William Pesek
Bloomberg
8th April 2014

The Flight 370 crisis has fully exposed the dangers of allowing one party to rule a nation for six decades.

President Barack Obama always knew his Asia tour later this month would be fraught with political landmines. The two nations that lead off his itinerary — U.S. allies Japan and South Korea — have been squabbling for more than a year over World War II history. Another, the Philippines, is one of Asia’s economic bright spots even as President Benigno Aquino’s government is locked into a dangerous maritime territorial spat with China — a country Obama would rather not antagonize.

But most problematic of all may be Obama’s time in Malaysia. Obama’s visit — the first by a U.S. leader to Kuala Lumpur in 50 years — was meant to celebrate a nation viewed as a high-tech hub of moderate Islam and a democratic contrast to China. Six months ago, Obama hailed Malaysia as “an example of a dynamic economy” and touted its multiethnic society as a model to others. Today, amid the global outcry over the loss of Malaysia Airlines Flight 370, such praise sounds naive. The past month has highlighted Malaysia’s deepest flaws, and all-too-few of its strengths.

The international press has pilloried Prime Minister Najib Razak‘s government for its initial response to the crisis, which was marred by conflicting information, poor coordination with neighboring countries, defensiveness, and an apparent lack of transparency. Fairly or not, since March 8 when Flight 370 disappeared on its way to Beijing, Malaysia has lost a great deal of its standing both in the region and around the world.

At the same time, Najib’s government has been clamping down on internal political dissent. Opposition leader Anwar Ibrahim once again faces the specter of jail on sodomy charges; Karpal Singh, chairman of the Democratic Action Party, is defending himself against sedition allegations. Local media outlets critical of Najib are on the defensive. The government has by contrast been silent on efforts by Islamic conservatives to limit who can use the word “Allah” — a campaign that has eroded Malaysia’s reputation for religious tolerance.

What can Najib’s government do, post-Flight 370, to improve its image at home and abroad? This isn’t a mere PR challenge. The country needs nothing less than a political revolution.

The Flight 370 crisis has fully exposed the dangers of allowing one party to rule a nation for six decades. Since rising to the top job in 2009, Najib has had to divert his attention from revitalizing Malaysia’s economy to maintaining the United Malays National Organization’s long hold on power. It’s a full-time job: For years populist handouts, gerrymandered districts, and political arrests secured the party comfortable majorities, but in last year’s election the ruling coalition lost the popular vote for the first time. Its ethnically Malay, largely rural base is dwindling.

Early on, Najib thrilled global investors by hinting that he would scrap his party’s 40-year-old affirmative-action policies, which favor Malays. But UMNO’s troubles prompted Najib to expand rather than eliminate such apartheid economics.

These affirmative-action policies stifle innovation and drive away investment. They disenfranchise the country’s Indian and Chinese minorities, forcing many of them to seek their fortunes overseas. Malaysia is blessed with enviable natural resources. But it is willfully squandering its equally enviable human capital.

The longer Malaysia sticks with the racial preferences, the more graft and opacity will worsen and undermine growth. The only way to unshackle the economy — which should be performing a lot more like South Korea than Vietnam — is to end such policies.