People crossing a street in Kuala Lumpur on 8 October 2021. (Photo: Mohd RASFAN/ AFP)

People crossing a street in Kuala Lumpur on 8 October 2021. (Photo: Mohd RASFAN/ AFP)

Long Reads

Malaysia on the Cusp of a New Political Order

Published

The discourse on Malaysia’s political history has been in flux for some time. This Long Read revisits the series of political, economic and social ideas that have sustained previous political eras and explores what is to come.

Malaysian politics has been in flux for some time. The old political order has frayed and decayed, and is perhaps already beyond redemption. What will take its place is as yet unclear, and so, for now, contradictions abound. To be sure, Malaysian politics has never been static, and the country’s capacity to achieve a new equilibrium cannot be underestimated. Francis Fukuyama has proffered the idea of “political order” being “a set of political institutions” which defines the state, manages the rule of law, and struggles with democratic accountability. This paper revisits the sets of political and economic ideas that sustained the political institutions in Malaysia’s previous eras, explores what caused the shift from one order to the next, and discusses what is to come in the 2020s. A new equilibrium will need to be found, encompassing key factors such as national identity, democratic efficacy and economic equity.

HISTORICAL TURNING POINTS

Political crises, demographic pressures, economic stresses, and geopolitical shifts have determined Malaysia’s previous turning points. From the onset, it is crucial to note the importance of agency and of political leadership in meeting challenges and shifting gears. Even when all the combined factors listed above are present, there is still no guarantee that change will happen. Change appears to need political leaders to guide the society at large to adapt—and reset. Of course, leaders can also be the cause of reversals and the catalyst for negative impacts. 

There have been three major shifts in Malaysia’s history. Khoo Boo Teik has perceptively identified the two “political orders” of the past half century – within which economic policies and political platforms coalesced, namely the New Economic Policy (1971) and Vision 2020 (1991).

Beyond that, and since 2005, Malaysia experienced the “Lost Years” during which the country in effect drifted without a working order.

Consequent to the May 1969 general election and the subsequent ethnic disturbances, the multiethnic Merdeka Compact gave way to the Malay-centric New Economic Policy (NEP) polity in 1971. And in 1991, the NEP order shifted to become a multiethnic Vision 2020-Bangsa Malaysia grand narrative. But by 2005, the UMNO-Barisan Nasional coalition had begun to move right politically and to modify its economic policy selectively, allowing a multiethnic opposition coalition to rise to prominence by occupying the middle ground on the ethno-political spectrum and espousing economic ideas that were moderately left-of-centre. These shifts set the stage for an epic battle that eventually toppled UMNO in 2018. No new political order, however, has as yet emerged to take its place.

Let us revisit the last four eras and study them in greater detail.  

The Merdeka Compact era (1957-1969), the intentions of which were laid out in the Federal Constitution, was very much a grand compromise between the British colonial government, the Malay Rulers, and the Alliance Party. UMNO, MCA and MIC constituted the Alliance Party that won the 1955 federal elections under British rule. Politically, the coalition led by the first Prime Minister, Tunku Abdul Rahman Putra al-Haj, was hailed as a model of “consociationalism” in which ethnic elites made compromises among themselves on behalf of the less educated masses.

The “Lost Years” (2005-2021)were typified by economic stagnation and policy drift, accompanied by UMNO’s move rightwards and the shrinking of its coalition. Opposition movements benefited from this, culminating in the Bersih rallies and in the electoral victory of Pakatan Harapan in 2018.

The commodity-based economy of that period, which furthermore had minimal import-substitution industrialization, was not able to match the expectations of the younger generation. The elite compromises that had been made were seen as not beneficial to the masses. With more parties challenging the status quo, and with ethnic tensions dominating the headlines from around the time of the 1964 general election until the 1969 general election, the Alliance Party lost support among voters from all ethnic groups; this is contrary to the erroneous view put forth in post-1969 propaganda that only non-Malays voted against the Alliance Party.

