Speaker 1: Malaysia's new leader, Anwar Ibrahim faces a bulging in tray
Speaker 1: as he starts his term as the country's 10th prime minister.
Speaker 1: Can he tackle domestic rice bowl issues? Keep international investors
Speaker 1: happy and keep his unity government on an even keel.
Speaker 1: I'm don Tan from the money mine team and this
Speaker 1: is five things you need to know about Malaysia's post
Speaker 1: election economic agenda.
Speaker 1: My guest today, Karim Qasim analyst at the Institute of
Speaker 1: Strategic and International Studies Malaysia, Haykel Rasanen, deputy Managing Director
Speaker 1: of Bower Group, Asia and Julia go senior economist at U. A. B.
Speaker 2: Malaysia,
Speaker 1: investors had a nervous few days but there was a
Speaker 1: boost to the ring it and Malaysian markets
Speaker 2: as Mr Anwar's
Speaker 1: appointment was confirmed. Kareem, do you expect this optimism to continue?
Speaker 2: Markets generally are reacting quite well from the news due
Speaker 2: to the inclusion of a more socially moderate and business
Speaker 2: friendly coalition that's forming the government. Overall Kl Ci index
Speaker 2: is actually risen by 4% which is a three month
Speaker 2: high main industries here are actually industrial and industrial services,
Speaker 2: consumer goods, utilities, and plantation stocks. So this generally is
Speaker 2: indicative of more confidence in consumption led sectors.
Speaker 2: So this could also be reflective of certain honeymoon period,
Speaker 2: if you will, of confidence in the new Malaysian leadership
Speaker 2: as opposed to the alternative of an ultra religious and
Speaker 2: ideologically driven government, which would have less political and social freedoms.
Speaker 2: The ingredients for a rally in the ringgit and Malaysian
Speaker 2: equities are already present. So going forward, I think from
Speaker 2: an economic viewpoint,
Speaker 2: the government will still remain pro business and provide adequate
Speaker 2: protection for local industries and companies and may not deviate
Speaker 2: too far from the status poll,
Speaker 1: Mr Anwar has said that tackling the rising cost of
Speaker 1: living will be his
Speaker 2: biggest concern. What
Speaker 1: sort of policies can we expect from the new government
Speaker 1: was very quick to announce that this is not a
Speaker 1: ph government, this is a unity government, I think most,
Speaker 1: because he wants to
Speaker 1: look at it from the perspective of not having tied
Speaker 1: to a manifesto of the party or any parties whatsoever,
Speaker 1: but more a broad strokes of addressing key economic concerns
Speaker 1: that he has, that he thinks the people have. So,
Speaker 1: I think in general, there are two broad economic policies
Speaker 1: that we can expect from this unity government. The first
Speaker 1: is addressing the dual challenge of packing the rising cost
Speaker 1: of living, were also practicing fiscal discipline, which is something
Speaker 1: he touched on in his address to the Civil Service.
Speaker 1: The second broad
Speaker 1: economic policy, I believe, is the decentralization of economic autonomy
Speaker 1: to states particularly that of Sabah and Sarawak in east Malaysia.
Speaker 1: It's because of the inclusion of the regional coalitions of
Speaker 1: which is GPS and Sabah in the unity government. And
Speaker 1: we think this will result in this revitalized efforts to
Speaker 1: kind of renegotiate the Malaysia agreement, 1963 give autonomy to
Speaker 1: the states to tip the balance in favor of Saba
Speaker 1: and Saba.
Speaker 2: We can expect people friendly policies. This will help reorient
Speaker 2: and redistribute wealth towards the low and middle income earners.
Speaker 2: So when we look at Harapan manifesto and they're published
Speaker 2: agendas before the election, there was a heavy emphasis on
Speaker 2: social welfare for the elderly, youth and small business owners.
