Kuala Lumpur, Malaysia – In his first speech as Malaysia’s 10th Prime Minister, Anwar Ibrahim pledged to prioritize the well-being of “ordinary Malaysians”.
To keep his word, Anwar will have to face a series of economic challenges, from the lingering scars of the pandemic and the rising cost of living to a falling currency and one of the largest wealth gaps in Asia.
Anwar, whose appointment caps a remarkable three-decade journey from leader-in-waiting to jailed opposition leader and back again, has laid out some details of his economic plans as well as vowing to spearhead development that is racially inclusive and free of corruption.
But Anwar, whose confirmation as prime minister on Thursday after days of political stalemate sent Malaysia’s stock market and ringgit up immediately, has earned a reputation as a reformist with leanings toward economic liberalization over his long career. politics.
“Anwar has a good understanding of economics and is thoughtful and eclectic in his approach. He is likely to seek a wide range of views and focus on economic reforms,” Geoffrey Williams, an economist and non-resident senior fellow at the Malaysian University of Science and Technology, told Al Jazeera.
“There will be fewer pamphlet-based policies and more structured long-term solutions. I also believe that it will offer a very attractive prospect for investors and international financial markets.”
On the campaign trail, Anwar, who leads the multi-ethnic Pakatan Harapan (PH) coalition, highlighted his connections to international business and finance, arguing that he could attract investors he counts among his “friends”. He also stressed the need to restore Malaysia’s image abroad, which was hit by the 1MDB corruption scandal involving jailed former Prime Minister Najib Razak.
“Corruption is undoubtedly Malaysia’s most critical systemic problem that can lead to unequal distribution of wealth, compromising the quality of education and healthcare, leading to an overall lower standard of living for Malaysians. said Grace Lee Hooi Yean, director of the Department of Education at Monash University Malaysia. Economy, she told Al Jazeera.
“In a corrupt economy, resources are allocated inefficiently and companies that would not otherwise be qualified to win government contracts are often awarded projects as a result of kickbacks.”
As deputy prime minister and finance minister during the 1990s, Anwar, 75, presided over a boom period that saw Malaysia become one of the fastest growing economies in the world.
At the start of the 1997-98 Asian financial crisis, Anwar implemented spending cuts and market-oriented reforms recommended by the International Monetary Fund, earning respect in Western financial circles but straining relations with his political mentor and then-Prime Minister Mahathir. Mohamad.
As ties between the two men soured, Mahathir fired Anwar, who went on to lead the Reformasi movement against the government before his imprisonment on sodomy and corruption charges, which were criticized at home and abroad on grounds politicians.
“Given his legacy as finance minister during the 1990s, when the economy enjoyed near-double-digit growth aided by manufacturing exports, I expect Anwar to be more market-oriented and favorable to foreign direct investment and investment in infrastructure,” said Niaz Asadullah, a professor. in economics at Monash University Malaysia, he told Al Jazeera.
“Compared to previous leaders, he will pursue global integration and strive to repair Malaysia’s tainted international image as an investment destination by aligning national policies with global norms and international best practices.”
Asadullah said he expected Anwar’s agenda to be pro-business but also “people-focused”, focusing more on need-based allocation of resources than ethnicity, a divisive issue in Malaysia. , where the majority of the Malay population receives certain privileges. the sizeable Chinese and Indian communities are not allowed.
The last PH government, elected in 2018 in a historic vote that ended six decades of rule by the majority Malay Barisan Nasional (BN), collapsed in part due to a reform agenda that Malay nationalists feared would undermine the “position special” of the Malays in the constitution.
“While it will remain committed to social protection policies, it will seek to minimize fiscal leakage by streamlining subsidies and ensuring smart targeting of resources and services,” Asadullah said.
After suffering the biggest contraction since the 1997-98 Asian financial crisis, Malaysia’s economy has rebounded strongly from the pandemic.
The gross domestic product grew 14.2 percent during the July-September period after expanding 8.9 percent during the second quarter.
However, Southeast Asia’s fourth-largest economy is facing slowing growth amid fears that the world economy could slip into recession in the coming months.
Inflation, albeit modest compared to Europe and North America, and rising interest rates are straining the budgets of low- and middle-income households, while the ringgit hovers at quarter-century lows.
For Malaysia’s long-term prosperity, structural reforms are needed to ensure its transition to a high-income economy, economists say.
The OECD and the World Bank have highlighted strengthening social protections and introducing competition in state-dominated sectors, such as transport and energy, as priorities for reform.
“A prerequisite for achieving a high-income, developed nation is progression towards a ‘high-productivity, high-income’ workforce,” said Lee, the Monash professor. “However, low economic growth has affected the Malaysian economy after the Asian financial crisis. One of the main factors contributing to low growth is low labor productivity growth.”
As the head of a unity government that includes several rival groups including the BN, Anwar, whose first tasks will include approving a long-awaited budget for 2023, could find it difficult to implement meaningful reforms.
“Given the unity government he heads, it will be difficult for him to implement structural reforms quickly without protracted negotiations and consensus among coalition members,” Yeah Kim Leng, Director of the Jeffrey Cheah Institute’s Economic Studies Program on Southeast Asia at Sunway . University, he told Al Jazeera.
“Since the ‘big bang’ is likely to be risky and politically destabilizing, it will inevitably gravitate towards Deng Xiaoping’s ‘feeling the pebbles as you cross the stream’, which is emblematic of a gradual approach,” Yeah added, referring to China’s reformist leader. who presided over a period of economic liberalization during the 1980s.
Harris Zainul, principal analyst at Malaysia’s Institute for Strategic and International Studies (ISIS), said Anwar is unlikely to change the status quo due to political uncertainties, including upcoming state elections.
“I don’t expect Anwar to make big changes in economic policy, especially with regard to taxes, anytime soon,” Zainul told Al Jazeera.
“The reason is that there is little political appetite to increase the tax base at the moment, and some key states in Malaysia still need to hold their elections in mid-2023. Until that happens, I don’t think Anwar is risking anything that could be seen as politically unpopular.
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