The New Economic Policy era (1969-1990) was marked by hugely increased state intervention to redistribute economic opportunities, resulting in upward social mobility for ordinary Malays while leaving non-Malays in general feeling deeply disenchanted. The two-pronged objectives of the New Economic Policy (NEP) were to eradicate poverty irrespective of race, and to remove the historical identification of ethnicity with economic functions. The loss of support among the Malays for UMNO, and the May 13 riots, were interpreted to have been caused by Malay poverty, by racial imbalance in employment, income and ownership, and by provocative activities on the part of non-Malay parties. A new breed of assertive and less compromising Malay leaders led by Prime Minister Tun Abdul Razak Hussein amplified UMNO’s dominance over other coalition partners through the formation of Barisan Nasional to replace the Alliance. A series of measures were introduced which in effect transformed the nature of democracy in the country, and which strongly curbed the ability of the opposition to act.

Where economic policy was concerned, Malaysia decided to ride on the wave of outsourcing by US firms taking place at that time, and embarked on a massive export-oriented industrialization that created many manufacturing jobs. These paid relatively well, and many young Malaysians relocated from villages to urban centres, for work as well as for education. This migrant population consisting mainly of Malaysians found themselves in a new and foreign environment. Many of them turned to religion and religious activities for emotional and social support, heightening Islam’s importance and visibility in the political realm.

Malaysia also discovered oil off its shores around the time of the global Oil Shock of 1973-1974. Significantly, compared to the Merdeka era, there was now much less need for domestic ethnic Chinese capital to provide employment, and thus less say would from now on be given to the Chinese businessmen’s party, the MCA. UMNO grew more and more dominant over its allies, and oil money from the mid-1970s onwards allowed the Malaysian state to pursue a more authoritarian mode of governance.

When the national economy tanked in 1985, Prime Minister Tun Dr. Mahathir Mohamad and Finance Minister Tun Daim Zainuddin opened up the economy to more foreign direct investment as well as domestic investments by relaxing NEP policies. This bold move helped turn the situation around quickly. By 1988, the Malaysian economy started to boom. Most fortunately for the country, as the Japanese yen was forced to appreciate as demanded in the Plaza Accord, Japanese, and later Taiwanese and Korean firms, began relocating to Malaysia and other Southeast Asian states.

Takuhiko Tsuruta (L), President of the Japanese-based Nihon Keizai Shimbun Inc., greets Malaysian Prime Minister Mahathir Mohamad (R), on 17 April, 1997. Mahathir earlier launched the Kuala Lumpur bureau of the Nihon Keizai Shimbun, or Nikkei as it is widely known, it’s 12th in Asia and 31st in the world. (Photo: Francis SILVAN/ AFP)

Clearly, the old political order had frayed by the mid-1980s, especially after the 1985 economic downturn. Barisan Nasional under Mahathir absorbed the Islamists – a growing societal force – and their agenda through Datuk Seri Anwar Ibrahim’s entry into UMNO in 1982, forcing the opposition PAS into a corner. PAS responded by taking the uncompromising moral high ground and pushed for heavier Islamic agenda to distinguish itself from UMNO, alienated the non-Malays and Malay middle ground as a result. The other segment of the opposition was the non-Malays, which was at that time represented by the DAP.

In the 1986 general election, challenged only by a disunited opposition, Barisan Nasional won handsomely. However, UMNO would soon experience its worst ever internal split the following year. After an intense party election in April 1987, and after the court banned the party in February 1988, the defeated challenger Tengku Razaleigh Hamzah was not allowed to join Mahathir’s newly-formed replacement party, UMNO Baru. Forced onto the opposition bench, Razaleigh, via his new party Semangat 46, formed separate coalitions with PAS and DAP. Although Mahathir won the 1990 general election, he knew very well that if Malay votes were to split further while non-Malay voters continued to favour the opposition, Barisan Nasional would eventually lose power. Something had to be done. 

Vision 2020-Bangsa Malaysia era (1991-2005) was a multi-ethnic state narrative that located UMNO firmly in the middle ground. Vision 2020 and a more Malaysian outlook were adopted—partly forced upon Mahathir and partly deemed necessary by his own political instinct and his realization of the pressing need to shift the political discourse. As the opposition formed the first coalition to face the 1990 general election, Mahathir knew that he had to woo some non-Malay voters to his side, just in case more Malay voters turned their back on his new UMNO.

It also made economic sense to espouse a Malaysian identity for the long term. Significant economic innovations made by Mahathir at this time, such as privatisation, were heavily influenced by the neoliberal revolution started by Ronald Reagan and Margaret Thatcher which was then raging on the global stage. Absorbed into the Malaysian context, the essence of that way of thinking was that as long as one has money, one can buy cultural rights and socioeconomic opportunities. And so, while non-Malay students in the 1970s had complained about university quotas affecting their educational advancement, their younger siblings in the 1990s now had the opportunity to pay for private education instead. It was this access to ‘user-pay’ cultural rights which continued to endear non-Malays to Mahathir’s party in the 1995 general election.

