Mahathir Mohamad, reacts as he sits for a photograph in Kuala Lumpur, Malaysia. (Photographer: Ian Teh/Bloomberg)

How Sworn Enemies Toppled Najib But Pose a New Risk to Malaysia

(Bloomberg) -- A courtroom handshake in September 2016 between sworn enemies may have sealed the fate of Malaysia’s ousted premier Najib Razak.

The rapprochement between Prime Minister Mahathir Mohamad and his nemesis-turned-ally Anwar Ibrahim started a process that culminated in their shock election win last week, sweeping away a coalition in power for six decades. Now the fledgling administration faces a big early test: The durability of the alliance between the two men as they stop being the opposition and start the difficult business of governing.

The jailed Anwar is expected to be released this week, but there’s uncertainty about when -- or if -- Mahathir will make good on a pre-election pledge to hand over when Anwar’s pardoned and allowed to re-enter politics. Mahathir, 92, is indicating the timeline for that to happen is already blowing out.

How Sworn Enemies Toppled Najib But Pose a New Risk to Malaysia

“In the initial stages, maybe lasting one or two years, I will have to be the prime minister and I will have to run the country,” Mahathir said on Tuesday via video conference to a Wall Street Journal event in Tokyo. Once Anwar is pardoned he will need to contest a parliamentary seat, and initially he may have a role in cabinet, he added. Mahathir said he would continue to play a background role regardless.

Unity between Anwar and Mahathir is key to the ability of the government led by the four-party Pakatan Harapan coalition to execute quickly on campaign promises to scrap an unpopular goods and services tax, review big-ticket infrastructure projects and cut spending. While economic growth is solid, any cracks in the ruling coalition -- or worse a potential power struggle -- would raise doubts about the ability of the administration to deliver.

“The lack of a fixed timetable to pass on the baton to Anwar is a key source of political risk,” said Hugo Brennan, a Jakarta-based senior Asia analyst at risk consultancy Verisk Maplecroft. “There is likely to be a deal of early goodwill between the pair, given the historic nature of the election outcome. The question is to what extent this can be maintained over the longer term.”

Lawmaker Nik Nazmi Nik Ahmad, the youth leader of Anwar’s People’s Justice Party, or PKR, said in an interview Tuesday the ruling coalition did not expect Anwar, 70, to take over as prime minister for a while.

"Naming the time period now when Tun has just been appointed would be a bit disrespectful to Tun,” Nik Nazmi said, using an honorific for Mahathir. “The focus will be on his release and probably he will take some time off and give Tun the focus to run the country and then we’ll talk about time."

Mahathir’s decision to show up when Anwar appeared in court in 2016 marked the public start of their thaw. But decades of bitterness lingers, stemming from Mahathir’s decision to sack Anwar as his deputy in 1998 amid a dispute on how best to respond to the Asian financial crisis.

How Sworn Enemies Toppled Najib But Pose a New Risk to Malaysia

After he was fired, Anwar was jailed in the majority Muslim nation for committing sodomy and abusing power, charges he denied. He is currently in jail on a subsequent sodomy conviction and would require the royal pardon to bypass a five-year ban on re-entering politics. The Pardons Board committee is due to meet Wednesday.

"The belief that I dismissed him because I was afraid he would oust me is without basis. I dismissed him for two reasons only: he was unsuitable to continue serving in the government and he was unsuitable to succeed me as prime minister,” Mahathir said of Anwar in his book "A Doctor in the House.” He added: "I may have made many mistakes, but removing Anwar was not one of them."

Mahathir also said in September 2005 he could not "have a person who is like that in my cabinet who may succeed and become the prime minister. Imagine having a gay prime minister. Nobody would be safe."

Anwar meanwhile once accused his former mentor of “orchestrating” a “Gestapo-style” smear campaign to destroy his political career. “To use the sodomy and sexual perversion in order to appeal to the conscience and sentiments of the rural masses, particularly the conservative Muslims, is clearly pathetic,” he said in a 2012 interview.

Asked about a timeline for handing power to Anwar, Mahathir said last week the process could take “a long time.”

“Before he can join the cabinet he will have to be a member of parliament first,” he told reporters. “Whether he will immediately join the cabinet or not will be decided when the time comes.”

How Sworn Enemies Toppled Najib But Pose a New Risk to Malaysia

There are other signs of tensions. Anwar’s wife Wan Azizah Wan Ismail, who is deputy prime minister and also president of the People’s Justice Party, or PKR, was notably absent from Mahathir’s announcement on Saturday of his initial cabinet picks. PKR’s leader later said Mahathir would need Anwar’s approval for the appointments.

Anwar met with Mahathir on Saturday night and said in an emailed statement he expressed concern about the need for discussions to be more inclusive. Still, “I reiterated the support of the People’s Justice Party for the leadership of Dr Mahathir,” he added.

Najib last month referred to Mahathir’s coalition as a "motley collection of parties" that he said would struggle to remain united. Prior versions of that alliance -- before Mahathir joined -- collapsed in acrimony over ideology, and at times parties competed against each other for votes in the same districts.

The current four-party Pakatan Harapan grouping includes one mostly representing ethnic Malays, and one representing Chinese.

Investors will also be watching if Mahathir and Anwar bicker over policies, given differences in the past. Anwar had favored austerity measures during the Asian crisis and higher interest rates, in line with the International Monetary Fund’s prescription for some neighbors. He also called for a repeal of the race-based affirmative action policies that favor ethnic Malays, arguing economic aid should be given based on need.

“It remains to be seen what role Mahathir will play after the intended leadership transition to Anwar takes place,” said Lawrence Loh, an associate professor at the National University of Singapore. “Given the strong personalities and even differing ideologies of the duo, the political field will have to be treaded carefully to sustain the harmony.”

©2018 Bloomberg L.P.