Malaysia

Redazione published in Malaysia, Politics and strategy

Malaysia in search of political stability

Could the anti-party hopping law for upcoming elections be the solution?  

By Aniello Iannone

On February 23, 2020, during the government led by the Pakatan Harapan coalition (PH), exponents of the Pribumi Bersatu Malaysia (Bersatu) party, the main party of the PH coalition, meet with members of the Pertubuhan Kebangsaan Melayu Bersatu (PEKEMBAR) party, at the Hotel Sheraton, in Kuala Lumpur.

That event, known in the media as "Sheraton Move," will cause the collapse of the PH coalition with the exit from the coalition of the BERSATU party and a fraction of the Keadilan Rakyat (PKR) party. This event will cause a government crisis in Malaysia with Mahathir's resignation on February 24, 2020.

The events that preceded the Sheraton Move are linked to the victory of the Pakatan Harapan (PH) coalition during the G-14 (14th General Election) when the Barisan Nasional (BN) coalition was defeated after 60 years in command.

The PH coalition, led by former Prime Minister Mahathir Mohammed, managed to gain support during the G14 by taking advantage of internal weakness in the opposing coalition.

This weakness resulted from the tax scandal involving Najib Razak within the Barisan Nasional coalition and the Pertubuhan Kebangsaan Melayu Bersatu (PEKEMBAR) party, better known by the English acronym UMNO. 

However, after less than 22 months of PH's rule, the ideological differences between the parties within the PH coalition, with weak leadership at its helm, led to its crumbling. The unfulfilled promise by Mahathir to cede the role of prime minister to Anwar Ibrahim has given rise to a crisis within PH, which has consequently led to the exit from the coalition of an entire party, BERSATU, and a fraction of the Keadilan Rayat party (PKR). A government crisis began in Malaysia from these events, known as the Sheraton Move. 

This crisis led to the resignation of Mahathir and the beginning of an alternation of governments. First of all, there was the government of Muhyiddin Yassin, followed by the formation of the government of Ismail Sabri Yaakob, exponent of the UMNO / PEKEMBAR party and of the Barisan Nasional coalition in August 2021, currently in office. 

Why an anti-party hopping law now? 

The problem of the government crisis opened a debate in Parliament for an anti-party hopping bill. The law would require any members of Parliament who change parties during legislation not to be able to continue their role as a parliamentarian. Members of Parliament (MPs) who change parties do not maintain loyalty to the part of the population who voted for them. The law would also prevent larger parties from attracting members of smaller parties (Chacko, 2020)

The practice of “hopping” from one party to another by parliamentarians is not new in Malaysian politics. The political crisis in Sabah in 1994 started when supporters of the Bersatu Sabah (SPB) party, which won the state elections against BN, left the party to join the opposing party.

After the events of the Sheraton Move, the PH and the current government have agreed on a memorandum of understanding (MoU) which states that the plan for an anti-party hopping bill should be implemented no later than the first session of the fifth session of Parliament. To date, the law plan has been postponed for further insights.

Analyzing Malaysia's political and constitutional situation, an anti-hopping law should revise various articles of the Malaysian constitution, in particular article 10. The Mahkamah Persekutuan Malaysia (Federal Court) 1992 declared an anti-hopping law illegitimate because it went against 'Article 10 of the constitution, which defines freedom of association.

To deal with this regulatory conflict, the government has asked for a reform of Article 10. Should this reform pass, it will introduce a clause (A) in paragraph 3 of Article 10, i.e., the introduction of limitations for members of Parliament who change party during a period of active government and the introduction of a second clause stating that the act of hopping is harmful to public order (Loh, 2020)

Uncertainties: Is it heading in the right direction?

The events during the Sheraton Move may not justify the government's proposed law. The bill provides that if one member of Parliament leaves his party for another, they will automatically lose their role as parliamentarians. Nevertheless, what led to the Sheraton Move events stems from different problems. In that context, an entire party, BERSATU, left the PH coalition. Even if there had been an anti-hopping law, it still would not have changed events at the Sheraton. 

The law is currently being reworked. The lawyer for Liberty (LFL) group noted that an anti-hopping law could become a double-edged sword in the Malaysian context, with dangerous repercussions for democracy.

According to LFL, the bill lacks a concrete definition. According to LFL, this law does not concern itself with solving the problem of party-hopping but, in a contradictory way, grants decision-making power to the party to expel any members, limiting the independence of elected representatives.

