| China has been unveiling fresh economic-support measures to try and meet its 2024 growth target of around 5% practically since it set the goal. For many nations—even those lower on the development scale with lots of catch-up potential—that mark is hard to sustain. But there is one country that seems to nail it consistently: Malaysia. As this newsletter has previously noted, Malaysia’s neighbor to the north, Thailand, has seen political upheaval hold it back. Its southern neighbor, Indonesia, hasn’t been able to catch up to its income level. And while Malaysia has its own volatility, with Prime Minister Anwar Ibrahim’s two-year tenure longer than those of his three immediate predecessors, it has nevertheless found a recipe for success. Elements of the winning formula include a long-term push to lure foreign tech firms. A dedication to price stability, with a strong central bank and unorthodox measures such as price controls, has underpinned consumer confidence and spending. Last quarter, Malaysia’s GDP rose 5.3%, against China’s 4.6%. The International Monetary Fund sees the smaller Asian nation outpacing China on average the coming five years. Now, Anwar’s government has a big domestic investment plan. How that proceeds will shape Malaysia’s capacity to weather economic storms that will likely accompany the incoming Trump administration in the US.  Anwar Ibrahim, Malaysia's prime minister Photographer: Manuel Orbegozo/Bloomberg Anwar, 77, is celebrating his second year in office, appearing at a three-day-bash near the iconic Petronas Twin Towers this weekend. He has reason to feel festive: while last year’s growth disappointed, coming in under 4% as the country was hit by global trade fragmentation, this year the economy appears to be on track, with economists surveyed by Bloomberg predicting a 5% GDP gain. And that’s after Anwar unveiled a program aimed at luring companies that can create high-income jobs, along with reforms to make the stock market more attractive and boost participation of women in the workforce. Anwar also harbors ambitions to turn the country into an artificial intelligence hub. He’s already attracted the likes of Microsoft Corp., Amazon.com Inc. and Google parent Alphabet Inc. to pour money into Malaysia’s infrastructure—to the envy of neighboring Indonesia.  A quarter-century after the Petronas Twin Towers reshaped Kuala Lumpur’s skyline, Malaysia’s capital is continuing to add new skyscrapers. Photographer: Ian Teh/Bloomberg That approach builds on a long legacy. Malaysia first pulled in major tech investment back in the 1970s, when it set up a free-trade zone years before China’s Deng Xiaoping adopted that tactic. Among the multinationals that landed at the location in the northern island of Penang was Intel Corp. By the turn of the century, Malaysia was home to the chipmaker’s biggest assembly, test and manufacturing facility. Penang’s success spread, with the neighboring mainland state of Kedah hosting the likes of Infineon Technologies AG. In the south, the state of Johor has benefited from its proximity to Singapore, which itself has retained a significant manufacturing base over the decades. Malaysia and Singapore are set to sign a deal on a joint economic zone there by next month. Continuing foreign interest in Malaysia also marks a contrast with China, which has seen a decline in outside investment in part thanks to crackdowns by President Xi Jinping on both domestic and overseas private-sector companies. How long the good times will last for Malaysia, once a commodity-based economy, remains to be seen. Donald Trump’s re-election as US president and the policy uncertainty he brings have Malaysian officials worried. Domestically, Anwar is facing a challenge in resolving disputes with a state government trying to wrest control over lucrative gas reserves and revenues. But the economy enjoys resilient consumption—one of the factors that sets Malaysia’s growth story apart from others, according to central bank Governor Abdul Rasheed Ghaffour. That remains a key growth anchor, along with unemployment returning to pre-pandemic levels, policies such as targeted cash transfers for vulnerable households and rising tourist spending. A further bump beckons as Malaysia raises salaries for civil servants and proposes higher minimum wages for the private sector, beginning next year.  Shoppers in the Brickfields area of Kuala Lumpur last month Photographer: Samsul Said/Bloomberg The government’s subsidies for staples like sugar, fuel, eggs, cooking oil and electricity—while costly for public finances—have also underpinned consumer confidence. The World Bank noted in 2023 that Malaysia has the most price controls of any country in Southeast Asia. One key gasoline subsidy is set to be unwound starting next year, however, which will prove a test for both inflation and sentiment. Still, Malaysia is approaching uncertainty from a “position of strength,” the central bank governor contends. “Our growth is mostly from domestic demand, and Malaysia has a very highly diversified economy and trade partners.” Economy Minister Rafizi Ramli said last month the government aims to grow the economy by 5% annually for the next few years. We shall see. —Anisah Shukry | 
