In Malaysia, Signs of Government Reform

Malaysian Prime Minister Ahmad Abdullah Badawi, under increasing attack from his predecessor for his handling of politically disastrous elections in March and other issues, has nonetheless been compiling an impressive record through his appointments of top officials in the civil service and government-linked companies (GLCs) such as the national air carrier, Malaysia Airlines (MAS).

Today, Badawi’s hold on power is increasingly tenuous after the cabinet kicked off a rebellion by agreeing to investigate former Prime Minister Mahathir Mohamad on charges of having fixed judicial appointments during his 22-year tenure. In response, Mahathir angrily resigned from the United Malays National Organisation and is seeking to dethrone Badawi. Although so far he has officially lured few UMNO members away from the party, he retains strong support within it.

Nonetheless, the prime minister’s record as a government administrator stands in vivid contrast to Mahathir’s. In the two decades of Mahathir’s rule, one financial scandal after another beset the country. The Bumiputra Malaysia Finance affair in the early 1980s saw US$1 billion (RM3.2 billion in 2008 ringgit) go down the drain. An attempt to corner the world tin market in the 1980s is believed to have cost some US$500 million. Betting in foreign exchange futures cost Bank Negara Malaysia, the central bank, another RM30 billion in the 1990s.

Perwaja Steel, intended by Mahathir to be the cornerstone of Malaysia’s industrialization drive, is estimated to have resulted in losses of US$800 million. Mahathir’s appointee to take over the operation and fix it, Eric Chia, was charged with corruption for allegedly steering US$20 million to a Hong Kong-based company and into his own pockets. Brought to trial at Badawi’s insistence, Chia was abruptly freed when the judge ruled that the defense had no case to answer, a case that contributed to widespread disillusionment with Malaysia’s judicial system.

To say that Badawi inherited a mess is an understatement.

For example, Malaysia’s state-owned airline was driven to near bankruptcy with RM9.5 billion (US$2.94 billion) in debt under a Mahathir appointee, Tajuddin Ramli. The government bailed out Tajuddin by buying his 29 percent stake in 2001 for RM1.79 billion at RM8 per share when the market price was just RM3.62.

When Badawi brought in Idris Jala as chief executive officer in 2005, the airline had booked a loss of RM1.3 billion in that year alone. Idris, a former Shell executive, has turned the airline around, bringing it back into the black by increasing both yield and revenue. This was not without resistance from a pampered staff. In mid-2007, there was a silent strike among employees in protest of Idris's painful policies.

"What does he (Idris) know about airlines? He is from an oil and gas company. MAS is not just a multi-national, it has plays a role in nation building," complained an UMNO member and Mahathir loyalist.

But Idris's appointment was significant, says a senior analyst with a Kuala Lumpur think tank. "First, Idris Jala is a Kelabit from Sarawak and a Christian. He was the first non-Malay non-Muslim to be appointed to head a GLC. Second, Idris Jala was previously employed by Shell and had an excellent track record. Third, Idris has succeeded in improving MAS, both in operationally and financially," she told Asia Sentinel in an email interview.

Besides MAS, other GLCs have been infused with new blood plucked from private industry. In February, Jamaludin Ibrahim, the former chief executive officer of Malaysia’s most successful telecommunications of company, Maxis Communications Bhd, joined Telekom Malaysia (TM), the privatized national telecommunication company, as its new group chief executive officer. Jamaluddin had grown Maxis since its listing in 2002 from RM11 billion to RM40 billion.

Another major reform by Badawi was renegotiating contracts between the national electricity provider, Tenaga Nasional Bbhd, and independent power producers, many of whom, connected to UMNO, had inflated production contracts. Long-term power purchase agreements required Tenaga to buy a fixed amount of power from the producers regardless of utilization. Under the new terms, leases have been extended to accommodate lower compulsory power purchases, which translates into lower fixed costs for Tenaga.

Badawi's appointees have also improved several government departments, particularly immigration, national registration and inland revenue. Applying for passports, compulsory identification cards and paying income taxes is now easier and faster. A sluggish civil service has been a perennial complaint among Malaysians as they plan their visits to government departments around the numerous tea breaks that civil servants are notoriously known to take. It was a problem that confounded Mahathir himself, who famously made civil servants wear name tags to give taxpayers the names of the offending bureaucrats so they could complain about them. Mahathir himself took to wearing a name tag, as did his ministers. It didn’t make government work any faster.

At one point, the drive to get people to change their old identity cards to the new MyKad, a multipurpose digital smart identification card, turned almost comical. As the deadline for to apply for the new cards approached, the government held a contest to motivate Malaysians. The deadline was extended repeatedly until people queued from as early as 6 am on the last day. In the end, the fine for late application was negligible. The contest was cancelled, leaving participants disappointed.

Just before the election this year, the government formed Pemudah, a task force comprising top civil servants and private sector officials with the goal of reforming the civil service and GLCs. Among its achievements listed in its website are improvements in the same departments and cutting more red tape for businesses, foreign investors and expatriates.

Opposition politicians have called Pemudah an election gimmick in response to flak for not doing enough. Nonetheless, governmental procedures are undeniably faster. Passport renewals, for instance, which used to take days, can now be completed in a single day – within two hours for early arrivals -- and they can be paid for by credit card.

Women have also made headway under Badawi, who appointed Rafia Salim as the first woman vice-chancellor of University of Malaya, the country’s oldest and most prestigious university. Another, Dr Sharifah Hapsah Syed Hassan, was appointed vice chancellor in the Universiti Kebangsaan Malaysia in the same year. Other key appointments include Zarinah Anwar, formerly the legal head of Shell Malaysia, as chairman of the Securities Commission, and Nik Ramlah as managing director.

Badawi’s accomplishments, however, have been compromised in the eyes of United Malays National Organisation stalwarts as one after another Mahathir’s beloved projects, with their money-spinning contracts for rent-seeking party members and cronies, were scaled down or stopped. A second bridge to Singapore, which the government had planned to build halfway and then to destroy Malaysia’s half of the existing bridge for force the island republic to go along with its plans, was scrapped, which infuriated Mahathir. Proton, the national car that Mahathir shepherded into existence against the advice of planners and which has incurred billions of dollars of debt, has been sidelined although it continues in existence. Early on, Badawi vetoed a US$3.8 billion national railroad contract to a consortium controlled by Syed Mokhtar Al-Bukhary, Malaysia’s richest man and a close crony of Mahathir’s.

Badawi has been forced by political weakness to scale back his plans to kill other Mahathir projects, including the Bakun Dam in Sarawak, which is considered to be a multi-billion dollar white elephant. In addition, he has been personally hampered by allegations that his son-in-law, Khairy Jamaluddin, has exerted undue influence on government contracts. An associate, Patrick Lim, has been under fire for his perceived closeness to Abdullah Badawi – so close, in fact, that he was nicknamed Patrick Badawi, raising questions over government land deals.

Badawi has been perceived as detached. He has occasionally fallen asleep during public meetings, and the sense of drift within the government is undeniable as he has veered from issue to issue without resolving many of them. Today, he is struggling to stay in power while support in within UMNO rallies behind Mahathir. It remains to be seen how the contest will play itself out. But if he goes it appears he will leave a stronger, more efficient government behind him, and more rational GLCs.