What Does the New Government Mean for Malaysia in Terms of Business?
Malaysia, the fourth largest economy in Southeast Asia, has always been known for its high labor productivity and its diverse economy. For the first time in 61-years, the country has a new government, a significant win in the country’s history since it gained independence.
The New Government and What It Means for Malaysia
Following the elections that took place on the 9th of May, the new government of Malaysia is set make moves that won’t just improve the country’s economy, but to help ease the burden of the people as well. Among some of these initiatives is to abolish the current 6% GST and replace it with a sales and service tax which is deemed to be fairer, and provide 20% royalties for all oil producing states. The GST was widely blamed for the rising cost of living when it was introduced in 2015.
The reintroduction of gasoline subsidies could also prove to be a boon for consumption as the new government has its eyes on a 6% growth goal.
At the moment, Malaysia’s economy is enjoying a strong rebound with growth surging to 5.9% last year and forecasted to reach 6% in 2018 by the central bank. The central bank’s policy decision held its benchmark rate at 3.25% one day after the announcement of the new government. This is in line with its forecasts by economists surveyed by Bloomberg, and there is not much change expected anytime soon.
The local currency too is at its best-performing state in emerging Asia this year, strengthening 2.5% against the dollar.
This unprecedented and unexpected win could mean more uncertainties for international investors according to Christy Tan, Head of Market Strategy at National Australia Bank Singapore. Understandable, given the changes that are set to take place steadily over the next five years as the new government seeks to improve the economy and the state of the country for the better. So far, little is known about the new government’s full range of economic policies and a full assessment of the budgetary and macroeconomic impact is yet to be determined.
Malaysia’s closest neighbour Singapore is looking forward to maintaining its already close relationship with the country post elections, with Singapore’s Minister for Trade and Industry Chan Chung Sing saying that they hope to advance the relationship between the two countries.
Moving Forward
Prime Minister Tun Dr Mahathir Mohammad is no stranger to leading a country, having served as prime minister from 1981 – 2003 when he resigned. During his reign, he was and still is one of the most respected political figures in Malaysia, having formulated policies that helped businesses flourish and made education easily available to the people. His extensive career has cemented him as possibly one of the most influential figures in Malaysia’s political history.
Given that both Prime Minister Tun Dr Mahathir and his former political rival Datuk Seri Anwar Ibrahim were both Finance Ministers at some point during their political career, and the Prime Minister’s great business acumen, the change of government could quite possibly bring a more positive outlook moving forward.