Speaker 2: This also overlaps with certain policy
Speaker 2: proposals from various international who, among other policies, they also
Speaker 2: propose to provide a basic income assistance to the very
Speaker 2: bottom percentile of earners to ensure that every family in
Speaker 2: Malaysia has a household income above the poverty rate. It's
Speaker 2: likely we will see some form of this basic income
Speaker 2: for the poor and more policies to x
Speaker 2: span social safety nets and attempts to address the vulnerabilities
Speaker 2: of marginalized communities. I do not rule out the possibility
Speaker 2: of keeping the current subsidy regime with minor tweaks to
Speaker 2: make it more targeted. So this is to ensure that
Speaker 2: there is a better take up of these subsidies among
Speaker 2: the very poor, at least for the next year.
Speaker 1: On day three after his appointment as prime Minister, he
Speaker 1: chaired a special meeting with several senior government officials, including
Speaker 1: the Central Bank Governor, Ministry of Finance and Agriculture Ministry
Speaker 1: and the aim was to resolve a key economic issue
Speaker 1: which is addressing the rising cost of living. Some measures
Speaker 1: that have been mentioned include targeting food cartels, given the
Speaker 1: recent issue of X supplies. Another meal
Speaker 1: measure that was mentioned is to implement targeted subsidies and
Speaker 1: this is to ensure that the benefits are channeled to
Speaker 1: lower income groups versus the current structure whereby everyone, regardless
Speaker 1: of income groups enjoys the subsidy. The way we see
Speaker 1: it is that the risk to implementing targeted subsidies in
Speaker 1: the near term in particular fuel subsidies is that retail
Speaker 1: prices of fuel would rise. One sub
Speaker 1: these are removed and this would have a direct and
Speaker 1: indirect effect to prices of a broader range of goods
Speaker 1: and services. Now, for the average Malaysian household fuel is
Speaker 1: the single largest sub component in their consumption basket, and
Speaker 1: the average Malaysian household spends 8.5% of their household income
Speaker 1: on patrol. So raising fuel prices will have an immediate
Speaker 1: direct effect on household wallets,
Speaker 1: including the middle income earners and businesses faced with higher
Speaker 1: transport costs are likely to pass it on to consumers.
Speaker 1: And that's how we would see the past through to
Speaker 1: a broader price increase, that would tell inflation risk higher
Speaker 1: in the near term and stretch the issue of an
Speaker 1: already high cost of living, does Mr Anwar's pakatan Harapan,
Speaker 1: or ph have enough support to push its agenda
Speaker 2: through though
Speaker 1: Julia,
Speaker 1: the Unity Government appears to have the two thirds majority
Speaker 1: support from other partners, given that the other parties also
Speaker 1: prioritize tackling higher cost of living, I think they would
Speaker 1: be supportive of this agenda given it is to help
Speaker 1: the people. But the question remains, is how they will
Speaker 1: do it. And as I said, if you reduce subsidies,
Speaker 1: it could risk inflicting more cost pressures
Speaker 1: in the near term and heightened cost of living. So
Speaker 1: the timing to which the remove subsidies is very important
Speaker 1: to get not only the support from the coalition partners
Speaker 1: but also the public support because they are new government
Speaker 1: and the somewhat fragile coalition whereby no party commands a
Speaker 1: simple majority,
Speaker 1: the new government comprises parties with many different ideologies. Is
Speaker 1: that going to be a drag on decision making.
Speaker 2: Anwar in the short term may need to play the
Speaker 2: balancing act here between the different political and personal interests
Speaker 2: of the various parties and mps. So this will be
Speaker 2: difficult knowing that Anwar also repeatedly announces intention to reduce
Speaker 2: the size of the government to make it a more
Speaker 2: lean and streamlined
Speaker 2: outfit with the parliamentary budget office to manage expenditures. So
Speaker 2: this will be actually very good for spending, rationalization, fiscal
Speaker 2: consolidation and reducing bureaucratic burdens. This is something that has
Speaker 2: not been done before, but because this new government is
Speaker 2: eager to pass this through, I think it will be
Speaker 2: a very good move. But one of the down sciences
Speaker 2: that Anwar has less of a pie to distribute among
Speaker 2: his supporters in parliament. So that
Speaker 2: very delicate juggling game is necessary at least in the
Speaker 2: short term. But with that being said, I'm also a
Speaker 2: bit concerned that an expansion of social welfare and income
Speaker 2: distribution measures could also translate to higher government expenditures. So
Speaker 2: something that could also raise the eyebrows of many ratings
Speaker 2: agencies and investors right? So it's going to go against
Speaker 2: a lot of their manifesto pledges to consolidate and reduce
Speaker 2: fiscal expenditure.
