May 10, 2019
By Joseph Sipalan and Rozanna Latiff
KUALA LUMPUR (Reuters) – A year ago, Malaysian land surveyor Muhammad Nur Aliff had high hopes that a shock election victory by 93-year-old Mahathir Mohamad could be the catalyst for reform and revival in a country hobbled by sky-high public debt and corruption.
But polls show that such optimism has been steadily eroded since the election upset, in which the United Malays National Organisation (UMNO) was removed from power for the first time in 60 years and replaced by Mahathir and the patchwork Pakatan Harapan coalition.
Mahathir, who inherited a debt-laden economy, has focused much of his administration’s attention on cleaning up public finances following a multibillion-dollar corruption scandal involving state fund 1MDB and former prime minister Najib Razak.
Najib is facing charges but denies any wrongdoing.
Meanwhile, deep divisions within the ruling coalition have curbed efforts to boost government revenue, attract investment or create jobs.
Support for the government fell to just 39 percent in March, sharply down from the 66 percent rating in August 2018, according to a survey by independent pollster Merdeka Center.
Mahathir also saw his popularity plunge to 46 percent from 71 percent over the same period, although he says he doesn’t put much faith in these numbers.
Worryingly for Mahathir, Merdeka Center said Malay Muslims, who make up around 60 percent of Malaysia’s 32 million people, were largely more critical of his administration.
Most of the poorest people in the country are Malay and for decades they have been the beneficiaries of subsidies and other affirmative action policies pushed by UMNO.
Many in the majority community were also angered when Mahathir appointed an ethnic Chinese finance minister and an attorney-general from the Malaysian-Indian minority, and said cash handouts to Malays could be reduced.
Pledges to end the death penalty and rescind oppressive laws such as the colonial-era Sedition Act were also unpopular with traditionalists.
“Many young people placed a lot of hope in this new government, but we haven’t seen anything that we had hoped for,” said Aliff, 28, protesting in the capital last week with hundreds of other Malays.
“We want to ensure a better future for young people, especially young Malays.”
Following protests by Malays and a series of by-election defeats for the ruling Pakatan coalition this year, many of these planned policies have been put on the backburner.
In recent months, Malaysia has rolled back efforts to abolish the death penalty and revoke repressive security laws, as well as reversed plans to ratify two U.N. human rights treaties, after pro-Malay groups raised objections.
But UMNO and members of the opposition Islamist party PAS have been quick to remind voters of what they describe as Mahathir’s failure to uphold Islam and protect Malay interests.
“Pakatan is unpopular with the Malay-Muslim electorate,” said Adib Zalkalpi, a Malaysia director with political risk consultancy Bower Group Asia.
“UMNO and PAS have formed a credible opposition front to challenge the government by exploiting communal sentiments.”
Reform ambitions are also hampered by fractures within Pakatan, a coalition of parties that was aligned in its goal of removing Najib and UMNO, but doesn’t seem to agree on much else.
“Everyone is working in silos. Everyone has a general idea of the problems we face but there really are no discussions going on,” said a senior government source, who asked not to be named due to the sensitivity of the topic.
“We don’t have a common narrative to counter the opposition’s racial rhetoric.”
Mahathir says accusations the coalition is dysfunctional are false.
“Our attention is directed at correcting all the mistakes of the previous government. That has taken much of our time,” he told reporters on Thursday.
Business sentiment has cooled after initial optimism that followed Pakatan’s electoral win, due mainly to a lack of consensus on the way forward for the economy, according to an April survey of 250 businesses by Ipsos Business Consulting.
“The continued lack of clarity on economic policies may lead to increased level of anxiety among the businesses and further intensify the fear of an economic slowdown,” the firm said its report.
Investors in the survey also expressed concerns over currency fluctuations and slowing economic growth. The ringgit currency has slumped this year and stocks are underperforming regional rivals.
Malaysia has had to fill a revenue shortfall stemming from a populist measure to scrap a goods and services tax last year, while efforts to turn around struggling state entities that burden the treasury, including long-suffering Malaysia Airlines, have faltered.
In March, Malaysia’s central bank cut its 2019 economic growth forecast to 4.3-4.8 percent from 4.9 percent, on expectations of a significant drop in export expansion due to slowing global growth and the U.S.-China trade war.
On Tuesday, Bank Negara Malaysia became the first central bank in the region to cut its benchmark interest rate, in a move to support the country’s economy.
Mahathir has mended ties with China, reaching a cut-price $11 billion rail link deal, which is a welcome investment boost.
But with Malaysia’s debt-to-GDP ratio around 50 percent, public support waning and a unstable ruling coalition, it will become increasingly difficult for Mahathir to boost economic growth and win back disillusioned voters.
“With exports likely to remain in the doldrums, GDP growth in Malaysia looks set to slow to a post-financial crisis low this year. The government’s recent policies will make the downturn even worse,” Capital Economics said in a research note on Wednesday.
(Reporting by Joseph Sipalan and Rozanna Latiff; Editing by Joe Brock and Raju Gopalakrishnan)