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Malaysia’s Anwar to steer economy as households feel pinch

Kuala Lumpur, Malaysia – In his first speech as Malaysia’s 10th prime minister, Anwar Ibrahim promised to prioritize the welfare of “ordinary Malaysians”.

To implement his words, Anwar will have to contend with a host of economic challenges, from the lingering scars of the pandemic and rising costs of living, to a declining currency and one of Asia’s largest wealth gaps. Hmm.

Anwar’s appointment An amazing 30-year journey From leader-on-waiting to imprisoned opposition leader and back again, he has taken the lead in his economic plan, except for a promise to usher in racially inclusive and corruption-free development. It gives very little detail.

But Anwar Confirmation as Prime Minister on Thursday After several days of political turmoil, Malaysia’s stock market and ringgit soon rose, earning him a reputation as a reformist bent on economic liberalization throughout his long political career.

“Anwar has a good understanding of economics and his approach is thoughtful and eclectic. He seeks broad views and is likely to focus on economic reforms,” said an economist and adjunct senior at the University of Science and Technology Malaysia. Researcher Jeffrey Williams told Al Jazeera.

“There will be less handout-based policies and more structured long-term solutions. We also think he offers a very attractive prospect for international investors and financial markets.”

In the course of the campaign, Anwar, who heads the multi-ethnic Pakatan Harapan (PH) Federation, emphasized his ties to international business and finance, claiming he could attract investors who count among his “friends”. Did. He also stressed the need to restore Malaysia’s image, which was tarnished by 1MDB’s state corruption scandal involving imprisoned former prime minister Najib Razak.

“Corruption is arguably Malaysia’s most significant systemic problem, undermining the quality of education and healthcare, and undermining the overall standard of living of Malaysians,” said Grace Lee Huey Yen, Dean of Monash University Malaysia. It can lead to an uneven distribution of wealth that causes Economics told Al Jazeera.

“In a corrupt economy, resources are allocated inefficiently, and companies that otherwise would not be eligible to win government contracts often win projects as a result of bribery.”

As Deputy Prime Minister and Minister of Finance in the 1990s, Anwar, 75, presided over a boom period that made Malaysia one of the fastest growing economies in the world.

At the onset of the Asian financial crisis of 1997-1998, Anwar implemented spending cuts and market-oriented reforms recommended by the International Monetary Fund, earning him respect in Western financial circles, but his political leadership Relations with then-Prime Minister Mahathir Mohamad were strained.

As relations between the two deteriorated, Mahathir dismissed Anwar, who had led a reform movement against the government, before imprisoning him on charges of sodomy and corruption.

“Given his legacy as finance minister in the 1990s, when the economy grew in near double digits, fueled by manufacturing exports, Anwar is more market-oriented, favoring foreign direct and infrastructure investment. We expect it to be,” said Professor Niaz Asadullah. A PhD from the Monash University Malaysian Department of Economics told Al Jazeera.

“Compared with past leaders, he has pushed for global integration, and by aligning domestic policies with global norms and international best practices, Malaysia’s tainted international image as an investment destination has been tarnished. I will endeavor to repair the

Asadullah says Anwar’s agenda is both business-friendly and “people-centred,” with a focus on allocating resources based on need rather than ethnic group membership. said he expected. Not given to Chinese and Indian communities.

The last PH government, elected in a historic vote that ended 60 years of rule by the Malay-majority Barisan Nacional (BN) in 2018, is a move by Malay nationalists to give Malays “special status.” It collapsed in part because of the reform agenda it feared would undermine . Constitution.

“While he remains committed to social protection policies, he will seek to minimize fiscal leakage by streamlining subsidies and ensuring sensible targeting of resources and services,” Asadullah said. rice field.

Trains travel along raised tracks with several lanes of cars underneath in what looks like a busy city center
Malaysia’s economy has recovered strongly from the COVID-19 pandemic [File: Bazuki Muhammad/Reuters]

rear suffering from maximal contractions Since the Asian financial crisis of 1997-98, the Malaysian economy has recovered strongly from the pandemic.

Gross domestic product increased 14.2% from July to September after increasing 8.9% in the second quarter.

But Singapore, Southeast Asia’s fourth largest economy, is facing slowing growth amid fears that the global economy will slip into recession in the coming months.

Inflation stood at 4.5% in October, modest compared to Europe and North America, and the ringgit neared a quarter-century low while rising interest rates have left low- and middle-income families short on budgets. is transitioning.

Economists say Malaysia’s long-term prosperity requires structural reforms to ensure its transition to a high-income economy.

The OECD and World Bank have highlighted 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 developed country is a shift to a ‘high-productivity, high-income’ workforce,” said Professor Lee of Monash University. “However, the Malaysian economy has suffered from slow growth since the Asian currency crisis. One of the main reasons for the slow growth is low labor productivity growth.”

As the head of a unity government that includes several rival groups, including the BN, Anwar’s first task is the passage of the long-awaited budget for 2023, which could make it difficult to implement significant reforms.

Yeh Kim Ren, director of the economic studies program at Sunway’s Jeffrey Chia Institute of Southeast Asian Studies, said, “Given the unity government he leads, it is unlikely that he will be able to implement structural reforms without lengthy negotiations and consensus among coalition members.” It will be difficult to implement quickly,” he said. The university told Al Jazeera.

“The ‘Big Bang’ is risky and likely to be politically unstable, so he is inevitably drawn to Deng Xiaoping’s ‘Feeling the Pebbles and Crossing the Stream’, the epitome of a gradualist approach. I would,” Yar added. About the period of economic liberalization in the 1980s.

Harris Zainur, a senior analyst at the Malaysian Institute for Strategic and International Studies (ISIS), said Mr Anwar was unlikely to shake the status quo due to political uncertainty, including the upcoming state elections.

Zainul told Al Jazeera: “I don’t think Anwar will make any major changes in the near future, especially in regards to economic policies, especially taxes.”

“The reason is that several major states in Malaysia have to hold elections by mid-2023 and there is currently little political appetite for increasing the tax base. I don’t think we’ll run the risk of being considered politically unpopular.”

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