Malaysia opposition takes aim at cronyism

Penang - The opposition took power in Malaysia's industrial heartland on Tuesday and immediately said it will no longer follow the nation's controversial affirmative action policy in state administration.

"We will run the government administration free from the New Economic Policy that breeds cronyism, corruption and systemic inefficiency," said Lim Guan Eng, whose Democratic Action Party (DAP) won control of the state at the weekend's watershed general election.

Under the policy, majority ethnic Malays, whose politicians dominate the ruling national coalition, receive preference in terms of state contracts, jobs and financial assistance.

Penang is the only one of Malaysia's 13 states so far to openly spurn the "Bumiputra" (sons of the soil) affirmative action policy.

Lim also said he wants to use cash from state oil firm Petronas to fund a new $940 million bridge project, and would seek a meeting on that matter with Prime Minister Abdullah Ahmad Badawi.

"I shall be seeking an appointment to meet with the prime minister ... on listening to and addressing the needs of the people of Penang expressed in the general elections on 8 March such as using Petronas proceeds to fully fund the construction cost of the federal government's second Penang bridge project," he said.

Lim's government, led by his DAP party backed mainly by the ethnic Chinese minority, was sworn into office on Tuesday in Penang in a quiet ceremony witnessed by somber-looking civil servants who have only ever worked for the long-ruling National Front coalition.

The strongly Islamist Parti Islam se-Malaysia (PAS) will lead or share power in four states, including three -- Kedah, Perak and Kelantan -- that share borders with Thailand, which has been battling an Islamic insurgency with historical links to Malaysia.

PAS and the DAP have vowed to review federal projects on the drawing board in their areas, but said would not stand in the way of projects that were already approved and were beneficial to the people, and have warned they would not tolerate cronyism.

POLITICS OF PATRONAGE

Malaysia's politics of patronage, whereby state contracts are given to businesses aligned with ruling-party interests, has nurtured a powerful political-business establishment whereby contracts are often awarded without open, competitive tenders.

The Edge Financial Daily said in an editorial on Tuesday that was a major factor in Saturday's election, which handed the ruling National Front its worst electoral setback in history.

"Indeed, one can say that one reason why the people voted so strongly for the opposition in the elections is to send a message that they have had enough of political cronyism and awards of contracts and deals to politically connected companies.

The prospect that this nexus could be cut, and the possibility of policy gridlock now that the National Front has lost its iron-clad two-thirds majority in parliament and faces strong opposition in heartland states, has spooked the markets.

Malaysian shares plunged 9.5 percent on Monday, wiping out some $30 billion in market capitalization, probably the biggest single-day loss in the market's history.

Stocks had rebounded 2 percent by 0445 GMT, but analysts saw it as a short-lived reprieve. "It's a dead cat's bounce," said Kenny Yee, research head at OSK Investment Bank. "Certainly our market will be undergoing lengthy consolidation."

Prime Minister Abdullah Ahmad Badawi's National Front will be undergoing consolidation as well in the days to come.

He has a tricky task ahead in fending off leadership challenges, especially with his UMNO party -- the dominant coalition partner -- set to hold leadership elections in June.

He will also need to fill gaping holes in his Cabinet -- four ministers lost seats in the weekend election, including Works Minister S. Samy Vellu, the head of the main Indian party in the coalition, who lost his seat in the weekend debacle.

The winning opposition parties have a delicate task ahead as well. The Chinese-dominated DAP has long harbored deep suspicions about the Islamist agenda of PAS, which advocates Islamic law for Muslims, including punishments such as stoning and amputations.

The DAP, PAS and the People's Justice party of former Prime Minister Anwar Ibrahim were still hammering out their power-sharing arrangements on Tuesday in Kedah, Perak and central Selangor state in the first test of how well they will govern.

PAS kept power in Kelantan state and its government was due to be sworn-in on Tuesday evening.  -- Reuters

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