Key Malaysia Party Threatens to Leave Ruling Bloc, Pressuring PM

(Bloomberg) -- The largest party in Malaysia’s ruling coalition threatened to pull out unless it gets better terms, adding pressure on Prime Minister Muhyiddin Yassin to shore up his unstable government or call a snap election.

The United Malays National Organisation (UMNO), which holds about a third of the seats in Muhyiddin’s 12-party government, said in a statement late Tuesday that it would enter talks with him to stay in the bloc. It also suggested formalizing an alliance with the Pan-Malaysian Islamic Party, which would unify the largest Malay-Muslim political organizations.

Separately, Malaysia’s state news agency Bernama cited a top party official saying that UMNO President Ahmad Zahid Hamidi is scheduled to have an audience with the king at 5 p.m. on Thursday. The agency later cited Zahid saying the meeting has been deferred and a a new date has not been set.

The moves add another twist to Malaysia’s political drama, which has seen various factions jockey for power after former Prime Minister Mahathir Mohamad abruptly resigned in February. Muhyiddin emerged in March as the head of an unwieldy bloc with a majority of only a few votes, prompting constant speculation about the potential collapse of the government.

UMNO, which has only been in the opposition for about two years since Malaysia’s independence in 1957, has emerged as a key power broker in the latest negotiations. Some of its members had threatened to join a new coalition led by Anwar Ibrahim, who claimed on Tuesday to present a “convincing majority” of more than 120 lawmakers in a meeting with the king.

Yet the monarch remained unconvinced, saying in a statement that Anwar didn’t submit the names of lawmakers to back up his claim. He advised Anwar “to abide by and respect such legal processes enshrined in the Federal Constitution” before stressing the need for unity to fight the coronavirus.

Investors are focusing more on the surge in virus cases that threaten a rebound in economic activity than on the political situation, according to Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. in Singapore. Malaysia’s economy shrank 17.1% in the second quarter when the government imposed a national lockdown.

“The focus is on the third wave of Covid outbreak and what impact that will have on the recovery, with the U.S. election the big external driver for the ringgit,” he said.

Malaysia’s ringgit rose 0.2% to 4.1480 and the main stock index closed little changed after initially falling as much as 0.6%.

In a press briefing on Tuesday, Muhyiddin kept mum on Anwar while announcing that Malaysia would be a priority recipient of the coronavirus vaccine that China is developing.

“I don’t want to comment on what Anwar did in the palace,” Muhyiddin said in a televised interview. “I leave it to the best judgment of the king.”

Malaysia’s ruling parties earlier on Tuesday dismissed Anwar’s move as a tactic to destabilize the country’s politics. Muhyiddin’s coalition won a key state election last month in Sabah, which is crucial to taking power nationally, though it took heat after the campaign led to a jump in virus cases.

“The king advised Anwar to respect the constitution, a good lesson,” Annuar Musa, Barisan Nasional secretary general and an UMNO party leader, said in on Twitter. “Let’s focus on fighting Covid-19 and helping the people.”

Yet later on Tuesday, UMNO released the statement saying it may withdraw from Muhyiddin’s government.

Zahid said the party didn’t discuss Anwar’s claims, Bernama reported, and the UMNO statement didn’t mention Anwar by name.

©2020 Bloomberg L.P.