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Malaysia's opposition banks on new economic deal

Monday - 4/29/2013, 8:06am  ET

A flag of Malaysia's ruling National Front coalition flies against the background of landmark Petronas Twin Towers ahead of the upcoming general elections in Kuala Lumpur, Malaysia, Monday, April 29, 2013. With less than a week to general elections, Malaysia's opposition alliance is banking on the promise of bold change to end the governing coalition's 56-year rule. It says a new economic playing field will strip away decades of race-based policies that it believes bred corruption and hampered growth. (AP Photo/Lai Seng Sin)

EILEEN NG
Associated Press

KUALA LUMPUR, Malaysia (AP) -- With less than a week to general elections, Malaysia's opposition alliance is banking on the promise of bold change to end the governing coalition's 56-year rule. It says a new economic playing field will strip away decades of race-based policies that it believes bred corruption and hampered growth

The three-party opposition alliance led by former Deputy Prime Minister Anwar Ibrahim says it cannot be business as usual in Malaysia, where affirmative action policies that favor majority ethnic Malays in business, jobs and education have polarized the country and suppressed its economic competitiveness.

Despite posting robust economic growth in the past decade, the opposition says the cost of living has surged in Southeast Asia's third largest economy, outpacing rise in wages. The country is lagging behind many of its Asian peers such as Taiwan and South Korea, as its race-based policies fueled a brain drain abroad. Corruption is endemic, and the government ran a budget deficit for the last 15 years, swelling the national debt.

Anwar's People's Alliance promises a more competitive merit-based system and a clean break from what it calls a corrupt past if it wins May 5 national polls.

Its election manifesto says it will end monopolies in sectors such as telecommunications, rice and sugar that kept prices high. It will review suspicious government concessions, abolish highway tolls, cut taxes to lower car prices and free up civil liberties.

"This election offers a possibility of a political transition of power. The campaign will come down to who can deliver more genuine and fundamental reforms and who will give them a better deal," said Bridget Welsh, a political science professor at Singapore Management University.

Anwar's alliance surged into political prominence in 2008 elections when it won more than a third of seats in the federal parliament and gained control of several states. It was the biggest blow for Prime Minister Najib Razak's National Front coalition since independence from Britain in 1957 and was spurred by discontent about corruption and racial and religious discrimination.

The keystone of the opposition policies is reform of preferential treatment started in 1971 to lift Malays, who account for 60 percent of Malaysia's 29 million people, from poverty after race riots. The policies are credited with enlarging the Malay middle class and putting 20 percent of corporate wealth in Malay hands, but the opposition says the system has been abused to enrich the well-connected elite and distorted the economy. Many contracts go to businesses with links to the ruling party, which has created a powerful culture of cronyism and a nexus between politics and business.

Najib, 59, who is seeking his first mandate at the polls since becoming prime minister in 2009, has taken on the reform mantle to counter the opposition.

He has embarked on a series of economic and government transformation efforts to revamp his coalition's image, including abolishing security laws widely considered repressive, wooing investment from abroad and bolstering public welfare including cash handouts for civil servants and the poor.

With his battlecry of "1 Malaysia," Najib also trimmed affirmative action policies but is restrained by hardliners in his ruling Malay party. He has pointed to the National Front's stewardship that turned Malaysia from an agricultural backwater into a modern, stable nation.

Malaysia's focus on heavy industries and manufacturing in the 1980s drew multinational corporations to its shores but it has since lost out to neighboring countries as a low-cost manufacturing base. Government spending in the last decade helped bolster growth as foreign investment ebbed.

A 2011 World Bank report said Malaysia's brain drain was intensifying with more than one million of its citizens, mainly ethnic Chinese, living in Singapore and other countries largely due to higher wages, unhappiness over poor governance and lack of meritocracy. It warned the outflow of skilled people could bog down Malaysia's economy.

Najib insists his government is on a reform path, with Malaysia on track to become a developed nation by 2020. He has warned an opposition win would bring economic ruin and political chaos.

"Certain politicians are talking about change but what is it you want to change? Do you want to change from peace and harmony to a country full of conflict and violence? Do you want to change the economic success that we have achieved?" he said at a mammoth political rally last week.

The concern resonates with some voters, who fear differences among the three parties in the opposition alliance may hinder their ability to govern nationally.

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