Economy Minister Rafizi resigns from PM Anwar's Cabinet after losing in PKR polls
Economy Minister Rafizi Ramli has resigned from Cabinet on May 28, as promised after losing the Parti Keadilan Rakyat deputy presidency. PHOTO: BERNAMA
– Economy Minister Rafizi Ramli resigned from Cabinet on May 28, as promised, after suffering defeat at the hands of Prime Minister Anwar Ibrahim's daughter at the ruling party's polls on May 23.
His departure, to take effect on June 17, will leave a gap at a time when Malaysia's economic reforms are stalling due to global headwinds.
Datuk Seri Rafizi's ally, Natural Resources and Environmental Sustainability Minister Nik Nazmi Nik Ahmad, also announced his exit from Cabinet effective July 4, confirming a report by The Straits Times.
He cited his failure to defend his position as one of four vice-presidents for stepping down. Mr Rafizi and Mr Nik Nazmi will be on leave immediately.
In the campaign leading up to Parti Keadilan Rakyat's (PKR) internal elections, Mr Rafizi had said that he would leave Cabinet should he fail to defend the deputy presidency. Ms Nurul Izzah Anwar took close to three quarters of the vote.
Most of those in Mr Rafizi's slate were also defeated in the polls, which were marred by accusations of nepotism, money politics and fraud.
'I joined politics to inculcate a new political culture based on accountability and the people's mandate. My loss at the recent PKR elections means I no longer have the mandate from my party to translate the people's agenda,' he said in a statement on May 28.
Mr Rafizi noted that the practice in any nation that places importance on democratic principles is for leaders who lose in party polls to make way for the winners to take positions in government.
Ms Nurul, in addressing allegations of nepotism when announcing her candidacy for the PKR's No. 2 spot on May 9, had said: 'I am not interested in a Cabinet position.'
The 44-year-old former parliamentarian said in response to Mr Rafizi's resignation: 'His ideas will not be forgotten but will be continued, refined and implemented, not because they came from him or myself but because they are what is best for Malaysia.'
Mr Rafizi's resignation leaves his former ministry, which is charged with economic planning, in the lurch ahead of the parliamentary tabling of the 13th Malaysia Plan, a five-year development blueprint, that must now be helmed by his replacement less than two months before the federal legislature reconvenes.
'My final duty as economy minister has been completed, with the 13th Malaysia Plan finalised and now set to be tabled at the next Parliament sitting. I hope the Cabinet retains several bold reforms that involve the Education Ministry,' Mr Rafizi said.
Among major projects spearheaded by him were subsidy rationalisation across a broad spectrum of products, especially energy, progressive wages and the Johor-Singapore Special Economic Zone (JS-SEZ). After the planning phase, these initiatives are usually handed over to the relevant ministries.
Investors are still waiting on final blueprints for the JS-SEZ's nine flagship zones to boost growth, while a closely watched revamp of the entry-level RON95 petrol price is still being fine-tuned.
Mr Nik Nazmi was also a key figure in the retargeting of electricity subsidies before the energy portfolio was handed over to Deputy Prime Minister Fadillah Yusof.
Datuk Seri Anwar has thus far not responded to the two ministers quitting his administration, but he had earlier on May 28 replied to reporters 'who told you?' when asked if Mr Rafizi was leaving Cabinet.
The PKR president could avoid an immediate reshuffle by appointing acting ministers from the existing Cabinet members. By the end of 2025, he will also have to select a new investment, trade and industry minister as Tengku Zafrul Aziz's final term as senator ends.
Aside from picking the best people for the respective portfolios, selecting a Cabinet that is representative of the ruling alliance is a difficult juggling act due to the disparate nature of his multi-coalition government of former bitter foes.
Shannon Teoh is The Straits Times' bureau chief for Malaysia, where he has reported on various beats since 1998.
