Watershed Elections Could Mark a Political Transition in Malaysia

April 5, 2013

Almost two years of speculation about pending elections in Malaysia ended on April 3 when Prime Minister Najib Razak dissolved the parliament, paving the way for what promises to be the tightest elections since the country achieved independence in 1957. Malaysia’s Election Commission is expected to set a date in late April for the balloting. Most observers believe the ruling coalition will eke out a victory, but it is possible that the opposition could win a narrow majority for the first time.

The elections could determine the speed of political and economic reform in Southeast Asia’s second-wealthiest nation per capita. Even if the opposition loses the election but increases its representation in the parliament, Najib’s efforts to liberalize the economy and political system could be slowed, and he will almost certainly face a leadership challenge from within his party. 

Najib’s dissolution of the parliament had been expected for months, and its delay created uncertainty within the business community and a widespread perception that the ruling coalition was uncertain how it would fare against the opposition led by former finance minister Anwar Ibrahim. Malaysia’s stock market, one of the weakest performers in the region this year at least in part because of uncertainty about the elections, responded to the dissolution of the parliament with jitters. It fell 1.2 percent in the hours after Najib made his announcement before rebounding to close near its starting point.

In the last elections in 2008, the opposition snared 82 of the 222 parliamentary seats —for the first time denying the ruling coalition the two-thirds majority it needs to change the constitution—and took control of five of the country’s state assemblies. The loss of support among the country’s majority ethnic Malays prompted the United Malays National Organization (UMNO), which dominates the coalition, to oust former prime minister Abdullah Badawi and appoint Najib. 

Najib launched a series of political and economic reforms, including moves to repeal the draconian Internal Security Act that allowed detention without trial. He announced economic reforms intended to pull Malaysia out of the middle-income trap, improve government transparency and services, and reduce costly subsidies on fuel and food. The prime minister worked hard to improve relations with the United States and joined the Trans-Pacific Partnership trade negotiations with the United States and nine other countries to help stimulate domestic economic reform.

Many of Najib’s reform efforts have been opposed by a conservative faction within UMNO that is determined to block any rollback of the pro-Malay affirmative action policies introduced in 1971.

When announcing the dissolution of the parliament, Najib warned that the reform agenda will be affected by the outcome of the elections. “If we do not keep up the pace of reform, we risk losing out,” he said. Najib called on voters to return his coalition to power so that it can complete his more than $400 billion Economic Transformation Program, which he says will turn Malaysia into a developed economy by 2020.

The opposition coalition—made up of Anwar’s People’s Justice Party, the conservative Pan-Malaysian Islamic Party (PAS), and the largely Chinese-supported Democratic Action Party (DAP)—garners much of its support in urban areas, from minorities, and among young people. The opposition has promised to boost government transparency and replace the race-based affirmative action policy with a needs-based safety net. Many Malaysians appreciate the opposition’s exposure of government corruption scandals and its calls to ease limits on civil liberties.

There do not seem to be large economic or foreign policy differences between Najib and Anwar, a former deputy prime minister. Anwar was seen as pro-West, friendly with the United States, and a proponent of free-market principles and foreign investment when he was in government. 

The opposition has implemented pro-business policies in the country’s two most economically vibrant states, Selangor and Penang, which it took over in 2008. But the coalition’s strong opposition to an Australian-owned rare-earths plant in Kuantan has raised some questions about its views on foreign investment. 

One of the concerns among foreign investors is whether the opposition’s three component parties, especially the conservative Islamic PAS and the secular Chinese-dominated DAP, will be able to develop unified economic policies and govern effectively if they gain power. These fears are likely overblown, as the parties have done reasonably well running the states they have controlled since 2008.

A poll in February by the Merdeka Center found Najib’s personal approval rating at 61 percent, down 4 percent from November 2012. However, the ruling coalition’s approval was only 45 percent, while support for the coalition among ethnic Chinese, who make up a quarter of the population, stood at 34 percent. Tackling corruption is the first or second priority for 51 percent of voters, according to polling by the Merdeka Center. The next priority is the rising cost of living.

One of the key uncertainties about the elections is how young people will vote. Voters under 30 make up a quarter of Malaysia’s 13 million voters. Some 3 million young people, roughly one-tenth of the country’s population, have registered to vote for the first time. 

Over the past year, Najib launched a series of handout schemes to boost support among lower-income workers, people in rural areas, and government employees. Just days before dissolving the parliament, he announced a $300 bonus to the 40,000 employees of the state-owned oil and gas company.

Some opposition members and analysts speculate that the ruling coalition will be reluctant to hand over power if it loses the elections. Najib addressed this directly in his television address, saying, “If there is any transition in power…it will be done in an orderly and peaceful manner.” For the first time since independence, that transition is a possibility.

(This Commentary originally appeared in the April 4, 2013, issue of Southeast Asia from the Corner of 18th & K Streets.)

Murray Hiebert is senior fellow and deputy director of the Sumitro Chair for Southeast Asia Studies at the Center for Strategic and International Studies in Washington, D.C.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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