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Update1
Reforms, new investments lead to JPMorgan’s upgrade of Malaysia’s rating
FMT Business-11 Jul 2024, 10:55 AM
Government’s bold step in rationalising subsidy also a positive move, Banking group’s head of Asia-Pacific (ex-Japan/China) equity strategy Rajiv Batra says.
JP Morgan’s Rajiv Batra praised the administration’s cutting of subsidies, saying the savings are going to ‘productive uses’ in the economy such as reskilling workers. (Bernama pic)
PETALING JAYA: Policy reforms, data-centric investments and infrastructure build-out have been cited by JP Morgan as factors for its decision to upgrade Malaysia’s rating from underweight to neutral.
Over and above that, reforms and policy changes in the past year have also helped to lift the country’s ratings for the first time in six years, the investment banking group’s head of Asia-Pacific (ex-Japan/China) equity strategy Rajiv Batra said.
Rajiv, who was speaking on Squawk Box, the pre-market morning news and talk programme of CNBC International early today, said the pace of progress has come as a surprise.
He noted that the gross domestic product had expanded 4.2% in the first quarter of 2024 and earnings growth was almost 10% to 11%.
“(This) surprised us on the upside, which means we need to give credit to the country and hence we upgrade it to neutral,” he added.
Rajiv noted that the government had taken some “bold steps” in cutting subsidies.
“It’s always controversial and always very sensitive but they managed to do it,” he pointed out.
“It is also meaningful how they sold this to the population,” he added, noting that cash has been offered.
Under the diesel subsidy rationalisation scheme, those in the lower income group will receive cash handouts to defray to increase in the cost of fuel.
Businesses will continue to enjoy the subsidy to ensure that they do not raise prices of consumer goods.
Rajiv said what people should realise is that the subsidy cut of almost 25% will be diverted to productive uses in the economy.
He said the savings could be invested in literacy reskilling or to introduce the progressive wage policy on which Malaysia is trying to draw inspiration from Singapore.
Rajiv agreed that much of the upgrade is down to a governance reset in the wake of the 1MDB debacle.
He also concurred with the view that Malaysia has now achieved some closure on the issue and perceptions have changed for the better among international investors.
“We are seeing the government walk the talk,” he said.
He gave the thumbs up for reforms such as energy transition and the Madani economy budget.
“Most importantly, (there is) the desire to go ahead with the fiscal consolidation without sacrificing growth,” he said.
Malaysia is targeting a growth rate of 5% this year.
He said foreign investors’ perception on Malaysia is also changing.
For instance, he said, Malaysian equities saw an outflow of US$150 million to US$160 million (RM705 million to RM752 million) in the first quarter of 2024 but it quickly recovered and in the second quarter foreign investments were back.
From April to June, Malaysian equities saw an inflow of new investments of about US$200 million (RM941 million).
Overall, he noted, the equities markets in Asean countries have accumulatively lost about US$7 billion (RM32.9 billion) in foreign investments so far this year.
Rajiv said that foreign investors are now taking note of not just the technology story in Penang but also the investments in data centres and other infrastructure.
“In my travels, I see that people are warming up to Malaysia again,” Rajiv said.
“Yes, it is a multi-theme story revolving around data centres that everyone is talking about,” he added.
He noted that Penang has proven to be a tech hub, and Malaysia is also investing in electric vehicles, green energy and solar energy.
“Taking all these factors into account, foreign investors now see multiple sectors and ideas in play in Malaysia,” he added.
Is PMX doing a good job to turn Malaysia’s economy around?
KUALA LUMPUR, July 11, 2024: Is Malaysia’s 10th Prime Minister (PMX) doing a good job to turn around the country’s economy?
Well, Forbes certainly think so but Malaysians think otherwise.
So, are Malaysians, especially the majority Malays, ignorant of the complexities of managing a country’s economy?
Or are Malaysians economically plain narrow-minded or unable to see the long-term future of the country’s socio-economic growth?
Pakatan Harapan (PH)-PKR’s defeat in the recently Sungai Bakap by-election is testimony of disappointed Malaysians from both sides of the political divide.
Singapore’s Straits Times has carried a worrying report headlined “Why the Penang by-election defeat should worry Anwar”.
