Malaysia could have a hung parliament - what will that mean for its economy?

KUALA LUMPUR: Malaysia's concluded 15th General Election has brought the country to unchartered waters with a hung parliament, with no coalition crossing the line of 112 votes for a simple majority to form the next government independently.

The conundrum is not surprising, said Universiti Tun Abdul Razak economist Barjoyai Bardai, adding that this is how democracy works today.

“The new government can be formed without a majority of winning seats, a mixed government of several political parties, and a new coalition emerges,” he told Bernama.

A total of 220 of 222 parliamentary seats were contested on Saturday (Nov 19), with polling in the Padang Serai parliamentary constituency in Kedah postponed to Dec 7 following the death of the Pakatan Harapan candidate and incumbent M Karupaiya.

The new date for nomination of candidates is Nov 24.

Voting was also suspended at 11 polling stations in Sarawak's Baram parliamentary constituency due to flooding, with voters seen standing knee-deep in floodwaters.

Citing recent developments in the United Kingdom where former prime minister Liz Truss was ousted 45 days into her appointment, Professor Barjoyai said: "It goes to prove that (a) rotating prime minister, swap method that allows the government to exist without the need of one majority party is possible."

Truss resigned after a series of U-turns in her proclaimed mini-budget, as well as a slew of sackings and resignations. The pound sterling tumbled as markets were spooked.

Professor Shazali Abu Mansor, deputy vice-chancellor of research and graduate studies at i-CATS University College, said that while Malaysia’s economy is fundamentally strong, the current post-election scenario would somewhat affect investor sentiment in the short term.

"Investors would probably adopt a wait-and-see attitude until a new government is formed," he said.

"POLITICS IS AN ART OF POSSIBILITIES"

Professor Nazari Ismail from Universiti Malaya's business and economics faculty said there were many scenarios at this stage, and it would boil down to the outcome of negotiations between the parties.

GE15 saw three major coalitions, namely Barisan Nasional (BN), Pakatan Harapan (PH) and Perikatan Nasional (PN) - compared to the previous election which had only BN and PH.

"If one party won, the political situation will be more stable; if the results are even, two parties will work together to form a government, but we don't know who will cooperate with whom at this point of time," he said.

The initial expectation - and which the markets had priced in - was for a government formed by BN and led by the United Malays National Organisation party, along with the Gabungan Parti Sarawak (GPS) alliance.

But the outcome of GE15 was an upset for BN, which had set out with confidence to retake Putrajaya.

The coalition suffered the worst defeat in its political history, winning only 30 seats out of the 178 it contested.

PH bagged 82 parliament seats and PN 73 seats. It was followed by GPS with 22 seats, Gabungan Rakyat Sabah (GRS) six seats and Warisan three.

PN chairman Muhyiddin Yassin has said that he is willing to collaborate with any party - except PH - that can accept its cause and principles in forming a "clean and stable" government.

He also said that PN had received a letter from Malaysia's king Al-Sultan Abdullah Ri'ayatuddin Al-Mustafa Billah Shah, instructed them to finalise certain matters by Sunday afternoon.

On the other hand, PH chairman Anwar Ibrahim has claimed to have obtained the support of enough Member of Parliaments (MPs) to form the new government with a simple majority. 

CGS-CIMB had predicted ahead of the election that a hung parliament result could lead to the market correcting on fears over political uncertainty. 

“As the saying goes and cliché as they sound, 'politics is the art of the possible' and 'there are no permanent friends and enemies in politics'," said analysts from the firm.

Maybank Investment Bank analyst Suhaimi Ilias had also said prior to GE15 that “we should not rule out the potential scenario of (an) 'unthinkable' alliance”. 

He said another possibility was a “minority” government.

"No guessing on policy changes and impact of such a scenario," he said. "It will be a period of uncertainty but discovery for everyone including the economy and the market."

Regardless of the outcome, fiscal consolidation will remain a priority, although the path could be different depending on which party or alliance leads the government, said Mr Suhaimi.

In terms of government expenditure, “people-oriented” measures will continue, he said, especially the cash handout programme that has been in existence since the time of the pre-GE14 BN government.

“What we expect - as per the cash handouts – is for other assistances to become more targeted such as subsidy restructuring to a targeted mechanism from a blanket system and rationalisation of various social safety net and welfare programmes," Mr Suhaimi added.

“We also expect the post-GE15 government to proceed with the tabling of the Fiscal Responsibility Act that was mentioned in the Budget 2023 speech.”

He said major infrastructure projects would continue, such as the East Coast Rail Link, Gemas-Johor Bahru (JB) Electrified Double Track, JB-Singapore Rail Transit Link, Pan-Borneo Highway and Sabah-Sarawak Link Road and Klang Valley Mass Rapid Transit Line 3.

The expectation is also for a higher share of federal government development spending to be allocated to less-developed states for basic infrastructure.

“The new federal government is expected to focus on improving the quality and delivery of essential public services, especially education, training and healthcare, as well as realising higher and quality investment flows to the less-developed states for a more inclusive, equitable and balanced socio-economic developments,” said Mr Suhaimi.

With sustainability being the buzzword, any government to be formed after GE15 will no doubt make it a key policy agenda - especially in realising the United Nations' Sustainable Development Goals and delivering Malaysia’s commitments to address climate change.

Key areas will include renewable energy, electric vehicles, natural disasters impact mitigation, management of natural resources and guiding and assisting society as well as enterprises in a transition to sustainability.