In addition, this would put the parliamentarian below the decisions taken by the party, for fear of possible repercussions. 

The criticism of the bill also comes from parliamentarians. The MPs Nurul Izzah Anwar from the PH harshly criticized the bill. Anwar said that if this law were to be passed, parliamentarians would see their freedom and discretion restricted during their work in ParliamentParliament.

 

Reference 

Chocko D., P. (2020) “ Policy Briefs: party-hopping of Lawmakers in Malaysia: a menu of remedies. Jeffrey Sachs Center on Sustainable Development, Sunway University 

Loh J. (2020) “Outlawing party hopping for good” EMIR Research 

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Francesco Brusaporco published in Malaysia, Politics and strategy

Muhyiddin Yassin: stepping out of the shadows under the August sun

After the end of the state of emergency, there is only one month left for the Malaysian Prime Minister to launch the vaccination campaign which could save his political life.

Just over one-and-a-half year ago, Malaysia's most popular politician, Muhyiddin Yassin, was unknown to many if not most. However, Muhyiddin, 74, who became the Prime Minister on March 1, 2020, is not exactly a newbie in Malaysian politics. After joining the United Malays National Organization (UMNO), the former dominant party, in 1971, Muhyiddin, "a very serious and boring man", managed to get through the major political transitions which have occurred in the country over the last fifty years.

In 2016 he was kicked out of UMNO for criticizing then-Prime Minister Najib Razak, who was involved in an international corruption case. In the May 2018, he played a crucial role in the election victory of the Alliance of Hope (Pakatan Harapan, PH), the pact of opposition parties which ousted UMNO from power for the first time since Malaysia's independence in 1957. However, not even two years later, the power struggles within the new government coalition and the miscalculations of the 94-year-old Mahathir Mohamad, a former Malaysian strongman who returned to power in the 2018 democratic revolution, the PH government collapsed. Muhyiddin won the support of his former UMNO colleagues and emerged as a compromise candidate for the premiership.

Muhyiddin – the official spelling is Mahiaddin – was born in 1947 in the state of Johor, at the southern end of the Malay Peninsula, then a British colony. His father, Muhammad Yassin, was an influential Muslim cleric belonging to the Malay ethnic majority. After graduating in economics and Malaysian studies at the University of Malaya, Malaysia’s oldest university, Muhyiddin joined the young generation of UMNO politicians led by Anwar Ibrahim, who was then climbing up the party hierarchy by promoting religiously-inspired pro-Malay policies.

In 1978, Muhyiddin entered parliament as a representative of the Pagoh district, whereas in 1986 he was appointed Menteri Besar, the chief minister of the state of Johor, where he built his electoral base. In 1995, he joined the cabinet of then-PM Mahathir as Minister of Youth and Sports and remained in government for the following twenty years, leading several departments under various prime ministers, until he was sacked by Najib in 2015 and expelled from UMNO the following year.

As Oh Ei Sun, a senior fellow at the Singaporean Institute of International Affairs, rightly pointed out, at that point most of the other members of the cabinet were still supporting Najib. Muhyiddin however realized the growing social outrage over the 1MDB scandal, denounced publicly "the birth of a new dictatorship", and saw an opportunity for political change. Five years later, Muhyiddin, then-President of the newly formed Malaysian United Indigenous Party (BERSATU) and Minister of Home Affairs in the government led by Mahathir, was able to capitalise on his deep knowledge of the system and enduring friendships across the political spectrum to present himself as the only one who could "save the country from prolonged political turmoil".

The appointment of Muhyiddin as Prime Minister, however, was not sufficient to solve the political crisis which was triggered by Mahathir to get rid of Anwar in February 2020. Mahathir and Anwar, the two most prominent personalities of the PH, have since defined Muhyiddin a “political opportunist” and a traitor, respectively, accusing their former ally of “compromis[ing] on principles to form a backdoor government with kleptocrats.” However, it was precisely because of the personal rivalries between Mahathir and Anwar that the Alliance of Hope was unable to provide a durable alternative to the “kleptocrats”. In the context of the dire Covid-19 situation, then, Muhyiddin declared a state of emergency which allowed him to rule by decree without having to test his narrow parliamentary majority.

