Abdullah Badawi’s Effect on Political Economy

Abdullah Badawi’s Effect on Political Economy 1.0 INTRODUCTION Tun Abdullah Ahmad Badawi, the fifth Malaysia’s Prime Minister (2003-2009), was born on 26th November, 1939 in Kampung Perlis, Bayan Lepas. He was greatly influenced by his family religious background and further strengthened it through the subject of Islamic Studies in Universiti Malaya, and graduated in 1964. After he was graduated from Universiti Malaya, Abdullah was working as a civil servant, including Assistant Secretary in the Public Services Department and Head Assistant Secretary in the National Operation Council (NOC) (Welsh, 2003). At that time, he also was also being a Director in the Ministry of Youth and Sports; and since 1974, Deputy Chief Secretary in the same ministry. In 1978, Abdullah resigned in the civil service and had been elected as the candidate for Kepala Batas Parliament seat For the year 1978-1987, Abdullah has won the 1978 elections for the Kepala Batas Parliament seat (Sivamurugan Rusdi Omar Mohd Azizuddin, 2010). He was then elected as Parliamentary Secretary and Deputy Minister in the Federal Territory Ministry. He was also been Minister in Prime Minister’s Department (1981-1984), Minister of Education (1984-1986), Minister of Defence (1986-1987). From the year 1987 to 1990, it was climax in Abdullah’s political leadership. The growth of Anwar Ibrahim and the presence of opposition leaders in UMNO had not feared by Abdullah (Sivamurugan Rusdi Omar Mohd Azizuddin, 2010). By this, he finally get the highest position in the party and government. He was trusted by Dr.Mahathir to offer him for involving in 1990 General Elections. He was also elected as the part of Cabinet. The support gained by Abdullah not only particularly on inner support but also because of his inner confidence and strength that had given him a trust by peoples (Sivamurugan Rusdi Omar Mohd Azizuddin, 2010).. Abdullah was served as the Minister of Foreign Affairs during 1991-1999. At that time, Abdullah also succeeded in winning back the UMNO Vice President seat in the 1996 elections after the failure to win Vice President seat in 1993 (Case, n.d). He gained the Dr. Mahathir’s trust and was finally elected as the UMNO Deputy President in 1999 and Deputy Prime Minister, the fourth under the leadership of Dr. Mahathir. In Jun 2002, Dr. Mahathir announced to retire, and announced to the public that he had given trust to Abdullah to be his successor of Prime Minister. The main objective to conduct this case study is to critically examine the political economy throughout his reign of nearly six years. The specific objectives are; firstly, to critically review Abdullah’s political performance by providing the election report between 2003-2009 and figure out the reason why the mass supported him; secondly, to interpret the international economy oil price and its problems; thirdly, to identify issues and challenges during his tenure, whether Abdullah’s political policy affects the Malaysia’s economy or vice versa or both. To complete our research, we will assess the data from books in library, journals articles, newspapers and electric sources to prove whether our argument is valid or not. The research is conducted by 3 members, everyone from each will be divided to collect sources based on their own task. Our finding will dramatically advance our understanding of political economy under the administration of Abdullah. 2.0 LEADERSHIP OF ABDULLAH BADAWI During Abdullah’s premiership, the government policies did not change much. To him, he was presiding over an individual change rather than regime change. Abdullah implemented his promise to address corruption. Abdullah is widely admired for his religious knowledge and credentials, and can confront Islamic radicals (in his own quiet way) while maintaining respect from mainstream society (McCreedy, 2003). Abdullah’s personal style—mild, incremental, consensual—will differ from the fiery tone of his predecessor (Tun Mahathir), and likely improve relations with the West (McCreedy, 2003). Not having as Mahathir aggressive personality as Mahathir had, Abdullah showed an early willingness to listen and work as a team. He attempted to bring economic liberalisation, declared war on corruption, improved governance, and