Mahathir Mohamad, the former autocratic head of government of Malaysia turned opposition leader, was sworn in on May 10, taking on the mantle of prime minister after his unexpected election victory over the conservative coalition led by Najib Razak. 92-year-old Mahathir has therefore officially become the seventh prime minister of Malaysia, and the oldest head of government in the world. Following the ceremony, Mahathir gave a reassurance regarding the pro-business “Malaysia Inc.” policies in force since the years of his first, long season in government, and he promised to correct the previous government’s mistakes “on the basis of the rule of law”, starting by recovering the billions of dollars stolen from the 1Malaysia Development Berhad sovereign fund: a scandal that contributed to Razak’s electoral defeat. Mahathir also said he was unconcerned about the strength of the new majority, which gained only 113 of the 222 seats in the lower house. The newly elected premier said he was convinced that a number of smaller independent formations would support the new government. The next few weeks will be crucial, as the appointment of ministers and senior government officials will give an indication about the political direction taken by the executive, especially on the economic front.
The economy will continue to grow
The surprise victory of the Malaysian opposition forces is not expected to have a significant effect on the performance of the country’s economy, the fundamentals of which remain intact and which already has the tools required to cushion against market reactions. He is supported by experts quoted in the Malaysian and Singaporean press, according to whom any repercussions on the stock and foreign exchange markets will be at most short-lived. Jorah Ramlan, an economic analyst at Ramlan Pointon Consultants Sdn Bhd, believes that the economic risks for Malaysia are for the most part exogenous: “Regardless of who is in government, I would say that the economy has progressed and will continue to grow. What Malaysia needs is continuity of government”, says the economist, according to whom “the fundamental factors for economic development must not be changed to gain popularity”. The electoral program of the Patakan Harapan (“Pact of Hope”) coalition, which won the elections, does however include radical changes in taxation, wages and even diplomacy, which are currently generating understandable uncertainty in the markets.
The electoral program Malaysians expected
Mahathir won the trust of Malaysian citizens with a program that provides for the monthly minimum wage to be increased to $ 520.87 by the end of the next parliamentary term, elimination of the debt accumulated by the Felda agency growers and the creation of ten million social housing units within the next decade. Pakatan Harapan also wants to introduce a social security contribution system for housewives based on public provisions and a 2 percent levy from the salary of working spouses. Finally, the program provides for the gradual abolition of motorway tolls. According to Anushka Shah, vice president and senior analyst of the sovereign risk group at Moody's, interviewed by the newspaper "Nikkei", the opposition’s electoral promises "lack the detail needed for a full assessment of their macroeconomic and budgetary impact". Referring in particular to Mahathir's promise to abolish the unpopular tax on goods and services, the economist warned that "some electoral promises, if implemented without further adjustment, will have a negative effect on the solvency of Malaysian sovereign bonds".