Analysis: Malaysia PM Anwar’s rating dips after first year, but his focus must stay on longer-term reforms

When it comes to cutting subsidies, one analyst said it is important for the government to communicate clearly to the public that the current system of blanket subsidies encourages a culture of wastage, and that targeted subsidies could free up funds better spent in areas like education and healthcare.

Mr Lee Heng Guie, an economist and executive director of the Socio-Economic Research Centre, said the government could also cushion the impact of subsidy rationalisation by handing out cash assistance, for instance in the form of vouchers, to those who need it.

“Assuming I do targeted subsidies, there’ll be some savings. The savings can go back into sectors that will have an effect on the economy,” he said.

To further stimulate economic growth, Mr Anwar could double down on policies that improve Malaysia’s investment climate, by making it easier to do business and being more “open” to using foreign labour to fill a shortage of skilled workers, Mr Lee said.

One area that Mr Anwar has seemingly excelled in is attracting foreign investment. The government said it has secured RM63.3 billion (US$13.6 billion) of foreign direct investment in the first half of 2023, compared to the RM74.6 billion net inflow for the whole of 2022.

Mr Lee said the premier’s slew of economic plans, like the National Energy Transition Roadmap, the Malaysia Madani framework and the mid-term review of the 12th Malaysia Plan, coupled with political stability will be crucial in wooing even more foreign investment.

“Get on with it, implement it and let the impact be felt on the ground, because we still face a lot of risks in the global economy,” he added, stressing that Malaysia’s export-driven economy remains vulnerable to external shocks.

Moving forward, Mr Anwar and his government need to “quickly deliver” on their economic plans, said Ms Yeoh from IDEAS.

“The administration will need to translate these into actionable items, translating them into a pipeline of economic activity that is clearly visible to industry,” she said, urging the government to identify potentially competitive sectors beyond the semiconductor industry.

“Developing ecosystems and sectors of economic priority will be key.”