Kuala Lumpur, 5 December 2020 –IDEAS echoes Fitch’s concerns over governance and political uncertainty in Malaysia, following its downgrading of Malaysia’s rating to ‘BBB+’ from ‘A-‘ on 4 December 2020. We believe that the Malaysian government must take this very seriously and urgently address structural reforms that can improve governance standards, including through greater transparency, control of corruption, and open data standards. The downgrade means that it will become more costly for Malaysia to borrow, which in turn has a fiscal impact, and the government needs to communicate its plans to rationalise public spending and reform the tax systems in the post-pandemic economy.

IDEAS CEO Tricia Yeoh commented, “I appreciate that the government has responded to the COVID-19 pandemic with an expansionary budget and therefore fiscal consolidation of our public finances may not be able to be immediately addressed. Yes, providing aid and assistance to affected groups is of utmost importance at this time, but there is now a growing urgency to look past these stop-gap measures and place greater emphasis on finding new sources for growth.

However, the Prime Minister and his administration must realise that this is a wake-up call: governance actually matters. He needs to take steps now to address our deteriorating governance standards. I, therefore, welcome the Minister of Finance’s statement that Malaysia remains committed to good governance.”

Here are some immediate measures that can and should be taken by the government in addressing good governance:

1. Legislate a robust Government Procurement Act to create a rules-based procurement system.
2. Adopt international standards for mega-infrastructure public-private partnerships (PPPs) and provide open procurement data to the public.
3. Introduce oversight, regulation, monitoring and evaluation of our government-linked companies (GLCs).
4. Ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
5. Legislate the Political Funding Act to regulate how political funds are raised and spent both within parties and during campaigns, which forms the heart of corruption in Malaysia.
6. Adopt the International Open Data Charter that would improve the way our government provides open data by default to the public.

The Malaysian government securities are currently benefiting from surging net inflows and strong foreign demand. We should undertake bolder reforms on governance and structure of the economy while we still have the policy space to do so. Governance and structural reforms will present the Malaysian economy with new growth opportunities, especially following the signing of RCEP and the possibility of ratifying the CPTPP.

“Malaysia can no longer afford to cruise along, thinking that economic recovery will magically take place after the pandemic’s end, the timing of which is still unpredictable. Hard steps must be taken now, or we will seriously risk losing out to our regional neighbours, many of whom have over the last decade already implemented reform measures to improve their governance.

The institutional governance of a country’s economic environment is therefore imperative to the international investing community. I urge the government to take this opportunity to demonstrate strong leadership by making reform policies a priority and also a reality as we position ourselves for a potential rebound in 2021.

I look forward to seeing what the government will do to avoid any further negative downgrade in the immediate future”, concluded Yeoh.

— END —

For media enquiry, contact tricia@ideas.org.my