(Bloomberg) -- Mahathir Mohamad officially became Malaysia’s prime minister a day after his disparate coalition ended the ruling coalition’s 61-year grip on power in the Southeast Asian nation.
The monarch known as Yang di-Pertuan Agong held a swearing-in ceremony for the 92-year-old Mahathir on Thursday evening in Kuala Lumpur. Mahathir had to collect signatures from party leaders in his coalition to prove he had their support after his bloc won a parliamentary majority in a Wednesday election.
Earlier in the day, Mahathir demanded to be sworn in before 5 p.m. to avoid an extended power vacuum, while expressing concern that the constitutional monarch might not pick him to run the country. During his 22-year term as prime minister that ended in 2003, he eroded the power of the royals, removing their legal immunity and laws barring criticism of them.
The incumbent Najib Razak stopped short of conceding defeat on Thursday morning, saying only that the king could decide the next prime minister because no party achieved a simple majority.
Mahathir’s victory rattled investors, many of whom bet on a Najib victory, with the iShares MSCI Malaysia ETF based on the nation’s stocks dropping as much as 9.5 percent to the lowest since April 2017. Financial markets in Malaysia have been closed since the election, and open again next Monday.
“I’m fully confident that in the long term this transition will be good for financial markets in Malaysia,” CIMB Group Chairman Nazir Razak, Najib’s brother, said in a Bloomberg TV interview. “Malaysia is going to prove that we can do a political transition smoothly and maybe financial markets and corporate Malaysia will become more detached from the political sphere.”
Mahathir’s coalition expects him to serve as interim prime minister until long-time opposition leader Anwar Ibrahim is released from prison in June. To be eligible to take power, Anwar would have to secure a royal pardon and then win a by-election for a parliamentary seat.
Mahathir pledged to work for a full pardon for Anwar in remarks to reporters on Thursday.
“There is a lot of work to be done,” he said. “We need to attend to this mess as soon as possible.”
Najib had faced increased public anger over a goods-and-services tax that boosted prices and a money laundering scandal involving hundreds of millions of dollars siphoned from state investment firm 1MDB. While Najib denied wrongdoing, Mahathir lambasted him as a “thief” on the campaign trail.
On Thursday, Mahathir said that the “rule of law” would prevail regarding 1MDB, and if Najib did anything wrong “he will have to face the consequences.”
Mahathir’s coalition has pledged to scrap the GST within his first 100 days in office, and reintroduce fuel subsidies. If implemented with no other changes, those moves could narrow the government’s revenue base and be credit negative for Malaysia’s sovereign, according to Anushka Shah, a senior analyst at Moody’s Investors Service.
The vote showed that Mahathir still knows how to win elections. The victory was dominant: He swept traditional government strongholds like Johor, Kedah and Negeri Sembilan and neutralized Najib’s advantage in the Borneo states of Sabah and Sarawak.
“This has been a Malaysian tsunami, across the board and the country,” said Bridget Welsh, a political scientist at John Cabot University in Rome who specializes in Southeast Asia. “Mahathir was a game changer. But it also took Najib. They wanted Najib gone.”
What comes next is unclear. Mahathir helms an unwieldy four-party coalition that includes Malaysia’s largest ethnic Chinese party. And then it’s uncertain how long he’ll stay in power before the return of Anwar, his one-time deputy to Mahathir who was fired after a dispute over economic policies in 1998.
“I have to manage four presidents of four different parties,” Mahathir said of his coalition. “It’s going to be a headache.”
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