A good wager to make on Malaysia would be: if it would become a high income economy by 2020 or a basket case.
A report by Global Financial Integrity ranks Malaysia as the world’s no. 5 in illicit financial outflows, topping countries such as Nigeria, India and its neighbours such as Myanmar:
Top 10 countries with the highest measured cumulative illicit financial outflows between 2000 and 2008 were:
- China: $2.18 trillion
- Russia: $427 billion
- Mexico: $416 billon
- Saudi Arabia: $302 billion
- Malaysia: $291 billion
- United Arab Emirates: $276 billion
- Kuwait: $242 billion
- Venezuela: $157 billion
- Qatar: $138 billion
- Nigeria: $130 billion
Malaysiakini has further analysis of this report:
The report warned that the sharp increase of capital flight in Malaysia is “at a scale seen in few Asian countries”.
It said that it was difficult to point out the reasons behind this massive outflow of illicit capital – estimated at RM889 billion (US$291 billion) between 2000 and 2008 – without carrying out an in-depth study of Malaysia, which is outside the scope of the report.
“It is clear however that significant governance issues affecting both the public and private sectors have been playing a key role in the cross-border transfer of illicit capital from the country.
“For instance, there are reports in the Malaysian media that large state-owned enterprises such as Petronas could probably be driving illicit flows.”
The financial watchdog said that its research has indicated that political instability, rising income inequality and pervasive corruption are some of the structural and governance issues that could be driving illicit capital from many developing countries.
“In the case of Malaysia, the additional factor could well be the significant discrimination in labour markets which move people and unrecorded capital out of the country.
Despite attempts to “reign in corruption” by the government, corruption has actually worsened, as Lim Kit Siang points out:
In the first TI CPI in 1995, Malaysia was ranked No. 23 out of 41 countries or the 6th highest-ranked nation in the Asia-Pacific after New Zealand -1, Singapore – 3, Australia – 7, Hong Kong – 17 and Japan – 20, with a CPI score of 5.28.
Sixteen years later, after numerous anti-corruption campaigns, two major anti-corruption legislation and “transformation” of the former Anti-Corruption Agency (ACA) into Malaysian Anti-Corruption Commission (MACC) with massive infusion of public funds and increase of staffing, Malaysia has continued to remain in the lowest TI CPI ranking of No. 56 as last year but with the lowest CPI score of 4.4 – falling to No. 11 country placing in the Asia-Pacific.
Malaysians disgust with the current ruling coalition and its weak leadership has lead to a loss of confidence in the country as manifested by “brain drain“, drop in foreign direct investment and now this report of outflow of funds.
It is likely that the bets are on Malaysia becoming a basket case rather than a high income economy by 2020.
What do you think?
Update 1: Further analysis on this issue.
Asia Sentinel has a general analysis titled “Where the hot money flows?” while the Malaysian Insider has one on the DAP demanding the government explain the report, in “Explain RM888 billion illegal fund leak“
That old fraud Mahathir and his Wawasan 2020 led Malaysia nowhere. I always have a laugh when I recall that in 1992 Mahathir compelled Bank Negara to speculate against Britain pulling out of the Exchange Rate Mechanism (George Soros was betting the opposite) making the Bank bankrupt for all practical purposes. Then five years later Mahathir blamed the “evil currency speculators” (principally Soros) for the decline in value of the ringgit, finally accepting in 2006 that Soros himself was not responsible.
Quality comment or not?
3 
0
Don’t forget that Dr M single handedly caused the collapse of the Tin mining industry in Malaysia by intervening in global tin prices. I’m sure this isn’t something the good people of Ipoh would forget very easily.
But back to the topic on the failed state – corruption and worsening public security. Only a week ago, was my mother was brazenly attacked by a “snatch thief” in broad daylight on the streets of Bangsar. Stories like these are so rife that any KLite would have experienced/loved one would have personally experienced being robbed on the streets. Clearly Malaysia is showing signs of a failed state with an inept (and ineffective) Police force.
Quality comment or not?
3 
0
Well Malcleigh,
The police force is not inept, just have different priorities. Crime prevention is just not that high on their list. Try doing something for the oppositon parties and see how fast they are at finding you?
In Malaysia, everything boils down to corruption. For myself, I have no idea how to go about solving the problem. It is so entrenched, like an underground peat fire, very difficult to put out.
As for being a failed state, Malaysia still has another 12-15 years to go before that happens, if things continue the way it is. After that…. kaboom…
Quality comment or not?
3 
0
Yep, Malaysia wont go down the gutter that easily. Give it another decade and reassess. Corrupted… well to some extent it is, but the good thing is the country has a political system in place and your political foundation is of a solid one. Look over to your Thai friends, they still cant clean up the dirts left behind after the coup. No political system in Thailand whatsoever. The whole government run by a small group of men< a few with some brain, most are just two legs in suit. What a mess.
…. My car has just gone past the Danish Parliament…the voice of my Danish friend still echoes in my mind…
Here is the statue of Frederik d Syvende of the House of Oldenburg. The king is remembered by Danes for being the Grundlovens Giver. Historians note that after the first Danish Constitution was signed by Frederik, the king was reported to have said…. now I can sleep in peace eternally.