Only on 5 July, after being rebuked twice by Sultan Abdullah of Pahang, the Yang di-Pertuan Agong, head of state of Malaysia, Muhyiddin agreed to convene a special sitting of the Parliament to present his national recovery plan. At the beginning of the session, on 26 July, the Prime Minister called on all parties to “stand in solidarity” with the government while Covid-19 cases were still on the rise. However, he refused to allow a debate on the measures announced by the government and declared the lifting of the emergency ordinances without consulting the Sultan. If the chaotic management of the so-called ‘second wave’ and the clashes with the king have raised the pressure on Muhyiddin to step back, the fragmentation of the opposition and the suspension of parliament have allowed him to buy time. For the moment, the Prime Minister is shunning critical voices and ignoring calls for resignation, while focusing on his ambitious vaccination plan which may ultimately ensure his political survival. With the state of emergency coming to an end and the next sitting of the parliament scheduled for early September, the fate of Muhyiddin, the politician who has always worked in the shadows, could be decided under the August sun.

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Emilia Leban published in Economy and trade, Malaysia

Dialogue for an EU-Malaysia trade agreement reopens

Despite the controversial issue of palm oil, European and Malaysian industry groups are pushing to restart trade negotiations

After free trade agreements with Singapore and Vietnam, the European Union aims to expand its network of bilateral agreements in Southeast Asia. With an economy devastated by the pandemic crisis, Thailand and the Philippines have expressed interest in reopening talks, while negotiations with Indonesia are proceeding. Now it seems that the conditions are in place to relaunch negotiations with Malaysia as well after some industrial groups have announced that they want to put pressure on Brussels and Kuala Lumpur to reach an agreement.

Today, Malaysia is one of the most advanced countries in Southeast Asia overall: it is the third region in terms of GDP (12%) and the EU's third-largest partner in ASEAN. It is the second-largest oil producer in the region and the third-largest exporter of liquefied natural gas in the world, thanks also to its strategic position among the main energy trade routes.

Malaysia has already tried to start talks with the EU in 2010, but these broke down two years later due to the difficulty in agreeing on key elements. The main obstacle, now as then, remains the controversial issue of palm oil. Lobbies in Indonesia and Malaysia - which supply 84% of global palm oil production - have long opposed EU environmental protection rules on biodiesel imports. Above all, this is because the crops are an important source of income for rural dwellers, who also make up a large part of the electorate in both countries. On the other hand, environmentalists are fighting hard against the intensive production of palm oil, which is the main cause of deforestation that destroys the habitat of orangutans and other endangered species.

This is why in 2018, with the Renewable Energy Directive II and the subsequent Delegated Regulation, the Commission established strict "eco-friendly measures" for the European energy sector, which include the total ban on imports of all those biofuels that cause even indirectly the increase in greenhouse gas emissions by 2030, including palm oil.

However, now, like Indonesia, Kuala Lumpur has decided to open proceedings against the EU using the WTO dispute settlement mechanism in January this year. Both states accuse the EU of pursuing discriminatory and protectionist trading practices. A risky move that could jeopardize negotiations with the EU, and all for a product that accounts for less than 5% of exports to the old continent.

Nevertheless, given the economic importance of a free trade agreement, some analysts believe that the well-known palm oil issue would be raised mainly for domestic political reasons. They highlight how the Malaysian Prime Minister, Muhyiddin Yassin, and his minority government, in view of the general elections scheduled for 2023, are committed to a nationalist agenda for the benefit of the country's Muslim majority, which accounts for the majority of owners and workers in the palm oil industry.

Meanwhile, pressure is growing on the Malaysian government, especially from local businesses, which are well aware that a free trade agreement with the EU would stimulate post-pandemic recovery. At the same time, the restart of the negotiations would allow European countries to take advantage of the commercial and investment opportunities offered by a dynamic market in an area of the world on which EU companies are betting a lot. Today, therefore, after the failed attempts of the recent past, the time seems finally ripe for Malaysia and the EU to sit down at the table to restart negotiations.

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Valentina Beomonte Zobel published in Culture and society, Malaysia

Peranakan

Once upon a time multiculturalism became the norm in Malesia

“I am Italian”, “I am Japanese”, is a usual answer for an Italian or Japanese citizen if questioned about his/her nationality. What is unusual, is to find a person from Malaysia to answer “I am Malaysian”. We are used to thinking about State borders as something distinct and separate. But in Southeast Asian countries, they are perceived quite differently. In many cases, they were decided on paper by foreign powers, not taking into account geography and different ethnic groups and cultures.

