beyondbrics

When you’re one of the few people who can legitimately claim to have predicted the global financial crisis, working out what is going on in Malaysia shouldn’t be too much of a challenge.

Perhaps that’s why Nouriel Roubini, chairman of the economics consultancy RGE, is attracting widespread attention in Kuala Lumpur for a note casting doubt on the practicality of the government’s radical economic reform plans.

There is a fierce debate going on in Malaysia about whether prime minister Najib Razak is serious about reform, or just attempting to monopolise the debate ahead of an early election. But RGE’s note pulls no punches, asserting baldly that nothing much is likely to happen, at least ahead of an election.

That has attracted a lot of attention in Malaysia’s independent and remarkably robust online media, which has carved out a large audience in recent years with coverage that challenges the reporting of the carefully controlled print and broadcast media.

The Malaysian Insider leads the way with a long report headlined “Pre-polls reforms unlikely, says Roubini’s RGE”. The piece has also been picked up by bloggers, including Lim Kit Siang, parliamentary leader of the opposition Democratic Action Party.

What Roubini had to say wasn’t all that exciting. His note pointed out, as others have done, that it will be extremely difficult for Mr Najib to make much progress in reducing the economically distorting preferences given to the majority Malay population because of strong and growing opposition from Malay nationalists.

Although the Malaysian political scene is complex and hard to read, it is clear that the response from Malays to Mr Najib’s reform plans varies from lukewarm to cold, apparently because many see them as a challenge to the special position of Bumiputeras [Malays and indigenous people] in the country’s constitution.

That is likely to mean, as Roubini’s note put it, that:

[Given] the governing party’s reliance on Bumiputera support, major changes are unlikely until [after] new elections are held and the government has the political confidence to confront popular resistance to reform.

Election rumours have been circulating for months about a possible poll in the first half of 2011, although the government can stay in office until 2013 if it wishes. However, the Malaysian Insider also reported that unnamed sources say that Najib had pushed the poll back to the fourth quarter to allow time for his reforms to gather support.

If Roubini is right, that will prove extremely difficult. That fact, together with his famously prescient analysis of the outlook for the global financial system, is why his intervention is being taken so seriously.

Related reading:

Affirmative action to test Malaysian PM, FT

Malaysia on hard road to high-skills wealth, FT

Is real change afoot in Malaysia, beyondbrics