Malaysia Is Staggering Down the Road to Failed Statehood

What started as a cry for help by Malaysians during rolling lockdowns and galloping Covid-19 infections has come to epitomize the descent of their once-proud nation. The Southeast Asian country lost its status as a role model for the developing world some time ago. Now, it may be relegated to the lane of also-rans that shone during the heyday of globalization but failed to capitalize on a strong start.  

Malaysians in distress have taken to waving the white flag from windows and driveways. At the most basic level, it’s surrender and a plea for assistance: food, a bit of cash to help pay the rent. Thanks to social media, the banners have taken on an emblematic life of their own. Not quite a movement; people have no hope, and not much desire, to overthrow the government, and it isn't clear these days that there’s one to topple. It’s more of a shorthand for discontent at the atrophying state and troubled economy.  

The country’s prime ministers were once given grudging credit for stable leadership, albeit with authoritarian traits. However, lawmakers have proven breathtakingly unable to coalesce around a figure or program to guide Malaysia through this plight. The nation is beset by multiple crises — social, economic and political — fed and worsened by each other. It may only be a slight exaggeration to invoke the dreaded label of a failed state.

Civic life is suffering from numerous misadventures. The latest twist in a saga that’s been running since at least early 2020 came in the small hours of Thursday. The United Malays National Organization, the party that led Malaysia from independence until losing power in 2018 in the aftermath of the 1Malaysia Development Bhd. scandal, declared it will leave the ramshackle coalition presided over by Prime Minister Muhyiddin Yassin and urged him to quit. That may not be the end of the machinations; UMNO itself is split between a group that wants to reclaim its dominant position and lawmakers willing to keep nice cabinet posts that Muhyiddin has given them. 

There isn’t an easy way out of this mess. Malaysia’s travails go beyond any one person. No prospective leader appears to have sufficient support in parliament, let alone a mandate from the population of 32 million, to replace the weak prime minister and provide stable administration. An election is supposed to be held once the pandemic subsides, a determination that’s hard to quantify. The monarchy, rotated among hereditary sultans of nine states, is being forced to leave the ceremonial shadows to referee, something that the royal households appear less than comfortable doing.

So, the surrender flag captures the end of a strutting, can-do mentality, or “boleh.” Citizens are stepping in where authorities have failed as the pandemic has delivered seemingly endless misery. Southeast Asia has been rocked by the delta variant. On Thursday, Malaysia added almost 9,000 Covid cases. Only a bit more than 8% of Malaysians have received both vaccine shots, as of Monday. Some of the strictest lockdowns have been in Kuala Lumpur and the nearby commercial powerhouse of Selangor state, and taken a toll. At their worst, factories have been shut, public transportation has run on a skeleton schedule, and the military has manned road blocks.Some measures have been eased, but large parts of the country remain shuttered. 

Asia, writ large, is in the midst of a strong economic upswing. However, that recovery has yet to fully visit Southeast Asia, a region of more than 650 million people. In its last World Economic Outlook, the International Monetary Fund forecast growth in Malaysia of 6.5% this year. Gross domestic product plummeted by more than 5% in 2020, the worst performance since the Asian financial crisis in 1998. To meet such a bullish projection or even get close to it, the second half of 2021 needs to be stellar. Further interest rate cuts and fiscal outlays are almost assured. But whatever the numbers say, many Malaysians aren’t close to feeling the benefit. Even rubber glove makers are worried; they appealed to authorities this week to lower Covid restrictions and let them continue to produce. 

The last decades of the 20th century offered a different route. During Mahathir Mohamad’s premiership from 1981 to 2003, Malaysia was an emerging-market icon. The country grew rapidly with relatively low inflation and stable budgets. Mahathir loved to poke at the West, but he opened markets and privatized state companies. He resisted aid from the IMF and challenged orthodoxy by imposing capital controls and fixing the exchange rate during the Asian crisis. Contrary to predictions that the efforts would fail, they shored up Malaysia.  

But it started to go wrong. Boondoggles like an ostentatious new airport and the soaring twin towers funded by state oil giant Petronas suggested waste. One of Mahathir’s successors, Najib Razak, bungled the disappearance of Malaysia Airlines Flight 370 in front of the world’s cameras. Najib led UMNO to defeat in 2018 and has been convicted of corruption related to 1MDB. Mahathir’s return at the helm of an opposition bloc offered a brief moment of renewal. But he couldn’t give up on political wheeling and dealing — even well into his 90s — and opened the door for Muhyiddin to edge him out of office. 

Longstanding ethnic and religious fault lines have been worsened in recent years by an urban-rural divide and a generation gap that no political organization has come to grips with. The credibility of the ruling class will keep eroding the longer it takes to vaccinate against Covid and for a recovery to take hold. The current intrigues sadly seem far removed from the daily needs of business, finance and even putting food on the table.

No country can continue on this course indefinitely and be a model for anything other than dysfunction.

Bloomberg