Thursday, January 10, 2008

Cracks appear in Malaysia's multi-ethnic settlement

By John Burton in Singapore
Published: January 10 2008 02:00 Last updated: January 10 2008 02:00

When at least 10,000 ethnic Indians gathered late last year in Kuala Lumpur to demonstrate against alleged racial discrimination, it triggered political tremors in multi-ethnic Malaysia. Not only did the protest defy a state edict against unauthorised outdoor assemblies, it also broke a taboo against publicly questioning the country's long-standing policy of preferential treatment for majority Muslim Malays.

Malaysia's government was clearly rattled. Abdullah Badawi, the prime minister, invoked the colonial-era internal security act for the first time since coming to power in 2003, detaining without trial five leaders of the Indian protest. This week it was also revealed that officials had been considering curbing the entry of temporary workers from India.

The protest revealed underlying racial tensions in what has been seen as one of the world's most successful multi-ethnic states and one of its more open economies. Malaysia is among south-east Asia's richest countries, regarded as a model for other Muslim countries in embracing globalisation.

Many observers were surprised that the protest was mounted by ethnic Indians, Malaysia's smallest and most quiescent racial minority, who have been the strongest supporters of the National Front coalition government since it came to power in 1957. But dissent has grown among Indians recently with the destruction of Hindu temples that officials said were built illegally and court cases that ruled that Muslim-born Indians could not convert to the Hindu faith.

Malaysia suffered race riots in 1969 when ethnic Malays clashed with Chinese, who have come to dominate the economy since they started immigrating in the 19th century. Since then, however, peace has reigned among the Malays (52 per cent of the population), ethnic Chinese (25 per cent), Indians (8 per cent) and indigenous people (10 per cent).

But there are signs of growing resentment among the country's minorities to Malay political dominance and what they see as "creeping Islamisation". "There used to be more mixing among the races but increased urbanisation has brought more competition for jobs and ethnic identities have become more important as a result," says Jawhar Hassan, head of the Institute of Strategic and International Studies in Kuala Lumpur.

The policy of preferential treatment for Malays, known as the new economic policy, has contributed to this trend. Established in the wake of the 1969 riots, the programme was meant to narrow the income gap between wealthy Chinese and poor Malays and indigenous people, known as bumiputra or "sons of the soil", by giving the latter preference for university places and state jobs. Businesses were required to have a bumiputra partner, who would hold at least a 30 per cent equity stake.

The policy succeeded in eradicating poverty among Malays but has been blamed for leading to an informal apartheid. The adoption of the Malay language rather than English as the language of instruction in state schools in the 1970s led Chinese and Indian families to enrol their children in private schools to preserve their native language. The overwhelming majority of students in state primary schools now are Malays.

The belief among ethnic Chinese and Indians that they are being denied opportunities has led many to emigrate, while others who do not have enough funds to start a new life abroad express frustration with the system. "I was born and raised in Malaysia and I consider myself as much a bumiputra as a Malay. But I'm treated like a second-class citizen," says Anand, an ethnic Indian taxi driver.

Several recent court cases involving the conversion of Muslims to other religions have exacerbated divisions. The civil courts have ruled that Islamic sharia courts, which oppose apostasy, are the sole authority on the issue since Muslims fall under their jurisdiction. The decision has raised doubts about Malaysia's commitment to freedom of religion and led to the formation last year of the Hindu activist group that organised the recent Indian protest.
Economists warn that the NEP represents a barrier to improving Malaysia's economic efficiency when the country is facing increased competition for foreign investment from regional rivals such as Vietnam. Mr Abdullah has sought to ease some affirmative action provisions in response to those concerns. But when he announced last year that the government would waive such rules for a new economic zone near Singapore, he was criticised by hardliners in his own United Malays National Organisation, Malaysia's dominant party.

The prime minister faces a tough challenge. He must appease Malay nationalists to keep his post, since his power base within Umno is weak. But his refusal to make concessions to minorities is likely to cause Chinese and Indian voters to defect to the opposition at the next general election, which could come early this year.

The government is expected to win the election easily, since it holds more than 90 per cent of the parliamentary seats. But a declining share of the vote for the National Front could undermine Mr Abdullah's authority and derail his economic reforms. An erosion in support for the Malaysian Chinese Association and the Malaysian Indian Congress, the two main parties in the National Front that represent the ethnic minorities, would further increase the influence of Umno on state policy.

Mr Abdullah already appears to be bowing to pressure from Umno conservatives, in spite of promising political liberalisation after the autocratic rule of his predecessor, Mahathir Mohamad. "The protest reflects the new openness that Abdullah sought to achieve by encouraging the expression of grievances. But he may have decided to use the ISA to calm down the power brokers within Umno, who don't like to see their authority challenged," says Ramon Navaratnam, head of the Malaysian branch of Transparency International.

A close aide to the prime minister painted a more alarming picture, saying that the recent Indian protest could create a backlash among Malays and lead to racial violence. "Abdullah appears to be genuinely worried about the situation," says a foreign diplomat in Kuala Lumpur.

There are other signs of a U-turn in Mr Abdullah's reform agenda. He recently scrapped plans to sell Proton, the troubled state-owned carmaker, to Volkswagen or General Motors, caving in to pressure from Malay subcontractors who feared a loss of business.

Any significant retreat from the NEP is unlikely as long as the National Front remains in power. "In spite of the complaints about the NEP, the fact is that the policy has ensured this country's stability and its abandonment would destroy it," says Mr Jawhar.

"The NEP was originally meant to eradicate poverty among all races, not just the Malays," says Mr Navaratnam. "But it has since evolved into a policy promoting the interests of Malays. If it can regain its original intention, the NEP can still play an useful role."

Copyright The Financial Times Limited 2008

http://www.ft.com/cms/s/0/c272c45e-bf1e-11dc-8c61-0000779fd2ac.html

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