A Postcard From Malaysia

Not so long ago, Malaysia was set to lose years of economic progress. Today, following the re-imposition of economic discipline, the country is almost back on track.

A new era dawned in Malaysia in May 2018, when the opposition coalition led by Dr. Mahathir Mohamad and Anwar Ibrahim secured a simple majority in a historical election. When Mahathir will return to retirement, opposition leader Anwar is expected to replace him in about two years.

In the 2018 election, their coalition - Pakatan Harapan (PH) - won 113 seats against the ruling coalition (United Malays National Organization, UMNO, and its allies) that had not lost an election since 1957.

Last year, Malaysia’s economy grew 4.7% year-on-year. Despite fiscal consolidation and challenging international conditions, the country is set to sustain its growth path in 2019. It is an extraordinary achievement after years of political turmoil.

The Najib regression

As the sixth Prime Minister of Malaysia, Najib Razak ruled the country from 2009 to 2018. His early tenure was marked by economic liberalization measures, including cuts to government subsidies, loosening of foreign investment restrictions, and reductions in preferential measures for ethnic Malays in business.

After the 2013 election, the neoliberal economic policies gave way to greater efforts at political consolidation, including the pursuit of critics on sedition charges, the imprisonment of opposition leader Anwar Ibrahim, the implementation of a consumption tax (GST), and the embarrassing scandal involving state investment firm 1Malaysia Development Berhad (1MDB).

That's when Malaysia lost its economic discipline. The changing fortunes can be illustrated by the fluctuations of Malaysian ringgit. Between 2009 and 2013, US dollar was still about 3-3.60 MYR. As economic prospects weakened, so did the ringgit. Between 2013 and 2018, US dollar amounted to 4.40 MYR (Figure).

Figure                  Malaysian Ringgit, 2009-2019

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Disclaimer: Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute ...

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