By Muhammad Nazreen

Malaysia has been classified as one of the highest ranked nations in a recently published Crony-Capitalism Index. A study by The Economist indicates Malaysia ranks third behind Hong Kong and Russia leaving behind its counterparts, Singapore (5) and Indonesia (10).

This survey revealed that Malaysia largely benefitted its cronies through state-sanctioned monopolies which are believed to have closely-linked political connections to the ruling party.

The nexus between politics and business in Malaysia is undeniably related to the promulgation of the New Economic Policy, which was intended to have its own ‘trickle-down effect’ by distributing wealth throughout the inter-ethnic composition. The formation of NEP has helped to alleviate the poverty rate from 30% in the 1980s to the current 15%, this was achieved partly by increasing Bumiputera corporate ownership by 30%.

Although NEP helped to reduce poverty substantially and led to the growth of a Malaysian middle and business classes, there has been growing concern over the influence of political patronage on the business sector, the apparent increase of corruption and other abuses of power.

The above-mentioned study revealed the fact that crony-capitalism has largely benefitted from government policies. The index has shown that the growing wealth of the 1% of “elites” represent more than 50% of Gross Domestic Product. It is significant that society is growing more unequal in terms of wealth composition.

The situation in Malaysia showcases the reality of an emerging divide. This has to do with the growing attitude of rent-seeking behaviour. It is an open secret that this has been a common practice among businessmen in Malaysia. To get benefits for business, you need strong access to politicians and those in power.

A prominent economist, Joseph Stiglitz demonstrates that America is facing the same problem of growing inequality. In his book, The Price of Inequality (2013) he put the situation in America was rooted from the dominance of the 1%  of top Americans who control the economy. This stark reality in America bears resemblance to that of Malaysia. The Gini co-effecient (which measures disparity between the rich and poor) in Malaysia has remained the same for the past few decades.

The economy remains unproductive. Pertaining to the nature of the ‘trickle-down effect’, some quarters may argue that inequality is unescapable in the quest to enhance economic growth.

As put forth by Jomo KS and Edmund Terence Gomez, UMNO’s hegemony and related political patronage have encouraged rent-seeking behaviour and certain abuses of power-discretion in awarding rents, government contracts and investment to their cronies and friends.

The monopoly goes to the incompetent few where they control the means of production.

The playing field is not level, due to cronyism. One has to gain extra access with politics to get projects, even though they are qualified. This sickening reality impedes fair and free competition, which resulting in corruption and graft.

Robber-baron refers to the domination of American industrialists in the wake of late 19th century. They are the selected few who have amassed extraordinary wealth and became powerful in the industry. This term was applied due to their exploitative business practice and subsequently accruing high levels of government’s influence. To name a few of robber-baron industrialists : Andrew Carnegie, J.P Morgan, John Rockerfeller and Cornelius Vanderbilt.

Same goes to the case of Malaysia. The intricacy between business and politics helps a selected few to emerge in corporate world. We could remember the name of Tun Daim Zainuddin, who rose through ranks and became a corporate godfather. He was helmed FleetArm Holding, an investment body for UMNO.

From FleetArm, he worked tirelessly to gain enormous wealth. He became disillusioned with money. Apart from that, he successfully mentored several individuals who later gained prominence in corporate world. Tan Sri Halim Saad, Tan Sri Wan Azmi Wan Hamzah and Tan Sri Tajuddin Ramli were known to be his proteges, who later benefitted from government contracts to own lucrative businesses.

To be a robber-baron is to engage in rent-seeking behaviour. They were closely alligned with several individuals and parties to reap extra business benefit. As exemplified by Jomo KS and Edmund Terrence Gomez in his thought-provoking book, Malaysia’s Political Economy (1997), rent-seeking activities have become rampant in Malaysia. Everyone who has extra connection with political patronage is likely to generate profits.

The problem arises when taxpayer’s money is involved to secure themselves in business gambling. When the Asian Financial Crisis struck Malaysia in 1997, there were many ‘robber-barons’ who lost enormous capital due to stock market failures. If we could remember, several corporations that did not represent public interest who were at the threshold of bankcruptcy were abetted by the government. The government was forced to bail them out.

The worsening scenario is when the ordinary people face extra financial difficulties were left behind, but when the cronies were at the fore of crisis, they were subsequently saved using taxpayer’s money.

The government should open up the public space for better democracy. A revealing study in India in 2004 shows that democratic institutions should protect the rights of every citizen by empowering social justice.

That’s the only way where the economy can flourish and help to alleviate poverty. It is not uncommon to say that democracy is hostile too. However, a fair competition where everybody starts from the same level playing field, can only begin with a strong democratic aspiration.

The rent-seeking behaviour is causes the economy to be vulnerable. It encourages corruption and money graft, which has a strong co-relation to the tendency of power abuses. UMNO had administered this country since independence. It was proven it lacks serious effort to deter rent-seeking behaviour from encapsulating Malaysia. It’s the time for Malaysia to change. -The Rocket