But multiracial Malaysians who cherish national unity and harmony are not worried for Anwar - they are worried about the prospects and reality of Malaysia coming under a Taliban-like PAS governance after the next general election (GE) which must be held in 2027.
“Taliban Malaysia” certainly sends the shivers down the spine of multiracial Malaysians, and of course their socio-economic future.
In GE16 Malaysians are likely to be at the political crossroads - they must choose between the devil and the deep blue sea or a Taliban-like PAS or a multiracial PH.
No News Is Bad News reproduces below the Forbes report and related articles:
FORBES LEADERSHIP LEADERSHIP STRATEGY
Malaysia’s Economic Turn Around Under The Leadership Of Anwar Ibrahim
Contributor
Expert commentary on global affairs for leaders everywhere
Jul 10, 2024,09:00am EDT
15 March 2024, Hamburg: Anwar Ibrahim, Prime Minister of Malaysia, stands in the lobby of the Hotel ... [+]
DPA/PICTURE ALLIANCE VIA GETTY IMAGES
When Anwar Ibrahim assumed office as Prime Minister of Malaysia in December 2022, he received a mandate beset by the economic fallout of a global pandemic and longstanding structural deficiencies.
Anwar—described by The Economist as “the most enigmatic figure in South-East Asian politics for half a century”—inherited this challenge at a pivotal moment. Malaysia’s premature deindustrialization—where the manufacturing sector’s contribution to GDP and employment diminishes at a lower income level than anticipated—had led to structural stagnation. The exodus of skilled workers in search of better opportunities abroad further depleted the domestic talent pool. These vulnerabilities were exacerbated by systemic corruption and a burgeoning national debt that had reached alarming levels.
Fiscal Reforms and Cost Optimization
How did Anwar plan to address these pressing issues? To tackle fiscal inadequacies, he introduced a series of new taxes. These included a higher Service Tax and a Capital Gains Tax, projected to boost government revenue by approximately $728 million. Additionally, the Progressive Wage Policy (PWP) was introduced to align wage growth with productivity, aiming to combat wage stagnation and elevate living standards. This policy sought to ensure that as workers become more productive, their wages increase correspondingly, thereby enhancing their purchasing power and overall economic well-being.
On the cost optimization front, Anwar’s administration undertook the politically challenging task of rationalizing subsidies and managing civil service costs. Transitioning new civil servants to an Employees Provident Fund (EPF) scheme—projected to reduce long-term pension costs—was a significant step. This move aimed to alleviate the financial burden on the government by shifting future pension liabilities to a more sustainable model.
Additionally, the enactment of the Public Finance and Fiscal Responsibility (FRA) Act institutionalized prudent fiscal management with targets for a 3% fiscal deficit and a 60% debt-to-GDP ratio. This legislative framework is intended to ensure that Malaysia’s fiscal policies remain sustainable in the long run, providing a stable economic environment conducive to growth.
Efforts to enhance investment have seen the administration expedite Foreign Direct Investment (FDI) approvals and improve the ease of doing business. Significant investments have been attracted in high-value sectors such as semiconductor fabrication and digital technology. By focusing on sectors with high growth potential and technological advancement, Malaysia aims to ascend the global value chain and foster a more dynamic and competitive economy. Measures to boost investment quality focus on labor productivity through automation and increased spending on research and development. These initiatives are designed to create a more innovation-driven economy—reducing reliance on low-skilled labor and enhancing overall productivity.
These reforms have significant implications for both Malaysia and the broader Asian region. Nonetheless, challenges persist. Recently, Malaysia’s attempt to retarget petrol subsidies faced potential setbacks following the government’s significant loss in a state by-election over the weekend. Voters in Sungai Bakap expressed their discontent, with the Islamist opposition party PAS retaining the rural seat in northern Penang state by a substantial majority of 4,200 votes on Saturday, despite low voter turnout. This defeat, driven by high living costs linked to other recent subsidy cuts, highlighted public dissatisfaction with Anwar’s economic policies.Read More
The South China Morning Post reported that “Malaysia’s uneven pandemic recovery has left millions of private-sector workers dipping into their retirement savings to cover living expenses after changes to the country’s mandatory savings fund allowed billions of ringgit to be withdrawn in a matter of weeks.” As a result, Malaysia’s ruling coalition was unable to secure a seat in a by-election in Anwar’s home state. Party leaders attributed the more significant loss to rising fuel prices. According to the Election Commission, Bloomberg reported that the Federal opposition alliance, Perikatan Nasional, more than doubled its winning margin in the Sungai Bakap state seat of Penang.
