'Gangnam Style' dances into M'sian politics: Economic disparity shows up

Malaysian Prime Minister Najib Razak has enough to worry about. A dwindling hold on power, a sluggish world economy, waning competiveness, rising religious extremism, you name it. Who knew rapper Psy would find his way onto Najib's list of headaches?

It's not that the South Korean's ubiquitous "Gangnam Style" is blaring too loudly in Najib's ears. It's the controversy over Psy's recent government-arranged performance in the Malaysian state of Penang. Critics claim Psy was paid handsomely with public funds for his gig. Najib denies it.

Yet the real scandal here should be how the rapper's visit spotlighted where Malaysia finds itself in 2013 relative to Psy's homeland. Four decades ago, resource-rich Malaysia was ahead of resource-poor Korea on a per capita gross-domestic-product basis. Today, Korea is far ahead and widening the gap. Make that galloping ahead, in a nod to Psy's crazed horse-riding dance.

The reason Korea is in the spotlight is human and innovative capital. Asia's fourth-biggest economy invested aggressively in education and productivity-enhancing technologies. Corporate names like Samsung, LG and Hyundai steadily upped research-and-development spending. Today, Samsung Electronics Co.'s Galaxy phone is the only thing standing between Apple Inc.'s iPhone and world domination. Hyundai Motor Co. is gaining market share, while Malaysia still toils with its laggard automaker Proton Holdings Bhd.

The problem? Najib's party, which has dominated Malaysian politics for more than six decades, is a bit too stuck in time for the good of the nation's 29 million people. It talks a good game of economic reform and change, but fails to address the reason many investors look elsewhere: a four-decade-old affirmative-action program that benefits ethnic Malays, hurts productivity and impedes foreign investment.

And it's not just foreigners. Take Tony Fernandes, the Malaysian who founded budget carrier AirAsia Bhd. and is often called Southeast Asia's answer to Richard Branson. Last year, he decided to move his regional headquarters from Kuala Lumpur to Jakarta.

Malaysia is a great place and its potential is boundless. Yet the government has been slow to raise the economy's game at a time when the global playing field is growing and its players are galloping faster than ever. Psy could show Najib a thing or two about that. He could show his native Korea, too.

- Bloomberg