Malaysia’s Opposition Chief: Country Needs to Prepare for Slowdown

By James Hookway, Wall Street Journal

KUALA LUMPUR—Malaysian opposition leader Anwar Ibrahim said Thursday the country’s export-driven economy needs to prepare for the prospect of a double-dip recession in the U.S. and Europe, and steel itself for a prolonged period of weakness in the global economy.

Mr. Anwar, a former finance minister, said Malaysia should focus on building up budget surpluses to better buffer itself from any further volatility in the global economy.

“That’s what we did during my time as finance minister: We built up the reserves and we were able to withstand the shock a lot better as a result,” Mr. Anwar said in an interview with The Wall Street Journal.

He said Prime Minister Najib Razak needs to focus on weeding out corruption and waste to make the country more efficient. “And we need to educate Malaysians about what is going on so they can prepare,” Mr. Anwar said.

The Muslim-majority, resource-rich country ran a budget deficit equivalent to 5.6% of gross domestic product in 2010, down from a record 7% the year prior as Mr. Najib spent freely to help stimulate the economy during the worst of the global economic slump. This year, Mr. Najib has said he aims to reduce the deficit to 5.4% of GDP.

Mr. Anwar, 64, lost his job as Malaysia’s finance chief and deputy prime minister when he clashed with former leader Mahathir Mohamad on the direction of Malaysia’s economic policy in 1998. An economic liberal, Mr. Anwar pressed for reforming Malaysia’s heavily state-influenced economic system. He was later arrested and convicted of sodomizing two male aides—allegations he denied and called a political stunt—before the convictions were overturned in 2004.

Now the leader of Malaysia’s multi-ethnic opposition alliance, Mr. Anwar is again on trial for violating Malaysia’s strict sodomy laws—this time for allegedly having sex with another male aide. Again, Mr. Anwar denies the allegation brought by 26-year-old Saiful Bukhari Azlan, saying the legal case was drummed up by Mr. Najib to destroy his political comeback. By law, Mr. Najib must call fresh elections by 2013.

Mr. Najib, though, denies having anything to do with Mr. Anwar’s trial, which this week is focusing on complex forensic DNA evidence legal experts say could determine its outcome. Mr. Anwar said that apparent inconsistencies in the prosecutors’ case could provide him a legal lifeline.

The opposition chief also said he sees a further decline in the value of the U.S. dollar and euro, saying “we have not seen the end of it.”

Mr. Anwar said he is worried, too, about whether China can continue being an engine of growth for the relatively healthier Asian economies. “You’ve got to wonder how sustainable it is,” he said.