Kuala Lumpur, Malaysia – In his maiden address as Malaysia’s 10th Prime Minister, Anwar Ibrahim pledged to prioritize the welfare of “ordinary Malaysians”.
To live up to his word, Anwar will face a host of economic challenges, from the lingering scars of the pandemic and rising cost of living to a declining currency and one of Asia’s biggest wealth gaps.
Anwar, whose appointment a remarkable three-decade journey from leader-in-waiting to imprisoned opposition leader and back again, has laid out few specifics of his economic plans beyond promising 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 the Malaysian stock market and ringgit immediately higher, he has earned a reputation throughout his long political career as a reformist with leanings towards economic liberalization.
“Anwar has a good understanding of economics and is thoughtful and eclectic in his approach. He will likely look for a broad range of viewpoints and focus on economic reform,” Geoffrey Williams, an economist and nonresident senior fellow at the Malaysia University of Science and Technology, told Al Jazeera.
“There will be less handout-based policies and more structured long-term solutions. I also think it will offer a very attractive perspective for international investors and financial markets.”
On the campaign trail, Anwar, who heads the multi-ethnic Pakatan Harapan (PH) coalition, emphasized his connections to international business and finance, arguing that he could attract investors whom he counts among his “friends”. He also stressed the need to restore Malaysia’s image, which was battered by the 1MDB state corruption scandal involving imprisoned former Prime Minister Najib Razak.
“Corruption is undoubtedly Malaysia’s most critical systemic problem that can lead to wealth inequality, jeopardizing the quality of education and healthcare, leading to an overall lower standard of living for Malaysians,” Grace Lee Hooi Yean, head of the Monash University Malaysia’s Department of Economics, Al Jazeera told.
“In a corrupt economy, resources are allocated inefficiently and companies that would otherwise be unqualified to win government contracts are often awarded projects as a result of bribery.”
As Deputy Prime Minister and Finance Minister in the 1990s, 75-year-old Anwar led a boom that saw Malaysia become one of the fastest growing economies in the world.
At the onset of the Asian Financial Crisis of 1997-1998, Anwar introduced austerity and market-oriented reforms recommended by the International Monetary Fund, gaining respect in Western financial circles but straining relations with his political mentor and then Prime Minister Mahathir Mohamad put.
As ties between the two men deteriorated, Mahathir fired Anwar, who subsequently led the anti-government Reformasi movement before being imprisoned on charges of sodomy and corruption, which was criticized at home and abroad as being politically motivated.
“Given his legacy as finance minister in the 1990s, when the economy experienced near-double-digit growth aided by manufacturing exports, I expect Anwar to be more market-oriented and beneficial to foreign direct investment and infrastructure investment,” says Professor Niaz Asadullah. economics at Monash University Malaysia, Al Jazeera told.
“Compared to leaders of the past, he will strive for global integration and aim to restore Malaysia’s tarnished international image as an investment destination by aligning domestic policies with global standards and international best practices.”
Asadullah said he expected Anwar’s agenda to be pro-business but also “people-oriented”, focusing more on allocating resources based on need rather than ethnic group membership – a divisive topic in Malaysia, where the majority of the Malaysian population enjoys certain privileges. not provided to Chinese and Indian communities.
The last PH government, elected in 2018 in a historic vote that ended six decades of rule by Malaysia’s majority Barisan Nasional (BN), partially collapsed on a reform agenda. constitution.
“While he will remain committed to social protection policies, he will try to minimize fiscal leakage by rationalizing subsidies and ensuring that resources and services are used wisely,” Asadullah said.
After suffer from the greatest contraction since the Asian financial crisis of 1997-1998, Malaysia’s economy has made a strong recovery from the pandemic.
Gross domestic product grew by 14.2 percent in the July-September period, following growth of 8.9 percent in the second quarter.
Still, Southeast Asia’s fourth-largest economy is facing slowing growth amid fears that the global economy will slide into recession in the coming months.
Inflation of 4.5 percent in October, though modest compared to Europe and North America, and rising interest rates are weighing down the budgets of lower- and middle-income households as the ringgit hovers around quarter-century lows.
Malaysia’s longer-term prosperity, according to economists, will require structural reforms to ensure the transition to a high-income economy.
The OECD and the World Bank have identified strengthening social protection and introducing competition in state-dominated sectors such as transport and energy as reform priorities.
“A prerequisite for achieving a high-income and developed country is the transition to a ‘high productivity, high income’ workforce,” said Lee, Monash’s professor. “However, low economic growth has plagued the Malaysian economy following the Asian financial crisis. One of the main factors contributing to the 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 task will be to pass a much-anticipated 2023 budget, could find it difficult to implement significant reforms.
“Given the unity government he leads, it will be difficult for him to quickly implement structural reforms without protracted negotiations and consensus among coalition members,” said Yeah Kim Leng, director of the economic studies program at the Jeffrey Cheah Institute of Southeast Asia. at Sunway. University, Al Jazeera told.
“With the ‘big bang’ likely to be risky and politically destabilizing, it will inevitably lean towards Deng Xiaoping’s ‘feeling the pebbles as he crosses the stream’, which is characteristic of a gradual approach,” Yeah added, referring to the China’s reformist leader who presided during a period of economic liberalization in the 1980s.
Harris Zainul, a senior analyst at the Institute of Strategic and International Studies (ISIS) Malaysia, said Anwar is unlikely to shake the status quo due to political uncertainties, including upcoming state elections.
“I don’t expect Anwar to make major changes in economic policy anytime soon, especially on taxation,” Zainul told Al Jazeera.
“The reason for this is that there is currently little political appetite for raising the tax base, as a few key states in Malaysia are yet to hold elections in mid-2023. Until that happens, I don’t think Anwar will risk anything that could be considered politically unpopular.”