In the last three years, Malaysia has had three prime ministers, two changes of the heads of many government-linked companies (GLCs), and a major shift in business sentiments.
It is a major shake-up for all and sundry. For more than 60 years, the country was subjected to one-party rule — Barisan Nasional, led by Umno. Now in the space of three years, we have seen three changes of government.
The corporate sector was caught off guard when the government changed in May 2018. Government contracts — especially those that had been awarded at inflated margins — came under the scrutiny of the new Pakatan Harapan (PH) government. There was a major shift too in the management of many of the GLCs.
Some infrastructure projects such as the Light Rail Transit 3 and Klang Valley Double Track Rehabilitation Phase 2 (KVDT2) projects continued at a reduced cost. But a number of projects were called off, and some went to the courts eventually. KVDT2 is now a subject of legal proceedings under the Perikatan Nasional (PN) government.
Considering the close nexus between business and politics, the shakedown in contracts awarded by the government to the private sector is only to be expected.
But the private sector, especially large corporations and small and medium enterprises (SMEs) that do not depend on government awards, has been unable to weather the changes that have taken place in Putrajaya within the past three years. Investment decisions have been delayed for fear of policy changes when a new government takes over.
An example is the U-turn on cabotage exemption for vessels that are handling the maintenance and repair work of submarine cables that is the heart of the new economy. The then Transport Minister Datuk Seri Wee Ka Siong withdrew the exemption despite objections from industry players and even the Malaysian Digital Economic Corporation (MDEC).
The cabotage exemption, which was given during the administration of PH, is said to be the reason why Google and Facebook have left Malaysia out in the laying of their new cables. This, in turn, has turned sentiments against the data centre business, which is one of the focal points in the country’s race to embrace 5G.
The private sector cannot withstand such policy changes, which do not encourage them to make investments and create jobs.
Unemployment is at 4.8% — the highest in recent years — and half a million SMEs are reported to have folded. The people are still fearful of Covid-19 as hundreds are dying every day.
Malaysians are not used to such an environment. The new government under Prime Minister Datuk Seri Ismail Sabri Yaakob cannot afford to disrupt the working of the private sector now — especially in the face of the economic and health crisis.
The messaging should start with workings in the GLCs that form the private sector arm of the government. In the last three years, every time there is a change in Putrajaya, there have been upheavals in GLCs.
It does not have to be that way in the interest of maintaining some continuity in trying times.
During the PN administration, active politicians were appointed to head GLCs, a practice that should be frowned upon as it is viewed as compromising on governance. However, considering that the corporate world has already seen too many changes in the last three years, more changes in GLCs to improve governance is not ideal for now.
To instil some sense of stability, the heads of GLCs and government-linked investment companies (GLICs) who have performed could be retained while those who have not should be told to leave.
In the last three years, the capital market has been moving sideways. The stock market has been trading range bound between 1,500 and 1,800 points since mid-2018.
The economy dipped to a negative 4.5% last year and is expected to grow by 4% this year. If inflation is taken into account, the country has probably seen negative growth in the last two years. The economy needs a jumpstart.
The new prime minister has taken a conciliatory approach by inviting the opposition to participate in his economic recovery plan.
Politically, it is a strategic move. The opposition leaders have stated that they will support Ismail Sabri and his recovery plans as long as it is beneficial for the people. A more profound impact of the conciliatory move is that he cements his position in parliament as the MP with the largest support — for now.
He probably took a cue on how not to be prime minister in a minority government after seeing what happened to his predecessor. All it took was for 15 MPs from Umno to withdraw their support for Tan Sri Muhyiddin Yassin to cause the collapse of his PN government.
If there can be a mindset change in politics, a similar frame of thought can also happen in the business world.
The private sector needs to have a clear message that there is consistency in business direction and that economic policies will remain or improve. A more inclusive economy that is open to more competition would stir interest among foreigners.
The push for 5G, automation, creating an environment for the Internet of Things to bloom and allowing more data centres to open up are all elements of the new economy. These activities will create thousands of jobs and move the general labour market towards higher value jobs.
A higher value job cycle will lead to higher wages and lead to a new beginning.
M Shanmugam is contributing editor at The Edge