By Daniel Wu & Trang Anh Do

Malaysian citizens celebrate Hari Malaysia. The government must ensure debated reforms facilitate future economic vitality. Source: esharkj's flickr photostream, used under a creative commons license.

It is no secret that an innovation economy requires economic and political freedom to go hand in hand. With a renewed global emphasis on free trade and long-term growth, an environment that fosters the freedom to think, innovate, and communicate is essential to an economy’s dynamism. The innovation market that Malaysia aims for in its 10^th Malaysia Plan will be difficult to achieve without concrete measures to implement both economic and political liberalization.

Taking stock of Malaysia’s political reform efforts:

Malaysia’s prime minister Najib Razak July 12 announced the repeal of the colonial-era Sedition Act, which critics have long condemned as a tool of the government to thwart opposition activity and protect the special privileges of the ethnic Malay population.  The repeal should be viewed as part of the evolution of Malaysia’s governance and economic structure.

Malaysia’s most recent reforms include:

• Replacement of the Sedition Act of 1948 with the National Harmony Act, the contents of which have not been finalized.
• Introduction of the Printing Presses and Publications Bill, which eliminates the requirement for newspapers to renew their licenses annually to print.
• Amendments to the Universities and University Colleges Act, which allow students to participate in politics.

They follow other important reforms over the last two year, including the abolition of the Banishment Act of 1959 and the Restricted Residence Act of 1933, the introduction of the New Peaceful Assembly Act of 2012; and the Replacement of the Internal Security Act of 1960 with the Security Offences Act of 2012.

Against the backdrop of Malaysia’s upcoming general elections, expected by the end of 2012, these reforms are deemed as politically well-measured actions introduced by Prime Minister Najib. After the 2008 general elections, which witnessed the ruling Barisan Nasional (BN) coalition’s diminished popularity, Najib has gone to great lengths to rally public support by promoting civil liberties and assuaging a growing middle class that has become more politically informed.

Why are these reforms important?

The government of Malaysia describes these reforms as “the biggest shake-up of the Malaysian system since independence from Britain in 1957.” They are good examples of a government moving toward a model of greater transparency, democracy, and liberty – attributes that can lead to greater innovation, economic growth, and inclusion. The government is recognizing that the bottom-up approach to growth and governance is fertile ground for citizens to contribute to the joint attainment of former prime minister Mahathir Mohamad’s Vision 2020. Non-arbitrary, law-based rule as well as fair and effective public institutions are essential for attracting quality investment that promises greater opportunity for innovation, economic growth, and improving living standards. If the reforms take hold, they may help stem and ultimately reverse the trend of many of Malaysia’s best and brightest migrating overseas for greater opportunities.

Innovation serves as a “special sauce” to Malaysia’s economic vitality; it is quickly topping the agenda as a strategy to propel the country out of the middle-income trap. To echo Human Resources Minister S. Subramaniam, who said on August 5, 2012, that critical thinking is vital to development, the essence of an individual’s freedom is the opportunity to deviate from traditional ways of thinking and doing things. In other words, these reforms are an opportunity to disrupt the paradigm of a government-driven environment and encourage Malaysians to think outside the box. The reforms can make the ruling coalition more endearing to liberal and young voters.

The upcoming general elections will be a critical test for Malaysians’ trust in the ruling party’s genuine interest in modernizing the country. As Najib once said, “the world is changing quickly and we must be ready to change with it or risk being left behind.” The results of the next election will demonstrate if his leadership, defined here as the enigmatic ability to rally both supporters and naysayers, will lead Malaysia forward in the national transformation agenda in 2013.

What is critical now is the actual implementations of the reforms. If they are successful, it will not be long before Malaysia adopts the tagline, “We do innovation right.”

Daniel Wu is a member of the Pacific Forum CSIS Young Leaders Program and currently works as an international trade policy and political risk professional in ASEAN affairs, based in Washington, D.C. Trang Anh Do is a researcher with the CSIS Southeast Asia Program covering Malaysia.