Will the ‘Madani’ government succeed in wiping out poverty?

Anwar Ibrahim has repeatedly shared his intention of creating an inclusive society where the poor will be protected and helped.

During his latest Budget speech in October 2024, he said the government will not reintroduce the Goods and Services Tax (GST) because the incomes of the bottom half of the population remain too low.

He also took pains to explain how the targeting of petrol subsidies will not affect the bottom 85% of the population and stressed that the super-rich should not expect subsidies.

The government has increased the allocation for the STR, the cash transfer scheme that benefits some 10 million people nationwide. For 2025, the allocation is RM13bn.

However, despite these intentions, the economic problems faced by the people, both from the bottom 40% and middle 40% of households, have not decreased significantly in the past two years.

Key economic challenges include:

• Incomes remains low for the majority of the people – the median salary is about RM2,800 per month. This means that half of the country’s nearly 10 million workers earn less than RM2,800 per month
• Home prices and rental costs have risen dramatically
• Many families carry a high debt burden, consuming 20-40% of their monthly income
• Health services are significantly stressed – government hospitals are overcrowded with not enough specialist doctors and investigative tools. Waiting lists are long
• Young people face high unemployment (8-10% of those aged 25-35) and underemployment, often forced to take low-wage jobs that do not match their education or training

So, the economic pressures faced by ordinary people have not subsided after the “Madani” (civil and compassionate) government’s victory. But is this Anwar’s fault?

The rich get richer

The economic system developed over the past 50 years heavily favours the richest people in the world.

In Malaysia, this is starkly evident: the gross domestic product (GDP) increased 24-fold in real terms between 1970 and 2020, while the median worker’s wage only doubled. Over the same period, total government revenue dropped from 30% of GDP in the 1980s to 15% now. This indicates that much of country’s wealth increase has gone to those at the top of the economic pyramid.

If government revenue had remained at 30% of GDP, the state could have allocated enough funds for stronger public health services, launched a universal pension scheme and provided more affordable public transport.

Instead, a significant portion of the increase in national income has been channelled into the bank accounts of large companies and billionaires, both domestic and outside the country.

Neoliberal approach

After World War Two, from 1945 to 1975, a social-democratic approach shaped government policies worldwide.

Challenges from the communist bloc – Russia, the Warsaw Pact countries, China, Vietnam and others – worried Western elites. They feared workers might revolt and align with the global leftist movement.

As a result, Western elites were willing to meet trade unions’ demands for reasonable wages, unemployment benefits, free or low-cost healthcare and pensions.

In Malaysia, this social-democratic period saw significant social developments: the launch of the Felda scheme, the supply of water and electricity to almost all rural areas, the construction of rural clinics so that over 90% of the people were within 5km of a health facility, the provision of free universal education, and the launch of the Employees Provident Fund and Socso (social security) schemes.

But after the collapse of the Warsaw Pact in the late 1980s and the transition of the Chinese and Vietnamese economies to capitalism, Western elites’ fears eased. They then began showing their true colours. The neoliberal ideology was encouraged in universities, think tanks and institutions like the World Bank and the International Monetary Fund (IMF).

Key neoliberal concepts promoted globally included:

• Reducing government’s role in economic development: For the ideologists, the government is the main obstacle to the development of the national economy. So, they believe, it is necessary to reduce the size of the government and to relax the regulation of companies. The market has to be allowed to do its ‘magic’
• Minimising corporate taxes and regulations:  They believe this will allow companies to play their role in driving GDP growth, ie ‘private sector-led growth’
• Attracting foreign direct investments by keeping wages low and controlling labour unions: They believe foreign investments are crucial for developing countries. So a country needs to have a “business-friendly” approach to attract such investments. For this, wages and taxes must be kept low and labour unions controlled 
• Pushing ‘free trade’ agreements that limit national sovereignty: They believe trade is the ‘magic bullet’ that will bring progress and prosperity. So ‘free trade’ agreements that severely restrict national sovereignty have been forced on third world countries

As a result, Asean countries have engaged in a race to the bottom in slashing corporate tax rates. In Malaysia, the corporate tax rate fell from 40% of company profits in 1988 to 24% today. Thailand took a similar path; its rate now stands at 20% while Singapore’s is at 17%.

This did not happen only in Asean. Corporate taxes have been cut worldwide. The EU’s average corporate tax dropped from 35% in 1997 to 20.7% in 2021⁴. In the US, corporate tax contribution to government revenue fell from 30% in the 1950s to 10% in 2015.

