Introduction
The Barisan Nasional (BN) coalition has been in power, since the establishment of the Federation of Malaysia on September 16, 1963, until the 14th General Elections held in 2018. The United Malays National Organisation (UMNO) which is the founding member of the BN remained the dominant party, with all Malaysian Prime Ministers belonging to the party. The political dominance became more entrenched under the leadership of Prime Minister Mahathir Mohamad.[i] Under his administration (1981-2003) Malaysia witnessed strong economic growth which helped reduce inter-ethnic disputes, which characterised Malaysian politics during the 1970s and 1980s. This provided a strong material base for political stability in a plural society.[ii] Under the BN coalition, close cooperation with other non-Malay parties – part of the ruling BN coalition – helped overcome political vulnerabilities which also had a positive impact on the economy.[iii] In the end of the 20th and the 21st century, the Asian Financial crisis of the late 1990s and the Global Financial Crisis of 2008 impacted Malaysia’s growth rate which has since then not recorded the pre-crisis level. Further, the onset of the COVID-19 pandemic reduced its export-led growth and investments. While managing the socio-economic impact of the related economic downturn, the political instability witnessed since February 2020, made the successful revival of the economy under strict COVID-19 lockdown a challenge.
From a New Political Alternative to Turmoil
The result of the 14th General Election in Malaysia declared in May 2018 was a major surprise, as the ruling BN coalition headed by the UMNO, lost for the first time since Malaysia’s independence. In these elections Dr Mahathir Mohamad returned as the 7th Prime Minister after the victory of his coalition the Pakatan Harapan (PH) – formed after the 2013 general elections – comprising the left and left-centred parties that included the People’s Justice Party (PKR), the multi-racial Democratic Action Party (DAP), the progressive Islamic National Trust Party (AMANAH), and the racially exclusive Malaysian United Indigenous Party (PPBM or BERSATU).[iv] On February 24, 2020, Mahathir resigned as the Prime Minister and along with him his party the PPBM and the PKR withdrew from the PH coalition - reducing its majority in the Parliament. This led to the formation of the Perikatan Nasional (PN) in February 2020, which was a coalition comprising of the PPBM, Malaysian Islamic Party, Homeland Solidarity Party, Sabah Progressive Party, and Parti Gerakan Rakyat Malaysia. Its Chairman Muhyiddin Yassin was appointed as the 8th Prime Minster of Malaysia and while it did not have a majority in the Parliament it had outside support from the UMNO.[v]
Muhyiddin Yassin tenure in office right from the start was on a shaky ground as the ruling coalition had a fragile majority in the Parliament. This often led to questions being raised on its legitimacy. Further, the onset of the COVID-19 pandemic with deep impact on public-health and the subsequent economic crisis, felt across the country ensured the inevitability of a constitutional crisis. On July 8, 2021, UMNO President Ahmad Zahid Hamidi, reflecting on the rising anger in the country on the handling of the government’s pandemic response, stated that the party would retract its support and called for the installation of an interim Prime Minister.[vi]After weeks of the opposition mounting pressure and eleven UMNO MPs withdrawing their support to the government on 3 August 2021 Prime Minister Yassin – in office for eighteen months – had to step down as the ruling PN coalition lost its majority. On August 16, 2021, Prime Minister Muhyiddin Yassin tendered his resignation to the Malaysian King, Sultan Abdullah Ahmad Shah. [vii]The pie diagram below depicts the composition of the Malaysian Parliament after the withdrawal of support of eleven UMNO MPs. The ruling PN coalition under Muhyiddin Yassin had 100 seats which were well short of the majority number of 111. The following bar diagrams indicate the break-up of the Malaysian Parliament party wise.