opened up democratic space (Ahmad Fauzi Abdul Hamid Muhammad Takiyuddin Ismail, 2012). To reform policy, he re-attached importance to agriculture, re-emphasized poverty eradication, highlighted human capital development, and shifted focus to regional development which was been practiced by the second Prime Minister, Tun Abdul Razak. Abdullah was so much emphasing on religious and he attempted to establish Islam Hadhari, a progressive approach towards understanding and practising Islam as a modern rather than conservative religion. Thus, Abdullah’s leadership style was soft-personality, but under his premiership, many plans were proved to be more than just declare. 3.0 ISSUES AND CHALLENGES FACED BY TUN ABDULLAH BADAWI 3.1 The Global Financial Crisis (2008-2009) The global financial crisis (GFC), caused by the bursting of a speculative bubble in the US housing market in 2008, affected the capital flows, trade flows, and commodity prices of the world (Athukorala, 2010). Different countries have been affected differently, depending on the nature of their financial/trade linkages with the rest of the world, the quality of financial institutions and polices. As we will see below, for Malaysia, the financial and economic development had worsened in 2008 and 2009. Our GDP remained declining in the year of 2008, ultimately 0.1% growth of GDP in third quarter of 2008. The GDP felt by approximately 3% in the fourth quarter of 2008, which was also the first time in negative territory since 2001 (figure 1) (World Trade Organization, 2011). From the data interpreting above, we could imagine that during Abdullah Badawi’s premiership, the main challenge affected by global financial crisis was the declining of GDP in Malaysia in 2008 and the exportation of Malaysia declined. 3.2 International Oil Price Crisis The second issue and challenge faced by Abdullah Badawi is international oil price crisis by 2008. The oil price has skyrocketed to levels never predicted by the strategists and economic planners, estimated from USD170 per barrel in end 2008 to USD200 in 2009 (D-8 Secretariat Istanbul, 2008). The increasing of oil price at that time also caused the price of food increased beyond the normal abilities to pay by the poor. Abdullah Badawi (2008) said that the oil price crisis was required global-level solutions, and Malaysia was needed to bring up this issue to international community to resolve together. It is undeniably that the oil price crisis also caused the most urgent challenge facing by Malaysia was the food shortage in the world. As the global oil price increased, the food price also increased, and believed to reach more than 75% since 2000 (D-8 Secretariat Istanbul, 2008). These had threatened to the Malaysia’s economic growth under Abdullah Badawi’s tenure. Thus, the methods that used by Abdullah Badawi to solve the issue were to cut off the government subsidy on fuel (since the increasing of oil price has burdened the government subsidy on fuel) and also suggested to produce or creating alternative sources of energy, such as bio-fuels and agriculture. From Table 1, fuel subsidies had raised from RM2.4bil or 3.8% of total operating expenses (OE) and 0.7% of GDP in 2001 to RM7.3bil in 2006 or 6.8% of total OE and 1.3% GDP (Ministry of Finance, 2008). While in 2007, it rose further to RM8.8bil or 1.4% of GDP (Ministry of Finance, 2008). In estimated 2008, fuel subsidies would escalate to estimate RM15.5bil or 12% of total OE and 2.3% of GDP (table 1) (Ministry of Finance, 2008). From Table 2, the petroleum product subsidy had increased from RM16.0bil in 2005 to RM16.2bil in 2007, but had decreased from 43.7% of total subsidy in 2005 to 37.3% in 2007 (Ministry of Finance, 2008). It could be said that the government had begun to cut off the fuel subsidy due to the increasing of oil price in 2007 but had put more effort on gas price subsidy due to Abdullah Badawi’s recommendation policy on replacing the fuel energy. 