The Asian Financial Crisis in 1997 and the sacking of Anwar Ibrahim in 1998 badly blemished Malaysia’s global reputation and tainted Mahathir’s leadership. The country turned introvert again. As Pepinsky noted, through “international retreat and domestic offensive”, Mahathir survived young Malay voters revolting against him with the buy-in into Vision 2020-Bangsa Malaysia by non-Malay voters in the 1999 general election.

The “Lost Years” (2005-2021) were typified by economic stagnation and policy drift, accompanied by UMNO’s move rightwards and the shrinking of its coalition. Opposition movements benefited from this, culminating in the Bersih rallies and in the electoral victory of Pakatan Harapan in 2018. Mahathir’s successor, Abdullah Badawi, held appeal for the middle ground, gaining great success in the 2004 general election, but was perhaps for that reason unable to withstand the strong onslaught from the UMNO right wing in 2005. Hishammuddin Hussein, who was UMNO youth chief, chose to wave the keris at the UMNO general assembly, and with that, dissembled the Vision 2020-Bangsa Malaysia grand coalition that UMNO had forged since 1990 with the wider population.

The political tsunami against Barisan Nasional in the 2008 general election was initially a simple expression of the social backlash against UMNO’s turn to the right. However, the opposition quickly grew confident and the Pakatan Rakyat (later Pakatan Harapan) coalition became a sustained force that proved to have the stamina to stay the course, benefiting from UMNO’s atrophy, and eventual toppling UMNO in 2018. In fact, signs of UMNO’s corrosion were already very visible by 2013. Barisan Nasional won only 47% of the popular vote that year while the opposition Pakatan Rakyat received 51%; despite that, the ruling coalition retained power by nevertheless winning 133 of the 222 parliamentary seats.

Prime Minister Najib Razak did try to move the discourse back to the centre with his 1Malaysia slogan and New Economic Model – a modest attempt to tweak the economic structure, but he capitulated when faced with resistance from right wing groups such as Perkasa and internal UMNO forces. As Najib himself became mired in one after another epic economic scandal, particularly but not restricted to the colossal 1MDB outrage, he resorted to more authoritarian measures to hold off opponents within the party and in the opposition. Expansion of publicly funded social assistance, especially for the B40 (Bottom 40%), became mainstreamed, while his imposition of Goods and Services Tax (GST) backfired massively. Extensive amounts of illicitly sourced money were used to oil his party and coalition machinery and patronage networks with the voting public.

DRIVERS OF CHANGE

The old political ecosystem could no longer hold. Massive political earthquakes in the form of a major split in UMNO when Najib sacked Deputy Prime Minister Muhyiddin Yassin on 28 July 2015; the break within PAS which resulted in that party’s progressives exiting to form Parti Amanah Negara; and the rebirth of Pakatan Rakyat as Pakatan Harapan. Even after history was created with the formation of the Pakatan Harapan government in 2018, the leadership vacuum had yet to be filled. By the end of 2021, that vacuum is more pronounced than ever.

All in all, 2020 was a watershed year within an era filled with uncertainties. The end-February Sheraton Move that toppled the Pakatan Harapan government was fuelled by the idea that, given the election results of 2018, a Malay-unity government could be formed through the exclusion of DAP and through the non-Malays being portrayed as the enemy. That idea, born of desperation and political envy, was immediately discredited after the Sheraton Move, when rivalry between UMNO and Bersatu quickly intensified. The “dua darjat” discriminatory divide between the well-connected elite and ordinary folks, acutely evident for all to see when the former were seen to flout Covid-19 regulations with impunity while the latter were severely punished for similar or even minor infractions. This divided Malaysians more sharply than the propagated differences between Malays and non-Malays. Class inequalities were pervasive and were keenly felt during the height of the Covid-19 pandemic, as exemplified by the White Flag aid campaign that drew attention to the plight of the poorest in society. A very large group of what I term “educated underclass” in society is both a timebomb and a potential source of progressive change. For instance, as a proxy statistic, 68% of PTPTN (National Higher Education Fund Corporation) borrowers – university and college-educated adults – earn an income below RM 4,000 per month even after working for more than a decade.