What is meant today with “Malaysia” is the union of 13 federal states (nine kingdoms, each governed by a Sultan, and four republics) and three federal territories in Southeast Asia. It includes the peninsular part (or Western) on the southern tip of the Malacca Peninsula and the Eastern part, a large branch of the Borneo island. The population consists of over 60% of Muslims, around 19% of Buddhists, 10% of Christians, and 6% of Hindus. The Muslim and indigenous majority holds the reigns of political power, while the ethnic Chinese minority holds the economic ones.

Going back to the previous question, someone from Malaysia could answer “I am Malaysian” if born by locals. But also: I am Chinese, I am Indian. Or baba nyonya, kristang, chitty. Or another of the countless ethnic minorities that are referred to in Malaysian as peranakan (lit.: “descendants”). The term identifies a person born on Malaysian soil by a local and somebody of a different ethnic background.

It all started in Malacca at the beginning of the 16th century. The city was the capital of the homonymous state of Malacca and home to one of the most important trading posts in Southeast Asia. Fine spices were traded here in bulk to and from all over Asia.

Due to this flourishing trade network, Malaysia started soon to attract the expansionist ambitions of European powers. Portugal took possession of the country in 1511; the Netherlands in 1641, after warding off the Portuguese; Great Britain in 1795 after beating, in turn, the Dutch. The English dominated the peninsula until when it gained official independence in 1957. During the English period, the region was occupied by the Japanese army too for a short period, from 1942 to 1945.

During these many centuries of foreign domination and wealthy commercial activity, there was a continuous mix of locals, Europeans, and traders of Indian, Chinese, or Arabic origins in Malacca. Intermarriages between different religions and ethnicities followed soon all over Malaysia. Today, for the descendants is impossible to identify their identity with standards terms like “Chinese”, “European”, or “Malaysian”. Even the Malaysian term orang Cina bukan Cina (“Non-Chinese Chinese), used sometimes to describe peranakans, is misleading. Each of these ethnic groups developed exclusive customs and traditions: partially deriving from their ancestors; partially in complete autonomy, as individuals halfway between two worlds.

There are several peranakans varieties. However, the great majority of them today is baba nyonya, kristang, or chitty.

Baba nyonya descended from Chinese traders that moved to Malaysia in the past centuries (usually males) and local women. They are the largest ethnic group, to the point that the term peranakan is often deployed by mistake as a synonym for baba nyonya. When the descendant is a male, he is a baba (“men”), when a female, she is a nyonya (“women”). The eldest generations speak baba Malay, a creole language that mingles Malay and many words from the Fujian Chinese region dialect. The most practiced religion is generally Buddhism. However, thanks to the strong European cultural influence in the country, it is not rare to find Christians too: in fact, the observed holidays come from both the Chinese Lunar and Gregorian calendars.

Kristangs are peranakans of European (mainly Portuguese) and Malaysian, Chinese, or Indian heritage. The distinctive feature of this group is the one of being not only multi-ethnic but also multifaith. From the second half of 1500 AD, the Malacca Jews persecuted by the Portuguese Inquisition sought shelter and protection among Kristangs, finally broadening their variety of traditions, customs, and religions. The festivities celebrated today include San Pedro Day and Christmas. On these occasions the multiculturality of kristangs cuisine emerges, a real blend of Eastern and Western taste. Around 300 Portuguese words are included in their creole version of the language, the “Malaysian Portuguese”. One of these, kristang (from the Portuguese Cristão, “Christian”) became the word used to identify the ethnic group. It was quite common for kristangs and local Malaysians to tie the knot in the past, but today it’s rarer: the law reform in 1976 provides that everyone who marries a Muslim must convert to Islam, the religion observed by the majority of Malaysians. Kristangs generally own a strong religious and cultural identity as Christians. For this reason, they find it hard to adapt to the new rule and tend more and more to marry other peranakans, or Chinese and Indians, because it is not mandatory to convert to another religion.

Chittys come from the union of Indians and Malaysians, Chinese or baba nyonya. They speak Malay, celebrate Diwali (the “Festival of Lights”, one of the most distinctive Indian holidays), and their cuisine is deeply rooted in the Indian and Malaysian cultures. It is easy to recognise the house of a peranakan chitty in Malaysia by looking at the front door: if there are mango leaves, there is a chance that a chitty lives inside.

