[Premium] Chairman’s Note (02/2019) – Malaysia’s Ongoing Storm

July 2019 |

Some 15 months after the surprise victory by the Pakatan Harapan (PH), I thought to share some observations about emerging developments in Malaysia. This is especially as the Parti Keadilan Rakyat (PKR), the biggest party in the Dewan Rakyat with 50 seats, is rocked by the sex video scandal implicating Economic Affairs Minister Azmin Ali. This is not the only sign of division and there are increasing concerns about the cohesiveness of PKR and PH going forward.

I recently met with influential members from a range of parties – the PKR, the Democratic Action Party (DAP) and the United Malays National Organisation (UMNO) – as well as a key advisor to Prime Minister Dr Mahathir Mohamad. Drawing on my discussions with these various sources, I would like to share some observations with you on a confidential basis, as our member and friend.

1. Euphoria Over, Pakatan Struggles: Public support for the PH has fallen. Government insiders can point to a number of new and worthy initiatives, but overall the public and media attention focuses on gaffes and shortcomings. The opposition Malay parties – UMNO and Parti Islam Se-Malaysia (PAS) – are working together and snapped up three consecutive by-election victories earlier this year. While polls vary, lower public support levels seem to affect Dr Mahathir too.

2. Cooperation for Voting Age Change: The recent step to lower the voting age to 18 was popular and showed bipartisan cooperation. In contrast, an earlier Bill to amend the status of Sabah and Sarawak in April had failed to gather the required two-thirds majority. This however is not because of a fundamental change in relations between PH and the Opposition; each side believes they gain from the change, especially UMNO and PAS. With the new automatic registration of voters, up to 3.9 million new Malay voters could be added, boosting these parties for the next elections. For these young voters, moreover, the Opposition believes that the Najib factor will fade, replaced by the current criticism against the PH government.

3. Axes of Confrontation: Politics as a whole, and especially for the Malay ground, is focused on two main rivalries involving the biggest political names. The first concerns former Prime Minister Najib Razak and the prosecution pursued by the government, with many seeing a personal push by Dr Mahathir for a court conviction. A second axis is between Dr Mahathir and PKR President Anwar Ibrahim, as doubts emerge about succession to the top job, as earlier promised. Both rivalries are being played out in a mixture of sensational headline news and behind-the-scenes manoeuvring. A number of political players stand on the sidelines as “the elephants make war”, while others are proxies.

4. PKR’s Civil War: The PKR internal elections in late 2018 can be seen in this light, with an all-out contest for the Deputy President post serving as a proxy battle. With Anwar supporting Rafizi Ramli and Dr Mahathir seen to have instigated Azmin Ali, the contest was ugly and divisive, with vote buying and rigged ballots. The loss of Rafizi, although he remains a PKR Vice President, was a blow to Anwar, who may shift his support to other loyalists to combat Azmin.

5. The Sex Video Scandal: The intra-PKR conflict escalated and accelerated with the sex video scandal. While Anwar called for Azmin to resign if he was positively identified in the video, the police currently remain unwilling or unable to make such an identification. Anwar has publicly accepted the police findings. In response, Azmin has openly accused “certain people” in his party of creating the video with a “political agenda”. In this sense, the episode is rebounding on Anwar. His political secretary was arrested as part of the investigation, though he was later released. Azmin’s supporters showed solidarity and strength by skipping the PKR leadership retreat on 20-21 July. The police claim to know the identity of the “political leader” who masterminded the video, those it remains undisclosed. If there is proof that Anwar or those closest to him are involved, implications can be severe. Given Anwar’s previous protestations of innocence when he was similarly accused, being involved in a fix-up scheme can erode his support, even among those who have stood by him for many years.

6. Intra-PH Frictions: Within the PH, the DAP is relatively united and more actively working with the Dr Mahathir-led government. In this sense, there are some in the PKR who feel DAP are indifferent to whether Anwar does become PM, rather than helping uphold the initial understanding. There are tensions, moreover, with the PKR. Although the PKR and the DAP have similar numbers of ministers in Dr Mahathir’s cabinet (7 and 6), the DAP controls more coveted ministries such as Finance and Transport. This, added to PKR’s own internal issues, is impacting PH cohesion.

7. UMNO’s Future: UMNO has come under a lot of pressure from different directions. As we predicted immediately after the election result, there have been a number of “defections” to Dr Mahathir’s party, Parti Pribumi Bersatu Malaysia (PPBM). UMNO now holds only 37 seats; down from the 54 that it won in the General Election. While cooperation with PAS has led to by-election victories, there is an internal debate about the longer term and the need for reform. This underscores a proposed constitutional amendment to expel members who were convicted of crimes. The amendment was dropped in June and followed by the return of Ahmad Zahid Hamidi as President, despite him facing 87 charges. Similarly, while pending trial, Najib has been appointed chairman of the Barisan Nasional (BN) advisory board. Some like former Minister Khairy Jamaluddin have voiced concern. But Khairy and others remain in the party and will try to set out a progressive, secular agenda. As such, UMNO is very much in flux.

I do not mean to be pessimistic. Malaysia is growing at a good rate, even though its base of resource exports is facing low prices and market pressures (e.g. palm oil).  Manufacturing has also benefitted from diversion in the Sino-American trade war; with Penang especially doing well with some US$2.1 billion invested, an almost 8-fold increase year-on-year. There are reasons to consider investment.

However, the political signs are a concern. The exact headline events are perhaps impossible to predict at this stage. But the initial promise of a handover within two years to Anwar sets an expectation and timeline. Within the next months, it is likely that political competition will heat up further, with coalition and intra-party divisions and personality-driven battles. The more cautious may therefore engage but take a wait-and-see stance into the end of the year.

I hope this is of interest to you. May I ask that you keep this confidential? We continue to enjoy good access to a range of political actors and I do not intend to make my views public.

We remain committed to engaging with prominent Malaysians, and are seeking funding for a programme to promote a foundation of trust between Singapore and Malaysia.

I would be happy to hear your views.