A STRONG mandate from the people is crucial to restore political stability and to form a strong, stable and respected government in the country after the 15th General Election (GE15).
“Stability is very important, especially for a developing country like Malaysia,” underlines Assoc Prof Dr Mohd Yusof Saari, chief economist at the Centre for Future Labour Market Studies.
“It will be critical when we consider that the world economy will be slowing down in 2023 and 2024.”
He explains that studies and experiences of developing countries have found that economic growth can best be achieved when there is political stability. This is because stability allows a country to implement economic growth plans with greater speed and effectiveness in shorter time periods.
‘Stability is very important ... when we consider that the world economy will be slowing down in 2023 and 2024,’ says Dr Mohd Yusof.
“As a small country with an open trading economy, Malaysia is affected to a large extent by the global economic environment. So a world slowdown will also affect us,” says Dr Mohd Yusof.
It’s “almost certain” that the world economy will slow down in 2023 and the negative impact is expected to last till 2024, he explains. For example, the World Bank has forecast that global economic growth will drop from 5.7% in 2021 to 2.9% this year ((2022).
The Organisation for Economic Co-operation and Development (OECD) expects world economic growth to hover around 3% per annum from 2023 to 2024, about the same level as in 2022. These projections are based on adverse global economic conditions such as the Russia-Ukraine war and trade sanctions, ever deepening inflation and the cost of living crisis.
The Finance Ministry when tabling Budget 2023 forecast GDP growth of between 4% and 5% for 2023. In contrast, growth in 2022 is projected to be between 6.5% and 7.0%. The drop for next year will be due to global headwinds.
Steady leadership
The growth in 2022 has been possible due to political stability under the stewardship of Datuk Seri Ismail Sabri Yaakob. A few months back, the prime minister admitted that “uncertainty and instability had enveloped the government” when he first took over the helm in August 2021.
Ismail Sabri’s leadership as prime minister reflects a style that focuses on negotiation, accommodation and participation.
“Based on previous incidents of party-hopping, there were quarters who had predicted that our Keluarga Malaysia government could collapse at anytime,” he recalled.
Ismail Sabri said that under his leadership, the administration upon the advice of the Yang di-Pertuan Agong took the initiative to put aside differences and then signed a memorandum of understanding on transformation and political stability with Pakatan Harapan in September 2021.
With a more stable political situation, Malaysia emerged as one of the countries in South-East Asia with the best economic performance after recording a gross domestic product (GDP) growth of 8.9% in the second quarter of 2022 compared to 5% in the first quarter of 2022.
The prime minister’s diplomatic style in recognising the importance of establishing common ground with Opposition politicians was key to the stability enjoyed by Malaysia since he took over in August 2021.
“He displayed a leadership style focusing on negotiation, accommodation and participation, and this helped him implement important policies for the country’s benefit,” said Prof Dr Sivamurugan Pandian of Universiti Sains Malaysia.
“Support from the Opposition has helped the government to pass new laws, such as the anti-party hopping Bill as well as revisions to the 1963 Malaysia Agreement.
“Ismail Sabri’s leadership has shown that there is a desire for structural reforms in legislation and the public delivery system,” he said.
Political scientist Wong Chin Huat of Sunway University argues that the claim that Ismail Sabri’s government was weak was not true as the MoU had boosted his parliamentary support to an effective commanding majority of 92.8%. This consisted of 40.9% from Pakatan Harapan and 52.3% from Barisan Nasional, Perikatan Nasional and the Gabungan Parti Sarawak.
“This is the highest majority since independence, even higher than the majority enjoyed by former prime minister Tun Abdullah Ahmad Badawi,” noted Wong.Crisis management
Dr Mohd Yusof explains that Malaysia has had a steady growth trajectory, averaging 6% yearly, since 1961. We are one of 12 low-income countries in the world that have managed to accomplish this (see diagram Malaysian Economic Growth Rates 1961-2021).
This enabled the country to emerge from low-income status and become a middle-income country that can boost the socio-economic development of its people and to narrow the income gap between rich and poor.
However, our economic growth did encounter hiccups along the way as we were not immune from global problems, says Dr Mohd Yusof. As seen in the diagram Malaysian Economic Growth Rates 1961-2021, Malaysia saw several contractions in GDP growth after Merdeka.
We were hit by the global oil crisis of the mid-1970s, the balance of payments crisis in the mid-1980s, and the Asian financial crisis in 1997. The latter resulted in a drastic 7.4% drop of our GDP in 1998.
In the 21st century, the global financial crisis of 2008 again plunged Malaysia into an economic contraction. However, the country was able to weather all these crises and return to growth, notes Dr Mohd Yusof.
In early 2020, political instability and the start of the Covid pandemic led to a drastic 5.6% drop in national GDP. The uncertain political environment and economic slowdown imposed a double blow on the country. This was an unprecedented challenge since Merdeka, says Dr Mohd Yusof.
He points out that the damage was made worse due to incompetent economic management, for example the closing of businesses for long periods without considering socio-economic consequences.
“Malaysia’s experience has clearly shown that political stability is crucial for efficient economic management. As we enter 2023, this means we will soon be facing a global economic crisis. We need political stability to tackle this. The decision to dissolve Parliament in order to get such stability is thus the right step to ensure that Malaysia is ready for global challenges next year. If the election were to be held in 2023, we will face a double risk of political instability plus a global economic crisis.
“Thus a change in political leadership now is important in providing a conducive environment for future economic growth,” he says.
He adds that the experience of other countries in the world (see diagram Elections In Countries Held Before Or After World Economic Downturns 1996-2021) shows how they tend to have their general elections when their economy is not in crisis.
In conclusion, it’s clear that a strong mandate from the people is crucial in order to form a stable government after the elections. This will then lead to better economic management and enable Malaysia to face global slowdowns in the next two years.
