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Malaysia in transition

Mahathir faces new challenges in second stint as prime minister

Fiscal discipline and inexperienced cabinet are issues confronting Malaysian leader

Malaysia's newly elected Prime Minister Mahathir Mohamad attends a news conference.   © Reuters

KUALA LUMPUR -- Malaysian Prime Minister Mahathir Mohamad officially began his second stint in office on Monday, with a different set of circumstances from his first time in the post.

In July 1981, Mahathir, then 56 years old, inherited a largely stable government from Hussein Onn, who stepped down due to health issues. The economy, which was undergoing a transformation from agriculture to industry, was growing at a rate close to 7%. As processes were still heavily bureaucratic, Mahathir introduced several measures to reduce red tape and improve efficiency, including making civil servants clock in to work and wear a name tag. 

Fast forward 37 years and Mahathir, now 92, whose surprise election victory on May 9 triggered the country's first change of government since it gained independence in 1957, is set to be tested on several fronts. 

Foremost among the challenges will be keeping the government's budget deficit in check. According to its election promises, the new government will slash the goods and services tax from 6% to 0% starting June 1. The GST, though unpopular with much of the electorate, contributed 44.3 billion ringgit ($11 billion) or 18% to government coffers in 2017.

The government had said it might reintroduce the previous sales and services tax, or SST, which affects a smaller range of purchases. Even so, an economic report released on Friday by Singapore's DBS Group Research said the government could face a shortfall of 23 billion ringgit or 10.6% of its total revenue this year, working on the assumption that the SST generated 20.8 billion ringgit.

The government is also planning to bring back a fuel subsidy, in accordance with its election manifesto. While recovering crude oil prices might help Malaysia, which is a net oil and gas exporter, an increase in oil revenues might not be enough to mitigate the fiscal burden, the report said.

Mahathir's advisers had said the government could make savings by cutting expenditure and reducing corruption. 

Another challenge facing Mahathir is the inexperience of his newly sworn-in core cabinet. Of the 13 ministers, only three have prior administrative experience in the government. Observers will be watching closely to see who is appointed to remaining positions in the 25 ministries.

One portfolio that remains vacant is the Ministry of Foreign Affairs, a key position considering that Mahathir had signaled a review of Chinese investments in the country. The nonagenarian leader accused his predecessor of compromising the country's interests by allowing some of these investments. He was also critical of Malaysia's participation in the original Trans-Pacific Partnership multilateral trade agreement, which Mahathir claimed was influenced by the U.S.

"Under Mahathir, Malaysia's ties with the U.S. and China will become more balanced again," wrote risk adviser Eurasia Group on Tuesday. 

Since his appointment as prime minister on May 10, Mahathir has shown a certain degree of tolerance for more freedom of speech in the country. When the police recently detained a local who insulted the new prime minister on social media, Mahathir said that laws governing such criticism would be repealed when parliament reconvenes.

His predecessor Najib Razak is still featuring highly in the mainstream local media -- coverage that Mahathir did not get when in the opposition. Najib, who is being investigated for his role in the financial scandal linked to state fund 1Malaysia Development Berhad, in exclusive interviews lamented the raids conducted at his residences, claiming that his daughter's private possessions had been unlawfully confiscated. Most of the country's mainstream media, which includes print, and private TV and radio stations, are controlled by companies linked to the United Malays National Organization, Najib's political party.

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