FOR decades, Malaysia has been caught in a vicious cycle: a weakening ringgit, spiralling living costs, and an economy burdened by systemic corruption and external dependence.
While some point fingers at local mismanagement and others at global economic pressures, the root cause runs deeper – a legacy of financial subservience that has shackled Malaysia since its colonial past.
Under Prime Minister Datuk Seri Anwar Ibrahim, that cycle is being shattered, starting with a radical overhaul of Petronas and a bold push for monetary sovereignty.
1967: the sterling betrayal that started it all
Before Malaysia’s economy became entwined with the US dollar, it was bound to the British pound through the Sterling Area – a colonial monetary framework that tied Commonwealth countries’ currencies and reserves to sterling. This arrangement promised stability but left nations like Malaysia at the mercy of Britain’s economic decisions.
On November 18, 1967, that vulnerability was laid bare when the UK, led by Prime Minister Harold Wilson, devalued the pound by 15% against the US dollar.
For Malaysia, a young nation just two years removed from losing Singapore in 1965, the impact was devastating. Overnight, the Malaysian dollar, pegged to the pound, lost value, and the country’s reserves – held largely in sterling – shrank by an estimated 200 million (a massive sum at the time). Imports became costlier, inflation spiked, and the working class bore the brunt.
The devaluation was pitched as a boost to British exports, but for Malaysia, it was a unilateral economic assault – one it had no power to prevent or mitigate.
The hartal riot: economic pain turns to bloodshed
The fallout hit hardest in Penang, a trade-dependent state where merchants and labourers saw their savings and livelihoods erode. On November 24, 1967, a “hartal” – a general strike – was called to protest the government’s failure to shield citizens from this foreign-imposed crisis.
Shops closed, streets emptied, and anger simmered. But what began as a peaceful demonstration spiralled into violence. Clashes with police escalated into riots, marked by looting, arson, and ethnic tensions. Official records report 27 deaths and scores injured – an indelible scar on Malaysia’s history.
The Penang Hartal Riot wasn’t just about economic hardship; it was a visceral reaction to powerlessness. Malaysia gained political independence in 1957, but its economy remained tethered to a fading colonial power.
The lesson was clear: reliance on a foreign currency system invites disaster. Yet, instead of pursuing true monetary autonomy, Malaysia pivoted from sterling to the US dollar in the decades that followed – trading one master for another.
The dollar trap: Petronas and the Petrodollar
By the 1970s, the global rise of the petrodollar system – where oil trade was denominated in US dollars – locked Malaysia into a new form of dependence. As an oil-rich nation, Malaysia had a golden opportunity to leverage its resources for self-sufficiency.
Instead, it fell into a trap of its own making, with Petronas, established in 1974, at the centre.
Petronas was envisioned as a national champion, tasked with securing Malaysia’s energy wealth. But under Umno’s long rule, it morphed into a political tool.
Rather than building a robust domestic refining industry, Malaysia exported crude oil – often at low prices – to foreign refineries, notably in Singapore, only to import refined fuel at a premium. This arrangement drained potential revenue and left Malaysia vulnerable to global oil price swings. When prices soared, the government splurged; when they crashed, the economy faltered.
Worse, Petronas became a slush fund for Umno cronies.
Billions in oil revenue were diverted to inflated contracts, dubious overseas investments, and bailouts for politically linked firms – like the infamous 1MDB scandal, where Petronas funds were indirectly implicated.
A cartel of loyalists – executives, contractors, and bureaucrats – siphoned wealth while oversight remained lax, shielded by political influence.
The result? Malaysia’s oil riches enriched elites instead of fortifying the nation.
Anwar’s revolution: dismantling the cartel
Anwar Ibrahim, now at the helm, isn’t just tinkering around the edges – he’s uprooting the rot. His plan hinges on two pillars: dismantling the Petronas cartel and restoring the ringgit’s strength through economic independence.
The end of the Petronas gravy train
Anwar’s government is stripping Petronas of its political baggage. The days of it serving as Umno’s ATM are over. He’s slashing redundant divisions, imposing transparency, and redirecting profits toward national priorities – energy security, infrastructure, and economic diversification.
Recent moves, like cutting ties with unprofitable ventures and scrutinising executive appointments, signal a break from the past. This isn’t mere reform; it’s a purge of a system that prioritised party loyalty over the public good.
The backlash is predictable. Perikatan Nasional (PN), Umno’s successors in opposition, decry these changes – hardly surprising, given their roots in the old patronage network.
But Anwar’s resolve is clear: Petronas must serve Malaysia, not a political elite.
Energy independence: breaking Singapore’s hold
Malaysia’s reliance on Singapore for refining has been a decades-long embarrassment. Anwar aims to end it by expanding domestic refining capacity.
Projects like the Pengerang Integrated Petroleum Complex (PIPC) are being prioritised to process more crude locally, reducing the need to export raw oil and import costly fuel. If Singapore baulks at fairer trade terms, Anwar has hinted at tariffs on crude exports – a bold move to reclaim control over Malaysia’s resources.
This shift isn’t just practical; it’s symbolic. Malaysia will no longer subsidise its neighbour’s prosperity at its own expense.
The broader purge: cleansing the system
Beyond Petronas, Anwar is targeting the wider network of cronyism entrenched since Tun Dr Mahathir Mohamad’s era.
Government agencies are bloated with political appointees facing restructuring. The civil service, long a tool of Umno’s shadow state, is being realigned to serve the public, not sabotage reform.
This Ramadan, as Malaysians gather for Hari Raya, the chatter won’t just be about festivity – it’ll be about who’s next in the purge.
Restoring the ringgit: beyond inflation
The ringgit’s decline – hovering near 4.75 to the USD as of early 2025 – isn’t just inflation; it’s a symptom of a rigged system. Anwar’s dedollarisation push, starting with trade in local currencies like the ringgit and Chinese yuan, aims to reduce Malaysia’s exposure to US monetary policy.
By cutting dollar reliance and boosting domestic economic control, he’s attacking the structural roots of the ringgit’s weakness.
Malaysians have long felt the pinch of a falling ringgit, but Anwar’s plan reveals the bigger picture: this isn’t just about prices, it’s about a nation breaking free from foreign dominance and internal corruption.
This Ramadan will mark not just a celebration, but a turning point in Malaysia’s economic liberation. – March 3, 2025
Mudasir Khan or Tuan Muda is a young entrepreneur who is based in the US but calls Penang home