Malaysia's Pakatan Government at 2: Foreboding Amid Success

Anwar leaves Reformasi behind, dismaying old allies

In the two years since Malaysia’s Pakatan Harapan came to power following national elections, ending a decade of politic chaos, the country has emerged as arguably Southeast Asia’s best economy, rendering stockbrokers and investment analysts ecstatic while confounding political analysts who said the decision to bring the corruption-riddled United Malays National Organization into the ruling coalition would be political suicide. It clearly wasn’t.

Instead, it looks as if the 77-year-old Anwar Ibrahim, amid growing concern over curtailing individual and press freedoms and Islamizing the government in a secular society that is only 63.5 percent Muslim, is solidly set to remain in power at least until the next election, due by November 30, 2027. Sultan Ibrahim Iskandar, the current king, is also said to want it that way.

But to many, amid the economic success, Anwar has discarded the Reformasi philosophy that brought him to power in favor of a political strategy and support from the old elites that more resembles that of the discredited UMNO that ran the country for 75 years before massive corruption drove it from power. He has been accused of laying on after old enemies including the late billionaire and onetime finance minister Daim Zainuddin and Daim’s boss Mahathir Mohamad and Mahathir’s children, not that they don’t deserve it, while ignoring growing corruption in his own administration. As widely reported, Malaysia’s World Press Freedom Index ranking has fallen by 34 places while 71 percent of people think government corruption is a major problem according to Transparency International.

Nonetheless, Anwar is on a roll despite a pervasive sense that the good economic news hasn’t reached the man in the street, and that the government isn’t doing enough about it. June household debt was RM1.57 trillion, or 83.8 percent of GDP, one of the highest levels in the ASEAN region. The annual CPI increase as of October was 1.9 percent, slightly higher than market expectations but below the 10-year rate of 2.0 percent after spiking to 4.2 percent post-Covid. The racial equation, a bugaboo since long before independence, continues to fester amid feelings Anwar, who championed multiracialism during his years in the wilderness, is now ignoring it for reasons of political expedience.

“Two years of sure-footed governance and a reviving economy have produced stability beyond all expectations. There are no serious challengers to Anwar’s position for now and the next two years look like being among the most politically stable in the last decade. Jockeying for position will begin again seriously in 2027,” according to a report by the Hong Kong-based Aletheia Capital Research. “In the meantime, Anwar Ibrahim, so long in the wings or under a legal cloud (Donald Trump is not the only convicted felon to become leader of a country), has the opportunity to stamp his mark on the country. If rising from the ashes has been Anwar’s trademark, setting Malaysia on course for high income status might well be his legacy. It is too early to tell but the signs are distinctly positive.”

The country has the best infrastructure in Southeast Asia outside of Singapore and is improving it to capitalize along with Vietnam on the shift of supply chains out of China, reporting US$69.5 billion of approved foreign investments and US$39.7 billion in actual investment in 2023, exploiting abundant land and natural resources, a well-developed information and communications technology infrastructure, an English-speaking workforce and, according to the US Department of State, a robust ecosystem of manufacturers and suppliers across key sectors, including medical devices, semiconductors and solar panels. Its principal 2023 sources of foreign direct investment were the Netherlands, first at RM35 billion (US$7.9 billion), followed by next-door neighbor Singapore at RM22 billion and the US at RM18.9 billion. Bank Negara Malaysia, the country’s central bank, projects 2024 GDP growth at 4–5 percent driven by both domestic and external demand and rising employment and wage growth.

The country has been on a torrid pace to lure big US IT firms including Google, Nvidia, Amazon, and the mainland Chinese Alibaba to build data centers – not to mention carmaker Tesla – taking advantage of the burgeoning demand for artificial intelligence and cloud computing across the region. Fixed investment, much of it from private sources, grew at an annual clip of 15.3 percent in the just-concluded third quarter. It is adding data center capacity at the fastest pace in the Asia-Pacific region, with 50-odd such projects in the southern state of Johor. Those in planning or construction have grown by a factor of 100 since 2020 according to the research firm DC Byte. Industry, which comprises more than 37 percent of GDP, according to the CIA World Factbook, has seen its traditional big three industries of rubber and oil palm processing and manufacturing, petroleum and natural gas give way to electronics and semiconductors, medical technology, light manufacturing, and pharmaceuticals. A Southern Special Economic Zone is developing to capitalize on links to Singapore.

