Malaysia was ranked as having the second-highest percentage of billionaires’ wealth coming from cronyism in a global survey by The Economist.
According to index by the London-based weekly publication measuring 22 economies, Russia topped the list, while Malaysia’s neighbours the Philippines, Singapore, Indonesia and Thailand were third, fourth, seventh and 12th respectively.
“Behind the crony index is the idea that some industries are prone to ‘rent seeking’. This is the term economists use when the owners of an input of production—land, labour, machines, capital—extract more profit than they would get in a competitive market.
“Cartels, monopolies and lobbying are common ways to extract rents. Industries that are vulnerable often involve a lot of interaction with the state, or are licensed by it: for example telecoms, natural resources, real estate, construction and defence,” said The Economist in an article titled “The party winds down” today.
The crony capitalism index, however, did not contain metrics, nor did it define “crony sectors” or “non-crony sectors”.
The Economist said there was a surge over the past two decades in billionaire wealth in industries that usually involved close ties with the government since globalisation in the 1990s, like casinos, oil and construction, but crony capitalism appeared to be coming to an end.
The publication said its 2016 crony capitalism index showed a 16 per cent drop in crony billionaire wealth to US$1.75 trillion since 2014.
Crony wealth remained steady, at about 1.5 per cent of the GDP, in affluent countries, but in developing nations, it fell to 4 per cent of the GDP from 7 per cent in 2008.
Critics have linked cronyism and rent-seeking in Malaysia to the pro-Bumiputera New Economic Policy (NEP) that officially ended in 1990, but affirmative action continues in various economic policies today.