FITCH Solutions Country Risk & Industry Research has reiterated its stance that Malaysia’s next general elections which is due by September 2023 will be called in 2H 2022 following the Barisan Nasional (BN) coalition’s commanding victories in both the Malacca state by-election in November 2021 and in the Johor state by-election on March 12.
The research house remains adamant that the BN coalition would likely want to capitalise on this momentum to regain its former dominant position in Malaysian politics by having ruled for 61 years since independence until its defeat in 2018 at the hands of the Pakatan Harapan (PH) coalition.
‘Against this backdrop, we see a somewhat less favourable few months ahead for the policymaking process as the Government’s attention is likely to be focused on campaigning, but there is potential upside over the medium-term if BN manages to secure a stronger majority and forms the next Government,” observed Fitch Solutions.
“This would potentially put an end to the series of unstable Governments with thin majorities that have stalled the political process since 2020.”
In this regard, Fitch Solutions has maintained its Short-Term Political Risk Index score for Malaysia at 64.4 out of 100 to reflect the uncertainty associated with policy-making and policy continuity.
Even as the BN and UMNO are in a dominant position to ‘wrest’ control or to be in a dominant driver seat to form the new Government should Malaysia call for its 15th General Election (GE15), the coalition’s victory is far from guaranteed and smooth, according to the research house.
While political infighting is less likely before the general elections as UMNO is likelier to close ranks and focus on winning the elections, Fitch Solutions expects the risks of factional disputes to increase once victory has been accomplished.
The research house raised concerns over risks of schism within UMNO which appears to have been divided into two main factions.
They are those supporting members of the current government led by Prime Minister Datuk Seri Ismail Sabri Yaakob and those who support former Prime Minister Datuk Seri Najib Razak (2009-2018) and his allies (including UMNO president Datuk Seri Ahmad Zahid Hamidi).
“This could leave Malaysia with less effective policy-making and implementation capabilities once again even if BN wins at the election,” cautioned the research house. “Over the medium-term, regardless of which UMNO faction forms the prospective Government, we expect reform momentum to remain slow.”
Fitch Solutions further envisages factional disputes to likely continue in the background while the fact remains that the Malaysian electoral landscape is now much more competitive than when BN was dominant during the first 61 years of Malaysia’s independence,.
“For instance, reforms that materially expand the tax base and increase competitiveness are likely to prove unpopular and hence remain unlikely to be implemented,’ suggested the research house. – June 23, 2022