4.0 POLITICAL POLICY AFFECTS ECONOMY OR ECONOMY AFFECTS POLITICAL POLICY? During Abdullah Badawi’s tenure, whether his political policy had affected Malaysia’s economy or the economy had affected his political policy? Based on our research, we would critic that during Abdullah Badawi’s era, the economy had affected his politcal policy. We would provide few facts at the following to support our critical analysis. The first fact is, the rising of world oil price to between US90 and US100 a barrel is expected to force Abdullah Badawi administration on reduction in fuel subsidies in 2008. According to Asia Times (2008), the fuel and gas subsidiaries approximately cost US12bil a year. The global oil price crisis had put increasing burdens on the family budgets, especially the middle-income family from developing country. Not only that, the oil price crisis also forced governments to curtail expenditures or reallocate resources for development in order to meet the more immediate needs of societies (D-8 Secretariat Istanbul, 2008). Thus, from our analysis, we could comment that the rising of oil price had affected Abdullah Badawi to reduce or cut off the fuel subsidies policy to societies. However, we could not find any other long-term solutions yet to stabilize the price of oil in the market. Perhaps, the reduction on fuel subsidies would be the best alternatives for controlling the government exp enditures. However, Abdullah Badawi’s reduction fuel subsidiary policy had been implemented until today. It could be proven by Malaysian government now (Najib Razak’s era) is following Abdullah Badawi’s step to cut fuel subsidy on ron95 fuel (Athukorala, 2010). In our opinion, there are pros and cons on abolishing fuel subsidy in Malaysia. The pros definitely would be the Malaysia takes advantages of falling global oil price and reduce the burden of government. If cut off fuel subsidy be implemented, the oil price would be followed international oil price, thus, if global oil price reduces, then Malaysia would pay lesser to import oil (McAleavey, 2014). Moreover, abolishing fuel subsidy could benefits government because government could save up the money to use it on other field of subsidiaries. The con on abolishing fuel subsidy in Malaysia would be widen the wealth gap issues. Dismissing fuel subsidy would be benefited to high-income households instead of protecting the l ow-income workers (Palatino, 2014). Nevertheless, in our point of view, if the reduction on fuel subsidy policy would be announced and get opinion from the societies first, it would be more beneficial to both societies and government to achieve a win-win situation. The second fact that we could provide to prove that the economy had affected Abdullah Badawi’s policy is the recommendation on Bio-Fuel Policy in 2006 (D-8 Secretariat Istanbul, 2008) by Abdullah Badawi as a renewable sources of energy to encounter the increasing of oil price issue. The goal to implement this policy is to promote the use of bio fuels as an alternative to petroleum in Malaysia. Examples of bio-fuel or bio-gas could be natural gas vehicles (NGV). Based on our finding, National Biofuel Policy (NBP) provided an alternative to reduce the dependency on petroleum in Malaysia. Palm oil is used as the alternative resource to replace the depleting petroleum as it is more environmental friendly and it could produce investments for it value added-finished products. Oil palm is an energy-efficient crop and the adoption of renewable energy resources started as the crisis of increasing oil price and depletion of crude oil reserve. Palm oil contribute the largest part in Malaysia’s economic. NBP was being launched to sustain the economic growth. Few objectives were formulated to mobilize the local resources for biofuel production and explore new technology to generate energy as an alternative resources (table 2). In 2009, the use of B5 blends (Envo Diesel) of 5% diesel biofuels and 95% petroleum diesel was introduced (Majid, 2015). This was to create an environmental friendly and renewable energy resources. The use of biofuel is definitely a great idea yet the usage of diesel biofuel in Malaysia is still low. Moreover, diesel engined-vehicles is more expensive than petrol engined-vehicles. Thus, less people supported the biofuel policy. It is in fact that until today, the Najib Razak’s era, this policy was not implemented yet in Malaysia. The current prime minister could only implement the reduction of fuel subsidy policy, instead of carrying up the bio-fuel policy. Based on our research, there are a few weakness of this National Biofuel Policy which launched by Datuk