This article first appeared in Forum, The Edge Malaysia Weekly on August 5, 2024 - August 11, 2024

One of the Reformasi movement’s strongest supporters, Datuk ­Ambiga Sreenevasan, has called Prime Minister Datuk Seri Anwar Ibrahim’s government dictatorial on account of its  actions in regulating internet messaging services and social media platforms.

The government has staunchly defended its new licensing rules as a measure to force the providers of internet messaging services and owners of social media platforms to act more responsibly when managing content on their platforms.

This is because the platforms are increasingly being used to spew racially charged and hate-filled messages, disseminate false information, and perpetuate online fraud, cyberbullying, scams and sexual crimes.

Ambiga has her concerns about the licensing requirement as it would mean that the internet messaging and social media platforms can be shut down if they do not adhere to Malaysian laws.

In its defence, the government points out that social media platforms are being misused to the extent that they have caused serious damage to individuals.

Laws governing social media platforms are not new. They have been talked about, even in the US. But such laws do not make Anwar a dictator.

Abusing the law to quell dissent would be tantamount to dictatorship. On that score, Malaysia has had prime ministers who have used their powers to silence their critics.

Tun Dr Mahathir Mohamad jailed his political opponents in 1987 under Operasi Lalang and imprisoned Anwar in 1998 when he became a threat in Umno. Datuk Seri Najib Razak sacked his deputy prime minister and removed key government officials in 2015 when they were about to charge him with corruption and abuse of power in relation to the 1Malaysia Development Bhd (1MDB) affair.

Anwar has so far navigated himself through a political compromise struck in November 2022 after the general elections where he forged a partnership with Umno-led Barisan Nasional to form a government with his Pakatan Harapan coalition.

Together with parties from Sabah and Sarawak, he has firmly established himself in Putrajaya until the next general election, which is due by late 2027. Political stability, which was missing between 2018 and November 2022, has returned.

Previously, any measures taken to muzzle social media would be seen in a bad light. They would have contributed to a drop in investor sentiment, causing a fall in the ringgit. But so far, the developments on regulating social media platforms have not dampened investor sentiment.

The ringgit closed below the 4.60 mark against the US dollar last Wednesday. The last time the currency hit that mark was in last December.

The appreciation of the ringgit is happening in a different scenario this time.

Interestingly, it comes amid a rise in the Dollar Index. The index is up 2.5% so far this year, which indicates that the greenback has also appreciated against a basket of major currencies.

What this effectively means is that the ringgit is improving on its own strength and not due to weakness in the dollar. Previously, the movement of the ringgit tended to correlate with the movement of the dollar. When the dollar strengthens, the local currency weakens and vice versa.

There are a few reasons contributing to the appreciation of the ringgit.

Firstly, Malaysia has political stability and the current government is using this advantage to reform public finances. With the support of parties in Sabah and Sarawak, Anwar has so far made some difficult decisions that previous prime ministers tended to avoid.

The government has lifted the blanket subsidy on diesel and electricity, and is looking at resolving the rising pension liability.

Diesel is not widely used by ordinary people and hence there was no opposition. As for cuts in the subsidy for electricity, it impacts households that have a high power usage.

With regards to the pension liability, the government is looking at doing away with the pension scheme for new civil servants. It is likely to be implemented together with a new civil service salary scheme.

Anwar’s biggest task ahead is to remove the blanket subsidy on RON95 petrol. It is a fuel that is widely used and there will be huge opposition no matter how the government implements it.

But it is something that has to be done for Anwar to have better control of the national finances.

Some of the structural reforms to rein in the government’s finances are beginning to show results. For the first time since 2020, net refinancing of government debt has fallen and the target to reach a fiscal deficit of 4.3% for this year is on track.

Secondly, exporters are also open to converting their proceeds to ringgit due to the dollar situation and constant engagement with Bank Negara.

Since March 2022, the dollar has been on the rise against all other currencies on account of the Federal Reserve raising interest rates. However, the Fed has stopped raising rates and instead is looking at lowering them from next month.

This means the US dollar has peaked. Exporters, who are holding more than RM250 billion in foreign currency deposits, have every reason to convert their proceeds into the ringgit.

What is holding them back, however, is the difficulty in getting speedy approvals from the central bank should they require US dollar deposits for future investment needs. In relation to this matter, Bank Negara officials have constantly engaged with exporters since February this year to assure them of approvals should they convert their US dollar deposits.

Apart from exporters, funds such as the Employees Provident Fund and Permodalan Nasional Bhd have been bringing back their excess US dollar requirements.

Finally, Malaysia is coming from a low base in terms of valuation as asset prices have lagged in the past few years.

Bursa Malaysia’s benchmark index, the FBM KLCI, is currently at levels seen in 2021/22 when the country was recovering from the pandemic. The stock market still has some room to go to reach the 1,800-point level in May 2018 when the Pakatan Harapan 1.0 government came to power.

Property prices have also been steady in the last few years, and have not seen a marked increase. However, in the last one year, buying interest has gained momentum and prices are slowly edging up.

In addition, Malaysia has an investment story to tell. The government is undertaking reforms and wants to see more investments coming into the country.

In the first quarter of this year, the country recorded the most number of transactions to build data centres in Asia-Pacific. Apart from data centres, there are more electrical and electronic hubs emerging in the country.

The ringgit has bounced back from a low of RM4.80 to the US dollar. It will continue to appreciate unless there is a significant slowdown in the global economy.

M Shanmugam is a contributing editor at The Edge 

https://www.theedgemarkets.com/node/721663