Thompson Chau

Malaysia’s political tsunami

May 15, 2018 / KUALA LUMPUR
Malaysia Najib Razak Mahathir Mohamad Barisan Nasional Elections South-East Asia ASEAN Economy Robert Kuok Tony Fernandez Bridget Welsh Pakatan Harapan

“What a stunning upset for the old guard and a historic win for the opposition. Democracy is massively on the back foot in Southeast Asia these days. Nice to see some actual change via ballot,” the AFP's Asia Pacific Editor mused on May 10, the day after the country’s 14th General Election. Such was the mood domestically, regionally and internationally.

Mahathir Mohamad, 92 and a former strongman ruler of Malaysia for 23 years until 2003, came out of retirement to challenge Najib Razak, the incumbent prime minister. On May 9, Mahathir’s alliance of opposition parties won the election, snatching the parliamentary majority from Najib’s ruling coalition Barisan Nasional (BN).

The shocking victory of the opposition party, and the peaceful transfer of power at the federal government, in a country where one single political party has ruled for 60 years since independence in 1963, are unprecedented and historic. In fact, what happened in Malaysia is the only bright spot in a region where authoritarianism is creeping back. Cambodia, Thailand and the Philippines are rolling backwards, while Burma, which recently celebrated its first democratic transition of power, saw its political honeymoon cut short by the Rohingya crisis. Malaysia brings back hope that democracy might prevail in the end.

With widely reported gerrymandering, an entrenched patronage network, cronyism and the government’s resource advantage from handouts to vote-buying, hardly anyone expected the shock result in Malaysia. An official who worked on Najib’s campaign observed that his camp had been sure of victory several days before the vote, according to Reuters.

Ultimately, the groundwell of electoral support reached an extent to which it overcame the heavily skewed electoral system. James Chin from the University of Tasmania said Najib had "finally run out of tricks". The reasons are as political as they are economic. Discontent over the government’s goods-and-services tax (GST), the scandalous 1MDB, anger at the perceived selloff of Malaysian land on unfavourable terms and frustration at being left behind by the country’s economic growth. Millions of Malaysians, Bridget Welsh from John Cabot University argued, voted to say "enough is enough" of Najib Razak. The ballot box as well as the peaceful transfer of power, by no means inevitable, revealed that elites and ordinary citizens alike recognised that Malaysia's economic future relies on maintaining the country’s democracy.

How will the 92-year-old patriarch of modern Malaysia work with his diverse coalition to bring about change? Will the old patronage system and cronyism give way to fairer economic policies and new priorities?

One thing is certain. The change in government shows that the political machine is no longer as absolute in its dominance as it had been (or perceived to be). Businesses and investors will unlikely to throw all their bets on one faction to appease an invincible leader. Tony Fernandes, chief of the Malaysian budget carrier AirAsia, publicly apologised earlier for backing Najib and painting his planes in BN colours with BN campaign slogans. Such an embarrassing U-turn is a reminder that the patronage network has its flaws and faults.

Already, the international media are speculating how the new administration will change the regional trade and investment dynamics, especially as Chinese investment in the Islamic country ran high as Najib Razak tapped into Belt and Road Initiative-led capital from Xi Jinping. Now, the new prime minister has committed to renegotiate "unequal treaties" with China.

The Economist Intelligence Unit placed Malaysia as the fourth-largest recipient of China's overseas direct investment in 2017, covering major port and rail projects. Mahathir has thrown in doubt the future of the BRI-led East Coast Rail Link in peninsular Malaysia, which is a core project for the BRI connectivity blueprint, and criticised another landmark China-funded residential project in Johor.

China's influence is not just limited to the hardware. Jack Ma's Alibaba launched a Digital Free Trade Zone last year - the first of its kind in ASEAN - to turn Kuala Lumpur into a regional logistics hub, capitalising on e-commerce markets in the Association of Southeast Asian Nations (ASEAN), a regional bloc comprising ten Southeast Asian countries which aspires to imitate the EU’s single market. Another focus will be economic partnerships between the country and Singapore, where most multinationals and law firms locate their regional headquarters.

Malaysia’s annual economic growth slowed to 5.4 percent in the first quarter of this year, while the new government are in the process of revamping the policies. The new prime minister has already announced plans to scrap the GST, reintroduce a sales tax and fuel subsidies as well as undertake a review on infrastructure projects signed off by his predecessor. The new political leadership also campaigned for scaling up technical and vocational as well as tertiary education, which is a sector foreign expertise can play a big part. The long game would be about making economic growth inclusive and delivering economic opportunities which are fairer for all Malaysians, regardless of their race.

Reassuringly for investors, Mahathir set up an economic advisory council and appointed numerous respected figures, including the Malaysian-born billionaire Robert Kuok, whose business empire spans the entire continent, from Shangri La hotels to the Kerry group. This is a sign that the new government is serious about reforming the economy but prizes continuity over abrupt and radical changes.

As high politics and corruption probe put Malaysia back on the map, investors and businesses abroad will be looking at how this political tsunami transforms the country, the region and beyond.

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