Since May 2018 much of Malaysia has been undergoing a spiritual rejuvenation brought about by its first genuine change of government in 60 years. From the Vertigo rooftop bar to the esteemed Malaysian Bar, via bus conductors and Grab drivers and bartenders, everyone you speak to lights up when asked about this year’s election.
‘It was incredible, absolutely incredible,’ one lawyer told me unblinkingly. ‘People were running and driving around collecting postal votes from total strangers, doing everything they could to ferry those slips of paper cross-country to the ballot boxes, leaving nothing to chance. Eligible expats each giving their vote to a guy who’d fly all the way to Malaysia, pockets stuffed with paper, just to make sure every vote would be delivered.’
Many in the West are marking the 50th anniversary of the ‘1968 moment’ – a time when it seemed like young people could stand up and be counted, make a real political difference and change the world for the better. For the Malaysian people, political promise is currently unfolding before their eyes – though the embodiment of said promise is the seemingly ageless 93-year-old Mahathir Mohamad, whose stint as prime minster from 1981-2003 made him the longest-serving leader in the country’s history even before his re-election a few months ago. Perhaps a surprising choice, then, for a deliverer of radical change.
This yearning for prelapsarian politics is less surprising when you consider how badly the country has been affected by the 1MDB scandal. The legacy of former prime minister Najib Razak encompasses not only alleged corruption but unpopular impositions, such as the Goods & Services Tax. (The latter has now been replaced by the Sales & Services Tax, which brings in less revenue for the government but targets a narrower tax base. Lawyers have been busy advising corporate clients both on the new tax regime and on obtaining tax refunds following unfair applications of Goods & Services Tax.)
‘Deferment of the Kuala Lumpur-Singapore high-speed rail project has sent shivers up the spines of law firms’
Dynamism on the tax front, however, is not finding echoes in other spheres.
Multibillion-dollar public projects have been put on hold, awaiting cancellation, readjustment or an eventual green light; the most high-profile has been the Kuala Lumpur-Singapore high-speed rail project, which has been deferred and will not be ready until at least 2031. Such news has sent shivers up the spines of those law firms that upscaled their projects teams and re-allocated resources in anticipation of handling long-term infrastructure projects.
Domestic bank liquidity remains fairly healthy, with around half of all major financings being done through Islamic structures, but international investors are watching developments cautiously. As a result, major M&A, IPOs and real estate deals have been quiet since the election was announced and have not picked up despite the jubilant response to the Pakatan Harapan (PH) coalition’s electoral victory. Talk to lawyers and businesspeople, and the phrase you will hear most often is ‘wait and see’ – though quite a few Malaysian companies have decided to list in Hong Kong and Singapore, rather than on the Bursa Malaysia.
Culturally, not much has changed: Mahathir secured a royal pardon for former PH leader Anwar Ibrahim, who had been jailed on homosexuality charges for a second time, but more recently two young women were publicly caned for engaging in lesbian activity. PH’s member parties are not organised along lines as categorically racial as those of the deposed coalition, Barisan Nasional (BH), but ethnic divisions within the country at large remain difficult to deracinate, especially in rural areas, where BH remained popular until recently.
Nonetheless, the current government is certainly making the right noises about anti-corruption and anti-money-laundering measures, and lawyers have been kept accordingly busy on the advisory and compliance side. There have been several politicised de-selections. For example, in July, Ahmad Nizam Salleh replaced Sidek Hassan as chairman of Petronas (the country’s largest company), and the entire board of sovereign wealth fund Khazanah tendered its resignation. One gets the sense that as Malaysia takes stock of its trillion-ringgit government debt, it is – at the higher levels of public business, at least – running to stand still.
These aren’t the only reasons for lawyers to be cheerful. Certain sectors are burgeoning: aviation finance, healthcare and technology, especially fintech, continue to grow, and oil prices have remained relatively stable. There have been some headline mergers: Asia Finance Bank was bought by Malaysian Building Society to form MBSB Bank, which has assets totalling nearly RM50bn (around £10bn). Relations with the Inland Revenue have improved considerably – sure, many firms are currently suing it, but the acrimony is really directed at the former tax administration rather than the current one. Excitingly, the current attorney general – Tommy Thomas, who has for years graced the pages of The Legal 500 – is the country’s first to come from private practice.
General market quietude will probably continue for the next few months, but it’s a fairly sure bet that 2019 will be busier all around, as the government clarifies its position on various fronts – especially in the projects space – and international investment begins to flow in in higher volumes. The legal market in two or three years may look rather different; it remains to be seen how firms close to Razak’s government will fare in the new political climate. But until then, watch this space.