Malaysia Prime Minister’s Survival Hinges on Passing Budget

A year of turmoil in Malaysia is coming down to a budget vote in the next few weeks that will double as a test of confidence in Prime Minister Muhyiddin Yassin, whose seven-month-old administration is hanging by a thread.

Since taking power in March following the collapse of another coalition government, Muhyiddin has only proved his majority a handful of times while maneuvering to avoid similar tests. He suffered a loss of prestige last month when Malaysia’s king rejected his request to declare a state of emergency to tackle the pandemic, which would’ve allowed him to pass a budget without approval from lawmakers.

Malaysia Prime Minister’s Survival Hinges on Passing Budget

Now Muhyiddin is rushing to cobble together the numbers to pass the budget, and he’s signaled a willingness to work with any of the nearly 20 parties that won seats in the 2018 election. His Bersatu party controls less than 5% of seats in Malaysia’s 222-member parliament, so he needs to woo disgruntled coalition partners or opposition parties with budget perks or prime cabinet posts to stay in power.

“You will see power struggles continue all the way to the budget vote,” said Oh Ei Sun, a senior fellow with the Singapore Institute of International Affairs. “In the event that any kind of major bill such as a budget by the government of the day is rejected by parliament, then the prime minister has to resign and by convention ask the king to dissolve parliament.”

The political uncertainty has weighed on the nation’s financial markets. Malaysia’s ringgit slid in October, lagging most Asian peers which strengthened on the back of a weak dollar. Global funds pulled a net $161 million from local shares last month, with the benchmark equity index capping its third straight month of losses.

Powerful Players

Muhyiddin’s government is set to present the budget on Friday, and a vote will likely come some time in the coming weeks. It will be the culimination of a dramatic year in Malaysian politics that began when former Prime Minister Mahathir Mohamad abruptly stepped down in February, prompting various factions to jockey for power.

The biggest party in the ruling coalition, United Malays National Organisation (UMNO), last week reaffirmed it would continue backing the government after it threatened to pull out of the Perikatan Nasional alliance last month unless it received better terms. UMNO helmed the ruling coalition that led Malaysia from independence in 1957 until a shock election loss in 2018, only to return to government earlier this year after Mahathir’s resignation.

Still, not everyone in UMNO has been won over by the truce, and its leaders haven’t said yet whether they will back the budget. Puad Zarkashi, who heads the party’s Supreme Council, wrote on Sunday there was a lack of trust in their dealings with the government.

“That’s why UMNO’s political bureau proposed new terms in black and white,” Puad wrote. “UMNO wants ties in the PN government to be based on consensus and political honesty.”

Former prime minister Najib Razak, who is appealing a guilty conviction over the 1MDB scandal and is facing trial on other related charges, has expressed concern that UMNO’s alliance with the government could cost the party in the next election, which must be held by 2023. “UMNO needs to be aware this risk exists,” he wrote on Facebook last week.

Some other UMNO members previously said they could join a new coalition led by opposition leader Anwar Ibrahim, whose own claims to command a majority in parliament didn’t convince the king last month.

‘Unity Budget’

Further complicating matters is the stance of the opposition’s Democratic Action Party, which has the most seats in parliament. It indicated it was willing to negotiate with Muhyiddin before hardening its stance.

The DAP won’t support the 2021 budget if Muhyiddin’s government rejects its six key fiscal and financial measures, Secretary General Lim Guan Eng, a former finance minister, said in a statement Monday.

“It is imperative that all parties come together to craft a unity budget that works to help Malaysians overcome and survive the current Covid-19 economic recession,” Lim wrote, noting agreement on the budget was crucial for avoiding snap general elections.

Finance Minister Tengku Zafrul Abdul Aziz said he had received more than 170 proposals for the budget from his meetings with politicians. The ministry is refining all the suggestions to be included in the budget, he said in a statement on Monday.

Muhyiddin needs to deal with both sides because the loss of just a few votes from the ruling coalition could result in defeat, according to Johan Saravanamuttu, an adjunct senior fellow at the S. Rajaratnam School of International Studies who researches Malaysian politics.

“It’s two sets of negotiations for Muhyiddin right now,” he said.

One major voice in Muhyiddin’s corner is King Sultan Abdullah Sultan Ahmad, who expressed “full confidence” in Muhyiddin’s ability to lead the country through the crisis and urged lawmakers to vote for the budget. He has the constitutional power to appoint a prime minister or deny a request to dissolve parliament for an election.

Even if the budget does pass, Muhyiddin’s hold on power may be tenuous. Even as UMNO reaffirmed support for his government last week, it also called for an election as soon as a surge in coronavirus cases abates.

UMNO and its allies “could form a much more stable coalition like what they had for half a century,” said Oh from the Singapore Institute of International Affairs. “I’m predicting a big UMNO win.”

©2020 Bloomberg L.P.

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