SINGAPORE – Malaysian Prime Minister Anwar Ibrahim finds himself in a difficult position, facing economic challenges against the backdrop of rising prices at home and increasing risks to the global economy coupled with domestic political challenges that risk widening disenchantment from his own support base.
Anwar’s fledgling coalition government could only look on as its former nemesis-turned-key partner, the United Malays National Organization (UMNO), recently expelled and suspended a number of prominent politicians for disciplinary breaches, including former ministers who had long been opposed to party chief and deputy prime minister Ahmad Zahid Hamidi’s leadership.
The purge wiped out nearly all of Zahid’s detractors and eliminated the threat of them taking any top posts ahead of an upcoming party election set for March 18. It followed a motion passed at the party’s general assembly last month blocking an electoral contest for UMNO’s top two posts, enabling Zahid to tighten his stranglehold over the once-dominant party.
Anwar named Zahid as his deputy, despite his being on trial for corruption and abuse of power, after UMNO lent its support to his multiracial Pakatan Harapan (PH) coalition, giving it a parliamentary majority after November 19 elections resulted in a hung parliament. Many of Anwar’s supporters saw the move as the price to pay for political expediency and stability.
Voters will have their say when Anwar’s “unity government” stands in six upcoming state elections in July that will serve as a barometer of support for the odd-couple pairing of PH and UMNO. Analysts believe Zahid’s cull of prominent figures within UMNO and moves to consolidate his position could backfire electorally, impacting the unity government’s showing.
“UMNO remains the biggest risk factor for Anwar. And this is something that is outside his control as parties do not have leverage to interfere in another party’s affairs,” said James Chai, a visiting fellow at the ISEAS-Yusof Ishak Institute in Singapore. “Whether [Zahid’s recent quelling of a bottom-up rebellion] is accepted by the voters in the upcoming state election is something to be seen.”
A total of 44 party members were fired from UMNO on January 27, among them Hishamuddin Hussein, a former party vice-president who has held various ministerial positions, who was handed a six-year suspension. Hishamuddin, the son of Malaysia’s third prime minister and grandson of UMNO’s founder, was seen as a potential candidate for the party presidency.
Former health minister Khairy Jamaluddin, regarded as one of UMNO’s most capable up-and-coming leaders, previously indicated that he wanted to challenge Zahid for control of the party, but was expelled as a member before he could do so, reportedly for disparaging remarks he made against the party leadership during November’s election campaign.
Khairy, 46, gave a speech on the hustings about being a reformist in a party that had “gone astray” and objected to the party presidency not being opened up for contest, alleging that “phantom delegates” were planted at the recent UMNO annual general meeting in order to pass the motion barring a challenge to Zahid’s leadership position by a show of hands.
Hafidzi Razali, a senior analyst at the BowerGroupAsia consultancy, said Zahid’s moves are “likely to backfire as UMNO sympathizers now feel that the party is resistant to changes.” He added that November’s election had demonstrated that fence-sitters now have “a formidable Malay-Muslim alternative” in the form of the opposition Perikatan Nasional (PN) coalition.
An alliance between former prime minister Muhyiddin Yassin’s Parti Pribumi Bersatu Malaysia and ultra-conservative Parti Islam Se-Malaysia (PAS), PN had made electoral strides in UMNO’s onetime ethnic-Malay rural strongholds, with Hishamuddin and others purportedly fired for offering their support for PN to lead a government after the polls, before falling into line behind Anwar.
Zahid’s moves have “painted UMNO as a party unlikely to reform itself enough in terms of anti-corruption and clean governance,” said Harrison Cheng, an associate director at consulting firm Control Risks. He added that the party chief “is not fully insulated from a backlash” and could still see his critics vie for senior party positions when party elections are held next month.
“There could be internal UMNO discontent that could drive a serious challenge for the three UMNO vice-president positions,” Cheng said, adding that former prime minister Ismail Sabri Yaakob “may be the natural candidate to lead the critics, as he’s the only prominent leader to survive the purge now that Khairy is out of the party and Hishammuddin remains suspended.”
Ismail, an UMNO vice-president who served as prime minister from August 2021 to November 2022, has said he is yet to decide whether he will defend his post in the upcoming party polls. He has publicly objected to Zahid’s purge, claiming due process had not been followed, and said the expulsion of Khairy would cost the party youth support.
