Global Risk Insights
September 2015

Malaysia’s prime minister has so far weathered anti-government protests calling for his removal. Without political stability and a strengthened economy, his long-term prospects of survival seem uncertain.

The Malaysian capital of Kuala Lumpur witnessed two days of anti-government protests over the weekend of August 29-30. The 34-hour marathon protests were organised by Bersih, an electoral reform group calling for the prime minister’s removal due to allegations of corruption.

These allegations relate to the 1MDB financial scandal, which has dogged Prime Minister Najib Razak since early July. The 1MDB investment fund is at the centre of an anti-corruption probe, which allegedly uncovered evidence of funds being channelled to accounts owned by Najib.

Najib’s response to the ‘people’s power’ movement was diplomatic

Saturday’s protestors came out in force, with disputed figures ranging from 30,000 to 200,000. Despite the Najib government claiming the rally was illegal, the protest remained calm and police presence was low-key. This can be compared to a similar rally in 2012, when authorities deployed tear gas and water cannons to disperse the crowd.

In an attempt to strengthen the protests, ex-Prime Minister Mahathir Mohamad called for a ‘people’s power’ movement to topple the embattled Najib.

Mahathir vocally opposes Najib despite once acting as the prime minister’s mentor, stating that “the only way for the people to get back to the old system is for them to remove this prime minister…and to remove him, the people must show people’s power”.

The peaceful protest is undoubtedly a step forward for Malaysian civil society. And it seems Najib’s careful handling of the protest has so far paid off.

Rather than visibly cracking down on protestors, the prime minister has employed a seemingly more diplomatic approach. In a speech on 4 September, Najib insisted “elections are the time when we leave it to the people to choose the government. Judge us, prosecute us as the government of the day whether it is good or not, the people can determine it…in between elections, we cannot do anything that contravenes our country’s constitution and laws”.

Najib went on to state that he and his colleagues are “willing to be judged during elections”.

Long-term strategic prospects remain mixed

The extent of this diplomatic approach may be questioned, however. Malaysian authorities have targeted Mahathir and leaders of the street protest for further questioning. A police spokesperson stated that Mahathir “made several allegations in his speeches…that warrants police action”.

This suggests that those responsible for the protest may yet face legal charges, although this is unlikely to extend to Mahathir.

Other factors can also be credited as working in Najib’s favour. The protest largely consisted of minority Malaysian Chinese. Without the support of ethnic Malays and a party identified with the Malay majority, it is unlikely to present a credible challenge to Najib, who appears to have maintained the support of the ruling United Malays National Organisation (UMNO) government.

However, Najib’s long-term prospects remain in question. Claims of corruption continue to haunt the prime minister, and future protests cannot be ruled out, which may not always be handled so carefully.

The continuing political unrest is also having a debilitating effect on the Malaysian economy. According to recent statistics, Malaysia’s ringgit has dropped by nearly 17 percent since January, and foreign investors are selling their stocks. This is unlikely to improve unless a degree of political stability is returned to Malaysia.

Indeed, the ringgit rose to a one-week high following the weekend protests, suggesting a brief restoration of investor confidence. This will need to be maintained if there is any hope of restoring the economy, and salvaging Najib’s political career.