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And the administration of Prime Minister Najib Razak has introduced some sound policy initiatives, including market-friendly policies, which would have been gladly accepted in the past.
Yet, argues, analyst, Abdillah Noh in an opinion piece in the Straits Times, Malaysians are not excited.
The reason: They do not trust the government.
Abdillah, a visiting research fellow at the Sir Walter Murdoch School of Public Policy, Murdoch University, and Assistant Professor at the Tun Abdul Razak School of Government, Universiti Tun Abdul Razak, says: “What is apparent is that Najib’s policies attract sceptics. Malaysians, it seems, are less willing to go along with government policies no matter how attractive the long-term benefits are.”
Nagging political issues, he says, continue to cloud the many positives of Najib’s policy initiatives.
“People in Malaysia are not quite done with the 1MDB issue. The international media has also kept turning the spotlight on 1MDB and Najib, reinforcing public scepticism. What is obvious is that Malaysians are stuck in second gear, unwilling to move beyond the 1MDB issue.”
“It seems so,”, he says in answer to his own question as to whether Malaysia is paying a heavy price for its political crisis.
Abdillah notes that the nation is suffering from a trust deficit, and that trust between the governed and the government is in short supply.
He quotes the 2016 Edelman Trust Barometer which found that only 39% of Malaysia’s general population trusts the government.
“That needs addressing because a trust deficit prevents the state from garnering policy collaborators. Policy ‘buy-in’ becomes difficult as stakeholders are unwilling to be part of the policy process,” says Abdillah.
Worse, he contends, a trust deficit could also see stakeholders subverting what otherwise could be effective policies.
As an example, he says, Malaysians are still unwilling to accept the goods and services tax even though GST receipts have clearly buffered Malaysia’s huge losses in petroleum revenue in the past year.
Warning that a trust deficit could potentially lead to more damaging systemic risk, Abdillah says: “Thinning public trust and greater tendency to talk down the economy could amplify Malaysia’s political, social and economic risks.
“A self-fulfilling prophecy may set in, creating a case where the public runs down the economy more than it should and triggering a crisis of confidence.”
Referring to the value of the ringgit as a benchmark of this confidence, he notes that it is currently Asia’s worst-performing currency.
“There are those who think that the ringgit slide is overdone as it does not reflect Malaysia’s fundamentals. But under conditions of low public trust, good economic figures are quickly neutralised by bad economic ones.”
Citing figures, he says the Malaysian economy has shown plenty of resilience despite chaotic domestic politics and severe economic headwinds, and that the country is in “better fiscal shape”.
However, Abdillah concludes, broken trust between the state and the governed is affecting Malaysia’s long-term effort at institutional change.
“Systematic public disengagement from political leadership could well be the most important factor that stands in the way of Malaysia’s long-term goals. In the short term though, Malaysians should be careful that their attempts at political change do not cripple an otherwise functioning economy,” he says.
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