2023 and beyond: Anwar’s new recovery plan

 

There are several challenges that are stacked up for Anwar Ibrahim as he seeks to take the country out of its mired condition.

The most immediate challenge is, of course, putting policies in place to handle a global economy that will be beset with a recession that will roil global markets this year.

This will result in something that may sound like a combination of what happened during the pandemic and the Russia-Ukraine conflict.

The Russia-Ukraine conflict is not over. Although it is not imminent, a nuclear attack from Russia cannot be ruled out. Prominent scholars John Mearsheimer and Stephen Walt have warned that such a threat does lurk in the air.

But even if it does not come to that, a nuclear initiative, a continued war, or an escalation in aggression, would mean dealing with the high cost of fertilisers, animal feed, grains and volatility in the oil markets.

India has been exempted from sanctions for its oil trade with Russia, but there is no guarantee that the West will continue to be accommodative. Worse yet, there could be action taken against China, which has helped moderate the bruises Russia has experienced due to sanctions.

Aside from geopolitical conflicts, China is facing another round of the Covid virus wreaking havoc in the country. China’s zero-Covid policy will give way to an opening of borders this year.

With China opening up borders we will have careful decisions to make: to receive persons from China with open arms, or to exercise caution with Chinese travellers, as Japan is expected to practise.

As China grapples with Covid, trade and investment will be impacted, though not as severely as under a closed border policy.

The outlook coming out of the United States is not terribly comforting either. We could see the US struggling under a rate of inflation that exceeds 2 per cent and a persistent effort at monetary tightening.

It is likely that these effects will take their toll on the Malaysian economy. We might have to continue to battle inflation and a high cost of living.

The SMEs might have a difficult time coping with the pressing circumstances and will demand government support.

Export-oriented manufacturing will, in particular, be hit.

Budget 2023 will be examined critically. All eyes will be on how this budget will get us out of a slowdown without being scathed. It will be the first policy document that Anwar announces and so will draw considerable attention, especially his astuteness in raising revenue.

As prime minister, Anwar will have to look beyond 2023.

To start with he is making some institutional reforms. He is clearing the ground of political appointees in GLCs. Hopefully, that is not part of the regular cycle that new prime ministers undertake.

He is making an effort at reducing the cost of infrastructure projects. Again, it will be necessary to take that effort further and to have transparent procurement processes.

There is promise of a comprehensive plan to address cost of living issues. That will be good preparation to handle the price increases in the first half of 2023.

The prime minister understands that monopolies and cartels can lead to welfare loss, but removing them will be a question of political will.

Anwar thought it necessary to address electricity tariffs, but claimed that he had to pull back on considering the additional cost it would bring to households. Here we see the tension between good economics and pragmatism.

Good economics would mean removing all subsidies; pragmatism would require a deeper look into the consequences of any such action, including timing and the political consequences.

The art of compromise necessarily creeps in surreptitiously.

Other longer term issues that need to be addressed are improving the quality of education, quick and affordable access to healthcare, and housing.

Climate change and more permanent solutions to flood mitigation cannot be ignored.

We need better connectivity (digital and otherwise) and technology upgrading. But we need to guard against these initiatives falling into the hands of those with vested interests. Some forms of technological upgrading may benefit companies in developed countries taking a wedge off our national welfare.

Alongside being better assured of sustainable development, achieving better healthcare, a more talented workforce, technological upgrading, as well as better institutions, will help strengthen the ringgit.

As much as the economy demands attention, the prime minister’s attention will be dragged along other dimensions. It will be necessary to ensure that he has a healthy and engaged coalition, which can be a tedious task.

Aside from the political dimension, the social dimension will have to be nurtured. That will take various forms, including maintaining good race relations, inclusivity, and social protection.

It is no longer merely a matter of planning for a post-Covid recovery. The national recovery plan that was talked of is no longer relevant with the rise of a further wave of Covid and the on-coming global recession.

The new recovery plan that Anwar will have to initiate is a bigger one. He has to rebuild the economy. And he has to get cracking in 2023 amidst tough times. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.