Kuala Lumpur, Malaysia – In his first speech as Malaysia’s 10th prime minister, Anwar Ibrahim promised to prioritize the lives of “ordinary Malaysians”.
In order to fulfill his promise, Anwar will have to overcome many economic challenges, from the scars of the pandemic and the rising cost of capital to the collapse of one of Asia’s largest economies.
Anwar, whose election spans a remarkable decade-long journey from leader-in-waiting to jailed opposition leader and back again, has revealed little about his economic plans other than promising to lead a development that is inclusive and free of corruption.
But Anwar, whose confirmation as prime minister on Thursday after days of political turmoil immediately sent Malaysia’s stock market soaring, has been known as a reformist who wants to liberalize the economy throughout his political years.
“Anwar has a good understanding of economics and he thinks and follows his methods. He should seek different opinions and focus on economic reforms,” Geoffrey Williams, an economist and non-major at the Malaysia University of Science and Technology, told Al Jazeera.
“There will be few plans presented by paper and long-term solutions. I also think that they will provide a very attractive opportunity for investors around the world and financial markets.”
On the road, Anwar, who heads the multi-party coalition Pakatan Harapan (PH), highlighted his connections to international business and finance, arguing that he can attract investors he considers his “friends”. He also stressed the need to restore Malaysia’s image abroad, which was affected by the 1MDB scandal involving former Prime Minister Najib Razak.
“Corruption is undoubtedly a serious problem in Malaysia which can lead to unequal distribution of wealth, disrupt education and health care, resulting in a very low standard of living for Malaysians,” said Grace Lee Hooi Yean, head of Monash University’s Department of Malaysia. Economics, he told Al Jazeera.
“In a corrupt economy, resources are allocated inappropriately and companies that could not win government contracts are often given jobs because of corruption.”
As deputy prime minister and finance minister in the 1990s, Anwar, 75, presided over a period when Malaysia became one of the fastest growing countries in the world.
At the start of the Asian Financial Crisis of 1997-98, Anwar implemented austerity measures and market-oriented reforms promoted by the International Monetary Fund, winning respect in Western financial circles but straining relations with his political mentor and then Prime Minister Mahathir Mohamad.
As relations between the two men soured, Mahathir fired Anwar, who led the Reformasi movement against the government before being arrested on sex and corruption charges, which was criticized at home and overseas for political reasons.
“Given his legacy as finance minister in the 1990s when the economy grew close to double-digits with the help of exports, I expect Anwar to be more pro-market and pro-foreign investment and investment,” Niaz Asadullah, professor. of Economics at Monash University Malaysia, he told Al Jazeera.
“Compared to previous leaders, he will seek international cooperation and work to improve Malaysia’s tarnished reputation as an investment hub by aligning domestic policies with international values and international best practices.”
Asadullah said he hoped Anwar’s plan would be pro-business and “people-oriented”, focusing on need-based funding rather than membership – a divisive topic in Malaysia, where many Malaysians have received other opportunities. it is not offered in the main areas of China and India.
The last PH government, elected in 2018 in a popular vote that ended six decades of rule by the Malay-majority Barisan Nasional (BN), has been slowly toppled by reforms that Malaysian nationalists fear could destabilize the “special place” of the Malays. Constitution.
“While they will be committed to the principles of protecting people, they will try to reduce economic leakages by providing aid and ensuring that the economy and services are managed wisely,” Asadullah said.
After suffering the worst since the 1997-98 Asian Financial Crisis, Malaysia’s economy has soared as a result of the pandemic.
Gross domestic product grew by 14.2 percent in the July-September period after 8.9 percent growth in the second quarter.
However, Southeast Asia’s fourth-largest economy is growing at a slower pace amid fears that the global economy will collapse in the coming months.
Inflation, although lower than in Europe and North America, and rising interest rates are putting a squeeze on middle-income households, while the ringgit is hovering near a century low.
For Malaysia’s long-term growth, structural reforms are necessary to ensure it transforms into a high-income economy, according to economists.
The OECD and the World Bank have identified strengthening social security and introducing competition in government-controlled sectors such as transport and energy as priorities for reform.
“The key to achieving a high-income and prosperous world is the development of a ‘high-performing, high-income’ workforce,” said Lee, the Monash professor. “However, economic slowdown has plagued Malaysia’s economy after the Asian financial crisis. One of the factors contributing to slow growth is the decline in labor productivity.”
As the leader of a coalition government that includes several rival parties including BN, Anwar, whose first tasks will include passing the long-awaited budget for 2023, it will be difficult to implement major changes.
“Given the current coalition government, it will be difficult to implement changes quickly without long-term negotiations and cooperation between the coalition members,” said Yeah Kim Leng, director of the Economic Studies Program at the Jeffrey Cheah Institute for Southeast Asia in Sunway. University, he told Al Jazeera.
“With a ‘big explosion’ that could be dangerous and politically disruptive, they will no doubt look at Deng Xiaoping’s ‘hearing stones while crossing the river’ as a sign of the way forward,” Yeah added, referring to China’s reformist leader who led the way. during the period of economic liberalization in the 1980s.
Harris Zainul, a senior analyst at the Institute of Strategic and International Studies (ISIS) Malaysia, said Anwar would not be swayed by political uncertainty, including the upcoming elections.
“I don’t expect Anwar to make any major changes in economic policy, especially on taxation, in the near future,” Zainul told Al Jazeera.
“Because there is little political will to increase taxes at the moment, while a few states in Malaysia need their elections to be held in the middle of 2023. Until that happens, I don’t think Anwar will risk anything that might be seen as politically unpalatable.”