With love from Copenhagen to NM readers, esp. to Suzie Wong and the Thai acharn who wrote about the Black Hole. Tomorrow I might find out what Werner Heisenberg actually said to Neils Bohr, and why Heisenberg came over to Copenhagen in 1941.
Dont you just love technology………….
Quality comment or not?
2 
0
The term „failed state“ seems to come easily. Before using the term, one should consider that it derives from neo-liberal economic and political theory, what implies an understanding of what a “non-failed? state” is supposed to be, namely providing opportunities for business, de-regulation etc. That in Malaysia, as much as elsewhere in the region state administration, economics, law and politics are not really and fully separated is well known. However, this does not mean that we have a “failed state”. In fact, Malaysia as much as Thailand is far from this. Even the demonstrations against the governments indicate that we have a working state. Even more, the state so far is quite efficient and not all “failing” as a means for the elites to maintain their power. The question is thus not whether the states in Southeast Asia are failing, but to analyse how ell they are actually working, to be able to point at changes and how these might be brought about.
Quality comment or not?
5 
0
Has anyone seen the latest Wikileaks exposure on Mahathir and his cronies having secret bank accounts in an Israeli bank ?
Quality comment or not?
0 
0
“Malaysia a failed state” is quite preposterous by any objective measure.
Given the way the term is so heavily geopoliticaly loaded by the war on terror, to claim a Muslim country is or will be a failed state raises the question of whether the author is just naive or islamophobic.
The whole idea that a nation must become 1st world or inevitably be relegated to basket-case status isn’t born out by history and also smacks of neocon thinking.
Quality comment or not?
0 
4
We will need to define a failed state to discuss this topic further I believe.
Let’s use Chomsky. Noam Chomsky is arguably a leftist.
He has a book called “Failed States: The Abuse of Power and the Assault on Democracy (American Empire Project)” in which he argues that the US the the world’s biggest failed state.
So, the label of failed states being a neo-con tool maybe out of place.
The central criteria Chomsky uses to identify a failed state is what he calls a “democratic deficit”
“..In the respects that one mentioned, and also, another critical respect, namely the—what is sometimes called a democratic deficit, that is, a substantial gap between public policy and public opinion…” (Read here)
This is clearly the case in Malaysia where public policy is formulated, as a priority, to entrench the ruling elite rather than serve the public, whose interest are a secondary consideration.
The statistics that we are seeing (brain drain, outflow of funds, loss in investor confidence, etc) demonstrates that key stakeholders are opting out of Malaysia.
Malaysia’s middle class votes with their feet (and money). Unlike, the Red Shirts, they prefer this option, rather than fight the regime.
Also view this short documentary to understand why it is likely that Malaysia will fail.
Quality comment or not?
4 
0
@ Dave Abbott, @ MalcLeigh – I have heard this numerous times, even from people within the system. Is there any documented evidence that is not a third party statement? Appreciate if you could point me to it.
@ Nasi Lemak – I have seen this via email but unable to locate the source within WikiLeaks. Appreciate if you could provide link.
Thanks.
Quality comment or not?
0 
0
GL is correct, the term failed-state initially belonged to Chomsky before it was hi-jacked by the Washington-Axis. Umm.. the term Washington Axis may be a little bit unfair.. let’s put it this way> the only state Chomsky the leftie linguist had in mind was actually the United States (Ideology 1). Somehow the term was picked up conveniently by a few vulgar journalists and technocrats (disguised as academics) at one or two daddy-know-best institutions of the “first” world. Now it has become a label for low performing or “decelerating” economies, which, with little surprise, tend to be the young democracies of the “third” world (Ideology 2).
The “Prime”, not first, not third nations should not pay too much intention to it. Try again, fail again, fail better > Samuel Beckette. If Malaysia’s going to fail I’m sure she’ll land in style. Have faith in your nation ladies & gents. Oh my, this keyboard….. I give up>.
Quality comment or not?
0 
0
@ Submarine, thanks for sharing the different views on failed states.
In the Malaysian case, Neptunian has provided a likely scenario on what could happen (read here).
My prediction is more dramatic.
In 1992, as a first year undergraduate, I attended a seminar at my university, where a middle-eastern visiting fellow predicted – based on the 1990 election – that Malaysia in the future would end up like Algeria i.e. Muslim majority countries where disenfranchised Muslims will fight the corrupt ruling elites – also Muslims if it did not resolve income inequality and rising Islamisation.
In 2004, just before the 2004 GE, none other than Abdullah Ahmad (Dollah Kok Lanas) predicted that in the future in Malaysia, Muslims would be fighting Muslims (UMNO against PAS). He put this down to the intensity of politicking among Muslims in UMNO and PAS.
This trajectory has been correct. Income inequality is worsening (read here) and Islamisation of Malaysia is now almost complete (Read here). Najib has taken politicking to unprecedented heights (read here).