Sri Abdullah Ahmad Badawi in 2006. Ccsenet.org (2011) mentioned that the weakness of this policy is that the demand from market is small. There is only few diesel users compare to petrol users. Thus, the biofuel policy only benefits some of the populations. Figure 2 shows the difference of energy consumption between petroleum products and biodiesel in Malaysia. The minuscule domestic market could not gain much profits and supports from the people and lastly would fail to reach the objectives of the policy. Besides that, the biofuel infrastructure which could fulfill the basis of nation was not sufficient. People might feel interested and wish to try something which is new and environmentally friendly yet the lack of infrastructure had made the policy unsuccessful. According to Phys.Org (2009), 16 biofuel plants were built but due to low price of biofuel was not being operated. The infrastructure that being built was wasted and made the people feel not confident with the good side of biofuel. The lack of market opportunities of biofuel had also lead to the failure of this policy. Development of biofuel always related to the rain forest deforestation which lead to biodiversity loss. Malaysia has chosen a solution of land-clearing to get plant oil-palm for biodiesel. Climate changes and global warming had become the issue in few conferences and lead to the failure of this policy. Resources and skilled workers and research were not fully utilized to conduct the policy. Thus, National Biofuel Policy is indeed a good policy if we have sufficient manpower, resources and technology intelligence to make it successful and increase the nation’s economic growth. However, the lack of skilled labour and technology and high dependency towards petroleum had caused the implementation of the mandate of B5 biodiesel sale to be delayed in February 2010. 5.0 CONCLUSION The difference in Abdullah Badawi’s leadership style with his predecessor brings about cause for some to consider it as a weakness and loss of control (Utusan Malaysia, 19 September 2006). Under his tenureship, Malaysia had experienced two big challenges, which are the global financial crisis and international oil price crisis during 2008-2009. These two challenges yet never came into a long-term solutions to solve these issues until today. Therefore, in our opinion, the international oil crisis, cut off subsidiaries on oil and increased of oil prices in Malaysia perhaps are the reasons to let him lose his mass support on general election in 2008. REFERENCES Welsh, B. (2003). Malaysias transition: Elite contestation, political dilemmas and incremental change. Washington, D.C: Asia Program Special Report. Sivamurugan, P., Rusdi Omar., Mohd Azizuddin. (2010). Work with Me, Not for Me†: Malaysia under Abdullah Ahmad Badawi (2003-2009). Asian Culture and History, Volume 2, Issue 1. Case, W. (n.d). Abdullah Badawi’s first year as Malaysia’s Prime Minister. Austrialia: Griffith Asia Institute. McCreedy, A. (2003). Passing the mantle: A new leadership for Malaysia. Washington, D.C: Asia Program Special Report. Welsh, B. (2003). Malaysias transition: Elite contestation, political dilemmas and incremental change. Washington, D.C: Asia Program Special Report. Welsh, B. (2003). Malaysias transition: Elite contestation, political dilemmas and incremental change. Washington, D.C: Asia Program Special Report. Welsh, B. (2003). Malaysias transition: Elite contestation, political dilemmas and incremental change. Washington, D.C: Asia Program Special Report. http://www.energyglobal.com/downstream/refining/30102014/Malaysia-reduces-fuel-prices-1527/ http://thediplomat.com/2014/10/why-malaysia-reduced-its-fuel-subsidy/ http://www.twn.my/title2/ge/ge26.pdf APPENDIXES Figure 1: Real GDP and trade growth of Malaysia, 2008-10 Source: World Trade Organization, 2011. https://www.wto.org/english/news_e/pres11_e/pr628_e.htm Figure 2: The Difference of Energy Consumption between Petroleum Products and Biodiesel in Malaysia. Source: National Energy Balance 2012 (Retrieved from Malaysia Energy Statistic Handbook, 2014) Table 1: Malaysia’s Fuel Subsidies 2001-08 Table 2: Malaysia’s Subsidies and Financial Assistance (RM bil) 2005-07 Source: Ministry of Finance, Bank Negara, Department of Information, Malaysia CIMB/GK Research, 2008.