… Malaysia is about to enter into another “political order”. While the demise of UMNO’s hegemony has been accompanied by prolonged uncertainties, it provides space for a new compact premised on a multi-ethnic middle ground attracted to polemical ideas of social and economic justice. We may hopefully call the new order the Malaysian New Deal.

The country’s political reconfigurations in 2020 and 2021 have yet to coalesce into a new stable and functioning order. With a highly urbanized population, with women holding a significant place in society while being politically underrepresented, a very well-connected online citizenry, and the influx of younger voters due to the lowering of the voting age and the implementation of automatic voter registration, I argue that Malaysia is about to enter into another “political order”. While the demise of UMNO’s hegemony has been accompanied by prolonged uncertainties, it provides space for a new compact premised on a multi-ethnic middle ground attracted to polemical ideas of social and economic justice. We may hopefully call the new order the Malaysian New Deal.

While events in 2021 reflect enduring complexities in Malaysian politics, they underscore the pressing need for new settlements as well. The Emergency rule by Prime Minister Muhyiddin discredited the administration and failed in its principal mission of containing the pandemic, while the Memorandum of Understanding between Muhyiddin’s successor Ismail Sabri Yaacob and the opposition Pakatan Harapan, and the recent Melaka and Sarawak state elections, demonstrate how heavily the onus lies with the political class to respond to public demands and craft a new equilibrium that provides for an effective reformist government.   A new combination of factors is needed which can bring economic growth and political stability; this need was made painfully poignant by the Covid-19 health crisis and the resultant deep economic crisis.

What needs to be accomplished? First is a New Malaysian Identity: 

Without addressing identity politics, no new compact has a chance of lasting for long. The lessons learned from the last few decades testify to this. Malaysians may be culturally different, but that can easily be an asset.

Dealing with ethnic identity is not about abolishing identity but about giving meaning and purpose to a broader and more encompassing identity, in short, a new Malaysian identity based on citizen rights. Framing every issue in a racial perspective can only go so far, and Malaysian politics has obviously gone way past that point.

Second is a system that is capable of Nurturing Democracy:

Malaysia has been seeing declining support for UMNO-Barisan Nasional and increasing support for its alternatives since the 2008 general elections. The new normal today is such that there is no longer a dominant party and Malaysians would be better off realizing that it can achieve better governance through more vibrant coalition building between parties of similar strength, and through an empowered parliament. The King’s statement on 18 August 2021 captures the spirit of our times succinctly, “yang menang tidak menang semua manakala yang kalah pula tidak kalah semua (winners don’t win all, losers don’t lose all).”

Furthermore, Malaysia’s federalism has always tilted too much in favour of the central government. As Hutchinson has argued, “the health of Malaysia’s federal system is in jeopardy.” Devolving more powers and resources to the state governments, especially Sabah and Sarawak is a necessary dynamic in building a new and stable polity.

Third is the Building of a Fairer Economy:

Malaysia needs to build a virtuous cycle of higher pay, higher quality, higher technology and higher productivity. Only if this is achieved can equitable and dynamic growth be possible and credible. The oil money that has allowed for Malaysian governments to be wasteful and ineffective without needing to tax ordinary citizens cannot last forever. But instead of focusing on tax revenue, the conversation should be broadened to ask how Malaysia can move away from a pyramid-shaped income society that has a huge bottom to one that is more diamond-shaped and reliant on a large middle class. Failure to address the structural imbalances that marginalize the “educated underclass” will assuredly trigger some form of revolt. An economy that is fairer to this “educated underclass”, above all through bolstering wages and elevating a broader segment into the middle-income tax brackets, is necessary for any stable system to evolve.

Economic development and recession, democratic awakening and its associated movements, the rise or fall of identity politics – these are all key denominators in Malaysian politics. Interpreting the series of previous shifts in Malaysian history is not just an academic undertaking. It is more to show that the dynamics of history are more like a pendulum than a speeding train, and that our understanding of the past changes over time.

This helps us to imagine—emboldens us to imagine in fact—possible positive changes in the 2020s.

New orders come out of flux. Understanding the flux allows for the best possible orders to emerge.


This is an adapted version of ISEAS Perspective 2022/2 published on 6 January 2022. The paper and its footnotes can be accessed at this link.