protection from foreign competition, but also concessions, licences, monopoly rights and government subsidies. [White 2004].

In short, crony capitalism is a system where politics and business are intertwined and involve corrupt practices which in the long term undermines a nation.

Many Malaysians perceive that ‘crony capitalism’ is exclusively a by-product of affirmative action policies such as the New Economic Policy (NEP).

This is not precise as ‘crony capitalism’ has its roots in the Alliance party, where a compact between the Malay political elite in UMNO and the big Chinese business in MCA was made, as the MCA hoped to protect Chinese economic interests from excesses of Malay nationalism while receiving favours from the UMNO led Alliance government.

This would later be expanded first by Tun Razak as he used the public sector, and therefore selected civil servants, to go into business and later by Mahathir who personified the term ‘crony capitalism’ through his privatisation policy. Therefore, by definition, the Alliance and subsequently, the Barisan Nasional government practise a ‘crony capitalistic’ system. By extension, millions of Malaysians willingly or unwillingly support ‘crony capitalism’ by voting for the BN or participating directly in them.  

Hence, the current debate on the removal of affirmative action will not resolve crony capitalism in Malaysia; although it may remove an emotionally strong but weak argument against crony capitalism as this system predates affirmative action and can be continued even without affirmative action. The system is built into BN.

Debilating effects

Crony capitalism in Malaysia is well researched and is an accepted fact. It’s debilitating effects on the country and its citizens are well expounded. The works of K.S. Jomo and E.T. Gomez, utilising terms such as ‘money politics’ and ‘rent-seeking’ is sufficient to illustrate ‘crony capitalism’ in Malaysia authoritatively.

Furthermore, no less than the current prime minister and former premiers, Mahathir (left) and Badawi, have repeatedly spoken of this curse.

A final indictment must be the amazing speech that Tengku Razaleigh gave recently at ISEAS.

Two key questions then arise: (i) can crony capitalism be dismantled and (ii) how can it be dismantled? The answer to the first is that crony capitalism can only be dismantled if BN is dismantled or removed and Pakatan Rakyat does not follow the same system.

Let’s look at PR to decide if they would be perpetuating ‘crony capitalism’. A crucial test is to analyse if PR states have put in place systems of checks and balances that prevent ‘crony capitalism’. The DAP led Penang appears to be at the forefront through the introduction of the ‘competent, accountable and transparent’ (CAT) guidelines that has improved the regulatory environment with regards to government procurement.

The PKR led Selangor had introduced ‘SELCAT – Special Select Committee on Competence, Accountability and Transparency’. An excellent example of SELCAT was when the Chair took to task his own colleague for finishing his allocation within a ‘very short period’ and requested a detailed account of his expenditure. The PAS led state governments of Kedah and Kelantan, while not having any specific agency, as part of PR, have promised to do away with ‘crony capitalism’.

Overall, it appears that PR states are better managed then BN led states although there have been accusations of ‘crony capitalism’ in PR states especially by BN friendly sources. None have yet to be proven. It may be the case, which PR being new, have yet to establish ‘crony capitalism’ as it requires incumbency.

Alternatively, the real threat of being voted out maybe a disincentive to venture into crony capitalism. Furthermore, with BN waiting to pounce on any real or perceived slip-ups, PR has every incentive to behave.

Difficult to dismantle BN

This leaves us with the problem of BN. Can the BN be dismantled especially when the livelihoods of millions of Malaysians are tied to this ‘crony capitalistic’ system? The short answer is no.

Through its control of the government and budget allocations, GLCs, institutions such as the royalty, the police, the judiciary, the Election Commission, Islam, the civil service, the media and a large portion of the entrepreneurial class through the control of government procurement, it is near impossible to dismantle BN.

The only feasible avenue for Malaysians to challenge BN is through electoral competition as this is where the BN is at its weakest.  BN is in power because there is sufficient buy-in from Malaysians across a broad spectrum.

Through its components parties, BN claims representation of various ethnic groups despite the compelling evidence of the debilitating effects of crony capitalism on the very constituencies it claims to represent. Hence blaming UMNO, affirmative action and/or Malay opportunists and chauvinists addresses only half the problem.

BN will continue to reign over Malaysia unless there is a paradigm shift among a majority of Malaysians that being a supporter of ‘crony capitalism’ is not in the best interest of the country.  

Will Malaysians be citizens with the best interests of the country at heart, or crony capitalists with the primary goal of acquiring personal wealth?

For further reference:
Nicholas J. White, 'The Beginnings of Crony Capitalism: Business, Politics and Economic Development in Malaysia', c. 1955 – 70 in the Journal of Modern Asian Studies 38: 2, 2004.
E.T. Gomez and Jomo K.S., Malaysia’s Political Economy: Politics, Patronage and Profits, Cambridge University Press, 1999.

GREG LOPEZ is a postgraduate scholar at the Crawford School of Economics and Government, Australian National University (ANU).