This article first appeared in The Edge Malaysia Weekly on December 30, 2024 - January 12, 2025

AS it enters the third year of administration in 2025, Malaysia’s unity government finds itself walking a political tightrope. Balancing economic pragmatism with political survival, Prime Minister Datuk Seri Anwar Ibrahim is seen to have adopted a delicate strategy of compromise — one that faces scrutiny from every angle.

From appealing to the Malay demographic to navigating the demands of Sabah and Sarawak, Anwar must simultaneously address accusations of abandoning his Reformasi agenda — the rallying cry of his 25-year political movement that got him to his premiership — while managing the boundaries of race, religion and royalty in public discourse.

Yet, within this maelstrom, the government has managed to lay the groundwork for the country’s much-needed economic recovery.

The Madani Economy framework, which Anwar introduced on July 26 last year, along with ambitious national plans and the annual budgets, has begun to address the country’s economic challenges and the government’s fiscal limitations.

During Anwar’s two years as prime minister, Malaysia’s economic performance exceeded expectations. The country’s gross domestic product sustained strong growth in the first three quarters of 2024 (9M2024), expanding by 5.2%, a notable improvement from the 3.8% growth recorded during the same period in 2023.

The robust performance reflects continued resilience despite global uncertainties, and is seen as a positive sign for the country’s economic stability.

“The Madani government is generally moving in the right direction in economic development. The raising of the minimum wage is necessary to close the income gap and push Malaysia’s businesses towards technological upgrade,” says Sunway University political scientist Prof Wong Chin Huat.

The government has also actively sought foreign investments and undertaken structural economic reforms, signalling a clear direction for Malaysia’s high-growth high-value sectors.

According to the Malaysian Investment Development Authority, the government approved RM254.7 billion of investments during 9M2024, marking a steady 10.7% increase from the previous year. Of the sum, foreign investors contributed RM106.7 billion, or 41.9% of total approved investments.

“The government is active in securing investment from abroad into the country as can be seen by the intense efforts by the prime minister and his team over the past [two years]. These measures will take time but once the investments are cleared in, we should see income improving and opportunities expand,” Merdeka Center for Opinion Research co-founder and programmes director Ibrahim Suffian tells The Edge.

This foresight and fortitude in devising economic policies may have contributed to the increase in public approval for Anwar, which rose to 54% in December 2024, from 50% a year ago, based on a survey conducted by Merdeka Center. Meanwhile, the approval rating for the unity government stood at 51%, up from 46% in November 2023, the survey showed.

Even with economic recovery on track, the government continues to face significant political and social challenges. Critics from liberal and human rights groups argue that the administration has sidelined institutional reforms, but observers like Ibrahim see pragmatism at play.

“I don’t think the government has abandoned the Reformasi ideals, but rather it has become more realistic in terms of governing,” he says, pointing to lessons learnt from the collapse of the 2018 Pakatan Harapan (PH) administration.

“I think the current leaders understand that the government needs to perform [when it comes to] addressing the major public concern — that is, the economy — before working on the finer details of reforms that are being demanded by liberals and the middle class,” Ibrahim adds

While echoing the sentiment that the government has not entirely abandoned the Reformasi agenda, Wong argues that “reforms like the separation of the attorney-general and public prosecutor’s powers are not ‘nice-to-have’ to please the so-called Bangsar bubble, but are ‘must-have’ for a good investment environment guaranteed by rule of law, political stability and good governance”.

Although some legal reforms have indeed been initiated, there remains scepticism about whether these changes will take effect anytime soon.

Honorary research associate with the University of Nottingham Malaysia Prof Bridget Welsh takes an even stronger view, highlighting that there has been regression on reforms in the judiciary, civil liberties and media freedom as well.

“The government must take a different tack and focus on delivering reforms to its base. Its window is closing. It should also recognise that forming the cartel [between] Barisan Nasional and PH for an election is not a guarantee for being in government again. Time is ticking,” she tells The Edge.

For the unity government, maintaining the fragile coalition of former political enemies is a challenge of its own. Sabah and Sarawak parties demand greater autonomy and federal funding, while Umno’s internal struggles complicate its role in the coalition.

This compromise often results in criticism of inefficiency and perceived weakness.

“There is a view that Putrajaya is held hostage by its Sarawakian coalition partners who seem determined to extract as many concessions at autonomy and access to federal funding before the term ends,” Ibrahim says.

“The Sabah and Sarawak parties want decentralisation and, if possible, political monopoly within their states,” Wong explains. “Decentralisation is a must, not just for keeping the Sabah and Sarawak parties, but also in the long run, for keeping Malaysia intact.”

However, he warns that excessive concessions to Borneo — such as agreeing to a 35% representation in the Dewan Rakyat — without engaging peninsular states in a broader decentralisation agenda could invite backlash, “which can easily be framed as selling out of Malay-Muslim interests”.

Datuk Dr Ooi Kee Beng, executive director of Penang Institute, takes a broader view, describing Malaysia’s political landscape as one shaped by compromise. Like Wong, he advocates decentralisation as a path towards stability.

“Layers upon layers of compromise led to centralisation instead, because of the strength of racial arguments over technical or legalistic ones,” he observes, adding that meaningful reforms may emerge from decentralisation efforts at the state level rather than sweeping changes at the federal level.

Within Umno, challenges abound. The party’s need to distance itself from its corrupt past — exemplified by its former president Datuk Seri Najib Razak’s conviction — is at odds with the pressure to secure a pardon for the former prime minister.

“Anwar may be happy to sacrifice PH’s political legitimacy for his second term,” Wong notes, “but PH’s base would punish him and his allies for such betrayal.”

Welsh concurs, saying that the appeasement of Umno has led to the “Reformati” label — an implication that the Reformasi agenda is dead. These compromises, she argues, have yielded little but merely maintained power at the expense of legitimacy and erosion of PH’s political base.

“Power is being seen to corrupt, feeding those wanting to stay [in power] rather than delivering reforms that were promised,” she says.

Meanwhile, the opposition’s weaponisation of race and religion continues to test the unity government’s resilience. Social media plays a central role in shaping these narratives, often amplifying divisive rhetoric, posing a formidable challenge for the government to maintain national unity.

Much like the previous PH administration, the current government has been criticised for failing to control the narrative, often overcompensating to the point that it has been accused of restricting freedom of speech and, even worse, acting with insecurity.

“I think the government is struggling to get its message out to the public, and will need to improve present channels to reach them in the time that it currently has,” says Ibrahim.

“I don’t think they are dialling back on the commitment to freedom of speech. Instead, they need to compete more effectively in the social media space and find novel ways for getting their persuasion efforts to the public,” he contends.

Ooi, on the other hand, paints a stark picture of the chaos in online discourse. “Democracy has to be narrated by strong minds and courageous leaders, lacking which, populism upon populism will be the rationale of the day, leading to narrative chaos, like in a kindergarten.”

The government’s move to raise civil service salaries underscores its recognition of the Malay demographic’s political weight.

“Raising civil servants’ salaries is politically necessary to prevent this crucial constituency from turning against the government,” says Wong.

He notes that the previous PH administration “paid a huge price by not managing its relationship with the civil servants well”.

For Anwar, whose coalition struggles with limited Malay support, such measures may be seen as essential for maintaining political stability.

However, Welsh highlights an issue with this approach. “The problem is that raising salaries is not enough as civil servants have been used to perks which have been curtailed. Importantly, they can taste the insecurity in the government and are holding back support.” 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.