Some have interpreted the defeat of Pakatan Harapan (PH) candidate, Dr Joohari Ariffin, by Perikatan Nasional (PN) candidate, Abidin Ismail, in the Sungai Bakap state by-election on July 6 as a sign that Malaysians reject the economic policies introduced by Prime Minister Datuk Seri Anwar Ibrahim.

The most talked-about economic policy is the introduction of the targeted diesel subsidy policy on June 10, which is said to have burdened the people by increasing the prices of goods and services. The defeat of Dr Joohari in the Sungai Bakap by-election is claimed to be evidence that Malaysians reject the targeted diesel subsidy policy.

In fact, there is nothing surprising about the results of the Sungai Bakap by-election. It is merely a continuation of the trend to maintain the status quo in all by-elections after the 15th General Election (GE15) on November 19, 2022, and the state elections in five states on August 12, 2023, both at the parliamentary and state legislative assembly (DUN) levels.

PAS retained its seats in two by-elections, namely the Kuala Terengganu parliamentary by-election on August 12, 2023, and the Kemaman parliamentary by-election on December 2, 2023. Similarly, the PH-Barisan Nasional (BN) coalition retained its seats as well, namely in the Pulai parliamentary and Simpang Jeram state by-elections on September 9, 2023, the Pelangai state by-election on October 7, 2023, and the Kuala Kubu Baharu state by-election on May 11.

Unwise to quickly blame government’s economic policies for by-election defeat

In addition to the continuation of the status quo trend, the outcome of a by-election is also due to many reasons, both internal and external.

Therefore, it is unwise to quickly blame the government’s economic policies for Dr Joohari’s defeat when local political factors are at play. Simultaneously, urging the government to halt or review its economic policies, especially the targeted diesel subsidy policy and the proposed targeted petrol subsidy policy, following Dr Joohari’s defeat in the Sungai Bakap by-election, is neither appropriate nor logical.

International credit rating agencies retain Malaysia’s good ratings

The most solid evidence that the government is implementing the correct economic policies, especially the targeted fuel subsidy policy, is the retention of Malaysia’s good sovereign credit ratings by international credit rating agencies such as S&P Global Ratings (S&P), Fitch Ratings (Fitch), and Moody’s, which reflects international stakeholders’ confidence in Malaysia.

S&P stated that its rating on Malaysia is supported by the country’s strong external position and monetary policy flexibility. Furthermore, its trend economic growth rate is faster than sovereigns of similar income levels. It also expects Malaysia’s fiscal deficit to narrow with the planned subsidy rationalisation measures. Fitch also projects Malaysia’s GDP growth to surge by 4.4 per cent in 2024 and 4.5 per cent in 2025.

More recently, the government’s economic performance was praised by Rajiv Batra, Head of Asia-Pacific Equity Strategy at JP Morgan, in a CNBC interview on July 10, where he stated that JP Morgan had upgraded Malaysia from ‘underweight’ to ‘neutral’.

Rajiv Batra explained that policy reforms, including bold steps to target fuel subsidies, data-centred investments, and ongoing infrastructure development in Malaysia, made JP Morgan positive about Malaysia. He added that what was more surprising was the rapid pace of progress, with GDP growth of 4.2 per cent in the first quarter of this year prompting JP Morgan to upgrade Malaysia.

MADANI government “walking the talk”

Rajiv Batra also stated that JP Morgan sees the MADANI government “walking the talk” in almost one and a half years of their tenure, passing difficult policies and reforms, and most importantly, committing to fiscal consolidation without sacrificing growth. This has led to increasing foreign investor interest and the return of foreign investment to Malaysia.

Dr Benjamin Laker, a leadership professor at Henley Business School, University of Reading, England, in an article on July 10 titled ‘Malaysia’s Economic Recovery under Anwar Ibrahim’s Leadership’ published by Forbes Magazine, also praised the economic reforms introduced by the Prime Minister.

Among the praised economic reforms are the introduction of new taxes, subsidy rationalisation, Progressive Wage Policy (PWP), the enactment of the Public Finance and Fiscal Responsibility Act (FRA), the acceleration of Foreign Direct Investment (FDI) approvals, and investments in high-value sectors deemed crucial for Malaysia’s economic recovery.

At the same time, Dr Benjamin noted that the Prime Minister’s leadership and political acumen in managing public dissatisfaction, including the impact of these economic reforms on the people – especially in terms of living costs – will be a critical determinant of the long-term success of his economic policies and, consequently, the future of Malaysia’s economy, potentially making Malaysia a model for other countries navigating post-pandemic recovery and similar structural transformations.

Recognition from international credit rating agencies and international leadership experts is the clearest indication that the Prime Minister’s economic policies are correct and should continue.

-- BERNAMA

Professor Ir Ts Dr Ahmad Ziad Sulaiman is the Deputy Vice-Chancellor (Academic and International) at Universiti Malaysia Pahang Al-Sultan Abdullah (UMPSA), Pekan, Pahang.