A long runway for reforms

GE16 will be a severe test for the unity government as the likelihood of Perikatan gaining further ground and winning GE16 cannot be discounted. — Bernama

SEEMS like yesterday, but the results of the six state elections held last week remain on investors’ minds and various theories have been brought forward as to what lies for Malaysia over the next four years or so before we go to the polls again in the 16th General Election (GE16).

The current 15th Parliament session will automatically dissolve on Dec 19, 2027 and GE16 must be held within 60 days from this date.

Alternatively, the sitting Prime Minister has the sole discretion to determine if an earlier poll date is warranted, depending on political or economic circumstances.

With such a long runway, although there would be other state elections to be called in between, the unity government has the mandate and power to carry out the necessary reforms.

As highlighted by this column before and echoed in the Madani Economy framework, the government has its work cut out to bring Malaysia back to its glorious economic path based on the reform agenda that it has presented.

This includes lifting wages for the formal sector, reducing the fiscal deficit, expanding the economic pie to make Malaysia among the 30 largest economies within the next decade and of course, subsidy rationalisation plan that will help Malaysia to address the low “tax minus subsidy” ratio to gross domestic product (GDP), which fell to its lowest level of just 0.6% last year.

Although, as commented by many political analysts, the results of the six-state elections last week came in within market expectations of a 3-3 score, the underlying trend and results may see Malaysia’s current political stability as fragile again and may change if this is a realignment of political alliance with one or two parties from the current unity government were to form an alliance with Perikatan Nasional instead.

Of course, for that to occur, Perikatan would need to gain as many as 38 more seats and this is only possible if Barisan Nasional with 30 seats were to move en bloc to the Perikatan coalition, plus a potential movement of other Sabah and Sarawak-based parties like Gabungan Parti Sarawak which has 23 parliamentary seats, and Gabungan Rakyat Sabah, which has six seats.

For now, this scenario has only a slim chance but the results of the state elections have added pressure on selected political parties. Barisan, with its poor showing at the states, may see accelerated changes within the coalition in the form of political affiliation as well as direction.

The results of the elections also showed that Perikatan’s reach and influence are gaining momentum with the unity government losing traction, especially in of Penang and more so in Selangor.

Should this momentum continue, GE16 will be a severe test for the unity government as the likelihood of Perikatan gaining further ground and winning GE16 cannot be discounted.

Perikatan, with its brand of politics led by PAS, would mean Malaysia’s political narrative is not only moving towards the right but far-right, and with that comes economic and social consequences, which may be detrimental to Malaysia’s minority groups and confidence of foreign investors in the country.

Constitutionally, the Election Commission (EC) is required to carry out a redelineation exercise of electoral boundaries once every eight years. With the last one carried out in 2018, the next redelineation exercise is only due in 2026, in time for the GE16 the following year or early 2028. The upcoming redelineation exercise is crucial not only for the respective state assemblies but more importantly at the federal level.

With the current ratio of almost one MP for every 100,000 eligible voters, the value of each vote in the smallest and largest parliamentary constituency is at 10.7 times.

Bangi in Selangor had some 303,430 registered voters, making it Malaysia’s largest constituency, while Igan in Sarawak had mere 28,290 eligible voters in the last general election.

The EC will need to address this imbalance when carrying out the redelineation exercise plus to take into consideration increasing the share of parliamentary seats held by Sabah and Sarawak, as endorsed under the Malaysia Agreement 1963 (MA63), from the current 25% to 35%.

Leaving everything else unchanged, this would mean Sabah and Sarawak seats in Parliament will increase from the present 56 out of 222 to 89 out of 255 seats, an increase of 33 seats.

Thereafter, for every 20 additional seats for Peninsular Malaysia, it must be matched with a proportionate increase of seven seats for Sabah and Sarawak.

While the EC or the government is trying to achieve balance representation for all, the issue of what is the right size for the Malaysian parliament comes into question.After more than eight months since the unity government was formed, the government must get the ball rolling on the reform agenda with a focus on economic issues that will lift the livelihood of all Malaysians, irrespective of their geographical location and political party affiliation. The government should maintain a moderate and centre approach in combating issues at hand and not get carried away with populist measures that seem to only worsen the government’s fiscal standing.

Back to the right path

The unity government may have lost the battle in the recently concluded state elections but more importantly is to win the war on reforms to bring Malaysia back to the right path.

With the New Industrial Master Plan 2030 set to be rolled out in less than two weeks and Budget 2024 on the horizon, the unity government should use these platforms to present bold and strategic moves that will lift Malaysia’s economic standing and boost the government’s coffers.

Failure to carry out these reforms would be detrimental to Malaysia’s long-term economic standing and, of course, that would also mean we would likely see further deterioration in our fiscal position, a potential rating downgrade, increase in brain drain as well as suppressed wages – which is all negative for the capital markets as well as our ringgit.

The time to be “Mr Nice Guy” is over and it is time to make tough economic decisions for the long-term benefit of the nation. To quote James Freeman Clarke, “A politician thinks of the next election; a statesman thinks of the next generation”.

Let us focus on the long-term implication and not be sidestepped by short-term gratification. After all, the unity government has a long runway to carry out the necessary reforms.

Pankaj C. Kumar is a long-time investment analyst. The views expressed here are the writer’s own.