Speaker 2: Despite this alliance between strange bedfellows and a diverse composition
Speaker 2: of the government. The current Unity Government is generally more resilient,
Speaker 2: I think, than the majority that th held in 2018
Speaker 2: because of the anti party hopping act. So this will
Speaker 2: eliminate any sudden switching of political allegiances, for example, like
Speaker 2: during the Sheraton move. But I am also
Speaker 2: a little bit more skeptical on whether ph can push
Speaker 2: their entire pre G 15 agenda. PH is generally seen
Speaker 2: as more progressive and liberal, while B. M. Is seen
Speaker 2: as more moderate in their approach. So for a consistent
Speaker 2: and stable government, both sides have to seek consultation. So
Speaker 2: this means compromise and prioritizing on the kinds of reform
Speaker 2: they want to push
Speaker 1: through, but that's quite a long list for Mr Anwar
Speaker 1: to tackle the top of the agenda tackling inflation,
Speaker 1: But he'll have to juggle any targeted subsidies and welfare
Speaker 1: nets with reining in government expenditure and keeping the peace
Speaker 1: with partners in the unity government. That could also mean
Speaker 1: decentralization of economic autonomy to states, especially Sabah and Sarawak
Speaker 1: in eastern Malaysia, a cost of living aside what will
Speaker 1: be Mr Anwar's biggest economic challenges as we head into
Speaker 1: 2023
Speaker 2: cost of living Malaysia is relatively low compared to many
Speaker 2: similar countries in other parts of the world. So the
Speaker 2: real problem here is not so much cost of living
Speaker 2: as it is on stagnating wages, wages in Malaysia especially
Speaker 2: for young graduates and new graduates have remained quite low
Speaker 2: and when we factor into account the impact of inflation,
Speaker 2: it may have actually even declined over
Speaker 2: for the past 20 years. So the increase of wages
Speaker 2: is more important in this case because higher wage individuals
Speaker 2: tend to spend less as a proportion of their income
Speaker 2: on necessities and they tend to spend more on luxury
Speaker 2: goods and more discretionary items, which means that they can
Speaker 2: actually absorb short term increases in the price level of
Speaker 2: daily necessities. Short term
Speaker 2: fixes in this case will include some form of cash
Speaker 2: transfer to the board and subsidies on necessities. So this
Speaker 2: is in the short term and good thing but with
Speaker 2: higher global inflation this does not sort of provide a
Speaker 2: long term structural solving to the problem, This needs a
Speaker 2: lot more structural reforms to actually bring about higher wages
Speaker 2: that we want to see in the Malaysian economy.
Speaker 1: One of the biggest challenges is to ensure stable growth
Speaker 1: next year. Given rising external headwinds to date, private consumption
Speaker 1: has been the key driver of growth contributing close to 80%
Speaker 1: of G. D. P. and going into next year. We
Speaker 1: expect exports to slow further alongside weaker global demand consumption
Speaker 1: is also likely to moderate unless we see China speeding
Speaker 1: up easing of its restrictions. So I think that
Speaker 1: challenge for the new government is also to unite the
Speaker 1: people by addressing underlying issues including low incomes, widening income gaps,
Speaker 1: which you know, you just can't rely on cash handouts
Speaker 1: because that's not a permanent solution. There's probably other policies
Speaker 1: that need to be looked at, including a more holistic education,
Speaker 1: better job opportunities, ensuring that policies are pragmatic to keep
Speaker 1: Malaysia on the radar to attract investors.
Speaker 1: Then of course, there are also other reforms that they
Speaker 1: should look at, including tackling fiscal weaknesses, improving governance and
Speaker 1: addressing corruption.
Speaker 1: As with all other countries. The other major economic challenge
Speaker 1: to Malaysia next year is mostly external in nature. I
Speaker 1: think as a small open and export oriented economy, we
Speaker 1: are exposed to two possible external shocks in the global economy. Right?
