Malaysia’s rich natural resources are standing in the way of an Arab Spring

July 25, 2013
July 25, 2013

A long time corrupt, disconnected ruling party? Check. Contentious elections? Check. Allegations of voter fraud? Check. Ethnic and religious fault lines? Check. On the surface, two months after the closest election in Malaysian history, one in which the opposition coalition actually received more votes, the situation looks ripe for an uprising along the lines of Egypt or Tunisia, or even nearby Indonesia and Thailand. Instead, the country seems destined for more years of unequal, resource-driven, racially divisive policies.

Growth = Discontent

Malaysia gained independence from Britain in 1963, and separated from Chinese-majority Singapore two years later. This made Muslim Malays, Bumiputera, the majority in the country at 55% of the population, versus 30% for Chinese-Malaysians, and 8% for Indian-Malaysians (the remainder are orang asli, indigenous peoples, and immigrants). Since then, Malaysia has been governed by the same ruling coalition, Perikatan, later renamed Barisan Nasional, led by the United Malays National Organization.

They ruled freely and, for several decades, elections weren’t even close. Until 2008, Barisan maintained a greater than two-thirds majority of parliamentary seats, allowing it to change the constitution at will. This period paralleled Malaysia’s rapid economic growth, which averaged 6.5% from 1957 to 2005, led chiefly by exports of natural resources.

Flush with cash, the Barisan Government embarked on the New Economic Policy that included infrastructure development and growth subsidies, but also reverse affirmative action setting up quotas and benefits for the majority Malay population, poorer than the business-savvy, well-connected Chinese minority that prospered under British colonial policies. At independence, Malays only controlled a paltry 2.4% of the economy, so Malay schools received nearly six times the funding per student of Chinese and Tamil language schools, while investment laws forced companies and foreign investors to give 30% of equity to ethnic Malays.

Fifty years later, Malays do play a greater, if still underrepresented role in the economy, but the biased policies still stand. They’re now a sign of ethnic nepotism rather than genuine social action and are most clearly demonstrated by the fact that orang asli and Indians, who are poorer than Malays, receive few benefits from the system. This has created a peculiar situation, where Malaysia experiences both rapid growth and a pervasive brain drain. Millions of highly-educated, mostly Chinese citizens now choose to work abroad in search of better opportunities. Moreover, these policies have in fact broadened the divide between ethnic groups, leading many to lament that younger Malaysians are actually more segregated than older generations. They speak different languages, study in different schools, and attend different universities. Malays, taking advantage of government quotas and benefits, stay domestic while Chinese are more likely to go abroad where they have better chances of receiving a quality education. Indians are stuck in-between. The goal of unity is even farther from reach than it was in 1963.

A resource curse?

The funding for these policies comes from Malaysia’s vast resource base. The two chief exports are petroleum and palm oil. Petrol is nationalized under Petronas, and its revenues provide upwards of 40% of Malaysia’s yearly governmental budget. Malaysia palm oil conglomerates are the largest in the world, accounting for 39% of global palm oil production, forming the bulk of Malaysian exports from 1970 to 2000.

Together, in 2012, natural resources made up nearly a third of Malaysian exports, and a large majority of government revenues.

There is evidence that countries with large reserves of natural resources—oil, minerals, timber, gas, diamonds—are most likely to have high levels of corruption, fall into states of civil war, violate human rights, and degrade their environment, leaving them poorer than countries with limited natural resources. The reasons for this are multitude, but are arrayed around the fact that resource-rich countries are less dependent on taxes for revenues, and, thus, less accountable to citizens.

Malaysia is often cited as a counter-example due to its growth and stability. If it were stuck in a resource curse, wouldn’t it have experienced the traumatic violence and upheaval of other resource-dependent countries such as Nigeria, Democratic Republic of the Congo, or Venezuela? While Barisan supporters will point to their leaders implementation of prudent government policies, the real reason may be geographic. Many resource-rich African and South American countries are surrounded by unstable governments and are forced to trade with distant partners. But Malaysia sits right alongside the busiest trade route in the world: the straights of Malacca. It also enjoys ready access to vibrant regional economies, with China, Japan, and Singapore alone responsible for nearly a third of exports and seemingly unceasing, ever-growing demand.

One symptom Malaysia is exhibiting—natural resource rich governments are more difficult to overthrow. Just look at the Middle East, where Arab Spring uprisings in Syria, Egypt, Yemen, and Tunisia have taken place in resource-poor countries. Oil-rich Saudi Arabia, Bahrain, the United Arab Emirates, and Iran have, despite protests, been able to maintain their centralized, dictatorial regimes. Despite its quasi-democratic status, Malaysia may in fact be more like the latter group than the former. Stability may be the lesser of two evils.

Hope for the future?

This May’s election was a cruel irony to democracy advocates, with the opposition winning 53% of the vote but only 40% of the seats in parliament, a consequence of gerrymandering, greater-weighing of rural, Malay-dominated districts, and the realities of the British style first-past-the-post system. Next time, will 60% be enough? Or will the government be prepared and rig the system in its favor again?

Meanwhile, Barisan is now officially the longest-ruling political coalition in the world, in power now for an astounding 56 years. Though they say that they will pursue economic reforms and policies to bring people together, history shows that when rulers are threatened in resource-rich countries, they tend to become more entrenched and despotic, clinging to power through any means necessary.

Unless there are incredibly massive protests, or something unexpected occurs like a huge drop in resource prices, Malaysia’s parliamentary system does not require elections to be held again until 2018. While opponents, including opposition leader Anwar Ibrahim are already organizing to break Barisan’s monopoly, Malaysia’s brightest youth, Chinese, Malays, and Indians, will continue to emigrate abroad.

Will this be sustainable? Currently, oil prices are still high but oil reserves will eventually run dry. Malaysia’s palm oil advantage is slipping to countries like Indonesia, Nigeria, and Thailand. Environmental concerns are also leading more countries to restrict imports of the tropical-forest clearing crop. The economy is diversifying but it’s due to foreign factories and investment, not local innovation, and it’s not happening quickly enough. A real opposition might be able to press for genuine economic reforms that empower new industries, and perhaps, give an incentive to educated Malaysians, who might otherwise emigrate, to stay and build businesses in the country. Barisan, tied even more to its ethnic social policies, may not have the will, or ability, to make necessary changes. Only time will tell if it is people or natural resources that will determine Malaysia’s future.

You can follow Nithin on Twitter at @excinit. We welcome your comments at ideas@qz.com

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