Kuala Lumpur, Malaysia – In his first speech as Malaysia’s 10th Prime Minister, Anwar Ibrahim pledged to prioritize the welfare of “ordinary Malaysians”.
To keep his word, Anwar will have to tackle a host of economic challenges, from the lingering scars of the pandemic and a rising cost of living to a declining currency and one of Asia’s largest wealth gaps.
Anwar, who crowns his appointment a A remarkable journey of three decades From leader-in-waiting to jailed opposition leader and back again, he has laid out some defining details of his economic plans apart from promising to spearhead development that is racially inclusive and free of corruption.
But Anwar, His appointment as prime minister on Thursday After days of political stalemate that immediately sent the Malaysian stock market and the ringgit soaring, he built up a reputation as a reformer with leanings towards economic liberalization throughout his long political career.
“Anwar has a good understanding of economics and is thoughtful and eclectic in his approach. He is likely to seek a broad range of viewpoints and focus on economic reforms,” Jeffrey Williams, an economist and non-resident fellow at the University of Science and Technology Malaysia, told Al Jazeera.
“There will be fewer handout-based policies and more orderly solutions in the long run. I also think it will present a very attractive perspective for international investors and financial markets.”
During the election campaign, Anwar, who leads the multi-ethnic Pakatan Harapan coalition, highlighted his connections to international business and finance, arguing that he could attract investors whom he considers among his “friends”. He also stressed the need to restore Malaysia’s image abroad, which has been damaged by the 1MDB corruption scandal involving imprisoned former Prime Minister Najib Razak.
“There is no doubt that corruption is the most important systemic issue in Malaysia which can lead to an uneven distribution of wealth, which is detrimental to the quality of education and healthcare, resulting in an overall lower standard of living for Malaysians,” Grace Lee Hui Yin, Department Chair, Monash University Malaysia Economics, he told Al Jazeera.
“In a corrupt economy, resources are allocated inefficiently, and companies that would not be eligible to win government contracts are often awarded projects as a result of bribery.”
As deputy prime minister and finance minister during the 1990s, Anwar, 75, presided over a boom period that saw Malaysia transform into one of the world’s fastest growing economies.
At the onset of the 1997-1998 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 relations between the two men deteriorated, Mahathir sacked Anwar, who led the reform movement against the government before imprisoning him on charges of sodomy and corruption, which were criticized at home and abroad for political motives.
“Given his legacy as finance minister during the 1990s when the economy enjoyed near double-digit growth supported by manufacturing exports, I would expect Anwar to be more market-oriented and more favorable to foreign direct investment and infrastructure investment,” Niaz Asadullah, professor of economics at Monash University Malaysia told Al Jazeera. .
“Compared to previous leaders, he will seek global integration and strive to repair Malaysia’s tarnished international image as an investment destination by aligning domestic policies with global standards and international best practices.”
Assadullah said he expects Anwar’s agenda to be pro-business but also “people-centered”, focusing more on allocating resources based on need rather than membership in an ethnic group — a divisive issue in Malaysia, where the majority of Malays receive Certain privileges are not accorded to the large Chinese and Indian societies.
The latest PH government, elected in 2018 in a historic vote that ended six decades of Malay Barisan Nasional (BN) majority rule, has collapsed, in part because of a reform agenda that Malay nationalists fear will undermine Malays’ “special status” in the constitution.
“While it will remain committed to social protection policies, it will seek to reduce financial leakage by rationalizing subsidies and ensuring smart targeting of resources and services,” Assadullah said.
After, after suffers the greatest shrinkage Since the 1997-1998 Asian financial crisis, the Malaysian economy has rebounded strongly from the pandemic.
Gross domestic product grew by 14.2 percent during the July-September period after expanding by 8.9 percent during the second quarter.
However, Southeast Asia’s fourth-largest economy is facing slowing growth amid fears that the global economy could slide into recession in the coming months.
Inflation, while modest compared to Europe and North America, and rising interest rates are squeezing the budgets of low- and middle-income households, while the ringgit is hovering near its lowest levels in a quarter of a century.
For Malaysia to prosper in the long run, structural reforms are needed to ensure its transition to a high-income economy, according to economists.
The Organization for Economic Co-operation and Development and the World Bank have highlighted strengthening social protection and introducing competition in state-dominated sectors such as transportation and energy as priorities for reform.
“The prerequisite for achieving a developed, high-income country is progression to a highly productive, high-income workforce,” said Lee, a professor at Monash University. However, low economic growth has plagued the Malaysian economy after the Asian financial crisis. One of the main factors contributing to lower growth is lower labor productivity growth.”
As head of a national unity government comprising several rival groups including the National Front, Anwar, whose first tasks will include passing a long-delayed budget for 2023, may find it difficult to implement major reforms.
“Given the unity government he heads, it will be difficult for him to quickly implement structural reforms without lengthy negotiations and consensus among coalition members,” Yes Kim Ling, director of the Economic Studies Program at the Jeffrey Chieh Institute of Southeast Asia at Sunway University, told Al Jazeera.
Yes, he added, referring to the Chinese reformist leader who presided over a period of economic liberalization during the 1980s.
Harris Zinul, a senior analyst at the Institute of Strategic and International Studies (ISIS) in Malaysia, said Anwar was unlikely to change the status quo due to political uncertainties, including the upcoming state elections.
“I don’t expect Anwar to make any major changes in economic policy, especially with regard to taxes, in the near term,” Zinol told Al Jazeera.
“The reason is that there is very little political will to increase the tax base right now, with a few key states in Malaysia still needing to hold their elections by mid-2023. Until that happens, I don’t think Anwar will risk anything that might be considered. politically unpopular.”