Commentary: Malaysia’s economic indicators are improving, so why aren’t Malaysians celebrating?

KUALA LUMPUR: A video posted on Instagram by “finfluencer” HY Tan went viral on Aug 17. In the video, Ms Tan talked about how the Malaysian ringgit had strengthened significantly in the past few months, attributing it to both the government’s efforts and external conditions. At the time of writing, the video had more than 660,000 views, and over 21,000 likes.
The host also cited international reports, including from JPMorgan, which has upgraded Malaysia’s rating from “underweight” to “neutral”’. Such complimentary videos are rare, and for a country that has made international news for the wrong reasons for the past decade, you would expect local exuberance. But the reactions were mostly scepticism and cynicism.
Among the popular comments posted by users were if the video was a paid government advertisement. Another user asked whether this meant that the prime minister was doing a good job. Yet another acknowledged the challenges of governing, noting that if the ringgit performs poorly, the government is criticised, but if the ringgit does well, any praise is viewed suspiciously as paid propaganda.
This sentiment stood in contrast to the growing enthusiasm international media and investors have developed for Malaysia.
In March, the Financial Times published a piece focusing on Malaysia’s beneficiary position in the United States-China chip war. A few days later, an article in The New York Times highlighted how Malaysia has become a “crucial link’’ in the chip supply chain. Outfits such as Bloomberg and Nikkei Asia have characterised Malaysia’s story as a comeback economy after years of being overlooked.
Malaysia’s economic indicators have been objectively improving. The most recent quarterly gross domestic product growth exceeded estimates and was its best-performing in the past six quarters.
Malaysian stocks have “outpaced” the region, and the RM2 trillion (US$461.4 billion) market capitalisation is at an all-time high. As was pointed out in the viral Instagram video, the ringgit is indeed performing well, the best in Asia against the US dollar. Last year, Malaysia’s foreign direct investment was its highest, and the performance in the first half of 2024 was 18 per cent higher compared to the same period last year.
To understand the gap between international and domestic enthusiasm about Malaysia’s economy, we need to replay the events of the past decade.
The most high-profile events that garnered widespread attention have been the 1MDB corruption scandal and political turbulence in the country.
These events heightened caution and reservation among international investors, leading many to exclude Malaysia from their Southeast Asia portfolios and adding to doubts about the country’s reliance on low-growth traditional industries. The 1MDB scandal also raised the country’s debt levels beyond what was comfortable and raised questions about governance, which is a necessary precondition for long-term investment confidence. 
With the new administration prioritising anti-corruption, economic growth, and international cooperation, investors have taken note of the medium- and long-term opportunities.
However, ordinary Malaysians have been slower to follow suit, as trust in government leaders have stayed low for the past few years.
According to the Edelman Trust Barometer 2024, governments are seen as far less competent and ethical compared to businesses and non-governmental organisations. Granted, this is not unique to Malaysia.
Global trust for governments and institutions has been low over the past few years, amid a more polarised world. What is particular to Malaysia, however, is its history of corruption, which has eroded public trust over the decades.
Studies on the correlation between corruption and low trust in institutions have been consistent across all jurisdictions and cultures in history, whether in post-Soviet countries, Latin America or Asia. Corruption has a unique effect to “sand the wheels” (rather than grease them) and its negative consequences on development of institutions and civil society is hard to reverse immediately.
Many transition democracies, like Malaysia, went through the same cycle, and the chances of democracy either breaking down, stagnating, advancing or eroding is not certain. In a study of third-wave transition democracies, between 1974 to 2012, only 23 out of 91 cases advanced their democracies. The vast majority broke down, stagnated or eroded entirely.
Malaysia also has another unique aspect to its transitional democracy. Before the first government turnover in 2018, Barisan Nasional was one of the longest ruling coalitions in the world. Attempts at changing the government before 2018 were unsuccessful, albeit increasingly close, which bred feelings of disappointment and scepticism.
Understandably, the 2018 turnover was euphoric for Malaysians, who raised their trust in institutions and reduced perceived corruption. But the post-election euphoria quickly turned into disillusionment as the country went into rounds of infighting that produced the highest levels of political turbulence with three changes of government in less than five years.
When Anwar Ibrahim became prime minister in November 2022, it was a second spring for Malaysia – a belated re-democracy. But the euphoria of 2018 is tempered, and the nation’s cynicism, stacked through the years, is its backdrop. This is not to say that the people’s trust can’t be repaired, but it at least provides an explanation to the people’s lethargy despite external excitement for the country.
A nation let down many times might be fearful to believe so readily, even when the numbers objectively look better. It is an understandable way of self-preservation. Trust takes time to rebuild, and the recent positive news are building blocks for the day the people will take the risk to believe again.
James Chai is a political analyst, columnist and the author of Sang Kancil (Penguin Random House).