Comment on “Economic Reforms in the Aftermath of Regime Change in Malaysia”

• DOI: http://doi.org/10.1111/aepr.12300
• Published date: 01 July 2020
• Date: 01 July 2020
• Author: Mohamed Ariff

Comment on “Economic Reforms in the

Aftermath of Regime Change in Malaysia”

Mohamed ARIFF†

International Center for Education in Islamic Finance (INCEIF), Global University of Islamic Finance

JEL codes: D70, H00, P16

Accepted: 24 December 2019

Lee (2020) provides a fairly crispy analysis of economic reforms underway in Malaysia

subsequent to the dramatic regime change through the ballot box on May 9, 2018. As

is often said, there is more to it than meets the eye.

Economic reforms have long been overdue in Malaysia. There were no reforms

even in the aftermath of the 1997–1998 Asian Financial Crisis. While many affected

countries in the region, including South Korea, Thailand and Indonesia, undertook

serious reforms with International Monetary Fund (IMF) guidance in the wake of cur-

rency meltdown and political upheaval, Malaysia remained in a denial mode, blaming

currency speculators. Malaysia was able to desist IMF intervention, as its short-term

external debt was small enough to be managed on its own, with no political fallout.

There has been a crying call for reforms in Malaysia with the sacking of the then

Finance and Deputy Prime Minister Anwar Ibrahim in 1998 by the then Prime Minister

Mahathir Mohamad under whose authoritarian rule institutional checks and balances were

compromised. While Mahathir might have drawn a line that he would not cross on moral

grounds, there was no such restraint for his successors, which led to many mindboggling

financial scandals with huge domestic and international ramifications.

Malaysia’s fourteenth general election (GE-14) was a game changer, which brought

93-year-old Mahathir back as prime minister, after beating the formidable incumbent coa-

lition that had ruled the country ever since Independence in 1957. Mahathir could not

have done it on his own, without Anwar’s consent or the support of Anwar’smultiracial

Justice Party which won the largest number of seats in the parliament. The “New Malay-

sia”euphoria, however, has petered out, as the promised reforms became elusive.

The new regime has faced much criticisms for failing to deliver election promises. In

fairness, it must be pointed out that the new government is not only saddled with huge

inherited problems, but also daunted by explosive expectations. Much time has been spent

cleaning up the mess left behind by the previous regime and renegotiating several lopsided

big-ticket contracts, saving costs in the billions of ringgits. Some progress has been made

†Correspondence: Mohamed Ariff, International Center for Education in Islamic Finance

(INCEIF), Global University of Islamic Finance, Lorong Universiti A, 59100 Kuala Lumpur,

Malaysia. Email: ariff@inceif.org

258 © 2020 Japan Center for Economic Research

doi: 10.1111/aepr.12300 Asian Economic Policy Review (2020) 15, 258–259