Falling Forward

Amid political chaos, is Malaysian democracy finally finding its feet?

Malaysia, the third-largest economy in Southeast Asia, will hold a general election on 19 November. This will be the first time the country has voted since its historic 2018 election, which saw the long-ruling Barisan Nasional (BN) party removed from power. BN leaders have been accused of systemic graft, perhaps best exemplified by the 1Malaysia Development Bhd (1MDB) corruption scandal. BN's former leader and prime minister (2009-2018) Najib Razak is currently serving a 12-year jail sentence for his role in the 1MDB scandal.

But the four years since can hardly be earmarked as a period of political stability for Malaysia: the Pakatan Harapan (PH) government which voters elected to take over from BN collapsed from infighting after just 22 months. The country has since been in a state of turmoil that has cycled through three prime ministers. Despite facing a cynical electorate, the changing political dynamics have also created an opportunity for Malaysia: consensus decision-making.

How did Malaysia get here?

Following the collapse of the PH administration, lawmakers from both PH and BN defected from their parties to cobble together a government, in what many considered a political coup. This coalition crumbled in August 2021, fuelled by more infighting and public anger over its poor handling of Malaysia's COVID-19 response. In an attempt to maintain a semblance of stability at the height of the pandemic, PH and BN leaders subsequently agreed to install the BN politician Ismail Sabri Yaakob as a placeholder prime minister.

Malaysia’s political divisions are no longer as clear-cut as they were in 2018. Whereas the last election was a straightforward fight between BN and PH, the upcoming vote will see three coalitions jostling for power. BN and PH are still in the mix, but now also have to contend with Perikatan Nasional (PN) – a loose coalition of what remains of the makeshift government that briefly led Malaysia prior to Ismail Sabri.

Recent polling suggests that public support for these three coalitions is evenly split. Observers are not expecting any group to emerge with an outright win, and some are even expecting voters to deliver a hung parliament. The investor community is also bracing for this possibility: after the election was called, Malaysia’s stock market saw its largest single-day drop in 2022. Investors are concerned that political turmoil could mean Malaysia remains directionless in the short term; it could also slow long-term growth prospects for the country as it faces global economic headwinds.

Progress amidst chaos

However, a scenario where the three coalitions continue to be deadlocked may not be entirely bad news for Malaysia. Rather, this situation would force opposing factions to work with each other to govern the country on a more level playing field. A hung parliament in November would show that a single Malaysian political class can no longer rule with absolute autonomy, and will force lawmakers to recognise the political legitimacy of opposing parties and make compromises.

As fraught as the last few years have been for Malaysia, it has also revealed some glimpses of what consensus decision-making may look like. The unstable governments with razor-thin majorities have been forced to make concessions with the opposition, creating some breakthroughs in the country’s governance and transparency.

For example, the Ismail Sabri administration is the result of a confidence pact between BN and PH leaders. BN has agreed to implement some PH reforms that it previously opposed. These include passing a new law mandating judges and senior executives of state-owned entities to publicly declare their assets, and proposed legislation for a regulatory agency to oversee political donations. In a rare show of bipartisanship, BN and PH also passed a bill preventing elected federal lawmakers to defect from their political parties.

The parliamentary deadlock also resulted in no political party being put in charge of Malaysia’s Finance Ministry. The institution is now run by a non-politician veteran investment banker who – like Ismail Saabri – was selected by consensus from all factions. Further, Najib’s conviction under Ismail Sabri’s tenure has been seen as an indication that his allies, who are in the incumbent government, have been willing to make significant compromises in the interest of sharing power.

Historically disenfranchised groups from eastern Malaysia have also found new political leverage. With parliament deadlocked, minority leaders from underdeveloped Sabah and Sarawak are now seen as kingmakers in the November election. In December 2021, Sabah and Sarawak leaders already successfully lobbied for amendments to Malaysia’s constitution to give their states more autonomy over natural resources. These changes have long-stalled under the BN and PH governments, as they were considered politically unnecessary – until now.

Learning to live with each other

The 2018 election set Malaysia on an uncharted course from single-party rule to full democracy. The current landscape is showing signs that this democracy, while chaotic, is maturing. Political elites are scrutinised more than ever, and their horse-trading has resulted in breakthroughs for transparency and governance.

In addition, Malaysian financial regulators have now been able to set policy independent from politicians. Through the pandemic, the country’s central bank adopted various pragmatic interest rate hikes – that were unpopular at the outset – but have been seen as crucial in keeping Malaysia resilient amidst global inflation. In early November, Malaysia posted its first double-digit quarterly GDP growth since the pandemic, beating international forecasts.

Malaysian lawmakers have to demonstrate to investors and markets that they are able to walk the fine line between advancing its democratic experiment and ensuring that the chaos that comes from it does not hamper economic growth.