Early on during the Pakatan Harapan government, a majority of market investors were concerned about Malaysia’s policy direction. The magnitude of political change Malaysia experienced in 2018 undoubtedly brought uncertainty. Such uncertainty needed to be addressed. To allay those concerns, the Ministry of Finance then frequently engaged with representatives from various funds invested in Malaysia.
A great deal of these funds were fixed income investors. So, they were concerned with the state of public finance. What will the government’s spending priority be? What will the projected deficit level be? How is tax collection with the GST abolished? How is the health of the banking system? How is the government facing the trade war between China and the US?
Such questions were easy to answer because the storyline was clear and plans were in place. Data was available and progress updates could be shared easily. Close engagement and high transparency level alleviated a great deal uncertainty in the market.
One concern was difficult to handle however. Mahathir had promised to handover power to Anwar Ibrahim. But the transition date was blurry. “When?” they asked.
“When” was an important question. Transition could mean, and likely would mean, policy change. And with it, investment rationale.
However the Ministry answered it, they could not be convinced and some of them were the biggest funds in the world.
Regardless whether they believed the transition plan, they were in the opinion that Malaysia could focus better on the economy if it had addressed its political uncertainty. Specifically, the trade war was once-in-a-lifetime opportunity for Malaysia to move up the value chain and gain from the reorienting global supply chain. Yet to the investors, political transition was distracting Malaysia from the task at hand.
Unfortunately, the level of political uncertainty in the country has worsened since then.
Muhyiddin’s supporters claimed formation of the Perikatan Nasional government would calm the politics down. We now know such claim is patently false. The faintest rumors would cause our collective heart to skip a beat.
It has become so bad that policymaking is grinding to a halt. Measures needed to mitigate the ongoing recession have been weak and late. Meanwhile, unemployment rate is shooting up and it will rise further. The result: we as Malaysians are experiencing more economic pain than necessary.
Not enough has been done. Continued inadequate and untimely government response will have long-term repercussions on the prosperity of the country. Remember, Malaysia has never fully recovered from the Asian Financial Crisis. Our growth since has been slower than before. This current crisis if not handled well would reduce the pace of our growth further.
Malaysia needs political stability to address the recession well. At the rate things are going, Perikatan Nasional is incapable for providing that stability.
Pakatan Harapan sees an opportunity to retake the power it won in 2018. If it succeed, could PH provide the much needed stability?
In order to answer the question confidently in the affirmative, I think PH will need to avoid having to face the transition question all over again. Either let their candidate be the PM until the next election (presumably in 2023), or ideally, do away with the transition plan altogether.
