Anwar’s ‘unity’ government a fraught Faustian bargain

SINGAPORE – Malaysian Prime Minister Anwar Ibrahim’s strategic allocation of key cabinet seats appears to have bolstered the near-term stability of his new royally-brokered “unity government”, but volatile political fault lines and strong economic headwinds will test his leadership in 2023.   

While selecting a cabinet of past political foes was never going to be easy, the 75-year-old premier’s choice of graft-accused United Malays National Organization (UMNO) president Ahmad Zahid Hamidi as deputy prime minister has been an especially bitter pill for Malaysians who voted for Anwar’s good governance and anti-corruption agenda.

The November 19 election delivered a hung parliament where Anwar’s Pakatan Harapan (PH) bloc won the most seats with 82 but fell well short of a majority. The PH chief was appointed by Malaysia’s constitutional monarch to lead a unity government after Zahid’s Barisan Nasional (BN) coalition agreed to back Anwar’s bid, prompting key Borneo-based parties to do the same.

While the UMNO president’s top-level appointment has raised eyebrows, it is widely seen as a compromise of political necessity. Zahid, who served as deputy premier from 2015 to 2018 under the scandal-plagued Najib Razak administration, was not appointed to serve in the two governments preceding Anwar’s due to the various corruption-related court cases he faces.

Anwar’s decision to also serve as finance minister has likewise drawn criticism from activists and civil society given the precedent set by Najib, under whose watch as premier the multi-billion-dollar 1Malaysia Development Berhad (1MDB) scandal unfolded while he concurrently held the finance portfolio from 2009 until 2018.

“There is considerable unease, not least because Zahid was picked as deputy premier and Anwar seems to have gone back on PH’s promise not to have the prime minister also occupy the finance minister position. These are glaring contradictions to PH’s reformist pledges,” Harrison Cheng, an associate director at consulting firm Control Risks, told Asia Times.

“However, there have also been sections of PH supporters who are prepared to give Anwar the benefit of the doubt as long as he has some time to try and steer the reform agenda now that he is prime minister. They understand the necessary political price, so to speak, to ensure that PH and company have the legislative numbers and political stability,” he added.

Anwar unveiled his cabinet line-up on December 2 with 28 full ministers and two deputy prime ministers, one hailing from East Malaysia; 27 deputy ministers were announced the following week. With six ministerial appointments, UMNO is the second-biggest party in the cabinet, second only to Anwar’s Parti Keadilan Rakyat (PKR), which has eight portfolios.

Saifuddin Nasution Ismail, PKR secretary-general and long-time confidant of the twice-jailed premier, now heads the powerful home ministry, while PKR deputy president Rafizi Ramli controls the economic affairs portfolio, putting him in charge of planning medium- to long-term policies and targets for Anwar’s finance ministry to execute.  

UMNO’s cabinet members are nearly all Zahid-aligned figures while the party president himself was also given the rural development portfolio, a crucial position he can leverage to win back lost support from ethnic Malay voters, the party’s traditional base that turned against BN at last month’s polls, resulting in its worst-ever electoral performance with just 30 seats.

Other UMNO stalwarts in the cabinet include party deputy Mohamad Hasan (defense minister), former finance minister Tengku Zafrul Tengku Abdul Aziz (international trade and industry minister), UMNO vice-president Mohamed Khaled Nordin (higher education minister), Azalina Othman (law and institutional reform minister) and Zambry Abd Kadir (foreign minister).

Zahid faced calls to resign in the immediate aftermath of last month’s polls and analysts say his hold on the party presidency will most likely be challenged when UMNO holds intra-party leadership polls due by May next year. Now regarded as the main watchpoint for political stability, UMNO’s party elections will test rank and file support of Zahid’s precedent-breaking decision to back Anwar as premier.

“This new cabinet selection reinforces Zahid’s hold on the party vis-à-vis rival UMNO factions ahead of the party polls and puts him in a better position to defend his presidency from potential challengers,” said Cheng of Control Risks, who observed that Anwar’s immediate successor, former premier Ismail Sabri Yaakob, and his top allies were sidelined in the cabinet selection.

The unlikely union of erstwhile foes PH and BN have kept another ex-premier from returning to power: Muhyiddin Yassin and his right-wing ethnonationalist Perikatan Nasional (PN) coalition, the second-best performing coalition at the polls. In a scathing rebuke, Muhyiddin accused Anwar of appointing a “kleptocrat cabinet” formed on the basis of unspecified “electoral fraud.”

