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Will Najib Razak Remove Malaysia's System of Racial Preferences?

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For the first time since 1957, the outcome of the national elections was not a foregone conclusion in Malaysia. Yesterday's electoral win for Prime Minister Najib Razak and his ruling coalition (Barisan Nasional, or National Front) was confirmation that the majority of Malaysians fear change and prefer the devil that they know. For a country that is increasingly out of step with the dynamic political change that has recently swept a number of countries in Asia (such as Burma and Thailand), the BN's win is an indication that the ancien régime can remain in power, even though it clearly does not represent the aspirations of the country's minorities and youth. It also raises question about how genuinely clean this election could have been, particularly given the BN's performance in 2008, when it barely clung to power.

Four times as many young first-time voters registered for the election than five years ago, a trend that obviously has the potential to transform the political landscape in time. Malaysian youth are proving to be less concerned with racial identity per se than issues of equality, transparency and democratic governance. If the ruling coalition is to have a realistic chance of maintaining power in the future, it really has no choice but to address these issues more seriously going forward.

Public discontent with corruption and the state of race relations were the main issues that mobilized Najib Razak's opponents. For many years the BN's ties with big business have secured its power base, in conjunction with the economic interests of the elite. Opposition candidate Anwar Ibrahim has claimed that such cronyism has undermined economic opportunities for the average young Malaysian. The "brain drain", particularly among the country's young, has resulted in a significant cost to Malaysia, as more than a million of its citizens have moved to other countries to work for higher wages in recent years. Some 60 percent of skilled emigrants cited 'social injustice' as an important reason for leaving Malaysia. However, the underlying economic health of the Malaysian economy -- for which the BN may rightly claim credit -- has enabled the country overcome the negative effects of the brain drain. Annual GDP growth has ranged from 5 to 6 percent in recent years, inflation is low, and the unemployment rate has remained below 4 percent since 2009. BN's economic record likely tipped the balance for many voters, who feared the potential economic implications of political change.

Malaysia's racial divisions have shaped national politics for many years. Since the 1970s, the government has implemented a series of affirmative action policies designed to favor 'Bumiputras' (indigenous Malays) at the expense of racial minorities, primarily Malaysian citizens of Chinese and Indian ancestry. As a result, Malay citizens were privileged with respect to such things as land ownership, bank loans and admission to universities. Bumiputra policies created a large, mostly urban Malay middle class, and fueled resentment on the part of the country's minorities.

The prime minister's incumbency enabled him to increase handouts to low-income Malaysians in rural areas, raise pay for civil servants and make new promises about building new highways and more subsidized housing. But some analysts are concerned about the prospects for continued economic growth given the downturn in oil and gas prices, the rising household debt-to-GDP ratio, and fifteen years of high budget deficits. Although spending money on swing-voters helped influence yesterday's outcome, it remains to be seen whether Malaysia's reelected leaders will make the difficult decisions needed to ensure future prosperity for the young Malaysians who provided Mr. Anwar's campaign with much momentum before the election.

Malaysia sits at the crossroads. Although the legacy and history of semi-authoritarian rule remains strong, there is little doubt the country is changing in some fundamental and important ways. The fact that Anwar Ibrahim's multiracial party formed an alliance with a secular Chinese-majority party and the conservative Malay-majority Islamist Party indicates that the ethnic, religious and ideological divides are viewed differently by Malaysia's youth, who believe that the political process should spur change rather than promote the entrenchment of established interests. As a result of the predominant themes of this election, the BN can no longer take its power for granted.

It remains to be seen whether the BN is capable of enacting real and meaningful political reform, or whether it will attempt to continue with business as usual. The real test will be a dismantling of the Bumiputra system before the next election. A 2008 survey found that 71 percent of Malaysians agreed that race-based affirmative action was obsolete and should be replaced with a merit-based policy. But after decades of institutionalizing preferences for the majority Malays, turning the spigot off will prove to be no easy task.

Given that the BN won, handily this time, with Bumiputra policies in place, it has little incentive to change the formula. If history is any guide, Malaysians have every reason to doubt that the Bumiputra system will be dismantled under BN rule. But the BN is swimming against the long-term tide. Our hope is that it does not view this win as a fresh mandate for more of the same, but rather, as a wake-up call. Maintaining a system of preferences for a majority population is not a prescription for the long-term political stability the government says it wishes to ensure. Surely, the prime minister can see that.

Daniel Wagner is CEO of Country Risk Solutions, a cross-border risk advisory firm, and author of the book "Managing Country Risk". Giorgio Cafiero and Nicholas Parker are research analysts with CRS based in Washington, D.C. and Denver.