There are reasons for concern over the data centers. Singapore imposed a temporary moratorium on data center expansion in 2019, and for good reason. Tenaga Nasional Bhd., the country’s national utility company, forecasts potential electricity demand from data centers to skyrocket to more than 5,000 MW, by 2035 with TNB having received applications for new data centers exceeding 11,000MW, or 40 percent of peninsular Malaysia’s existing installed capacity, most of it powered by fossil fuels – with the potential for critical energy shortages. The government is planning to pipe power 690 km underwater from the Bakun Dam in Sarawak, long regarded as a boondoggle of the state’s late chief minister Abdul Taib Mahmud to allow for clearing the dam site of valuable tropical hardwoods to line his personal pockets. While construction of the data farms could employ up to 40,000 workers, once they are in place they employ only a handful of technicians.

Anwar, when he came to office, reportedly adopted a philosophy of riding above local politics to serve as Malaysia’s international representative, seeking foreign investment to one of the world’s moderate Islamic countries blessed with abundant resources, both natural and human. He has made 38 international trips to 28 nations during his premiership, which began on November 24, 2022. While that has subjected him to considerable criticism, including declining to keep a tight rein on corruption in his cabinet and repression of the press, it seems to have worked.

Anwar continues to face criticism from disillusioned longtime supporters for either ignoring chafing problems while he jaunts on foreign red carpets, or leaves them to Deputy Prime Minister Ahmad Zahid Hamidi, acting prime minister, along with his massively overstuffed cabinet of 31 ministers and 29 deputies. Zahid, the UMNO president, had been indicted on 47 charges of abuse of power, corruption, and embezzlement including looting his charitable foundation Yayasan Akalbudi until the government magically made the charges disappear.

Former Prime Minister Najib Razak, the alleged architect of 1Malaysia Development Bhd, which collapsed into one of Asia’s biggest-ever financial scandals, has had his 12-year sentence cut in half amid credible rumors he will be granted to serve the rest under house arrest, a stratagem to keep ethnic Malays, who continue to venerate Bossku on his side. On November 27, Najib was granted a “discharge not amounting to an acquittal” for six other criminal breach of trust charges involving the misuse of RM6.6 billion in government funds after the prosecution failed to hand over several classified documents required to prepare a defense. Many expect Najib to be freed by royal decree or subterfuge.

A particular lightning rod is the pugnacious Communications Minister Fahmi Fadzil, who at one point said critics could “expect to see a police car parked outside their house” if criticism persisted. The government on January 1 is set to impose mandatory social media licensing requiring all social media and internet messaging platforms with at least 8 million local users such as Facebook and TikTok to be licensed, alarming multinational tech companies that want control over their own legal terrain.

Former Ambassador Dennis Ignatius, who has emerged as a trenchant critic, recently pointed out that news portals and websites critical of the government are routinely blocked, including Asia Sentinel despite a personal denial by Fahmi, while social media comments and videos critical of the government on TikTok, Facebook and other media have been removed at the request of the government. The Madani government, he reported, made the world’s highest number of requests to TikTok to take down content in the second half of 2023, part of a surge in social media censorship. The government, he reported, is now considering an amendment to the Printing Press and Publications Act that would tighten control over online media like Malaysiakini, Free Malaysia Today, and the Malay Mail.

Ultimately, Ignatius wrote, “this is really about limiting the legitimate right of the people to criticize and hold accountable the government they elect.” That is a point that Anwar would do well to ponder. From 1999, he was imprisoned on charges regarded by international rights organizations as spurious, until 2018, during which he was either in prison or out of power, without the benefit of either a nonpartisan judiciary or press in which to make his case.

A year ago, wrote the respected Ibrahim Suffian, the head of the Merdeka Centre for Public Research, the government “may need to choose between strategies pegged towards cultivating votes or towards more aggressively pursuing what is right.” It is clear what choice Anwar has made.