Business and investment in Thailand and Malaysia have been slow in the first half of 2023. To be fair, growth across the entire region has been less than hoped for, but in both countries, there were more than economic factors at play. After indecisive election results, questions about political stability clouded prospects.
The Malaysian elections last November produced no clear winner even if a “unity government” was cobbled together under Prime Minister Anwar Ibrahim. Many looked to elections in six states as something of an early referendum on whether the new combination might be durable. For Thailand, the May 2023 election results clearly favoured pro-democracy parties over those aligned with the military and establishment. Yet, efforts by the biggest vote winner – the Move Forward party – were stymied.
Now, state elections in Malaysia are over, and there is a government in Bangkok, endorsed by Parliament, Senate and the King. Are conditions right for these two neighbours to focus on growth? Or are the politics still unstable?
Thailand’s post-election compromise
When pro-democracy parties won decisively in the Thai elections, some viewed the results as a revolution by the ballot box. Yet my analysis in BT (Thai elections: Voting done, now more politics) just two days after the elections was that Move Forward – while enjoying widespread popularity – would struggle to be accepted as the new government. In contrast, I took the view that Pheu Thai – which polled second-highest – would be amenable to compromise.
Events have moved in that direction. The new prime minister, Srettha Thavisin from Pheu Thai, has cast off the initial partnership with Move Forward and will now work with pro-establishment and pro-military parties. This leads some to see the situation as a triumph for Pheu Thai’s patron, former premier Thaksin Shinawatra, who has now returned from exile.
This is no doubt significant. Yet what is emerging is not a triumph for any one side but a compromise. The Thai establishment which was outvoted in the elections has pushed back.
How? A bargain is needed for Thaksin’s return for the first time since the coup of 2006, and to deal with the legal convictions imposed on him in absentia. Another factor is that the Pheu Thai did not do as well in the elections as expected. Back when Thaksin was PM, the party dominated with an outright majority; now, it does not have that power.
If the new coalition government has a single colour, it is not red. It is instead, mingled with yellow, a shade of orange. That is not what many wanted – and compromise runs risks.
The elections strongly signalled that voters wanted change and, in Bangkok, Move Forward won almost all seats. Frustrated and angry supporters could stage protests. From within the Pheu Thai too, strife and internal division could surface from deeper “red” elements who see no reason to compromise.
Stalemate and after
In Malaysia, voting at end-2022 yielded no clear winner, and the recent state elections are similar. The Opposition gained seats and did make inroads in Selangor and Penang – key and prosperous urbanised states. But they won only those states they already held, and there was no strong swing in their favour. Some suggest that this shows the limit of what was feared to be a pro-Islamic wave.
Even so, this is more a stalemate than real stability. Consider the results for the United Malays National Organisation (Umno), once the dominant force in the country, and still a key component in the “unity government”. Its traditional appeal to the Malay ground all but evaporated in some states. There are calls within the party to replace incumbent leader Ahmad Zahid Hamidi.
As Zahid is deputy prime minister and Anwar’s key ally within the party, his ouster would have implications for the ruling coalition. Recall that Umno and the Pakatan Harapan alliance that Anwar leads are long-time opponents, and only recently wedded for convenience.
The state election results also show limits to PM Anwar’s own appeal. Despite the charismatic premier spending considerable time and focus on campaigning, few Malay Muslim voters were won over. With state elections concluded inconclusively, the next question is whether the coalition in power can switch from the campaigning mode of the last months and focus on governing.
The Budget to be presented and debated in November will be watched for efforts to deal with low growth rates, poverty and needs that persist from the pandemic years. PM Anwar has talked about a “madani” concept to become a leading Asian economy while offering people a better quality of life.
Details are, however, scant and budgets limited. Watch, too, for focus and energy across ministries headed by different coalition partners. The hope is that the politicking between and within parties over these last months will ebb into background noise.
Similar challenges face the new Thai government. The outgoing government has done too little to spur recovery after the impacts of the pandemic. Plans for a digital economy and the Eastern Economic Corridor have not moved significantly. Tourism, too, has not returned to pre-pandemic levels.
Performance and coordination across the coalition led by new PM Srettha will be watched. Coalition politics can make cross-cutting issues such as the digital economy particularly hard. Controversial policies can result too, as with cannabis that was legalised during the outgoing administration at the behest of the Bhumjaithai Party, again a major component in the incoming government.
While leading, Pheu Thai must show accommodation of others, especially when establishment interests may be affected. The influence of Thaksin as party patriarch will be especially scrutinised. Despite the current compromise, there is still little trust from past record that he will be conciliatory and prudent.
Post-pandemic reform
While challenges are considerable, Thailand and Malaysia may be consoled that they are not alone. Post-pandemic, growth in almost all the regional economies has been slow. Corruption and other controversies have also surfaced in countries that are usually stolid and almost boring, including Vietnam and Singapore.
In both countries, institutions and systems are responding. For Singapore, the emphasis has been on transparency, even at the risk of risque news rippling in the short term. For Vietnam, anti-corruption measures are said to slow down some decision-making processes. But the country remains attractive to those willing to be patient.
Ultimately, investors do not require absolute stability and accept risks relative to the potential return. Our region continues to outperform, and most companies can accept a rough and turbulent patch – like when a pilot tells airline passengers to secure their seat belts. But turbulence cannot be prolonged or accepted as normal.
Thailand and Malaysia have not descended into revolution and unrest. But both countries face social cleavages and continuing political contestation, traversing quite uncharted and potentially bumpy territory. Stability, reform and policy implementation will bear re-emphasis. The compromise coalition governments that have emerged will have to move beyond stalemate to show real movement forward.
Simon Tay is chairman of the Singapore Institute of International Affairs (SIIA).
This article is part of a series of SIIA column on “The Politics that Matter to Business” for The Business Times. It was first published on 29 August 2023.