PN outperformed expectations at the polls, winning upset victories in BN strongholds by casting itself as a cleaner and stronger defender of Malay interests than UMNO. The coalition won 74 seats, while its key component party, Parti Islam Se-Malaysia (PAS), an ultra-conservative Islamist party, shocked observers by winning more seats, 44, than any party in parliament.

At least 10 BN lawmakers had initially backed PN leader Muhyiddin to become prime minister after the election, while others such as UMNO deputy president Mohamad did not agree initially with the unity government proposal and preferred for BN to be in the opposition. If Zahid is defeated as party president, analysts say his successor could opt to withdraw support from Anwar and form a new government with PN.

“If Zahid can keep UMNO united behind him, there is a good chance that this alliance, strange as it is, will hold. The real test will come if Zahid is either forced to resign as UMNO president and/or if he is convicted for corruption,” added Cheng. “But because the king played a key role in getting PH and BN to work together, politicians will think twice about trying to oust the government.”

Other analysts agree that the unity government’s longevity and stability are directly linked to the UMNO party election and whether Zahid is acquitted or convicted in the coming months on charges that he misappropriated funds from a charitable foundation he established. Anwar has maintained that Zahid is innocent until proven guilty while the PN-led opposition can be expected to seize on any hint of political pressure on the legal process.

Anwar’s unity government draws support from PH with 82 seats, BN with 30, Gabungan Parti Sarawak (GPS) with 23 and Gabungan Rakyat Sabah (GRS) with six. Smaller parties’ support has given the government 148 out of 222 seats in the federal parliament, a two-thirds majority not commanded by any Malaysian government since early 2008.

Anwar will be banking on his administration’s ability to table and pass constitutional amendments to further his “reformasi” aims without the need for bipartisan support. He will also need both to push through long-overdue fiscal reforms and restore confidence in Malaysia’s economic trajectory toward middle-income status.

The veteran politician last held the finance portfolio from 1991-98 during the first Mahathir Mohamad administration, when Malaysia was regarded as a fast-growing “Asian Tiger” economy. But differences with Mahathir over how to handle the fallout of the 1997-98 Asian financial crisis led to his ignominious sacking and persecution on widely seen as politicized sodomy charges.

Now back at the finance ministry 25 years later, Anwar must again confront crisis-like economic conditions with soaring inflation, sagging external demand and rising recession fears. The premier has said his cabinet would take a 20% salary cut for three years until Malaysia’s economy recovers; Anwar had vowed on the campaign trail not to collect a prime ministerial salary if he became leader.

Anwar has said addressing cost of living issues will top his government’s economic agenda. That will include narrowing the nation’s subsidy program with the aim of redirecting state money towards lower-income groups. Malaysia currently subsidizes fuel, cooking oil, electricity and other goods, which the premier argues has disproportionately benefited the wealthy.

Parliament was dissolved in October ahead of last month’s polls before the passage of the BN-authored federal budget for 2023. Anwar is expected to revise the budget in a way that reflects his and PH’s priorities when it is re-tabled on December 19, namely through targeted subsidies and income support for the poor and middle classes.  

With billions of dollars spent to support citizens and prop up businesses during the Covid-19 pandemic, Malaysia’s fiscal space has narrowed considerably. Anwar has opposed reintroducing the goods and services tax (GST) scrapped by the PH government in 2018 but now faces the challenge of bolstering state revenue for support schemes without stoking inflation.

“Anwar is likely to favor market-driven solutions, just like how he was in the late 1990s. At the same time, Anwar historically has also been very vocal in speaking up for economically disadvantaged groups,” said Adib Zalkapli, a director with BowerGroupAsia, a strategic advisory firm. “This balanced outlook definitely helps in winning confidence internationally without losing domestic support.”

Foreign investors likely see Anwar as Malaysia’s best bet for economic reform, with the appointment of his deputy Rafizi being perceived as a strong pairing. Rafizi, a trained chartered accountant, held managerial roles at state oil company Petronas for six years before resigning to pursue a career in politics – all while founding tech start-ups along the way.

“Rafizi’s appointment is also likely to bolster international confidence in Malaysia as he is seen as someone with policy ideas as well as a fairly reputable figure,” said Cheng. “Admittedly, Anwar could have appointed Rafizi as finance minister, which would have mitigated criticisms about the prime minister also taking the finance role as well as freeing Anwar up to look at other policy areas.”

For his part, 45-year-old Rafizi has maintained that Anwar’s decision to concurrently hold the finance portfolio was the right one and taken due to “extraordinary circumstances” requiring strong economic leadership. He reiterated that the positions of premier and finance minister should be kept separate in principle, with the move being “an exception rather than the norm.”

Follow Nile Bowie on Twitter at @NileBowie