THE LAST TIME the legitimacy of governments across Asia was such a talking point was at the height of the Asian financial crisis. The collapse of Asia’s currencies in the late 1990s prompted regime changes across the region, including the downfall of Indonesian dictator Suharto and a political crisis in Malaysia which was only allayed by the pegging of the ringgit to the US dollar.
Once again it is all about government. Last week saw a failed attempt by former strongman president of Sri Lanka, Mahinda Rajapaksa, to return to power as prime minister after his party failed to score the necessary vote tally in parliamentary elections.
Recently elected president, Malthripata Sirisena, who in January ended 10 years of Rajapaksa’s rule, called surprisingly early elections in a bid to underscore his government’s legitimacy and win a clear mandate for reform. Rajapaksa and his family have been accused of fraud – among other charges – and allegations of a stitch-up from the Rajapaksa clan. Let’s hope the mild-mannered Mr Sirisena can help draw a line under the whole business.
Meanwhile the debate over the right to rule rolls on in Malaysia, where events surrounding funds deposited in Prime Minister Najib Razak’s personal bank account have become a veritable circus.
The accusation that the funds were misappropriated from state-owned investment firm 1MDB was parried by Mr Najib, and official investigators found that the funds came from a Middle Eastern donor. Najib claims he took no money for personal gain but to shore up ruling party Umno’s funds prior to the 2013 general election.
FORMER PRIME MINISTER Mahathir Mohamad has stepped up his campaign against Mr. Najib, suggesting that the “world has had a good laugh” at Mr Najib’s claim as to the source of the deposit, which was in the region of US$700m.
Whatever the truth of the matter, it looks as if the various government reshuffles that have occurred in Malaysia over the past month or so, together with the suspension from print publication of the Edge newspaper, which ran a series of explosive “exposes”, have succeeded in taking the fizz out of the story.
Indeed a market contact of mine who was in Kuala Lumpur last week told me that it was business as usual amongst the city’s banking community. Perhaps the government’s favourite spin phrase every time the accusations against Mr Najib are reiterated and answers demanded – that they are “recycled” – is succeeding in creating news fatigue. A test will come this week when a rally is scheduled to take place in KL in protest at the government’s handling of the entire issue.
Political legitimacy might well be the root cause of the bomb that exploded last week in Bangkok, killing 21 people, including tourists from China visiting a popular shrine in the middle of the city’s shopping district. At the time of writing, no group has come forward to claim responsibility, but there is speculation that the anti-government “red shirts” were behind the attack. Other possible perpetrators include Muslim separatists who have been waging a mini civil war in the south of the country, or even ISIS.
Regardless of which group is responsible, undoubtedly the tragic event raises questions about public resentment towards Thailand’s unelected military government and its stated intention that democratic elections will occur no sooner than 2017.
Perhaps we will have decisive democratically determined outcomes in Malaysia and Thailand along the lines just seen in Sri Lanka. The former is scheduled to hold a general election by 2018 and on current form you’d get long odds on the ruling party remaining in office. The same could be said of Thailand if the junta keeps its promise on electoral timing.
One democratic arena that has called the shots with clarity is the foreign exchange market
ONE DEMOCRATIC ARENA that has called the shots with clarity is the foreign exchange market. The ringgit and the baht plunged to new multi-year lows last week, while the Sri Lankan rupee rallied.
If Sirisena wants to nail home his unequivocal mandate to govern, he should instruct his treasurers to bring a stonking great offshore bond. A dearth of sovereign issuance from Asia this year plus the upbeat political backdrop would, I’m sure, guarantee any deal’s rather sweet success in the light of his electoral victory.
The great moment which was to have arrived in Myanmar and the promise of Aung San Suu Kyi assuming the presidency will not happen when that country goes to the polls in a general election this November, due to a constitutional edict which bars her from standing. Nevertheless her party, the NLD, will contest the elections, and according to Ms Suu Kyi they have a “plan” to address the issue should they win a majority in both houses.
There are already complaints that voting lists are compromised. And given that the junta ignored a landslide victory for the NLD in the previous general election, you’d wonder if change is on the agenda or something massaged to look like it.
But some sort of change would be welcome, and financial crises have a habit of accelerating it. As things stand, Thailand and Malaysia are lurching towards more repressive authoritarianism. If markets continue to move against them, the public’s tolerance will quickly put that to the test.