Despite that peranakans are considered as part of Malaysian intangible cultural heritage, these countless, varied linguistic and cultural identities are today at risk: today, 55% of the Malaysian population is Malaysian, 35% Chinese, 8% Indian, and just 2% “others”, which includes peranakans. For this reason, several associations and even a Peranakan Museum in Singapore have been founded, to make sure to preserve this fundamental part of Malaysian culture.

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Diego Mastromatteo published in Economy and trade, Malaysia

Challenges and opportunities for Malaysian Top Glove in the year of Covid-19

The world’s largest manufacturer of latex gloves has racked up record profits this year, but has also closed 28 factories 

Top Glove è un’azienda malese produttrice di guanti in gomma, specializzata anche in mascherine per il viso e altri prodotti. L’azienda possiede e gestisce 41 fabbriche in Malesia, Cina, Thailandia e Vietnam, e produce 220 milioni di guanti di gomma usa e getta al giorno, esportando in 195 Paesi con oltre 2.000 clienti in tutto il mondo. Due terzi dei guanti in lattice del pianeta sono realizzati in Malesia, con Top Glove che ne produce uno su cinque. I mercati più grandi dell’azienda sono il Nord America e l’Europa. 

“Urgent demand for medical supplies appears to have become the norm for Top Glove”, Executive Director Lim Cheong Guan told reporters, adding that demand should continue to grow. “We expect there will still be a shortage of gloves in the next three years”, he added. “The potential increase in demand is mainly due to the fact that current glove stocks are at extremely low levels in our customers’ warehouses”. The company estimates that demand for gloves will grow by 20% this year, 25% next year and 15% after the pandemic.

Due to the sharp increase in demand during the pandemic, the company’s value has multiplied at least six times this year, altering the composition of the Malaysian stock market and becoming one of the highest-rated companies in the country. In the financial year ending August 31, 2020, the demand for rubber gloves was so strong that the company increased full-year earnings to more than a billion, a record figure that has significantly increased the value of the company's shares. Building on these results, in November 2020, the company also donated a total of $45 million to the Covid-19 government fund set up to fight the pandemic.

However, in the same month, an outbreak emerged in the Meru plant, a town in the Klang district of Selangor, the most developed state of Malaysia, forcing the management to opt for the temporary closure of 28 plants in the country, causing a decease by 10% of the company’s stock value. The company's shares fell another 3.5% last week, but still rose 337% since the beginning of the year. Out of 5,767 employees subjected to controls, 2,453 tested positive for the virus, highlighting the need for drastic actions to contain the damage on an epidemiological level. Most of the positive cases in the cluster are workers, mostly foreign immigrants from Nepal, who often live in unsanitary conditions in large and crowded housing complexes.

In fact, this year Top Glove was in the global spotlight not only for its record profits, but also for allegations of labor exploitation practices. In July, the United States banned the importation of gloves from two of the company's subsidiaries due to concerns about forced labor. Glorene Das, Executive Director of Tenaganita, an NGO based in Kuala Lumpur, told the BBC that “these workers are vulnerable because they live in crowded shared apartments and do jobs that do not allow them to practice rigorous social distancing”.

Faced with the controversy, Malaysian Defense Minister Ismail Sabri Yaakob announced that authorities will immediately begin enforcing new workers’ housing rules and imposing fines of approximately $ 12,300 for each employee living in unregulated housing, they have also been allocated 25 million dollars for the renovation of housing complexes. In addition, the country’s authorities tested all Top Glove workers in the factories and dormitories concerned with the aim of limiting the outbreak and limiting the damage. According to the Minister of International Trade and Industry Mohamed Azmin Ali, in fact, it is necessary to enable the company to continue production as soon as possible, since Top Glove is one of the few companies in Malaysia focused on the production of plastic sanitary materials and one of the most important in the global market.

Despite this unexpected obstacle, Top Glove’s presence and business continues to be of great significance to Malaysia and the rest of the world using its quality products. During this year, the company was able to set aside enough resources to expand manufacturing capacity to 100 billion pieces in the next five years. This year’s global crisis has put a strain on the dozens of rubber glove manufacturing factories scattered across Southeast Asia, but has also put them in the conditions to expand production and play a crucial role in the fight against the pandemic. 

