Najib Win Masks Biggest Test After Malaysian Chinese Exodus

Malaysian Prime Minister Najib Razak
Najib Razak, Malaysia's prime minister, arrives for the first meeting with his newly elected Barisan Nasional's (BN) parlimentary and state representative at Putra World Trade Centre in Kuala Lumpur on May 7, 2013. Photographer: Rahman Roslan/Getty Images

Malaysian Prime Minister Najib Razak’s election win without the bulk of ethnic Chinese voters is set to pose the biggest test yet for the pro-Malay affirmative action policies instituted by his father more than three decades ago.

The May 5 ballot left Najib’s United Malays Nasional Organisation with 109 parliamentary seats, almost enough to govern without any of its 12 allies in the Barisan Nasional coalition, Election Commission data showed. At the same time, the alliance as a whole took just 47 percent of the popular vote, the lowest since 1969, when Sino-Malay race riots flared.

With opposition chief Anwar Ibrahim -- ally of the mainly ethnic-Chinese Democratic Action Party that expanded its seats - - planning protests tonight over electoral fraud concerns, Najib, 59, is calling for national reconciliation. To get that, he may need to temper the same preferential-contract and job rules that helped secure his victory among rural Malays.

“UMNO is looking strong, but it’s a false dawn,” said Edmund Terence Gomez, a professor at the University of Malaya in Kuala Lumpur who edited a book on the race-based programs. “They know they need structural changes, and if they don’t do it they will face serious consequences in the next election.”

Gomez said the biggest change needed is the removal of policies that restrict certain government contracts to Malays and indigenous groups together known as Bumiputera, or “sons of the soil.” They make up about 60 percent of Malaysia’s 29 million people. Abdul Razak, Najib’s father and Malaysia’s second prime minister, initiated the preferences in the wake of the 1969 riots that killed hundreds.

Arrest Threat

Anwar planned to proceed with a protest rally this evening in Selangor, outside of Kuala Lumpur, even as police threatened to arrest anyone who attended, Rafizi Ramli, an official with his People’s Justice Party, said by phone today. The gathering is illegal, Tun Hisan Tun Hamzah, the state’s police chief, said in a text message to Bloomberg News.

Najib’s coalition won 133 seats, topping the 89 seats won by Anwar’s three-party opposition, which captured 51 percent of the popular balloting. Chinese parties in the government saw their seat total cut by more than half, leaving Najib’s Malay-based party with 82 percent of Barisan Nasional’s seats, up from less than half in the 1990s.

‘Big Mistake’

“We have to go to the center, not to the right,” said Saifuddin Abdullah, an unsuccessful UMNO candidate who attributed his loss to a drop in support in urban areas with more Chinese voters. It would be a “big mistake” for UMNO to take heart from the win stemming from its appeal to Malays, he said. The Barisan Nasional, or National Front, alliance should be transformed into a political party that people can join directly, without having first to choose one of its members, such as UMNO, he said.

Besides UMNO, the election night’s other success story was the Democratic Action Party, which saw its take jump by a third, to 38 seats. Najib said in a press conference that evening that his coalition had lost in one state because of a “Chinese tsunami.”

Yet with ethnic Chinese only accounting for about a quarter of the population, the national results show a broader wave turning against the governing coalition in an election that had a record turnout of 85 percent.

Urban Voters

“The Chinese tsunami is all nonsense -- it’s an urban middle-class tsunami,” said Gomez, who has been writing about Malaysian politics and business for more than two decades.

About 71 percent of Malaysians lived in urban areas in 2010, up from 62 percent a decade earlier, according to the most recent government statistics.

Anwar, 65, a former deputy prime minister and UMNO member before he was fired in 1998, saw his alliance win a majority of the popular vote running on a platform criticizing affirmative action programs for feeding corruption.

Government-linked companies climbed after the election saw Najib returned to office, propelling a 4.7 percent jump in the FTSE Bursa Malaysia KLCI Index this week. The benchmark closed 0.2 percent lower today, paring earlier gains.

CIMB Group Holdings Bhd., a lender headed by the prime minister’s brother, Nazir Razak, gained 13 percent since the election. Tenaga Nasional Bhd., the country’s biggest power producer, advanced 7.6 percent. The ringgit has risen 2.3 percent against the dollar since the vote.

Brain Drain

“Taking on corruption is a priority,” Stanley Thai, the ethnic-Chinese owner of medical glove-maker Supermax Corp., told Bloomberg Television after the election. Thai, who has seen Supermax shares fall 3.4 percent since he said in an interview published April 26 that he’d vote for the opposition, called this week for Najib to assure transparency in awarding contracts. Otherwise “brain drain will continue,” he said.

Even so, the prime minister is unlikely to move against the majority of his party and revamp the affirmative-action policies, predicted Chua Hak Bin, an economist at Bank of America Corp. Chua, a Malaysian who has lived and worked in Singapore since the Asian financial crisis in 1998, returned to cast his ballot in the election.

“There may be some compromises such as more Chinese schools and affordable housing not just for Bumiputera but for all races and the low-income,” Chua said.

National Reconciliation

Najib said after the election that UMNO would make changes at the right time, without elaborating. He called for “national reconciliation” while blaming the opposition for making race an issue, and said he’d implement moderate policies.

“Barisan Nasional has a lot of resilience as a political party, despite the fact that we have been in existence for 55 years,” Najib told reporters on May 6, after his coalition won for the 13th straight time. “Not many political parties can claim that kind of record.”

The Malaysian Chinese Association, the main party representing ethnic Chinese in the government, said it wouldn’t take up any Cabinet posts after its poor election showing.

“Voting the Chinese out of the state and federal government won’t help solve dissatisfaction,” Chua Soi Lek, the party’s president, said in a May 6 statement. He added Najib would “continue to look after the interest of the Chinese.”

Three MCA central committee members in a statement today called on Chua to resign immediately because of “his failure to address the political sentiments of the Chinese community.”

‘Racist Outlook’

The opposition rejected the government’s analysis of the election outcome and said Barisan Nasional’s reduced majority stemmed from a push for change that transcended race.

“So long as he wants to polarize and racialize this phenomenon, then they themselves are guilty of a racist outlook and they are incapable of any national reconciliation,” Lim Kit Siang, who founded the Democratic Action Party, told reporters on May 6, referring to Najib. “It’s not a Chinese tsunami; it’s a Malaysian tsunami.”

While Najib considers policies for a second term, the opposition’s future is also undetermined. Anwar, who disputes the results, will struggle to keep the Malay-dominated Pan-Malaysian Islamic Party in the opposition after it lost seats in the election, according to Bilveer Singh, a professor of political science at the National University of Singapore.

With UMNO and the opposition DAP the biggest winners, “This is a very potent mixture that could destroy the country: two dominant, racialized political parties that are on a head-on clash,” Singh said. “Nobody will win. The ground is electrified along racial lines.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE