Malaysian PM Anwar builds cabinet amid raft of challenges from economy to US, China ties

Malaysia’s Anwar Ibrahim has finally become prime minister after some three decades of trying. Now, the reformist leader must overcome several immediate and medium-term challenges to keep his job.

Local commentators have suggested keeping the peace within his “Unity Government” – comprising alliances that were spewing vitriol at each other just days ago – will be priority number one. In a country that has had four prime ministers over five years, it is vital for Anwar, 75, to do his best to see out his five-year term.

Beyond the politics, Anwar also needs to urgently display to global investors his ability to govern. The stocks and Malaysian ringgit have suffered amid the country’s political turmoil stretching back to 2018, and while the market has rallied since his appointment on Thursday, long-term resurgence will depend on policies.

On the foreign affairs front, all eyes will be on how Anwar, praised by commentators as a “globalist”, handles ties with China and the United States, as well as other key trading partners.

Here are the key challenges that lie ahead for Anwar.

Keeping the peace

Cliched as it may be, Anwar’s government is indeed made up of “strange bedfellows”. With his own Pakatan Harapan (PH) alliance having won just 82 seats, Anwar’s government is backed by Barisan Nasional (BN), the Sabah parties of GRS and Warisan, and the ruling coalition of Sarawak, GPS.

BN is anchored by the United Malays National Organisation (Umno), the once-dominant Malay-Muslim political party that Anwar’s multiracial PH has long battled against.

Anwar was deputy prime minister in a BN government in the 1990s until he was unceremoniously sacked by then-leader Mahathir Mohamad – his political patron at the time – and later jailed for corruption and sodomy convictions.

Malaysian PM Anwar says tackling high living costs top priority

PH also has fractious ties with Warisan, a former ally. How Anwar manages GPS, which commands 23 seats, will also be closely watched. The group acceded to joining the unity administration – but not before PH’s Democratic Action Party (DAP) apologised for “offending” GPS leaders in the past.

The Chinese-centric DAP and GPS have been at loggerheads since then DAP leader Lim Guan Eng in 2019 said Sarawak was on the verge of bankruptcy under GPS rule.

In the coming days, attention will be on who Anwar picks as cabinet ministers. He has said he prefers a smaller cabinet than the status quo, and has pledged deputy prime minister roles to BN and GPS. Various players jockeying for key roles could make keeping the peace an arduous fight from the get-go.

And the domestic to-do list does not quite end there. While the political season elsewhere in Asia will wind down somewhat in December, that will not be the case in Malaysia.

The deaths of two candidates days before the November 19 election mean two by-elections will be held on December 7, one for a parliamentary seat left uncontested on polling day and the other for a place in the Pahang state assembly.

Parliament reopens on December 19, when Anwar is expected to hold a vote of confidence, which observers say he should easily win. All eyes will also be on a mini-budget that has to be tabled to tide the country through until a full 2023 budget is put forth by the new administration.

Two days later, Umno will hold its general assembly, which could raise temperatures – especially if there is open dissent against the party’s graft-haunted Ahmad Zahid Hamidi, who has been a key proponent of the unity government plan.

Fragile economy

Malaysia’s economy is set to expand at a slower pace of 4 per cent to 5 per cent in 2023, compared with more than 7 per cent this year, while economists expect the central bank to continue raising interest rates in a bid to tame inflation. That could prompt Anwar to take an increasingly populist stance and adopt Umno’s more generous pre-election promises of cash aid to help the country’s poorest.

“There’s a recognition that the focal point needs to be on the economy and the social fabric,” Bridget Welsh, honorary research associate with the University of Nottingham Asia Research Institute Malaysia, told Bloomberg. There will be “more attention to the social safety net and to the vulnerabilities of different communities”.

Umno – which was the governing coalition before last week’s vote – pledged to ensure every household earned more than 2,200 ringgit (US$450) a month, meaning the government would top up incomes to ensure they reached that threshold. If Anwar’s government adopts such measures, it may delay its fiscal consolidation plan and earn the ire of credit-rating firms.

The new administration will have to table a 2023 budget soon and that could well be the first test of confidence. It remains unclear if Anwar’s administration will make significant tweaks to the spending plan presented in October.

Anwar on Friday said reducing the burden of rising prices was the immediate priority of his administration and that he would meet relevant government agencies to discuss the matter.

Balancing act

Malaysian foreign policy observers say the way the country’s diplomacy conducted – and its outlook on external powers – is unlikely to change under Anwar’s leadership. A polished orator in Malay and English, Anwar has admirers across the world – and is often described at home as a “darling of the West”.

Responding to a question about ties with China on Thursday, Anwar made clear that while he saw the relationship with Beijing as “pivotal”, of equal importance were partnerships with India, the US, Europe and neighbouring Asean nations.

The leaders of Indonesia, Singapore and Brunei were among the first to congratulate Anwar, while Turkey’s Recep Tayyip Erdogan – a long-time personal friend – called the newly anointed leader to offer his good wishes midway through Thursday’s press conference.

“In contrast to his major rival Muhyiddin [Yassin], Anwar has more international exposure and he will devote more energy into international matters,” said Ngeow Chow Bing, director of the Institute of China Studies at the University of Malaya.

While Anwar is known to have good ties with US politicians and officials, and is generally viewed as America-friendly, “that does not really suggest much in terms of his policy approach towards China”, Ngeow said, noting that the new prime minister was “well received” by Chinese Foreign Minister Wang Yi and other Beijing officials during a visit in 2018.

Shahriman Lockman, a leading analyst of Malaysian foreign policy, said it was important not to “rush to make conclusions” about Anwar’s foreign policy outlook.

Malaysia’s China policy forecast to remain on even keel under new leader Anwar

“There’s this tendency to portray him as someone with strong networks in the West and parts of the Middle East,” said Shahriman, director in the chief executive’s office of the Institute of Strategic and International Studies in Malaysia.

“That may be true, but that was Anwar as minister or a political leader, not as PM. He will have a broader set of considerations now,” he added.

“He cannot afford any distractions on the foreign affairs front as he manages this coalition of strange bedfellows.”

Reporting by SCMP’s Asia desk, Reuters, Bloomberg