92 -year old Mahathir Mohammad came back to power after winning the general elections in Malaysia last week.
He had quit politics in 2003 but decided to re-enter the electoral fray after witnessing ‘massive corruption’ by the Najib Razak government. Najib’s party had been in power for 60 years; Mahathir was once a part of the ruling United Malays National Organization. Najib was Mahathir’s protege one time.
After Mahathir Mohammad won the elections, he told the media that Anwar Ibrahim, his one-time protege would be granted royal pardon from charges of sodomy. This development is unusual because it was Mahathir Mohammad who had sent Ibrahim to jail many years back.
Malaysia watchers say that Mohammad is just an opportunist out to grab power at any cost.
The immediate reason behind Najib’s loss was his government’s insistence on implementing Goods and Service Tax in the country. Malaysians felt that this tax was a financial burden on their earnings.
Mahathir Mohammad has promised to cancel this 6% GST upon winning the elections.
Another reason why Najib lost was that many Malaysians perceived him and his party to be corrupt. It is alleged that his wife received a USD 23 million necklace by swindling the state investment fund IMDB. The US Department of Justice believes that between 2009 and 2015 USD 4.5 billion was looted by Najib’s friends. Out of this money, USD 700 million found its way into his personal bank account.
Immediately after being re-elected as Malaysian Prime Minister after a gap of 15 years, Mahathir Mohammad promised to make the economy more transparent. He also promised to draw up a comprehensive roadmap for the Malaysian economy after his first 100 days in office.
The 92-year old Prime Minister had also promised to provide subsidies on oil to spark domestic demand. Increasing royalties to oil-producing states is also on the cards.
Future of One Belt project in Malaysia
Analysts believe that the new Prime Minister would discard the One Belt-One Road project in his country. Readers will recall that China has embarked upon a major global initiative that seeks to open several Asian markets for various Chinese products.
In 2014, US, Singapore, Norway, and Japan pooled in more than USD58 billion in Malaysia as FDI. This figure was 55% of all the FDI in that country.
But in 2016, China emerged as the single largest FDI country in Malaysia having put in USD10.84 billion there. Many real estate projects were backed by China.
Chinese investments in Malaysia are welcome, Mahathir said after winning the elections, but only if they bring in jobs and technology. Many countries in Asia like Sri Lanka and the Maldives are falling in the ‘debt trap’ of the Chinese. Probably, Mahathir wants to avoid that ugly situation.
Analysts say that canceling the GST would increase Malaysia’s budget deficit which had come down to 3% under Najib’s regime. The ousted PM has said that this move will add USD 104 billion to Malaysia’s debt. There would be increased pressure on the country’s economy by offering subsidies on fuel exports, experts say.
Last year, the Malaysian economy grew by 5.9% and it is expected to grow by 5.5-6% in 2018.
These gains might be offset by the ongoing global trade tensions.
It should also be noted that 2/3rds of the Malaysian GDP is made up by earnings from trade. Experts warn that unless Mahathir Mohammad has a credible plan in place, his economy would suffer a severe setback.
Impact on Malaysian currency
Bloomberg says that the surprise win of Mahathir’s coalition may upset the stock markets. The Malaysian ringgit could become unstable and the currency market would become a playground for currency manipulators. However, the new PM has warned them that he might peg ringgit should it become necessary.
Malaysia- Bharat trade relations
The total trade value between the two countries stands at USD 10 billion. Malaysia enjoys a trade surplus with Bharat. The major exports are;
- Palm Oil
- Electrical and Electronic Products
- Crude Petroleum
- Metal Products
- Chemical and Saw Logs
It is expected that Malaysian exports will become more competitive in international markets to keep the country’s economy afloat. Since Mahathir Mohammad has come to power by playing opportunistic politics, the Malaysian economy will just totter along.