This is the key reason why the once comprehensive social protection in Europe has weakened. This weakened protection has sparked a revolt among ordinary people in Europe and the US.

The absence of a left-wing movement, which could have channelled ordinary people’s profound dissatisfaction towards a socially useful direction, opened up spaces for the right wing to develop chauvinist and anti-migrant political narratives.

Satisfied with Madani government’s performance?

Afraid not! While recognising that the country’s trajectory towards benefiting the largest global companies began long before the Madani government, the socialist party PSM is disappointed that Anwar and his cabinet seem blissfully unaware of a new form of economic colonisation through four decades of neoliberal policies.

This regrettable lack of insight has led to the continuation of policies that further subjugate the national economy, such as:

• Prioritising foreign investments as a key component of the Madani development strategy. Government leaders are proud of the figures that show increases in foreign investment
• Signing the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP): This agreement will tie the government’s hands and further reduce policy space. What’s more, the Madani government is looking for more ‘free trade’ agreements to sign on to
• Showing reluctance to increase the minimum wage to RM2,000 (as PSM and some other parties had recommended) or to implement a universal pension scheme

Because Anwar and his cabinet do not fully understand the economic situation, their statements about eradicating poverty and creating an inclusive society remain merely rhetorical. The aspirations embedded in their statements directly contradict the existing structure and the current trajectory of the Malaysian economy.

Escaping new colonialism

Breaking free from global neoliberal policies won’t be easy! These policies have given the richest corporations and the billionaires multiple avenues to shift their profits to low-tax regime jurisdictions. They also intimidate governments with the threat of capital flight.

However, escape is not impossible. We can and should establish a phased strategy to gradually reclaim control of the Malaysian economy so that wealth generated in the country can be distributed to the people more equitably.

Possible policy approaches to consider:

• Negotiating an Asean-wide agreement to stop the race to the bottom in corporate tax rates. Perhaps the Asean Free Trade Agreement could be modified to reflect this goal. Or a new clause could be inserted into the agreement to impose tariffs on the products of any country that persists in cutting its corporate tax rates
• Promoting the idea that all Asean countries develop their domestic markets by raising average wages and boosting government revenue. If they succeed in increasing aggregate demand from Asean’s 650 million population, it will draw in more investments for the manufacturing of goods and the provision of services to the people. This will create more jobs for the people. Asean countries will then be less dependent on export markets for their economic health. To succeed in this effort, they may need to borrow one of Donald Trump’s strategies: imposing tariffs on imports that are too cheap – because cheap imports will undermine Asean nations’ efforts to build their manufacturing sector.

Collaborative Asean initiatives could also be powerful, such as:

• Working together to build electric buses for green public transport in the region
• Working together to achieve pharmaceutical self-sufficiency. Asean countries could work together with Cuba to make this region self-sufficient in 90% of the medicines used by the people of Asean

These are examples of the conversations we need to have to break the grip of 21^st Century neocolonialism. Unfortunately, Anwar and the Madani government do not understand the need for a ‘second Bandung’.

A 21^st Century Bandung

The Bandung initiative in 1955 failed due to several factors such as limited capital, technical knowledge and professional expertise (a lack of scientists, engineers and other professionals).

The efforts of the Western powers to overthrow leaders committed to the Bandung vision – Ghana’s Kwame Nkrumah, Indonesia’s Soekarno, Congo’s Patrice Lumumba, Guinea’s Amilcar Cabral, Burkina Faso’s Thomas Sankara and many others – was another major factor.

Now, 70 years later, the Global South has accumulated more capital, scientific and professional expertise, and infrastructure. Unfortunately, many Asian and African leaders, including Malaysia’s Madani leaders, have forgotten the Bandung vision. They have lost the plot!

These leaders have been turned over by the half-truths peddled by the World Bank and the IMF – institutions that exist largely to maintain the dominance of the largest Western companies over the entire world (as they have over the past 500 years!).

What should be done?

It would be much more effective if the Malaysian government spearheaded national and regional discussions to develop a comprehensive strategy to release the Asean region from the grip of 21st Century colonialism.

But as the government appears to have lost its way, civil society has to initiate this important project. PSM is committed to this task but it is small. We need many more idealistic people to join in the effort to free our nation from this new colonialism.

This is an edited version of a paper presented at “Sosialisme 2024” on 30 November at the Kuala Lumpur and Selangor Chinese Assembly Hall.

The views expressed in Aliran's media statements and the NGO statements we have endorsed reflect Aliran's official stand. Views and opinions expressed in other pieces published here do not necessarily reflect Aliran's official position.

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