Figure 1: The Composition in the Malaysian Parliament
Source: The Straits Times, See:// https://www.straitstimes.com/asia/se-asia/malaysias-muhyiddin-to-stay-on-as-caretaker-pm-after-king-accepts-resignation
After nearly a week of political chaos, on August 21, 2021, Mr Ismail Sabri Yaakob, who is the Vice President of UMNO, was sworn in as Malaysia’s ninth Prime Minister. Ismail Sabri Yaakob has the support of 114 MPs in the Parliament and while he will lead the PN coalition like Muhyiddin Yassin his taking over as the Prime Minister also marks the UMNO party’s return to power; three years after it had lost the general elections for the first time since the country’s independence. The new government headed by Ismail Sabri Yaakob would need to focus on recovering Malaysia from its ongoing COVID-19 crisis, which is further fuelling its economic recession.[viii]
An Overview of the Economy: Containing the Political Instability
Malaysia has witnessed a strong economic growth since its independence that was supported through its diversification into export-led growth in manufacturing, oil and gas, and plantation agriculture. The New Economic Policy (NEP) announced in the Second Malaysia Plan, 1971-1975, was fundamentally aimed to achieve national unity in the wake of the strong undercurrent of discontent that emerged between the politically-powerful Malays and the economically better-off Chinese. The NEP was aimed at - first, to eradicate poverty through raising income levels and increasing employment for all Malaysians irrespective of race. Second, was to help reduce the identification of race with specific economic function, which had led to class stratification in the Malaysian society. Third, the NEP was aimed at increasing access of the poor to land, physical capital, training, and other public amenities in the hope that an increase in the quantity and quality of their factors of production would reduce their incidence of poverty. The NEP had positive outcomes with poverty rates and the percentage of households living below the threshold poverty-line income declining significantly.[ix] Further, this also helped reduce inter-ethnic conflicts and disputes that characterised Malaysian politics during the 1970s and 1980s and provided a strong material base for political stability in a plural society.[x]
Figure Two: Malaysia GDP Growth (Annual in percentage), 1961-2020
Source: World Bank, See:https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=MY
The bar diagram on the GDP growth in Malaysia indicate that in the last sixty years the economic growth has been on an upward trajectory. Malaysia was one of the only twelve low-income countries to have registered in the post-war period an average of seven percent growth rate, which has helped the country change with social and economic indicators placing it in the forefront of developing countries. As indicated in figure two, since its independence Malaysia witnessed sharp contraction in its GDP; this is as a consequent of its economy being exposed to a number of global economic crises. The major ones includes the oil-cum-financial crisis in the mid-1970s; a fiscal balance of payment-cum-financial crisis in the mid-1980s; and the Asian financial crisis in 1997 resulting in a sharp contraction of its GDP to -7.3 percent in 1998. In the 21st century, the outbreak of the global financial and the subsequent economic crisis in 2008 once again plunged the Malaysian economy into a recession. While the global financial crisis was less damaging for the Malaysian economies in comparison to the Asian financial crisis, it led to a decline in its external demand and with the global economy still not fully recovered; its GDP growth rate has remained moderate.[xi]
The political instability since early 2020 along with the onset of the COVID-19 pandemic has led to a sharp contraction in Malaysia’s GDP, which contracted by 5.5 percent in 2020. The unsettling political environment along with the economic fallout of the pandemic has been putting pressure on the country, which is in the midst of a major crisis ever since it achieved its independence in 1957. Increasing public anger on account of lockdown measures which has been in place for months to combat the pandemic has hit businesses and households and was one of the major reasons for the withdrawal of support from the Muhyiddin Yassin government. While the COVID-19 situation in Malaysia is still the main challenge, the new government led by Ismail Sabri Yaakob would need to create an enabling environment that promotes economic recovery and growth. Growth and stability in Malaysia is also of great interest for India as the economic partnership has emerged as the mainstay of the bilateral relationship.
Figure Three: India’s Trade with Malaysia (in US $ Million)
Source: Department of Commerce, India
The bar diagram in figure three indicates India-Malaysia bilateral trade. The India-Malaysia total trade has increased since the signing of the India-ASEAN Free Trade Agreement in 2009 and the India-Malaysia Comprehensive Economic Cooperation Agreement (CECA) in 2011. Malaysia is the third largest trading partner for India within ASEAN[xii] with bilateral trade reaching a high of US$17.2 billion in 2018. While India continues to witness an unfavourable balance of trade with Malaysia with trade deficit in 2020 at US$ 2.3 billion, its export has been on the rise led by trade in goods and services. One area which needs to be relooked is agricultural trade between India and Malaysia which has been on the rise. In May 2020, Malaysia contracted to import a record 100,000 tonnes of rice from India. This purchase by Malaysia is nearly twice the average annual volume of rice Malaysia imported from India in the last five years.[xiii] As both countries are in the midst of an economic recession, a stable political environment is a pre-requisite; first in order to manage the ongoing COVID-19 crisis and second to build on the partnership required for the post-pandemic recovery.