Why Muslims against Muslims and not against non-Muslims.
You will notice that non-Muslims in Malaysia do not have any effective political rights but rely on the benevolence of the ruling Malay party (UMNO). Non-Muslims are unable to discuss issues in relation to the Malays, Muslims, Royal Institutions or any institutions that are run by Malays (which today encompasses everything).
Therefore, non-Muslims in Malaysia have been relegated to the sidelines and have unfortunately (rigtly or wrongly) taken the back seat. On the rare occasion that they have emerged e.g. in the likes of Lim Guan Eng, Teresa Kok, Teo Nie Ching, they have been hammered. Furthermore, after May 13, 1969 – the older generation of non-Muslims have accepted UMNO’s hegemon. (read here)
However, the same could not be done to Muslims from PAS and PKR. And therein lies the fight. Malays in PAS & PKR do not have the perceived illegitimacy to Tanah Melayu as non-Muslims.
The Malays could do a Thailand or we could do an Iran or in a remote chance, do a Tunisia. And I wonder whose side the non-Malays would take? PAS/PKR or stand idly by, remembering how they were brutally maimed and killed on May 13, 1969 (read here) and in Indonesia (read here).
Watch this space – more action to come.
Quality comment or not?
1 
0
The Malaysian state is not simply the Malaysian government, but is made up of all Malaysian citizens. That many Malaysian citizens, even your disenfranchised self, are dissatisfied with the current setup to me more indicates that there’s an equal possibility for governance change, and for there to be a more positive national economic trajectory. Moreover what might happen to the Malaysian state economically does not equate to state failure. I feel that the tenuous links to state failure throughout the article does not justify the hyperbolic title.
Quality comment or not?
0 
0
Thanks Martino.
I am not linking Malaysia’s weakening economy to state failure.
I’m suggesting that the brain drain, the loss of investor confidence, the outflow of illicit funds suggests that stakeholders have decided that something is wrong in the House of Malaysia.
Stakeholders may think that the state has failed them for the following reasons:
- it could be a corrupt government acting with impunity while cutting down subsidies,
- it could be the rise of ethnic tension driven by a corrupt government hell bent on protecting itself by driving a wedge among its citizens;
- it could be the rise of political Islam to counter a corrupt government;
- it could be the persecution of non-Muslims by a racist party fighting for its last breath;
- it could be killings of individuals by a police force gone wild;
But your right, that it all depends on who is viewing it.
p.s. When Hurricane Katrina happened, did anyone expect citizens of the richest and most powerful country in the world to behave in such a manner (looting, raping, etc).
Quality comment or not?
1 
0
Greg,
You write:
“I am not linking Malaysia’s weakening economy to state failure.
I’m suggesting that the brain drain, the loss of investor confidence, the outflow of illicit funds suggests that stakeholders have decided that something is wrong in the House of Malaysia.”
Yes, I see. So you mean Malaysia: Epic Fail?, not ‘Malaysia a failed state’?
Could it not be that all of those reasons you’ve listed? Are you doing telle-polling?
I think you’re trying to equate the state with something that is moralistic. Since when has a state ever been a moral entity?
Slow down Gandhi!
Quality comment or not?
1 
0
From the ongoing World Economic Forum, Davos Switzerland.
Listen to a special address by President Yudhoyono – don’t forget that seven or eight years ago Indonesia was classified by a number of institutions as failed state. >> The Big Shift and the Imperative of the 21st Century Globalism: Chair of ASEAN’s Address.
Friends from the industrialised nations may be interested in President Sarkozy’s address: Vision for the G20 (this one’s quite entertaining.)
All VDOs are up on http://www.weforum.org/events/world-economic-forum-annual-meeting-2011
Quality comment or not?
0 
0
Hi Martino,
Yes, I think you caught me – I put a very high premium – not on morality – but on “good government” and “good governance” (defined as a government that administers and is subject to the rule of law) for a simple reason – absent these values sows the seeds for destruction.
Would you agree with me that functioning states (e.g. stable governments and nations) which failed to address issues of corruption ultimately led waste to many of them.
Look at this region: Philippines under Marcos, South Vietnam under Nguyen Van Thieu, Indonesia under Suharto, Thailand, etc.
Do you think that Malaysia can escape the consequences?
p.s. I’m no Gandhi just a rational economic agent who understands the cost of not adhering to certain universal principles.
Quality comment or not?
1 
0
Hai Greg,
I stand by my statement that Malaysia will head the way of Thailand.. A PKR MP has just been charged with sedition for insulting the Sultan! – For other readers of NM, especially Thai news followers, that is “Lese Majeste” Malaysian style… As in Thailand, this law only applies to the opponents of the BN (democrat equivalent) govt
Quality comment or not?
1 
0
Malaysia continues its onward march towards becoming a basket case by 2020.
Quality comment or not?
0 
0
Malaysia in the limelight again.
US283 billion (or about RM893 billion) has been stashed away since 1970, reports Tax Justice Network.
Who are these people with so much of money and how did they get their hands on it?
Quality comment or not?
0 
0