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Malaysia Is Asia's Weakest Link, Says Bloomberg

A Bloomberg columnist says Malaysia's raced-based political culture is turning the country into Asia's weakest link when it should be amongst the superstars.

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Putrajaya's Policy Is Turning Malaysia Into The Weakest Link In Asia, A Bloomberg Columnist Said On 5 June 2014

Putrajaya

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Putrajaya’s one-party policy and its 40-year-old pro-Malay affirmative action programme will spell trouble for the country’s economy, effectively turning Malaysia into the weakest link in Asia, a Bloomberg columnist said today.

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According To Columnist William Pesek, Malaysia Has Been Making Headlines For All The Wrong Reasons, And The Nation's Economy Could The Next In The Sequence Of Unfortunate News

Citing Putrajaya’s poor handling of opposition politicians and the search for MH370, William Pesek said Malaysia will continue to hog headlines for all the wrong reasons if Putrajaya continues to be complacent in economic matters.

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A New Report By Sarah Fowler From Oxford Economics Has Ranked Malaysia As "The Riskiest Country In Asia", Even Before India, Indonesia And Thailand

Malaysian Prime Minister Najib Tun Razak

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That's the thrust of new report from Sarah Fowler of U.K.-based Oxford Economics, which ranks Malaysia the "riskiest country in Asia of those we consider," more so than India, Indonesia and even coup-happy Thailand.

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On the surface, she points out, all's well: Growth is zooming along at 6.2 percent, the external balance is reasonably sound and political stability reigns. But all's not what it seems. "Prompted by its high levels of public debt, rising external debt and shrinking current account surplus, there has been a shift in the perception of risks towards Malaysia and away from Indonesia," Fowler explains.

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Fowler Highlights A Number Of Malaysian Vulnerabilities That Requires More Attention

Fowler Highlights A Number Of Malaysian Vulnerabilities That Requires More Attention

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Malaysia wasn't included in Morgan Stanley's "fragile five" list of shaky emerging economies last year, as were India and Indonesia. But Fowler scratches at a number of Malaysian vulnerabilities that deserve more attention: external debt levels that in recent years have risen to close to 40 percent of gross domestic product; a higher public debt ratio than India; the biggest short-term capital flows among the 13 major emerging markets Oxford tracks, including Indonesia; and a shrinking current-account surplus.

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This last point is still somewhat of a positive. As the mini-crises in developing nations last year demonstrated, a balance-of-payments surplus is a very good thing to have.

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Also, Malaysia's use of so-called macroprudential policies has succeeded in preventing huge property bubbles of the kind afflicting Singapore and Hong Kong. But Malaysia's current-account surplus is dwindling, from 16 percent of GDP in 2008 to 3.7 percent last year. And household debt is, to use Fowler's words, "worryingly high" at more than 80 percent of GDP compared to less than 60 percent in 2008.

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The Malaysian Government's Complacency Is A Worrying Factor In Malaysia's Economic Future

What really concerns Oxford, and myself, is the complacency factor in Putrajaya. Malaysia is effectively a one-party state, having effectively been ruled by the same party for six decades.

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Pesek Says The Pro-Malay Affirmative Action Policy Is Hurting The Country's Competitiveness, Killing Innovation, Corruption, And Corruption Influence On Political And Business Culture

Pesek Says The Pro-Malay Affirmative Action Policy Is Hurting The Country's Competitiveness, Killing Innovation, Corruption, And Corruption Influence On Political And Business Culture

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Its 40-year-old, pro-Malay affirmative-action program chips away at the country's competitiveness more and more each passing year. The scheme, which disenfranchises Malaysia's Chinese and Indian minorities, is a productivity and innovation killer. It also has a corrupting influence on the political and business culture.

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"A climate of entitlement amongst the Malay community limits entrepreneurialism and vested interests within the United Malays National Organization still resist change," Fowler argues.

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The Need For Change In Malaysia's Government That Has Been Clinging On To Power For Six Decades Is Becoming Paramount

The need for change is becoming acute, though, as China's dominance grows and neighbors like the Philippines get their acts together. Indians just elected the party of reform-minded Narendra Modi and Indonesians will soon choose a successor for Susilo Bambang Yudhoyono in a contest that's all about reducing corruption and improving governmental efficiency.

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And Malaysia? Well, Prime Minister Najib Razak's lackluster party is clinging to power. Meanwhile, opposition leader Anwar Ibrahim may soon be in jail again on sodomy charges many see as politically motivated.

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The Result Of Putrajaya's Insular Political Culture Can Be Seen In How They Responded To The Disappearance Of MAS Flight MH370

The Result Of Putrajaya's Insular Political Culture Can Be Seen In How They Responded Towards The Disappearance Of MAS Flight MH370

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The government's handling of Malaysian Air Flight 370 said it all. Its deer-in-the-headlights response to the plane's disappearance was the product of an insular political culture.

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"That Insularity Is Holding Back A Resource-Rich Economy That Should Be Among Asia's Superstars, Not Its Weakest Links."

The trouble is, that insularity is holding back a resource-rich economy that should be among Asia's superstars, not its weakest links.

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Bloomberg Had Previously Put The Spotlight On Malaysia's Leadership As Malaysia's Management Of The MH370 Crisis Starts To Disappoint

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