Islamic Finance

Malaysian businesses hopeful for corruption-free future under new government

| 12 May, 2018 | Interview
 Richard Whitehead
Malaysian businesses hopeful for corruption-free future under new government
Photo: New Malaysian Prime Minister Mahathir Mohamad (C) speaks during a news conference in Kuala Lumpur, Malaysia, May 11, 2018. REUTERS/Athit Perawongmetha

Amid the uncertainty that accompanies a transfer of power, business leaders are broadly confident of Malaysia’s future under a new government. Though cautious, businesses Salaam Gateway spoke to see government change as positive.

KUALA LUMPUR - On May 9, Malaysians chose a disparate group of parties, the Alliance of Hope (PH), to replace the National Front (BN) coalition that had ruled the country in one guise or another since independence from Britain in 1957.

The new government has promised much in the lead-up to a bruising election, but has largely been untested in its years of opposition. Prominent in its election manifesto was an anti-corruption pledge and a vow to make Malaysia among the ten least corrupt countries in the world by 2030. Malaysia’s rank on Transparency International’s Corruptions Perception Index that scores countries on how corrupt their public sectors are seen to be, has been slipping - from 54th in 2015 to 55th in 2016 to 62nd last year.

For Abbi Kanthasamy, the owner of 11 high-end restaurants and a furniture manufacturing and export business, the hospitality industry is set to bounce back after years in the doldrums.

“Consumer confidence is already on the rise [since the election]: if people feel more confident, they’re bound to spend more,” Kanthasamy told Salaam Gateway.

“The restaurant business has been really suffering in the last couple of years. There’s import costs, for example: BN guys would just give licences to their cronies for things like beef, so only certain people got licences to import. So hopefully more open imports will drive prices down,” said Kanthasamy.

He also believes his manufacturing business stands to benefit from a fresh government that says it is committed to targeting graft.

“Manufacturing is my main business, and it has been so difficult because of all the bullshit these [BN] guys were doing,” he said, claiming challenges under the previous government with regards accessing foreign labour supply.

“They basically starved the entire distribution of workers for almost a year, so we had a huge lack of labour. I expect manufacturing will get a huge boost—a lot of it moved to Thailand and Vietnam, and I’m sure it will come back now.”

RULE OF LAW

On May 10, Dr Mahathir Mohamad was sworn in as prime minister, a position he also occupied from 1981 to 2003. Since his return, he has pointedly referred to restoring “the rule of law” to Malaysian society after what he claims were years of the government riding roughshod over the judiciary and making shady deals.

Corporate lawyer Ashvin Kulasingam holds Mohamad to his word, warning him that Malaysians who have been promised greater transparency will now place closer scrutiny on the government’s affairs.

“My practice is pretty hinged on the economy as a whole, dealing with small- and medium-sized businesses and institutional clients. Having good governance will mean that more deals are done through lawyers, not with politicians and officials in smoky rooms,” Kulasingam told Salaam Gateway.

“Government servants cannot behave in the way they have been behaving over the last 20 years. The rule of law should come back now, the judiciary has to be independent. It’s been stalled for some time, but now they just have to dust it off and get it moving again,” Kulasingam added.

However, it has not gone unnoticed by Malaysians that the new prime minister himself was often accused of presiding over widespread crookedness in his first stint in power. Mohamad acknowledged this albeit while distancing himself from it, telling the BBC, “I admit there is some corruption in my staff—not me.”

In 2015, Mohamad broke with UMNO—the party that spearheaded the former BN ruling coalition—in anger over the alleged corruption of its top officials. He had been a member since 1946.

Meanwhile, media companies are enthused by the formation of a new government, which will “need to show vision and direction very quickly,” according to Dave Carpenter, a marketing, branding and research specialist and chief executive of Firestar, a Kuala Lumpur media agency.

“I am very positive,” Carpenter told Salaam Gateway. “The ringgit will probably drop a bit in the short or medium term, which means better margins on our international business. The wave of positivity and relief across the country will spin off into greater confidence, lower the brain drain which is pulling people out of Malaysia at an alarming rate, and generate a positive business environment.”

Between 2006 and 2016, more than 56,000 Malaysians renounced their citizenship, according to official figures. Further, a 2016 Oxford University survey, funded by Malaysia’s CIMB Foundation, found that almost 49 percent of ethnic Chinese respondents to a survey and over 37 percent of ethnic Indians, “felt a strong desire to emigrate from Malaysia”, mainly because of perceived unfair treatment, religious discrimination and economic policies that are thought to be skewed unfavourably against their respective races and in favour of the majority Malays.

Carpenter also expects to be able to pitch for work with government agencies and linked companies, “hopefully when the corruption and slow- or non-payment issues are cleaned up”.

In one of Mahathir Mohamad’s first moves, he has pledged to investigate various government agencies, including the Election Commission and the Malaysian Anti-corruption Commission, in a purge of alleged graft and bias.

"We will properly investigate all these things because we want to follow the rule of law," Mohamad said on May 11.

HOPES OF TRANSPARENCY

In industry, greater transparency will prompt more people to invest in Malaysia, according to Vinod Sekhar, president and group chief executive of Petra Group, which has interests in rubber, biotechnology and financial software. He claims that graft is now perceived as a cost of doing business in the country.

“Malaysia was going off the rails with the previous government,” Sekhar told Salaam Gateway. “It was out of control; there was so much opaqueness in the way we did business, at least in the large infrastructure projects and the way the government operated for licensing and other permits. This allowed for the credibility of the system to be questioned. The election of a new government will have an incredibly positive impact on business.”

Though the PH coalition that won the election has never gained federal power, it has run the states of Selangor and Penang—Malaysia’s economic powerhouses— since 2008, and this should translate to national government, Sekhar believes.

“If you see how Penang has been operating and how Selangor has been operating, there has been significant transparency across the board. And that transparency brings confidence and the willingness for others to invest, to take a chance with Malaysia.”

UNTESTED

Not everyone is as upbeat, however. Muhammad Anas Manmohan, who has interests in technology transfer, trading and foodstuff import, worries about the competence of PH’s ministers.

“It might be exciting for some people but not for everyone,” he told Salaam Gateway. “I voted for BN—I have nothing against [former prime minister] Najib [Razak] personally, because he has done a lot for the country.

“It all depends on the ministers in the cabinet—how open they are and how much knowledge they have of the departments they are in. They are new and they have to start from zero all the way up again.”

Manmohan believes the outgoing cabinet had some “good guys” who were receptive to advice and engaged with experts in their field.

“I also hope the new cabinet has more discipline,” he added. "I’m sure they have their own friends lined up also. I’m afraid there will be favouritism again.”

CONTINUITY HOPES

Likewise, Asgari Stephens, a venture capitalist, believes that Razak’s handling of the economy was decent, and hopes the change of government will have little impact on his investments.

“It’s been very quiet leading up to the election, anyway. It’s all been down a little bit since last year,” Stephens told Salaam Gateway.

He also points to PH’s experience and success in governing the two state governments, and the wealth of government experience of Mahathir Mohamad and Anwar Ibrahim, a former deputy prime minister who is expected to take over from the nonagenarian. This will happen pending a royal pardon following his conviction on a sodomy charge that his coalition colleagues say was politically motivated by former prime minister Najib Razak.

“This is a very experienced team. PH have been running Penang and Selangor, which is worth 50 percent of Malaysia’s GDP. That’s the sort of thing you’ve got to look at, so I don’t think much will change,” Stephens added.

(Reporting by Richard Whitehead; Editing by Emmy Abdul Alim emmy.alim@thomsonreuters.com)

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