After the electoral tsunami in Malaysia, a sea of challenges for the new regime

An electoral tsunami swept away Malaysian Prime Minister Najib Razak, ending 60 years of rule by the United Malays National Organisation or UMNO. The outcome was welcomed at home as well as abroad – viewed as a democratic system asserting itself against corruption and erosion of the rule of law and perhaps presaging the decline of race-based politics.

Enthusiasm, though, is tempered by questions about the new ruling government – a disparate four-party coalition headed by 92-year former Prime Minister Mahathir Mohamad, a former physician with a limited record of compromise. Will the coalition hold? Will it attack corruption generally or focus on the ousted government? Will economic policies be populist or pragmatic? Will racial and religious harmony improve? Will foreign policy, particularly towards China, change?

The tsunami resulted from a mixture of factors including Mahathir’s personal appeal, economic grievances straddling all races, comprising Malay, Chinese, Indian and others; a desire for more inclusive politics particularly among urban Malays, as well as resentment against greed and arrogance of UMNO leadership. Any of these elements could guide the future. Race and religion-based politics remains alive, indeed represented by Mahathir himself as creator of the Malay Parti Pribumi Bersatu Malaysia, a breakaway from the UMNO he led for two decades. Although his party has only 12 of the coalition’s 113 seats, Mahathir’s personality dominates for now.

Delicate balance

The coalition’s cohesion and durability will be determined in large part by relations between Mahathir and his former deputy Anwar Ibrahim. The party Anwar founded, Parti Keadilan Rakyat or PKR, won the largest number of coalition seats and is currently led by his wife. The king pardoned Anwar, who was released May 16 from jail after being found guilty of dubious sodomy charges. Anwar will not return directly to politics in the short term, stating he is content for Mahathir to lead so long as the government prioritises reform issues including corruption and the administration of justice.

Mahathir has promised to pass leadership to Anwar within two years – a long time in Malaysia’s now volatile politics – and Anwar and his team may try to bring their policies to bear soon. In principle, the PKR should be able to work with the second largest party, the predominantly Chinese Democratic Action Party. But PKR must also protect its position among the Malays, be they nationalists like Mahathir or Islamists like Amanah, the coalition’s fourth member, as well as a potential UMNO revival. PKR may have to contend with policies favouring majority Malays who are overwhelmingly Muslim while non-Malay expectations of a shift away from racial preferences must also be met. Growing social and educational divides and religious intolerance require reversal.

The racial question relates directly to an economy held back by an exodus of capital and talent caused by preferences. In turn, government spending financed by borrowing has boosted economic growth. The pattern could continue, at least in the short term, as the government has already fulfilled a promise to abolish the unpopular goods and services tax introduced by Najib. Addressing this problem now falls to leader of the Democratic Action Party, Lim Guan Eng, the first Chinese chosen to be finance minister since the 1970s – though he must first face corruption charges brought by the ousted government. As a successful chief minister of Penang state, Lim is well regarded by the business community as a reassuring figure for those with memories of crony capitalism during the Mahathir era. He must also fend off pressures for more spending and replace lost revenues.

China ties

Current high oil prices will help, and so may new scrutiny of huge infrastructure projects including rail and port projects financed by massive Chinese loans, part of the Belt and Road program. Critics accused Najib of kowtowing to China, which had helped bail out 1MDB, the multibillion-dollar scandal-ridden state investment company, by buying some assets at generous prices. 1MDB – under investigation by authorities in Singapore, the United States and Switzerland – may now be subject to scrutiny in Malaysia.

Infrastructure projects provide fat contracts for some local firms. Others complain that China’s state companies get the bulk of benefits and import Chinese workers. While the money is welcome, some Malays express concern about an influx of migrants. More generally, Malaysia wonders whether, as a capital surplus country, it should rely on foreign money for projects like housing for which foreign technology is not needed.

Malaysian Chinese also have mixed feelings about China’s rise and Belt and Road projects – the economic spur offers a potential antidote to “bumiputra” policy of preference given to ethnic Malays, but the display of wealth and power stirs Malay resentment. The new government will likely continue welcoming Chinese money while being more discriminating. Some China-backed projects could fall foul of anti-corruption investigations.

Suspicions of China are unlikely to have much impact on foreign policy. Although Malaysia’s maritime area comes well within China’s claims in the South China Sea, the government has kept a low profile. China, while taking military action against Vietnam and the Philippines, has left Malaysia alone. This is unlikely to change, at least so long as the Philippines remains supine in the face of Chinese encroachment, and the Trump administration continues to undermine regional confidence in the United States. Likewise, no new direction in defense policy is expected in the near term. Defense Minister Mohammad Sabu, leader of the Islamist Amanah party and not known for prior interest in the topic, will likely focus initially on uncovering arms-deal kickbacks. Modernization of the navy may get more attention, but budget pressures will constrain big-ticket purchases.

Waters subject to Chinese claims are off the east Malaysian states, Sabah and Sarawak, neither predominantly Malay nor, in the case of Sarawak, Muslim. The election showed a sharp rise in the appeal of parties demanding more local autonomy and a fair share of state resources. Once in the UMNO pocket, they may flex their muscles.

In the neighbourhood

Malaysia’s neighbours have varying perspectives. Singapore had good relations with Najib and is wary of Mahathir, but was well aware of corruption’s threat for Malaysia. Prime Minister Lee Hsien Loong will be the first foreign leader to meet Mahathir as prime minister. Singapore may worry about the new government’s stability, but hopes for a more balanced ethnic composition. Lee may also hurry to choose his successor, scheduling an election before rebellious “me too” ideas penetrate his electorate.

Thailand’s ruling generals may see Malaysia as reason to delay long-promised elections. Mass discontent can overwhelm even the stoutest constitutional barriers to free and fair democracy. Alternatively they may assume that an early election could cement their power before the opposition gains momentum. Hopes for a return to the rule of law and judicial independence in Malaysia was well received in the Philippines by critics of President Rodrigo Duterte.

Indonesia’s President Widodo, facing an election in 2019, may feel most comforted. His personal popularity could yet be overwhelmed by big-money backed opponents mobilizing Islamic and anti-Chinese sentiment. Malaysia has shown that such tactics may not work and that anti-corruption efforts win votes.

UMNO’s fall is the biggest event in Malaysia’s political history since the 1969 racial riots or the 1965 separation of Singapore from the Federation – and may lead to fundamental changes in the structure of politics, a revival of state institutions or reshuffling of the party pack. Much depends on harmony between Mahathir and Anwar, which in turn hinges on whether Mahathir acknowledges that seeds of corruption and abuse of the judicial system were sowed during his previous premiership. The new coalition’s name, Pakatan Harapan – Alliance of Hope – sums up popular expectations that the tsunami sweeps away not just UMNO leadership but systemic sleaze.

This article first appeared on Yale Global Online.