It's been just over one year since Malaysian Prime Minister Mahathir Mohamad and his Pakatan Harapan coalition took office in a shock election upset that unseated the country's monolithic Barisan Nasional coalition. In the lead up to its electoral demise, the long-ruling coalition's credibility had suffered amid financial fraud allegations involving then-Prime Minister Najib Razak. But after more than six decades at the helm (in one form or another), Barisan Nasional's political roots run deep, harnessing extensive bureaucratic influence that its newly minted successor has yet to achieve. Since taking office in May 2018, Pakatan Harapan has already lost three state-level by-elections. The ruling coalition's approval ratings have also dropped significantly over roughly the same period, plunging from nearly 80 percent to just 39 percent in March.
Malaysia is a major player in Southeast Asia that has undergone a major political transition in the past year. As Stratfor highlighted in its 2019 Annual Forecast, monitoring such middle powers in Asia navigate the fallout of the U.S.-China trade war will be key in gauging the global impact of Washington and Beijing's escalating great power competition.
The government's inability to fully deliver on its promise of economic prosperity, as well as recent signs of internal discord, continues to dampen its legitimacy among voters. Meanwhile, the handover of power to a new prime minister in the years ahead risks crumbling the coalition's already fragile unity altogether. This, combined with looming global threats to Malaysia's economy, will further jeopardize the new government's ability to pass key aspects of its agenda, including targeted fuel subsidies and measures to attract greater investment. And that won't bode well for getting back in Malaysians' good graces, meaning the coalition's time in power will likely be short-lived.
Cracks in the Coalition
Pakatan Harapan's position in parliament is deceivingly strong. The four parties that make up the grouping hold a combined 129 out of 222 seats — bringing it just eight seats away from the supermajority needed to pass constitutional reform and command a decisive hand in legislation. In contrast to Barisan Nasional, however, Mahathir's coalition is more of an alliance of convenience than a unified political vision. Behind closed doors, internal divisions and its party members' troubled popularity limit its ability to govern as a cohesive force. Barisan Nasional, meanwhile, is slowly coming back to life. The long-reigning coalition now holds 40 of the remaining 84 seats in parliament, after gaining an additional 18 seats through its new alliance with the country's key Islamist party in March.
While there are still four years until the next national election is held until 2023, Mahathir's pledge to relinquish power to a handpicked successor by 2020 risks rifts in his coalition before then by shaking its already fragile sense of unity. Despite being prime minister and the head of the coalition, Mahathir's Malaysian United Indigenous Party (PPBM) is only the third-largest party in the ruling Pakatan Harapan coalition — holding only one-fifth of the grouping's seats. Mahathir's leadership standing is thus rooted in his party's alliance with the People's Justice Party (PKR), which holds the most seats of the Pakatan Harapan coalition. Mahathir initially promised the prime ministerial post to the PKR's president, Anwar Ibrahim, who served as deputy prime minister in the 1990s.
The Anwar handover is the linchpin to maintaining the coalition's unity. However, Mahathir has wavered on when exactly the transition would come. Rumors have started spreading that he is considering Azmin Ali, the PKR's deputy president, for the position instead. And these speculations have only been fueled by Mahathir's recent decision to appoint an anti-corruption chief who's a known critic of Anwar without first consulting the Cabinet — a move certain factions of the PKR have harshly criticized. Adding to the drama, Azmin has also become embroiled in a major sex scandal in recent weeks, which he says has been orchestrated by internal PKR opponents to smear his political standing.
Considering scandals have a long history of being used in Malaysian politics, Azmin's claim isn't necessarily ungrounded. The unfolding internal scandal may, indeed, be the result of acrimony among internal PKR factions. And as the handover of power edges nearer, continued disruptions inside Malaysia's ruling coalition could risk any remaining shreds of public confidence and governing power.
The Economy: The Saving Grace or Final Blow
In addition to internal disruptions, the economy also poses a key challenge to the ruling coalition's legitimacy. Public approval of the government's management of the economy has dropped from 60 percent to 40 percent over the past year, with inflation and cost of living listed as voters' top concerns.
Since taking office, the coalition has managed to fulfill several of its key campaign promises related to the economy. And there are signs that some of its moves — namely, capping fuel prices and repealing the unpopular goods and services tax — has, indeed, helped lower the cost of living for consumers. In January, the country's consumer price index fell for the first time in a decade and continued to drop in the following month. But laying aside fuels impacted by the cap, February also saw a 2 percent year-on-year rise in the prices of food, water, electricity, housing and some fuels.
Meanwhile, Mahathir's move to freeze megadevelopment infrastructure deals with Singapore and China (most notably, the China-backed East Coast Rail Link) shortly after taking office has had an adverse effect on the country's foreign investment. In 2018, overall foreign direct investment (FDI) into Malaysia dropped 13 percent from 2017 to $8.1 billion. In April, Mahathir resumed the East Coast Rail Link — a major railway that's a strategic part of China's massive Belt and Road Initiative — likely in the hopes of enticing back some of the lost investment dollars. His government even went so far as to pursue additional infrastructure cooperation with China shortly after by resurrecting the $34 billion Bandar Malaysia project that had been on the backburner under its predecessor.
These actions — along with an influx of manufacturing investment partly as a result of mounting U.S.-China trade tensions — have proven to have offered some economic relief. Malaysia's overall approved FDI rose more than 73 percent, hitting $7 billion in the first quarter of 2019 — $2 billion of which was allotted to the country's manufacturing powerhouse of Penang alone, which had its FDI spike over 13-fold from a year before.
The recent upticks in consumer spending and foreign investment have still made for a mixed economic picture overall. In the first quarter of 2019, Malaysia's gross domestic product (GDP) grew 4.5 percent, beating economists' forecast of 4.3 percent. But this is still a slight slowdown from the 4.7 percent GDP growth recorded in the last quarter of 2018.
Internal divisions, economic troubles and waning public support will limit the long-term success of Malaysia's new ruling coalition just one year after taking office.
Sustaining this economic momentum, however, will be key in order for Mahathir's government to consolidate power and amend its bleak approval numbers. But the looming global fallout from the United States and China's escalating trade war, along with declining global demand, will shadow prospects of continued economic growth. Suffice to say, the ruling coalition has its work cut out for it in terms of delivering economic prosperity and keeping its own house in order in the years ahead. Otherwise, its first term in office will almost certainly be its last.