Malaysia at the crossroads of the great global reset

New Straits Times

12-05-2025

The Reset Has Already Begun
The Great Reset isn't some distant event lurking on the horizon — it's already here, reshaping our world in real time. What we're witnessing is not a sudden collapse but a slow, grinding realignment of economies, politics, and alliances, sparked by rising tariffs, weakening trade flows, overstretched fiscal systems, and the steady return of great power rivalry. Japan, Singapore, and China — economies that once defined the stability of Asia — have already pivoted from recognising the gathering storm to building their own storm shelters. In Beijing, the Politburo has held emergency sessions, rolling out new waves of fiscal stimulus and shoring up safety nets to keep domestic consumption alive. In Tokyo, policymakers are cobbling together stimulus packages to keep consumers spending and factories humming. Even Singapore, the region's model of predictability, has slashed its growth forecasts and called early elections, trying to lock in political manoeuvring space before the downturn bites deeper. These are not isolated moves. They are the opening plays in a new global game — one where globalization as we knew it has been replaced by something messier, harder-edged, and far more fragmented.
The End of Frictionless Globalisation
The new economic playbook is clear: balanced budgets are out; emergency stimulus is in. Governments across the globe are ripping up the old rulebooks, choosing fiscal expansion over austerity, and national priorities over global integration. Domestic consumption is being pumped up like never before, not out of ideological conviction, but sheer necessity. The idea of maintaining immaculate balance sheets has taken a backseat to the urgent, immediate task of keeping societies cohesive and politically stable. Leaders everywhere are realising it's better to frontload risks now than to face an angry, disillusioned electorate later. And yet, while these moves are economic in appearance, they are deeply geopolitical at their core. What's unfolding is not just an economic reset — it's a redistribution of power, a return to spheres of influence, and the messy birth of a new multipolar world.
Malaysia in the Blast Zone
For Malaysia, a country whose economic life depends on the free flow of trade — with a trade-to-GDP ratio north of 130 per cent — the tremors of this new world are already rattling the foundations. A China slowdown suffocates our export markets. Singapore's cooling economy dulls our services and investment pipeline. Japan's struggles ripple through our industrial supply chains. Meanwhile, the broader rise of protectionism and "friend-shoring" threatens to cut Malaysia off from the global networks that have powered our growth for decades. We are no longer living in a world where openness guarantees prosperity. Instead, we're stepping into a world where access to markets, capital, and technology is increasingly shaped by geopolitics, not economics. And make no mistake: the stakes are not just economic. As the United States and China lock horns, as Europe, India, and other middle powers reposition themselves, Malaysia risks becoming collateral damage in a competition it did not start and cannot control. The world is tilting hard toward multipolarity — not the clean, rules-based multipolarity of textbooks, but a rough, jostling competition where trade routes, digital networks, and even green technologies become battlegrounds of influence.
Pivot or Perish: What Malaysia Must Do
The first imperative for Malaysia is clear: we must pivot and pivot fast. Preemptive economic adjustment is no longer optional — it is existential. We need a supplementary fiscal stimulus, targeted at strengthening domestic consumption, shoring up micro, small and medium enterprises, and jumpstarting investments in future-proof sectors like the digital economy, energy transition industries, and advanced manufacturing. Social safety nets must be widened now, not after unemployment becomes a front-page crisis. And we must rethink our industrial strategy — encouraging the localisation of critical supply chains, aggressively courting "China+1" investments, and moving fast into areas where Malaysia can be a first mover, not a follower. Fiscal constraints, of course, are real. Malaysia's Fiscal Responsibility Act caps federal debt at 60 per cent of GDP — a ceiling already tested during the pandemic. Budget deficits will widen, likely blowing past RM50 billion. Rationalising subsidies, like through the PADU programme, will be politically messy but unavoidable. Yet pretending we can muddle through without serious adjustment would be an even greater mistake. The longer we delay, the harsher the correction will be.
Neutral, Not Naive: Playing the New Geopolitical Game
But economic resilience alone isn't enough. Malaysia must also recalibrate its foreign policy for this new, divided world. Strategic autonomy is not a slogan — it's a survival plan. We cannot afford to be trapped in any one sphere of influence. Not wholly aligned with the United States and its Indo-Pacific initiatives. Not overly dependent on China's gravitational pull. Instead, Malaysia must pursue a smart, flexible multi-vector diplomacy: deepen trade ties across Asean, invest in security and technology partnerships with Japan, South Korea, and India, engage Europe in green economy collaboration, and remain an active voice in global multilateral forums.
Asean must be strengthened not as an abstract idea, but as a real strategic buffer — a regional compact that resists becoming a playground for external powers. Malaysia must push hard to reinvigorate Asean's political relevance, even if it means stepping on toes. We must also forge "minilateral" alliances — practical, nimble agreements with like-minded partners on trade, technology, and innovation — bypassing the paralysis of global forums when necessary.
No Time for Illusions
The big picture is unavoidable: the post-Cold War world of frictionless trade, global convergence, and shared prosperity is being torn down and rebuilt — right in front of our eyes. Trade routes will be weaponised. Currencies will be contested. Technology standards will split across geopolitical lines. Middle powers like Malaysia will be forced to choose, hedge, or — if we are clever enough — shape outcomes.
We have a choice: lead our own transition, or be led by others. Be a shaper of the new rules, or a price-taker under someone else's rules. But either way, the old certainties are gone. The world Malaysia faces is harder, faster, and less forgiving.
The Great Reset is here. The clock is ticking. And history will remember whether we stepped up — or were swept aside.
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