Anwar’s monumental task to get consensus for economic reforms
Published on: Friday, September 01, 2023
By:
David Pillai, FMT
Prime Minister Anwar Ibrahim needs to convince the country’s power brokers to agree on a reform agenda, but will he have the political will to do this?
PETALING JAYA: Prime Minister Anwar Ibrahim must exercise statesmanship by reaching out to powerful political and business elites to get the necessary buy-in for much needed reforms to restructure Malaysia’s economy, said an economist.
Monash University Malaysia economist Niaz Asadullah said nation-building is a “long journey and a collaborative process”.
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“Malaysia’s legacy of the New Economic Policy (NEP) has created a complex web of vested interest groups and elites, and that too across ethnicities.
"We need these powerful groups to agree on the reform agenda. Without a broad coalition of political and business elites, who are willing to accept costly concessions, the status quo will prevail regardless of leadership at the top,” he told FMT Business.
Niaz said deep structural reforms – be it fixing the public education system or downsizing the bureaucracy – stall because either the potential losers hold too much power or because the state cannnot fiscally compensate them for the short-term losses.
Given that structural reforms involve both the state and society, the government of the day needs to understand that reforms are all about “managing trade-offs”.
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“Some involve short-term pain for long-term gain. Often the pain is limited to certain social groups leaving others to profit from it. What is unpopular for the B40 (bottom 40%) may be popular for the T20.”
Niaz was commenting on former Umno Youth chief Khairy Jamaluddin’s recent statement that Malaysia needs a leader who is willing to risk his political career by taking unpopular measures to reform the economy and put it back on strong fiscal footing.
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Khairy agreed with the view that the series of structural reforms the country needs was painful and could make the government of the day lose the support of the people.
The former health minister highlighted subsidy rationalisation, the goods and services tax (GST) and government pension reforms as the top three tasks that Putrajaya must carry out sooner rather than later.
Unpopular decisions
The political instability that has been a feature of Malaysia’s political scene in recent years makes it more difficult for the government to undertake difficult reforms. The recent state elections which saw Perikatan Nasional (PN) make further inroads into states controlled by the unity government further compounds the problem.
KSI Strategic Institute for Asia Pacific research director Voon Zhen Yi agrees that this is certainly a problem for Malaysia as “we have had an unstable government since February 2020”.
“Any government which dares to undertake these measures will surely cause political movements that could see them being toppled,” he told FMT Business.
Voon noted that politicians generally avoid austerity measures when they are close to elections as such measures are always unpopular. However, there is a window of opportunity that astute political leaders can exploit.
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