Commentary: Critical Link Between A Stable Democracy And Business

Malaysia KL City Dep

In a strong democracy, anyone can start a business and cooperate together without limitations. These entities are allowed to communicate freely and compete within a trade or industrial ecosystem.

It has been proven that democracies and businesses have the ability to work together with open possibilities and supported by a government’s policy, which it in end promotes to the world.  A successful business depends on a well-developed system and steady growth. It is important to add that a democratic country has better odds of offering this security and strong policies.

Although there may exists competitive and trade barriers in business, often many industries support one another and this creates a wave that expands and covers the entire country. In return, this makes monetary growth more prominent within a nation.

Successful nations strive to create the most stable environment for their economy to establish confidence, not only for an investor who would feel that an investment is more secure but also for the consumer as people get to obtain reasonable prices within a free market economy.

Simply, when stability is present, we can focus more on developing new services, new offers, and new products. We will have more clients to work with. These are all factors that a business need. Maybe it sounds like an obvious fact, but when this type of stability is present, all businesses can develop faster, pay higher taxes, and continue to flourish. It is a clear advantage to the country and to the owners. Countries that lack stability often have undeveloped or obsolete service providers.

For over a year Prime Minister Datuk Seri Anwar Ibrahim and the Madani Government has been pushing efforts to boost foreign investor confidence by guaranteeing good governance and a corrupt-free Malaysia. 

This, among other factors, have brought in a list of investors from across the globe who have done their due-diligence on the economic and social aspects on Malaysia.

“We hope there is a new focus that can increase and drive economic growth more convincingly. This is necessary because Malaysia is a trading country that has all this while recorded an economic growth rate based on our efforts to secure domestic and foreign investment.

“Besides political stability and good governance, another step that should be taken is to speed up the approval process by ensuring that Malaysia is not a place where leaders amass wealth and look for commissions,” Anwar said.

The Prime Minister added: “I will not tolerate negligence that has destroyed the country in the past. I am asking for your cooperation because I know a large number of civil servants and this small (corrupt) group understand this, and this group must be eliminated,” (in referring to corruption and religion or racial bias.)

People are now asking as to how did the Madani government perform over the past year? Various groups and analysts recognised the reforms enacted by the government such as the abolition of the mandatory death penalty, decriminalisation of attempted suicide, bolder commitments to address the impact of climate change, and the increase in foreign investments, subsidy rationalisation and attracting global business concerns like Tesla, AWS and others to establish an office in Malaysia.

However, observers also noted that the Anwar government has been slow in rolling out reforms that would strengthen democratic mechanisms and media protection. Anwar is also accused of pandering to the conservative Islamic forces to bolster support from this segment of the population.

The question has now become ‘louder’ after the release of the 2023 Economist Intelligence Unit (EIU) Democracy Index yesterday (Feb 15) which stated that Malaysia is still considered a “flawed democracy” scoring only 7.29 out of 10, a minor drop from last year’s score of 7.30.

Across the five yardsticks in the index — electoral process and pluralism, functioning of government, political participation, political culture, and civil liberties — Malaysia scored the worst in civil liberties with a score of 5.88 and best in electoral process and pluralism with a score of 9.58.

“Asia is the most dynamic region of the world in terms of economic growth, but it continues to lag behind in terms of democratisation. More than half the countries covered by the index regressed in 2023, recording a deterioration in their democracy scores,” the report’s editor Joan Hoey said in an accompanying press release by the research and analysis division of London-based financial magazine The Economist.

Despite remaining stagnant in the global ranking at the 40th place, and 6th place in the Asia and Australasia region, Malaysia performed best in South-east Asia. Out of 165 independent states and two territories, the index listed a total of 50 countries in the flawed democracy bracket, and only 24 full democracies, including Greece, which has re-entered the full democracy bracket.

Israel, Botswana and Italy also fell into the list of flawed democracies, but Malaysia was still ranked lower than them. There were 34 and 59 countries listed as hybrid and authoritarian regimes respectively.

The EIU assigns “full democracy” status to countries that score 8 and above, while those between 7.99 to 5.99 as “flawed democracy.” Countries that score between 5.99 to 3.96 are what the agency termed “hybrid regime,” governments that are borderline authoritarian.

“Looking at Asia and Australasia by sub-region reveals big regional disparities in the quality of governance, democratic freedoms and social cohesion. South Asia and South-east Asia already had the lowest scores of all the continent’s sub-regions, and setbacks in Bangladesh, Cambodia, Pakistan, Sri Lanka and Thailand mean that the two regions have fallen even further behind,” the unit said in their report.

In the electoral process and pluralism bracket, Malaysia performed better than its neighbours — Indonesia and Singapore — and beat its former coloniser Japan, which the index considers a full democracy. But other countries in the region — Papua New Guinea, Timor-Leste, Philippines and Singapore — outperformed Malaysia in civil liberties.

“Another factor in the Asia region’s regression in recent years has been an erosion of civil liberties. Some governments cite concerns about national security and social cohesion to justify restrictions on freedom of speech and of the media,” the unit said in its press release.

Although there exists sample size and the demographics which seemed to have generated the index, it’s important to know who relay has perceived these results and if there are ant hidden agendas lurking.

As Anwar took over power in 2022, he stated then that many laws which restrict civil liberties are still in force. Human rights groups have been urging the government to promptly deliver the reforms promised during the election, including the repealing of laws, transparency in government processes and others.

At the international stage, numerous United Nations member states recommended that Malaysia amend or repeal laws that curb freedom of speech, expression and assembly.

Many key decision makers, who spoke to BusinessToday on the issue of democracy and business IN Malaysia, share a similar perspective in that Malaysia still faces slow progress in institutional reforms, including a lack of good governance practice, political appointments to government agencies, and the lack of public release of crucial information for mega projects like MRT3 and HSR. There is also slow progress on governance-related legislative reforms promised in the election manifesto.

The resultant question now would be what is lacking in this nation in mitigation the EIU perception.

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