However, while losing the state seat, Anwar’s coalition achieved a victory in a federal seat. In the recent Kuala Kubu Bharu elections, the Democratic Action Party (DAP) of Anwar’s coalition won by a 3,869-vote majority, polling 14,000 votes against the opposition Perikatan Nasional (PN) coalition’s Khairul Azhari Saut, who received 10,131 votes.
This highlights two sides to the story: on one hand, the dissatisfaction with certain economic policies has led to significant setbacks at the state level, while on the other hand, successes in federal elections suggest that Anwar’s coalition still retains substantial support in other areas. The mixed outcomes reflect the complex and evolving political landscape in Malaysia.
The Road Ahead
These electoral results underscore the delicate balance Anwar’s administration must maintain between implementing necessary economic reforms and managing public discontent. While the introduction of new taxes, rationalization of subsidies, and investment in high-value sectors are critical steps towards economic rejuvenation, the impact on the populace—particularly in terms of living costs—cannot be underestimated. Anwar’s ability to navigate these challenges will be crucial in determining the long-term success of his economic policies and, by extension, Malaysia’s economic future.
And so, as Malaysia stands at this crossroads, the coming years will test not only Anwar’s political acumen but also the resilience of a nation striving to reclaim its economic vitality and global standing. The world watches closely—will Malaysia’s journey set a precedent for other nations navigating similar post-pandemic recoveries and structural transformations? The answer remains to be seen, but one thing is certain: Anwar’s leadership will be a critical determinant in this unfolding narrative.
Benjamin Laker is a leadership professor at Henley Business School, University of Reading who undertakes research and delivers keynote speeches on the societal impact of leadership—often influencing government policies and law—to develop new ways for organizations to operate in a socially responsible manner. He is best known for popularizing the concept of Meeting-Free Days, often called "No-Meeting Days" or more recently "Meeting-Free Fridays", which are becoming increasingly common in workplaces globally—including Facebook, Microsoft, SAP and Shopify—as a way to improve employee wellbeing and productivity.
Sungai Bakap by-election: PKR’s defeat a call for self-reflection, says Nurul Izzah
Opalyn Mok
Sun, 7 July 2024 at 8:40 am MYT·2-min read
Malay Mail
SEBERANG PERAI, July 7 — Penang PKR chief Nurul Izzah Anwar said the party’s defeat in the Sungai Bakap by-election yesterday is a sign for the party to self-reflect.
She said it is also a reminder for the party to continue its work to win the confidence of the people.
“This defeat reminds us that we cannot be too complacent, and we must take this reality as a challenge in our struggle,” she said in a press conference after the official results of the by-election was announced last night.
Perikatan Nasional’s (PN) Abidin Ismail garnered 14,489 votes to win the seat with a majority of 4,267 votes against Pakatan Harapan’s (PH) Joohari Ariffin who garnered 10,222 votes.
PN retained the seat with a larger majority compared to the state elections last year.
In the state elections last year, PN’s Nor Zamri Latiff won the seat with a majority of 1,563 votes against PN’s Nurhidayah Che Rus.
The by-election was triggered by Nor Zamri’s death on May 24.
Nurul Izzah said PKR accepted and respected the choice of the people of Sungai Bakap in the by-election.
She thanked voters who came out to vote and the PH and Barisan Nasional (BN) campaign teams who worked tirelessly throughout the campaign period.
“While respecting the choice of the people of Sungai Bakap, it is disheartening that they were racial attacks and malicious slander by the Opposition to influence the sentiments of voters,” she said.
She said the party will continue to bring back the debate, explanations and efforts focused on resolving key issues such as the people’s welfare, education, infrastructure development and a livelihood that balances the needs of the mainland and the island.
“We take this by-election results as a determination to self-reflect and to change for a better future for Penang and Malaysia,” she said.
PH held the Sungai Bakap state seat since 2008 before the coalition lost it to PN in the 2023 state elections.
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