What Make in India can learn from Malaysian economy
Increase in discontentment is a fallout which will sooner or later come to haunt the growth story.
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Malyasia, the "Truly Asia" advertisements of which appear on our TV screens in India, is located right in the centre of Southeast Asia. A country with a population of about 30 million comprises of 13 states and three federal territories. While Islam is the state religion the constitution allows freedom of religion for non-Muslims. The country has been ruled since independence in 1957, by a moderate-Muslim party, the United Malays National Organisation (UMNO).
It has only been in recent times that a new multi-ethnic party Pakatan Rakyat has been gaining ground, both in terms of popularity and electorally. What this development has done is it has pushed the UMNO to fan fringe elements who help raise issues of Malay supremacy.
A GDP per person of $11,000 puts Malaysia in the top bracket of "middle income" countries. Malaysian population comprises of about 50 per cent Malay-Muslims, 25 per cent indigenous population and rest 25 per cent Chinese Malaysians and ethnic-Indians. The Chinese Malaysians have basically been businessmen, the Indians either white collared job holders or plantation workers depending on their education. The Malays, dubbed "lazy" by former Premier Mohammad Mahathir, in the bargain were left behind.
Deadly race-riot in 1969 prompted the government to push for reservations for Malays in education, job and many other sectors to bring income equality. Mandated for a fixed term, the reservations did raise development indices of Malays. However a political cash cow as reservations is, have seen it continue till date, increasingly stirring discontent among the Chinese and Indian population. A classic scenario of a population dependent on doles of government have emerged which is adversely affecting the Malaysian economy.
Of late, alleged corruption involving Prime Minister Najib Razak, has rocked the political scenario. After Wall Street Journal broke a story of finding $700 million in the premier's personal bank accounts, mass protests have been held by the yellow and red T-shirt wearers, the former against and latter in for of the ruling party. A charged-up environment has ensued where repeated provocations with respect to Malay chauvinism have drawn sharp differences across the races.
Malaysian economy has been a fairy tale of sorts in Asia. A stupendous GDP growth of about 6.5 per cent for five long decades have made Malaysia a good example for other Asian tigers to follow. Malaysia has driven on the mantra of economic diversification. From a natural rubber- and tin-producing economy, it diversified to palm oil and other produce agriculturally and from primary to secondary industry like manufacturing. Of all, manufacturing, which was facilitated by a slew of legislations by the government saw the economy take the fast lane.
Malaysian economy is facing turmoil almost similar to its politics, for recently the ringgit has fallen by 24 per cent since January 2015, the FDI has declined, global fall in oil prices has made its oil produce less returns and the general mood is not upbeat.
While the political establishment is sure to not fall in the middle income trap and surge ahead by 2020, its social engineering and the resentment it is generating, coupled with corruption and an ever-lurking fear of racial friction can offset the high growth trajectory that the country is slated to achieve.
Lessons for India
India is in the lower bracket of "middle income" countries with a GDP per person of about $1499. If it has to take quick steps to high growth, policy changes that favor manufacturing needs to be made. A welcome beginning has been made with Make in India, however its translation to significant rise in the IIP is yet to be seen. Another point to be borrowed from Malaysia is diversification in agriculture, something that Indian agriculture hasn't imbibed in wide scale. Tourism, emphasis on medical tourism, excellent infrastructure which ranks 25th in the world and a vibrant sporting culture are other emulating worthy features.
What race is to Malaysia, religion is to India. The narrative of majority thumping the voice of minority, migrants snatching jobs of natives, outsiders hurting the sentiments of locals, are relatable and can be traced to political forces trying to bring social engineering for vote bank politics. These are dangerous designs, examples of which we see in the country today, and also have the ability to offset economic progress.
Reservation policies, affecting Malaysia's social fabric, are veteran issues in India, with Patel agitation being the most recent chapter in the long tryst with state bringing equity among groups. The phasing out of reservation had been promised in both the countries however populism trumps pragmatism in politics and such has been the case. Increase in discontentment is a fallout which will sooner or later come to haunt the growth story.