It is unclear whether the fired UMNO members will opt to leave the party and join other parties, such as Anwar’s Parti Keadilan Rakyat (PKR) or Muhyiddin’s Bersatu. At least one former UMNO lawmaker has stated intention to join PKR; however, analysts say PH component parties are unlikely to take on such figures to avoid complicating ties with Zahid.
Amid the political drama within UMNO, Anwar himself has come under fire for appointing his eldest daughter, Nurul Izzah Anwar, 42, as his senior adviser in economics and finance. Her appointment has raised concerns over nepotism in Malaysian politics, despite forgoing a salary for the position, and debate over whether she possesses the pertinent credentials for the role.
“Because her name is Anwar, her appointment to any position would always attract criticism, regardless of how qualified and capable she is,” academic Chai said. “The position of senior adviser is one without decision-making powers, not even the power to call for meetings. By right, this wouldn’t substantially affect how the cabinet makes decisions.”
Anwar, who has spoken out against nepotism in the past, defended the appointment of his daughter, a three-term parliamentarian who lost her seat in November’s general election. “Nepotism is where [a family member] is given a position to abuse power, enrich themselves, obtain contracts and get paid a huge sum. This is not the case,” he told a press conference.
Criticism of the appointment came from a range of stakeholders including non-governmental organization Transparency International, which said the move “gives a wrong signal,” and think-tank Center for Market Education, which expressed concerns of power being consolidated within one family given that Anwar also controversially appointed himself to lead the powerful Finance Ministry.
“It was obvious that this would attract criticisms of nepotism, and clearly it has played out that way,” Cheng of Control Risks said. “The move strengthens perceptions that Anwar is trying to establish a political dynasty in the mold of the Razaks and Mahathirs, which arguably would not be compatible with PH’s push for institutional and political reforms to improve governance standards.”
Anwar has since appointed a team of business leaders and academicians to a newly formed economic advisory body, underscoring the importance being placed on his administration’s management of the economy amid an expected slowdown in external demand that is projected to contribute to a more moderate pace of growth compared with last year.
While government officials are optimistic that Malaysia will avoid a recession, economic growth is projected to slow to 4-5% this year, down from a more than 7% estimate in 2022, according to Bank Negara Malaysia, the central bank, with domestic private-sector spending expected to be the main driver of growth amid a slowdown in external demand.
Anwar, who is set to table a revised 2023 budget to parliament on February 24, recently called for “radical measures to recharge the economy” while emphasizing fiscal prudence. He has pledged to lower the nation’s debt gradually and narrow the budget gap without resorting to raising taxes that would impact low-income groups already hit by rising prices and living costs.
“People are fatigued by the elite politicking in the past few years and want to see actual, concrete policies and measures to help them cope with rising costs of living,” Cheng said. “Anwar would want to use the budget to showcase his administration’s prioritization of these issues, especially because a failure to do so could have massive electoral implications at the state polls.”
The prime minister recently warned that the country’s maximum debt service is approaching unmanageable levels following years of elevated pandemic-era spending. Debt and liabilities reportedly now stand at about 1.5 trillion ringgit (US$346 billion), or 61% of gross domestic product, with the budget deficit amounting to 5.8% of GDP in 2022.
Economic Minister Rafizi Ramli has said Malaysia aims to maintain the spending level set by the previous government for 2023 while aiming to narrow the fiscal deficit to 3.5% by 2025. “What we are trying to balance now is how to stay on course with the amount that we have, mindful of the deficit consolidation that we have to achieve down the line,” Rafizi said.
Austerity measures have already been initiated, with constituency allocations for government lawmakers slashed by more than 70%, from 3.8 million ringgit to 1.3 million ringgit, for 2023. Analysts say the challenge ahead will be balancing the need for structural changes to an economy overly reliant on subsidies while attending to the plight of lower-income earners.
Consumption subsidies to keep essentials such as gasoline, diesel, liquefied petroleum gas, cooking oil, flour and electricity at below-market prices were forecast to reach a record 80 billion ringgit in 2022. Anwar’s government has already moved to slash power subsidies for large businesses and multinational corporations with plans to direct spending toward the needy.
“The budget will be an opportunity for Anwar to posture his government as one that’s more foresighted, fiscally prudent yet able to address the pain points of the vulnerable,” Hafidzi of BowerGroupAsia said. “But the need to expand the revenue base while cutting costs would mean there are unhappy quarters with subsidies reduced or removed, or additional taxation imposed.”
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