Speaker 1: So the first is the anticipated slowdown in 2023, expected
Speaker 1: to dampen demand for several of our key exports, like
Speaker 1: electric and electronic products and oil and gas products.
Speaker 1: So the global economic slowdown will then also be compounded
Speaker 1: by other challenges faced by global supply chains, including prolonged
Speaker 1: war in Ukraine and china's continued dynamic zero Covid policy
Speaker 1: which we expect to continue well into 2023. This is
Speaker 1: the first challenge. The second major one is there's also
Speaker 1: a persistent threat of this U. S. And china breaking
Speaker 1: into economic blocs as geopolitical tensions between these two superpowers escalate.
Speaker 1: So these tensions have
Speaker 1: have an impact on Malaysia as us and china are
Speaker 1: among Malaysia's largest trading partner. I think Singapore is third
Speaker 1: in that list. Fortunately I think we have taken some
Speaker 1: proactive measures to mitigate the risk. Parts of which is
Speaker 1: diversifying our trading partners you know through free trade deals
Speaker 1: such as the or regional Comprehensive Economic Partnership and the C. P. T. P. P.
Speaker 1: As well which will help Malaysia increases access to other
Speaker 1: regional markets. So this is some of the things that
Speaker 1: they've put in place before.
Speaker 1: I think we have also been intensifying efforts to digitalize
Speaker 1: businesses so this will help us move that global value
Speaker 1: chain and increase that productivity of the workforce. So challenges
Speaker 1: are there and I think Malaysia has some stability there
Speaker 1: in terms of whatever they propose before but undeniable that
Speaker 1: it will be a hard year. Where should Malaysian investors
Speaker 1: zero in in 2020
Speaker 2: three.
Speaker 1: So the outlook in 2023 is dimmer but we always
Speaker 1: encourage businesses with vision and long term strategies to look
Speaker 1: beyond just the next year. And the government is likely
Speaker 1: to continue promoting high value added industries that bringing technology
Speaker 1: expertise and higher incomes for the people.
Speaker 1: So sectors that leverage on the supply chain diversification and
Speaker 1: expansion in the region, projects that increase digitalization efforts to
Speaker 1: reduce costs and raise efficiency and this can cut across
Speaker 1: many areas in services and manufacturing from business services to
Speaker 1: F and B robotics and engine.
Speaker 1: One other area is the promotion of agriculture and food
Speaker 1: production for food security reasons and also managing food inflation
Speaker 1: and last but not least would be areas that promote
Speaker 1: sustainability and push the climate agenda to help the country
Speaker 1: reach its net zero goal by 2050,
Speaker 2: assuming that many of the expansionary measures in budget 2023
Speaker 2: are kept like the 2% decrease among middle income earners,
Speaker 2: cash transfers for low income households and investment incentives in E. S. G.
Speaker 2: Such as electric vehicles. So this will have positive spillovers
Speaker 2: in other sectors of the economy like FNB retail transportation
Speaker 2: auto manufacturers who will likely sort of shift their production
Speaker 2: capability towards the
Speaker 2: electric vehicles. So sectors that also promote the adoption of E. S. G.
Speaker 2: And S. D. G. Principles among smes will also form
Speaker 2: a much more visible part of the economy. E. V.
Speaker 2: S is actually something very much worthwhile to look at.
Speaker 2: We're seeing a lot of very high intake levels in
Speaker 2: advanced economies, especially as climate change becomes more and more apparent.
Speaker 2: So coupled with the fact that Malaysia's auto industry is
Speaker 2: very much foreign investor
Speaker 2: lead, we will see a continued level of interest in
Speaker 2: mid level manufacturing for electric vehicles in Malaysia, the electric
Speaker 2: vehicle uptake is actually less than one E. V. Per
Speaker 2: 1000 people. So when we compare this to say Norway
Speaker 2: where the same statistic is about 81 electric vehicles per
Speaker 2: 1000 people definitely I think there is room to grow
Speaker 2: here in the Malaysian market. It's just that in the past,
Speaker 2: certain policy
Speaker 2: the hangovers have spilled over which in a way incentivize
Speaker 2: internal combustion engines over electric vehicles especially or import tariffs
Speaker 2: as well. So I think with the new government there
Speaker 2: is this sense that they will follow through on policy
Speaker 2: changes necessary to adopt electric vehicles. So I think the
Speaker 2: potential for E. V. S in Malaysia is definitely there
Speaker 2: and I think this is something that investors can look
Speaker 2: forward to.