  By Diego Mastromatteo           

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Rizka Diandra published in Malaysia, Politics and strategy

The Road Ahead for Malaysia

Income gap and sustainability issues remain a challenge as the country works to achieve its 2030 goals

Over the years, the economic development of Malaysia has been nothing but impressive. Since its independence from the UK in 1957, the country has been focusing all of its effort on strengthening the economy and improving the welfare of its citizens. For almost 5 decades until 2018, Malaysia recorded a stable GDP growth at an average rate of 6.1% per year, according to a report from OECD. The country also has a relatively high human development index at 0.804 – the third-highest in ASEAN after Singapore and Brunei Darussalam.

On top of these notable achievements, Malaysia set a high bar also for its medium and long term objectives. Not only does the country aim to achieve high-income status by 2024, but it is also working towards achieving sustainable growth and equality across all income groups, ethnicities, and regions – as outlined in the Shared Prosperity Vision 2030 document. Nevertheless, in working towards these goals, the country still needs to tackle several challenges both at home and abroad.

One of the most pressing issues in Malaysia is structural differences. Officially, Malaysia’s social fabric is divided into two segments: the majority Bumiputera or the Malay population, and the minority ¬non-Bumiputera, which mainly consists of Chinese and Indian populations. Historically speaking, economic disparity has always been an issue between the two groups, as national wealth used to be largely concentrated in the hands of the market-dominant Chinese population. However, although progresses are being made with regards to equal opportunities between groups, today the divide is still evident. The income gap between Bumiputera, Indians and Chinese has increased four times in the past 27 years. For this reason, the government is trying hard to create a balance between all ethnic groups, in particular by adopting the Bumiputera empowerment agenda, which aims to boost the population’s socio-economic standing. Moreover, the government is also committed to putting more attention on the development of other non-Bumiputera populations, to ensure everyone receives equal access to education, work, and opportunities.

Another issue that might hinder economic development is palm oil, and its effects on Malaysia-EU trade relations. Palm oil is one of Malaysia’s primary industries , accounting for 2.8% of the country’s GDP, and Malaysia is the world’s second-largest producer of palm oil after Indonesia. Since 2010, the Malaysian government and the EU have been working towards establishing a Free Trade Agreement. However, negotiations are on hold due to diverging views on the environmental impact and the sustainability issues associated with the production of palm oil. The initial reaction of the European Parliament on the issue was to ban the use of palm oil for biofuels by 2030. However, looking at the economic consequences of this decision, the EU decided instead to limit the amount of high-risk Indirect Land Use Change (ILUC) biofuels in entering its market. By definition, ILUC occurs when agricultural lands previously used for growing food are converted for biofuel production, resulting in the release of carbon emissions into the air. Biofuels categorized under the high-ILUC risk categories are those that are produced from areas that have a higher concentration of carbon such as forests, wetlands and peatlands.

Although this decision created a degree of leniency, it is still difficult for Malaysian palm oil to qualify under the low-ILUC risk category. The government is now working towards expanding the production of sustainable palm oil. This is done by restricting the development of peatlands, banning the conversion of forest reserves for palm oil, and certifying local plantations with the Malaysian Sustainable Palm Oil (MSPO) certification. Doubts remain on whether or not this certification system can be recognized by the EU, and a win-win solution is yet to be agreed. Experts are advising both parties to reassess their terms of engagement in order to create a more favorable outcome for both the palm oil industry and the global environment. 

Considering the above-mentioned elements, Malaysia faces a challenging situation. The income gap and sustainability issues remain detrimental, as they can significantly affect the country both internally and externally. However, the government is highly committed in addressing these problems, and the country appears to be on the right track to recover from the Covid-19 pandemic and continue the path to achieve its 2030 goals.

By Rizka Diandra and Alessio Piazza 

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Redazione published in Malaysia, Politics and strategy

Behind the origins of the EU-Malaysia tensions

Diverging views on palm oil fuel could prevent further collaboration.

Based on the European External Action Service’s data, the EU is Malaysia's third largest trading partner and accounted in 2014 for 9.9% of Malaysia's total external trade in goods. At the same time, Malaysia ranked as the EU's 23rd largest trading partner, the second largest trade partner in the South East Asia region. 2010 marked the start of the negotiations of the EU-Malaysia Free Trade Agreement; however, negotiations came to a halt, due to differing views on palm oil, and on how to reconcile economic interests with environmental imperatives.

The crux of the conflict between the EU and Indonesia lies in the EU's decision to phase out palm oil-based biofuel as an energy source. The Renewable Energy Directive (RED) I of 2009 encouraged and facilitated Southeast Asian countries like Malaysia and Indonesia to export palm oil to the EU. However, in recent years Europe has operated a radical change in discourse concerning palm oil, which is today widely considered dangerous for environmental protection.

