Commentary: Anwar Ibrahim’s struggle for economic rejuvenation in Malaysia

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POLICY STANCE ON GOVERNMENT SPENDING NOT SUSTAINABLE

Politics aside, economic headwinds remain Mr Anwar’s most serious challenge. 

Once one of the region’s budding tiger economies, Malaysia has fallen to fifth place among the economies in the Association of Southeast Asian Nations (ASEAN). It has been overtaken by Vietnam that ranks in the top four together with Indonesia, Thailand and Singapore.

The effects of the continuing global slowdown showed up starkly in the country’s export performance, which contracted 17.4 per cent year-on-year in April.

Bank Muamalat’s chief economist Mohd Afzanizam Abdul Rashid forecasts that overall exports this year could decline by 9 per cent, compared with a 25 per cent growth in 2022. “This will leave domestic demand as the main economic driver for overall growth,” he said.

Economists noted that domestic demand, made up by government spending and private consumption, has accounted for more than 70 per cent of GDP since 2019. 

But this growth option is no longer sustainable. Malaysia is now suffering a serious financial hangover for the spending binge, with government debt ballooning to 1.08 trillion ringgit at end-2022, almost doubling in six years.

“The policy stance of government spending is no longer sustainable, and Malaysia needs a new economic narrative,” Sunway University’s Professor Yeah Kim Leng, who sits on a five-member panel advising Mr Anwar on financial matters, told CNA.

“The new path must feature shifting the economy to more value-added production driven by attracting technology intensive industries that will in turn boost wages,” added Prof Yeah.

Leslie Lopez is a senior correspondent at CNA Digital who reports on political and economic affairs in the region.

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Commentary: A gruesome severed fingertip tells a painful story about corporate Japan

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WHERE DOES THE BUCK STOP

In the corporate context, this fear finds expression in various forms: Cash hoarding, risk-aversion, cross-held shares in other listed companies, the tendency to set forecasts low and hope for outperformance and chief executives whose grandest strategic ambition is to survive their time at the top without incident.

The striking thing about this framework of fear is how suddenly vulnerable it all looks, and on multiple fronts. The first of these, in a shift that has not yet been recognised for its truly tectonic nature, is a new edict from the Tokyo Stock Exchange that will in effect force companies to explain why their share-price-to-book-value ratio is consistently low.

The embarrassment factor should, in theory, shake a lot of companies hard. And while the price-to-book metric may not be the best or most consistent gauge of a company’s commitment to better governance and better capital efficiency, it works well as a catch-all identifier of the larger problem.

Japanese chief executives have lived until now without an explicit, sustained pressure (or stock-ownership-related incentive) to raise their share price, or even a clear doctrine that it lies within their powers to do so. Suddenly, the TSE has granted investors permission to hard-boil CEOs on their literacy levels when it comes to cost of capital, and to make inaction the greater fear than a sudden course correction.

Closely linked to that is the need for companies to be more scared than they currently seem to be by the pace of irresistible, and in some cases existential, change. The transformations that will be forced on corporate Japan by artificial intelligence, deteriorating US-China relations and the fact that the country’s most important company, Toyota, appears to have misjudged global demand for electric vehicles are all examples of concerns that should far outweigh the more conventional fear of sudden strategic change. They have yet to do so – at least outwardly – in the C-suites of many companies.

A missing fingertip, however gruesome, may be survivable. The question the incident raises is how bad the injury would have to have been to give up on that day’s deliveries.

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