[5 August 2021]

Malaysia’s fragile democracy saw deeper cracks emerge over the past two weeks. Political jostling heightened after Prime Minister Muhyiddin Yassin (PM Muhyiddin) lifted the State of Emergency on 21 July without parliamentary discussion or royal consent. Originally scheduled to end on 1 August 2021, the State of Emergency was formally introduced on 12 January 2021 as a mechanism to manage the Covid-19 pandemic. During this period, parliamentary sittings as well as elections were barred, thereby allowing the ruling Perikatan Nasional (PN) coalition to govern with less pressure from opposing parties. 
 

PM Muhyiddin’s move is a strange political misstep, as the government was required under the constitution to obtain royal endorsement before revoking the emergency ordinance. The emergency ordinances introduced under the State of Emergency were also to be debated in a special parliament sitting, which was never convened. PM Muhyiddin did not explain his decision but we assess that his motivation was to avoid challenges to the government’s legitimacy by denying opposing parties the opportunity to critique the PN’s handling of the pandemic. 
 

King Al-Sultan Abdullah openly rebuked the PN government for failing to follow the constitution. The political reaction was swift, and the United Malays National Organization (UMNO), a key party in the PN Coalition, publicly withdrew its support for PM Muhyiddin on 3 August. UMNO party president Zahid Hamidi said the government lost its credibility, and that such an action could potentially trigger a constitutional crisis between the royal institution and the government. The opposition coalition, led by Anwar Ibrahim and the Pakatan Harapan (PH) party, filed a motion of no confidence in the parliament.  
 

On 4 August, PM Muhyiddin asserted he maintains the majority in Parliament despite UMNO’s withdrawal, stating that he had received sufficient Statuary Declarations (these are documents signed by MPs indicating their support for a PM candidate or political coalition). The King granted PM Muhyiddin’s request to continue as Prime Minister until an official vote of confidence is tabled next month.
 

The actual breakdown of party lines across the Parliament’s 222 seats remains fluid and difficult to determine. In practice, an MP may sign Statuary Declarations for both sides to hedge their bets or could sign a new Statuary Declaration when so inclined. Moreover, UMNO (which holds 38 seats in parliament) is itself fragmented—eight UMNO MPs have withdrawn support for the Prime Minister, but 13 MPs who serve as current Cabinet members continue to support PM Muhyiddin. The remaining 17 parliamentarians have not issued formal Statuary Declarations. 
 

There are several possible scenarios that may play out until the parliament reconvenes in September. 

Scenario 1: PM Muhyiddin solidifies political base

Opposition MPs and political observers suggest that PM Muhyiddin will seek to influence more members of parliament to secure their support before calling for a vote of confidence in September. This is a tactic that has served PM Muhyiddin well so far. In February this year, two opposition MPs shifted their support to PN; another senior MP from Parti Keadilan Rakyat joined the ruling coalition in March.  

We may also see changes in PM Muhyiddin’s cabinet lineup if he were to choose to grant ministerial positions to shore up support and sway members from key parties. Last month PM Muhyiddin promoted UMNO Vice Party President Ismail Sabri to the new position of Deputy Prime Minister. (Ismail has been a critical player for the government, working to maintain support across UMNO parliamentarians). 
 

Scenario 2: Clear loss of UMNO support

More UMNO MPs could toe the party line and publicly retract their support for the PN government. In this scenario, the King would ask PM Muhyiddin to resign, and an interim Prime Minister would be appointed for a set period before a general election is called. This outcome would prolong political uncertainty for the remainder of 2021, as it is unlikely that a general election would be convened until Malaysia’s Covid-19 case numbers decline. However, in the scenario that PM Muhyiddin is removed, the main objective of the government would be ensuring stability and continuity—we therefore do not anticipate that an interim Prime Minister would introduce any changes to cabinet or to the ongoing priorities of the current administration.   
 

Scenario 3: Clear loss of UMNO support; coalition fails to demonstrate clear majority 

In this scenario, the King may allow PM Muhyiddin to continue leading a minority government— this outcome would become more likely if the PH opposition coalition were not able to form a majority in parliament. AGA Senior Advisor Dato’ Dr Awang believes that the direction of UMNO MPs is not guaranteed as MPs who withdrew their support for PM Muhyiddin may not necessarily side with the opposing PH coalition, due to the long-running ideological and political differences between PH and UMNO. 

Over the coming weeks AGA foresees that the royal institution will play a critical role in ensuring that political uncertainties do not undermine national priorities. All sides will also need to increase efforts to maintain public confidence in the political system and investor confidence in the business environment. The government’s handling of the pandemic will be critical in instilling support in its leadership, and the tide could turn in PM Muhyiddin’s favor if PN is able to demonstrate progress in reducing positive case numbers and rolling out the national vaccination program. 

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About Asia Group Advisors

Asia Group Advisors is a strategy advisory firm operating across Southeast Asia. 

We focus on resolving regulatory and reputational challenges to business as well as identifying and advancing new commercial opportunities. With offices in Singapore, Jakarta, Bangkok, Hanoi, Kuala Lumpur, Manila, Yangon and Washington D.C. we help clients adeptly navigate the geopolitical and economic complexities of Southeast Asia’s markets. 

For any further inquiries about our work in Malaysia, please contact Hafizin Tajudin at tajudin@asiagroupadvisors.com