Conclusion
At a time of a major pandemic and an economy that was already in recession, the unsettling political environment in Malaysia since early 2020 along with external economic factors are making the process of recovery long and hard. While Malaysia, over the last three decades, has grappled with the Asian Financial Crisis and the Global Financial Crisis, and did manage to overcome through its resilience, it never regained the pace of growth it witnessed in the 1970-1980s. Much would depend on how the new government manages to scale up the measures to counter the pandemic shock. While there is no easy fix the need for the new government is to first manage the ongoing health crisis, before any major recovery process can be set in motion.
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*Dr. Temjenmeren Ao, Research Fellow, Indian Council of World Affairs, New Delhi.
Disclaimer: Views expressed are personal.
Endnotes
[i]Lee Hock Guan and Helen E S Nesadurai, “Political Transition in Malaysia: The Future of Malaysia’s Hybrid Political Regime”, in Mely Caballero-Anthony (ed), Political Change, Democratic Transitions and Security in Southeast Asia, (Routledge: Oxon, 2010), p.98 and 102-103.
[ii]Joseph ChinyongLiow, Dictionary of the Modern Politics of Southeast Asia, (Routledge: Oxon, 2015), p. 19-22.
[iii]Joseph Chinyong Liow, Dictionary of the Modern Politics of Southeast Asia, (Routledge: Oxon, 2015), p. 19-20.
[iv]Lewis Mikulic, “A Mature Democracy? The Malaysian General Election”, Australian Institute of International Affairs, May 8, 2018, https://www.internationalaffairs.org.au/australianoutlook/we-are-a-mature-democracy-the-14th-malaysian-general-elections/, accessed on September 6, 2018.
[v]“Perikatan Nasional”, Wikipedia, April 18, 2021, https://en.wikipedia.org/wiki/Perikatan_Nasional, Accessed on August 16, 2021.
[vi]Nile Bowie, “Politics and plague make a noxious mix in Malaysia”, Asia Times, July 14, 2021, https://asiatimes.com/2021/07/politics-and-plague-make-a-noxious-mix-in-malaysia/, Accessed August 17, 2021.
[vii]“Malaysia’s Muhyiddin to stay on as caretaker PM until successor is appointed”, The Straits Times, August 17, 2021, https://www.straitstimes.com/asia/se-asia/malaysias-muhyiddin-to-stay-on-as-caretaker-pm-after-king-accepts-resignation, Accessed on August 17, 2021.
[viii] Ram Anand, “Ismail Sabri Yaakob sworn in as Malaysia’s new prime minister”, The Straits Times, August 21, 2021, https://www.straitstimes.com/asia/se-asia/ismail-sabri-to-be-sworn-in-as-malaysias-new-pm, Accessed on August 23, 2021.
[ix]David Lim, “Economic Development: A Historical Survey”, in Malaysia: Policies and Issues in Economic Development, Institute of Strategic and International Studies, Malaysia, (Aura Production: Kuala Lumpur, 2011), p.12-16.
[x]Joseph Chinyong Liow, Dictionary of the Modern Politics of Southeast Asia, (Routledge: Oxon, 2015), p. 19-22.
[xi]R. Thillainathan, “Economic Crisis: An Overview of Cause and Response”, in Malaysia: Policies and Issues in Economic Development, Institute of Strategic and International Studies, Malaysia, (Aura Production: Kuala Lumpur, 2011), p.101, 103, 114-115.
[xii]“India-Malaysia Relations”, Ministry of External Affairs, July 2013, https://mea.gov.in/Portal/ForeignRelation/India-Malaysia_Relations.pdf, Accessed on August 23, 2021.
[xiii]Rajendra Jadhav, “Malaysia signs record rice import deal with India: exporters”, Reuters, May 15, 2020, https://in.reuters.com/article/india-malaysia-rice/malaysia-signs-record-rice-import-deal-with-india-exporters-idINKBN22R1BI, Accessed on September 6, 2021.