Speaker 1: Anwar Ibrahim is the 5th Prime Minister of Malaysia in
Speaker 1: five years. Is there optimism that the game of political
Speaker 1: musical chairs is now ending Julia?
Speaker 1: I think there is cautious optimism and
Speaker 2: hope given
Speaker 1: that Malaysia was able to cross the recent political hurdles. However,
Speaker 1: uncertainties remain as it is a fragile coalition bound by
Speaker 1: an anti party hopping law. Politics in Malaysia is about personalities,
Speaker 1: internal party fragmentation
Speaker 1: and social and economic structure of the country. So I
Speaker 1: think for the new prime minister, he has to find
Speaker 1: a common ground to unite the parties for the sake
Speaker 1: of political stability and longevity to last a full term.
Speaker 1: And only with that they can then forge and pass
Speaker 1: supportive economic
Speaker 2: policies.
Speaker 1: Less so compared to let's say 12 months ago, let's
Speaker 1: say the near term risk of political instability is with
Speaker 1: the formation of a unity government or more accurately a
Speaker 1: grand coalition government right is purported to states majority in
Speaker 1: the parliament lower house and as a testament, today's Anwar
Speaker 1: has pledged to seek vote of confidence when parliament convinced
Speaker 1: on december 19th, we understand that
Speaker 1: and chairman, for example, has promised his coalition support, but
Speaker 1: we have not heard the same from GPS Right Sabba
Speaker 1: as well as the regional Parti Warisan. So they haven't
Speaker 1: made a similar pledge. So this threat of political instability
Speaker 1: still looms over this unity government as it's kind of
Speaker 1: an alliance that is built on the basis of the
Speaker 1: king's decree.
Speaker 1: So the main push factor that I see is that
Speaker 1: the continuance of this alliance that I see is that
Speaker 1: political parties, they do not want to be perceived as
Speaker 1: going against the king switches, which is basically to achieve
Speaker 1: political stability with the proposal for a unity government to
Speaker 1: be formed. And then we also look at what pakatan
Speaker 1: Harapan embarrass
Speaker 1: the nation has to do. Being longstanding political adversaries is unprecedented.
Speaker 1: Yet to be tested. It's inherently volatile. There are many
Speaker 1: moving parts that make it hold. So this is a
Speaker 1: test of leadership on on wall managing this expectation, building
Speaker 1: up mutual trust between the component coalition parties,
Speaker 1: a juggling act on all fronts for Malaysia's new prime minister.
Speaker 1: One focus for 2023 is likely to be stable growth,
Speaker 1: but mr Anwar will have to hold his unity government
Speaker 1: together to push ahead with economic policies. A big challenge
Speaker 1: is the cost of living, but again, he'll have to
Speaker 1: balance any subsidies and welfare initiatives with keeping government expenditure
Speaker 1: in line
Speaker 1: the unity government means that we're also likely to see
Speaker 1: changes in the relationship between the federal government and individual
Speaker 1: states with more decentralization of economic autonomy, particularly in the
Speaker 1: kingmaker states of Sabah and Sarawak in East Malaysia.
Speaker 1: Looking forward, the focus is on promising sectors like digitalization,
Speaker 1: food security, supply chain diversification and sustainability,
Speaker 1: and that's five things you need to know about Malaysia's
Speaker 1: post election economic agenda. My guest today, Michael Rossman, deputy
Speaker 1: managing director of Bower Group, Asia. Karim Qasim, analyst at
Speaker 1: the Institute of Strategic and International Studies Malaysia and Julia
Speaker 1: go senior economist at U O B Malaysia catch money
Speaker 1: mind on C N. A. And online at me, Watch
Speaker 1: CNN ASIA and Youtube.