Indeed, the main reproach made to the palm oil industry is the fact that it is a land-intensive production. The main consequences of this model are massive deforestation, soil degradation and a worrying increase of air pollution, namely through greenhouse gas emissions.

Pressure from European consumers finally convinced the EU Parliament to progressively ban the use of palm oil by 2030, and to revise the Directive (RED II) in 2018 to define benchmarks for biofuels. This change complicated relations between the EU and Malaysia. In fact, Malaysia and Indonesia (the two countries together produce more than 85% of the world’s palm oil) considered this move as a protectionist measure and asked support to other ASEAN countries to bring the case in front of the World Trade Organisation. After month of negotiations with the Energy Commissioner Kadri Simson, Malaysia stepped back from its initial intentions, but until the case has been resolved, it will keep penalising EU products in retaliation, and slow down any discussion regarding the FTA.

Not only does palm oil contribute around 5 per cent of Malaysia’s annual GDP, but also provides millions of people with stable job and wages. For this reason, it is also a matter of political and social concern.

The Malaysian government wants to persuade the EU that Malaysian palm oil was much greener than its critics claim, and to push the Union to revise its decisions by 2021. Until then, controversy between economic priorities and environmental commitments will keep hindering progress toward negotiations for an FTA.

 

Article edited by Valentina Beomonte Zobel.

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Redazione published in Economy and trade, Malaysia

Malaysia during the Covid-19 emergency

The crisis has hit the country mainly from an economic point of view, but there are also opportunities

With the aim of better understanding how Malaysia coped with the health crisis and its economic and social impact, on May 19th the Italy-ASEAN Association organized a webinar with Zuraida Kamaruddin, Malaysian Minister for Housing and Local Government, and Giovanni Andrea Toselli, CEO of PwC Italy.

Today, like most countries, Malaysia is suffering the consequences of the Covid-19 pandemic. However, the Malaysian government was able to promptly put in place significant measures aimed at tackling the medical, economic and social impact of the crisis.

With regards to the containment of the health crisis, as soon as the numbers started to grow in mid-March, the government immediately imposed lockdown and social distancing measures in the country, leaving only essential medical and grocery services open and active. No large gathering or private visits to friends and relatives were allowed, not even to celebrate Ramadan. Moreover, all people coming from abroad have to undergo two weeks of quarantine in special medical facilities, and only when checked will they be allowed to return to their homes. The government also dealt with the case of the many local workers operating in Singapore, developing a common protocol to protect the safety of all the citizens. To complete its approach with a regional dimension, Malaysia is engaging with ASEAN partners to develop a single coordination protocol aimed at effectively dealing with the consequences of the health crisis throughout South-East Asia. To date, the Malaysian authorities' intention is to phase out the containment measures gradually until 9 June, with a cautious and proportionate approach.

As for the economic impact of the pandemic, the government promptly intervened with strong measures to stimulate the economy and support businesses and workers. Among the main actions taken by the Malaysian government that are worth mentioning: the suspension of payment for rents, the extension of tax deadlines for SMEs, measures to support the unemployed and infrastructure investments. The stimulus packages for the economy have been among the most substantial in the Asia-Pacific area and for the moment Malaysia leads the ranking of ASEAN countries with an intervention of about 65 billion dollars. Despite the considerable effort however, the Malaysian Central Bank estimates the country's GDP growth in 2020 to be between -2% and 0.5%. The sector that is suffering the most for the moment is tourism, a fundamental asset of the Malaysian economy. The government is planning major support plans with the aim of boosting local tourism and relaunching international arrivals, when the conditions will allow it.

It is however interesting to highlight, that during this emergency, some sectors have had the opportunity to expand and develop. E-commerce platforms are growing in the country and demand for digital services is increasing. Smart-working is contributing to transform the scenario, generating new trends and creating opportunities. In addition, after the impact of this crisis, people seem to be more sensitive towards environmental and health issues in the country.

It is therefore important to underline that despite the economic and social consequences that the Covid-19 crisis is causing in Malaysia, the government’s prompt response and the dynamism of the Malaysian economy still allows the country to offer interesting opportunities for investors, especially with regards to the digital and tech sectors.

 

Article edited by Tullio Ambrosone.

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