The Navigator from CGP

Why Should the U.S. Care About Malaysia’s 2018 Election

PUBLISHED May 8, 2018

In a few hours, 15 million Malaysians will be voting in the country’s 14th General Election. If the incumbent Barisan Nasional (BN) government led by caretaker Prime Minister Najib Razak wins, the country’s tilt toward China is likely to accelerate. Najib — who is also the president of the United Malay Nationalist Organization, the anchor of the BN coalition — has made Malaysia a substantial partner for Chinese investments in infrastructure as part of Beijing’s One Belt One Road initiative. If, however, the opposition alliance Pakatan Harapan (Alliance of Hope or PH) wins, Malaysia is likely to stay its current course. The PH, led by former Prime Minister Mahathir Mohamad and former Deputy Prime Minister Anwar Ibrahim, is more likely to continue balancing Malaysia’s national interests between China and the United States.  

Troubles for the BN

The BN coalition has been in power since Malaysia’s independence 61 years ago. The coalition’s incumbency has been a boon and a bane for the country. Malaysia has developed by leaps and bounds since its founding. However, the absence of natural competition among political parties has allowed the BN to grow bloated, complacent, and out of touch.

Systemic corruption, masquerading as debt, has grown to unprecedented levels. The most notable example is the 1Malaysia Berhad Development (1MDB) scandal in which Najib’s friends allegedly looted a state investment fund that he chaired.  Billions of dollars were siphoned out and $680 million made its way into Razak’s personal bank account in Malaysia. Investigations are pending in multiple jurisdictions, including the largest money laundering case ever pursued by the U.S. Department of Justice.

While there is some likelihood that the BN could lose its majority in parliament, there is almost no scenario suggesting that Najib’s coalition will fare better than it did in 2013, which was its worst performance in history. There is seething national discontent over the cost of living, in part due to the imposition of the General Services Tax (GST) in 2015. Najib argued it was essential for the country’s finances, but his argument falls on deaf ears when the opposition juxtaposes GST revenues with the fabulous amounts of money lost in the 1MDB scandal. Wages have not kept pace with the cost of living, and graduate unemployment has stood at 12 percent — three times the national average. When employment is available, most of the menial jobs go to foreign laborers.

Winds of Change

Winning a general election in Malaysia comes down to attracting enough rural Malay voters, who represent the BN’s “fixed deposit.” Since Mahathir joined the opposition – bringing with him two decades of credibility as a staunch Malay nationalist – the opposition is gaining ground by penetrating the Malay heartland areas to win over voters who have known nothing but the BN rule their entire lives. Polling indicates that the PH is capable of winning as many as 20 seats from the rural Malay areas, a feat that would have been impossible just six months ago. And that could tilt the balance of power; to win a simple majority, 112 seats are needed, and the PH holds 89 versus the BN’s 133.

Malaysians realize that for the opposition to win a stable majority, it will need to overcome the impact of gerrymandered districts and an opaque vote counting process that allows the opportunity for tampering. That means the opposition will need to win close to 60 percent of the popular vote — a challenge, despite the star power Mahathir brings to the campaign.

 Potential Post-Election Shifts

The best likely outcome for Najib will entail a reduced majority in parliament and consecutive electoral losses of the popular vote. With no clear successor, he is likely to solidify his position through increasingly authoritarian measures within his party and against the opposition.  It is also likely that China will double down on its investments in Malaysia. Najib will need to keep showing progress in building the economy, even if the proceeds of those deals do not trickle down to everyday Malaysians. In the absence of a better offer from Europe and the United States, such as a free trade arrangement, Najib’s hands are tied.

However, if Najib loses, it will mean some changes for China. Najib has been quiet about Beijing’s assertive policy regarding the South China Sea. But given Mahathir and Anwar’s nationalist credentials — a stark contrast to Najib’s welcoming approach — China will have to reassess its relationship with Malaysia all over again if they come to power.

Yet ruling would not be all smooth sailing for a PH government. The PH leaders promised to do away with the 6 per cent GST. However, this would increase Malaysia’s fiscal deficit nearly $12 or $13 billion. The new government has to replenish revenue within six months, which could lead it to soften its stance toward China in order to benefit from the countries’ economic relationship. The issuance of a new bond may be possible, but this would not be a long-lasting solution. Thus, once Malaysia has overcome the GST conundrum, it might have the power to slip away from China’s influence. Otherwise, the country might have the will to change its China policy but lack the wherewithal to do it.

If and when the PH alliance takes office, it will be a landmark occasion of a majority Muslim country achieving a democratic transition with a multi-religious and multi-ethnic coalition. Such an outcome could be a key milestone in the process of democratization in Muslim-majority states. In addition to being an ally in the U.S-led efforts to counter China, Malaysia could also serve as a model for other Muslim states that are plagued by instability, insecurity and religious extremism.

Kim Beng Phar is the founder and CEO of Echo Strategic Insight and an expert on the geopolitics of East Asia. Phar has been a research fellow at the University of Cambridge, Harvard University, and the ASEAN Research Institute at Commerce International Merchant Bankers (CIMB).

The views expressed herein are the author’s and do not necessarily reflect those of CGP.

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