The Straits Times says: Najib must now focus on the economy

It was clear from Malaysian Prime Minister Najib Razak's closing speech at the United Malays National Organisation's (Umno) general assembly that he was not going to be cowed by his dissenters into resigning from his government and party head positions. Importantly for him, it was also clear from the thunderous applause and cheers from the 2,700 delegates, as he declared that "there will be no retreat, there will be no surrender", that his party was closing ranks behind him. There is no doubt that internal rumblings will continue, but his heavyweight critics - party deputy chief Muhyiddin Yassin and former prime minister Mahathir Mohamad - will likely find a reduced audience within Umno for their tirades.

Mr Najib - who has shown himself to be masterful in handling dissent - will still have to address the issues that brought him close to the brink in the past year. He will have to further cut state investor 1Malaysia Development Berhad's massive debts, for which his dissenters had been baying for his blood, and continue probing accusations that some of its funds had been siphoned off. While his party members appeared to have accepted his explanation for the RM2.6 billion (S$852 million) found in his personal bank accounts, that it was a donation, he needs to address calls, after the accounts came to light, to reform political party funding to make it more transparent.

More crucially, the blowing over of the party crisis surrounding Mr Najib affords the Malaysian leader the space and time to deal with larger issues, particularly the current economic woes and future economic direction of the country. Apart from the financial scandals, the dissatisfaction among Malaysians with Mr Najib's administration stems from the flagging economy, with prices of oil and commodities in free fall; a weakening ringgit; and the introduction of the unpopular goods and services tax. Most immediately, the 2016 Budget, unveiled in October, needs some adjusting, with the price of oil falling persistently below US$40 a barrel while the Budget is based on oil being priced at US$48.

In the longer term, there is need for structural reforms if Malaysia is to meet its goal of becoming a high-income nation by 2020. The government made a good start by introducing the GST and removing fuel subsidies to diversify its revenue base and make up for the loss in oil-related revenues. It now needs to attract investors by implementing reforms, including in its education system and human capital development, to build a skilled talent pool. It must also expand the services sector to help it move up the value chain. The country's signing up to the Trans-Pacific Partnership free trade deal will help it to accelerate reforms. Malaysia's well-wishers will want to see Mr Najib's government make this happen in the time remaining till the next general election.

This article was first published on December 24, 2015.
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