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A Malaysian construction firm Southrise, which has operations in Senai, Johor, has similarly seen a 15 to 20 per cent increase in tenders commissioned to them since January. Its administrative manager Cassie Tiong attributed the rise to the increased interest in the JS-SEZ. Banks have also taken steps to promote the project and have indicated their willingness to lend to smaller firms within the zone. United Overseas Bank in February launched a Green Lane with Invest Johor to fast-track investments into the JS-SEZ. Three months later, Maybank announced that it had partnered with ASME to facilitate Singapore-based SME financing and access to the zone too. The Malaysian bank also facilitated S$709.6 million (US$545 million) in client investments last week – from Thomson Medical Group, Centurion Corporation, and Alpine Renewables and Edible Oils – into the JS-SEZ. Though the zone is still very much in its infancy, larger firms which have taken the leap to expand into Johor have also benefited from the JS-SEZ thus far. Singapore-based agritech firm Archisen recently completed its development of a 52,000 sq ft smart indoor vertical farm located in Iskandar Puteri, a joint venture with Malaysia's state-owned agri-food company FarmByte. Archisen CEO Vincent Wei said his firm, which offers an end-to-end solution to design, build and operate urban farms, has seen an uptick in interest from both collaborators and clients who are keen to work with them in the JS-SEZ. Mr Wei said that Johor has for many years been known for having lower costs of production. 'What was lacking is the security, and the know-how of getting business approvals and permits,' he added. 'Furthermore, there will also be a slew of tax incentives which are in the process of being implemented – so that further attracts companies' interests.' 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Industry players in Singapore told CNA in January that they were concerned about several issues, including a lack of skilled labour in Johor and congestion along the Causeway – and some of those issues remain today. Mr Sebastian Tan, the group managing director at media production firm Shooting Gallery Asia, is resuming its Malaysian operations in Medini Johor – which is part of the Iskandar Puteri flagship area – after previously being based in Kuala Lumpur. He said that the 'energy and vibrancy' generated by the JS-SEZ announcement convinced him to kickstart his business there, where he plans to bring in 'big names' from the media industry to work on future cross-border projects such as films and television commercials. But the biggest hurdle to a successful launch is the commute between Johor and Singapore, including the movement of equipment between the two states, he said. 'If you want to bring international talents in, the moving of people and equipment between the two borders becomes a major hindrance,' he said. 'If these 'big names' get stuck in traffic for four, five hours, they would say: 'Don't waste my time' and never come back again.' While the Rapid Transit System (RTS) Link project linking Singapore's Woodlands North station to Johor's Bukit Chagar station is expected to begin service by the end of 2026 and ease congestion at the Causeway, Mr Tan said he was not sure if it would completely alleviate these concerns, as many foreign talent would still prefer to travel in the comfort of a private vehicle. Another primary concern for businesses seeking to expand their operations in the JS-SEZ is the availability of skilled workers. SMF's president Lennon Tan said that while it will not be an issue to find non-skilled workers in Johor, skilled ones are very often already working in Singapore. Due to skilled workers being in short supply in Johor, there is a consensus that firms would have to pay 'at least two-thirds' of Singapore's rates to employ them, he said. Because of this, in addition to the fact that smaller companies with fewer resources would not be able to qualify for MIDA's tax incentives, Mr Tan said SMEs should not fall into the mistaken belief that they would pay merely 'one-third price' if they set up shop in the JS-SEZ, referring to the fact that the Malaysian ringgit is roughly a third of the value of the Singapore dollar. Over in Malaysia, Mr Soh Thian Lai, the president of the Federation of Malaysian Manufacturers (FMM), told CNA TODAY that its members' primary concern revolves around 'skills mismatch and talent leakage'. He explained that the JS-SEZ's emphasis on high-impact sectors presents 'a challenge in terms of domestic talent readiness' in Malaysia. This emphasis refers to the zone's strategic focus on attracting innovation-driven sectors like artificial intelligence and advanced engineering – areas that have been highlighted by both governments as part of their push for high-value economic activities. 'There is a limited pipeline of skilled professionals in these fields and continued outflow of talent from Johor to Singapore due to wage imbalances,' said Mr Soh. 'Without proactive upskilling and retention mechanisms, the JS-SEZ may struggle to scale up or localise operations anchored in Johor.' Mr Soh also took issue with what he termed a 'significant gap' in the zone's engagement with SMEs, which he feels form the 'backbone of the nation's industrial base'. The current framework of the JS-SEZ, he noted, appears to prioritise large-scale foreign investment, with limited dedicated mechanisms or incentives targeted at the participation and growth of Malaysian SMEs. 'This oversight risks marginalising a crucial segment of the Malaysian economy, potentially hindering opportunities for technology transfer, skills upgrading within local firms, and the establishment of robust domestic supply linkages,' said Mr Soh. WHY OPTIMISM STILL RUNS HIGH Despite these teething pains, many believe the JS-SEZ has a fighting chance, in part due to lessons learnt from past attempts at cross-border collaborations. In 2006, Malaysia launched Iskandar Malaysia, formerly known as the Southern Johor Economic Region, where large areas of Johor were made available for the development of key sectors such as logistics, tourism and finance. And long before that, the Singapore-Johor-Riau Islands (Sijori) Growth Triangle was launched in 1990 together with Indonesia to capitalise on the three areas' comparative advantages. Dr Francis Hutchinson, a senior fellow at the ISEAS-Yusof Ishak Institute, noted in a commentary piece for ISEAS' publication Fulcrum that Sijori's legacy lives on – stemming