Newly Elected Malaysia Prime Minister Mahathir Vows to Cancel GST

Malaysia, election, news, Mahathir Mohamad

In a press conference on Thursday morning, Malaysia outgoing Prime Minister Najib Razak conceded defeat ending the dominance of the Barisan Nasional (National Coalition) after 60 years. The new government will be head by Mahathir Mohamad, 92, which used to be Prime Minister from 1981 until 2003 and conducted the country with an iron fist.

His coalition, Pakatan Harapan (PH) had won 122 parliamentary seats, enough to form a simple majority in the country’s 222-seat parliament. It will also be head of five States in Peninsular Malaysia.

While Mahathis is expected to be officially announced Malaysia new Prime Minister on Thursday afternoon, what could be the first changes for the tourism and transport industry in the country?

One of the most significant promise of PH top candidate Mahathir is to cancel the Good and Sales Tax introduced in 2015 which has been contested by most voters as well as regional states. This would whip out 6% on prices and could of course benefit to both local consumers and visitors.

Another act would be to look at Chinese investments in Malaysia. The new Prime Minister is likely to scrutinize if all investments from the new Asia superpower are all necessary in Malaysia. The 92-year-old Mahathir told a news conference he supported China’s Belt and Road initiative (BRI) but said Malaysia reserved the right to renegotiate terms of some agreements with Beijing, if necessary.

“We have no problem with BRI, except of course we would not like to see too many warships in this area because (a) warship attracts other warships,” he said.

According to Reuters, a Nomura report last month showed that Malaysia is one of the largest beneficiaries of Chinese investment commitments in Asia, securing $34.2 billion of BRI-related infrastructure projects, which have prompted critics to accuse Najib of “selling” Malaysia to the Asian powerhouse. Total Chinese investments in Malaysia represented 7% of all money set into the country in 2017.

In an interview with Bloomberg last April, Mahathir stated that “here we gain nothing from the investment. A renegotiation with China could affect some infrastructure mega projects such as a new Singapore-alike city in Johor Bahru as well as the East Coast Rail Link (estimated to cost US$15 billion). Talking in April at a forum in the State of Selangor, Mahathir highlighted that a Pakatan Harapan government would renegotiate the project, possibly seeking to reduce the 688-kilometer (428-mile) line unless there was enough demand. The project is slated for completion in 2024.

Mahathir’s comments reflect broader concerns about dependence of countries on China money.
A first immediate consequence of the election was a fall in the value of the Ringgit versus most currencies. In recent weeks, the Ringgit was hovering around RM3.80 for one dollar but has been down to RM4.00 to one dollar today.
 (Source: Reuters, Bloomberg)