from the moment when international firms began to see the benefits of pairing operations in Singapore with factories in Johor and Batam three decades ago. But changing international economic conditions and domestic political priorities meant that both those initiatives failed to sustain their momentum. This time round, however, the international geopolitical landscape, which has become more volatile than ever since US President Donald Trump's return to the White House, may serve as a driver of the JS-SEZ's success, rather than a hindrance. Mr Chua Hak Bin, an economist at Maybank, said that the JS-SEZ could act as a 'strategic hedge' against targeted tariffs introduced by Mr Trump. It could also leverage on the 'China plus one' shifts in the supply chain, he added, referring to the business strategy where companies diversify their manufacturing beyond China to reduce risk and dependence on a single market, often driven by factors such as geopolitical tensions and trade wars. Indeed, Mr Sia, the managing director of ATC, said it is for this reason that manufacturers like him have benefitted from the Trump administration's antagonistic relationship with China. 'Before Trump took office in 2016, many of our potential customers would not entertain any quotations from us because Singapore's prices would not be competitive. Prices in China are a lot lower than what we are able to offer,' he said. 'Now, after Trump was reelected in 2024, supply chains are expediting their restructuring activites, so people are looking to move away from China completely. This is an opportunity for us, and that's why we're looking to expand our manufacturing plant in Malaysia.' Mr Chua added that the JS-SEZ stands apart from past initiatives like Iskandar Malaysia by being a 'truly bilateral effort' – a view echoed by trade associations from both countries. Mr Tan of the SMF believes that both governments are 'putting in a lot more resources and conviction' this time, while the FMM's Mr Soh said that the groundwork laid by both countries 'reflects strong political will and sets a positive trajectory' for the JS-SEZ's long-term success. Furthermore, the economic zone builds on an already strong foundation of economic ties between Johor and Singapore, particularly in sectors such as electronics, logistics and precision engineering, Mr Soh said. This optimism extends to those in the services and consumer sectors as well. Malaysian F&B entrepreneur Ewearn Tan took the plunge by renting two stalls at a food court in R&F Mall, just several minutes from the border, in February as she noticed gradually increasing footfall there. Local retail outfit Perky Lash also expanded its operations overseas for the first time to the JB City Centre in March 2024. Like Ms Tan, its founder Jasmin Tay said she is hopeful that overall spending in the area will increase as investments pour into Johor. Then there is the royalty factor as well. Businesses noted that it is advantageous that Johor ruler Sultan Ibrahim Sultan Iskandar, who is also the King of Malaysia, is supportive of the JS-SEZ too. CRUCIAL NEXT STEPS NEEDED However, for all the optimism and interest that the JS-SEZ have garnered, businesses said the zone must do more to address on-the-ground needs, especially if it is to succeed beyond the initial buzz. At the top of his wishlist is an express lane for business stakeholders and staff in the JS-SEZ, said managing director of Alpine Renewables Steven Chiang, as it would go a long way in avoiding lengthy delays at immigration checkpoints. An executive from Singapore-based nuts and bolts manufacturer Chin Yuan Metal, which has operations in Johor, agreed, adding that execution must match intent for the JS-SEZ. 'There is a need to further expedite customs clearance for both goods and people,' said operations director Nathaniel Lin. 'Critical for our competitiveness is obtaining timely approvals for import tariff exemptions.' Beyond mobility, the issue of incentives looms large too. Mr Peh of GoRental noted that while EnterpriseSG has a Market Readiness Assistance grant to help companies expand into new markets overseas capped at S$100,000, he wishes to see more incentives for Singaporean businesses to move to the JS-SEZ soon. Other businesses cited structural challenges such as local labour quotas. Mr Sky Chong, the managing director of precision machining firm New Way Synergies, pointed out the difficulty of adhering to the local-to-foreigner hiring ratios in Singapore and Malaysia. Special passes or hiring flexibilities, he argued, would help fast-growing cross-border firms scale more sustainably. Manufacturing players also flagged infrastructure and policy risks. Mr Sia of ATC said that he has experienced electricity and water outages at least once or twice a year in his manufacturing plant in Penang – a situation he hopes will not be repeated in Johor. On that front, he believes that steps to prevent such outages, which can be costly for businesses like his, will be taken. Mr Lin of Chin Yuan Metal also called for more clarity in Malaysia's local licensing and legal requirements, noting that 'greater streamlining and simplification … would significantly benefit manufacturers like ourselves'. Current tax incentives by MIDA could also be refined to incorporate a graduated income tax benefit system, Mr Chiang of Alpine Renewables suggested. While investments above RM500 million currently qualify for a 5 per cent tax rate, he proposed extending a 10 per cent rate to investments between RM200 million and RM500 million. Preferential personal income tax rates for expatriate employees for businesses based in the JS-SEZ could also help attract top-tier talent, Mr Chiang added. Finally, Mr Yap Wee Kee, a partner at professional services firm KPMG, noted that a recurring concern for Singapore-based businesses lies in the clarity and consistency of the onboarding and implementation process to the JS-SEZ. To alleviate this, Mr Yap suggested the development of an online 'step-by-step onboarding guide' that clearly outlines key application procedures, critical milestones and expected outcomes. 'This will enable firms to plan their market entry and expansion strategies with greater confidence,' he said. Amid these calls for improvement, most businesses said they are still 'cautiously optimistic'. Ultimately, the success of the JS-SEZ will be measured by the scale of foreign direct investment, growth in Johor's gross domestic product, job creation, population increase and wage gains compared to the rest of Malaysia, said Dr Chua the economist.
