From the Economist Intelligence Unit

JULY 26 – Datuk Seri Abdullah Ahmad Badawi’s July 10 announcement that he plans to step down by mid-2010 seems an attempt by the prime minister to buy time – both for his own (probably doomed) leadership and for his party, Umno.

By sacrificing the second half of his current five-year term, the prime minister may hope not only to save the first half, and thus to stay in the leadership for two more years, but also to reduce internal feuding that is undermining the government’s stability.

Abdullah’s move comes as pressure continues to mount on him to step down to take responsibility for the political crisis as well as for rising inflation. This pressure is coming both from within the highly factional Umno – where some elements regard Abdullah as an increasing liability to the party or see his problems as an opportunity to make their own power bids – and from the parliamentary opposition, which has been emboldened by its gains in the March 2008 general election.

Although the ruling Barisan Nasional coalition, of which Umno is the dominant member, comfortably won the election, the loss of its two-thirds majority for the first time in nearly 40 years was a humiliating setback.

Sensing Abdullah’s weakness, the opposition Pakatan Rakyat (PR) alliance has intensified its efforts to bring down the government, a goal it hopes to achieve by September. At the same time, recriminations within Umno have accentuated divisions within the party, increasing the chances of an internal move to oust Abdullah and, in the process, making the political crisis more acute.

Abdullah’s promise to step down by mid-2010, making way for his deputy, Datuk Seri Najib Razak, is above all an attempt to gain political breathing room. By addressing, if only in part, demands that he take responsibility for the election debacle and for the country’s economic problems, he will hope to reduce the immediate pressure on him to resign.

It is almost certainly too late for him to do more than this, but he has little other option. Unless he can introduce a measure of calm into an ever more frenzied and sensationalised political scene, he risks being forced from office much sooner than 2010. In this context, it appears that the recent talk of Abdullah being provided with the means to make a graceful exit has come true.

Abdullah’s move has a better chance of subduing at least the worst of the harmful intrigue within Umno than it does of stopping the opposition in its tracks. Promising a managed transfer of power within Umno is wholly in line with party tradition, although the hope within Umno will be that Abdullah proves temperamentally more suited than his predecessor, Tun Dr Mahathir Mohamad, to effecting a smooth transition.

History does not invite optimism on this front: Abdullah himself was groomed for the prime minister’s job by Dr Mahathir, but the outspoken former prime minister has clashed repeatedly with Abdullah since the latter took office in 2003 and Dr Mahathir’s constant sniping has been a key factor in the political crisis.

Dr Mahathir also, notably, fell out with a previous deputy whom he had anointed as successor, though Datuk Seri Anwar Ibrahim did not even make it to prime minister before being ousted on now-notorious corruption and sodomy charges. Anwar has returned to the fray after the expiry of his ban from politics (on the grounds of his corruption conviction), and is heading the opposition’s bid to form a government. His return to politics, on its own, would have raised the political temperature substantially in Malaysia, but the emergence of a new sodomy allegation – from a 23-year-old aide – has created mayhem.

Anwar claims that the new allegation is a conspiracy to discredit him or remove him from the political scene, as he also claimed at the time of his sodomy conviction in 2000. Anwar’s supporters, and many Western observers, believed that that conviction had been trumped up, a theory supported by the fact that it was overturned in 2004.

Although Abdullah’s proposed transfer of power may disappoint Umno factions that might wish him to step down immediately, the reality is that the plan actually suits even his rivals quite well. Ditching Abdullah now would plunge the party into even greater crisis, increasing the risk of the government collapsing.

At the same time, there is no one in the party who is obviously in a position to replace him at the moment. Tengku Razaleigh Hamzah, a former finance minister and a former adversary of Dr Mahathir, is the only openly declared challenger for the party leadership. But memories of Tengku Razaleigh’s divisive 1987 wrangles with Dr Mahathir may limit the breadth of his appeal within Umno.

Meanwhile, Najib, Abdullah’s nominee, is fighting off controversy over his alleged links to a murder that has become the subject of a lurid trial. Although he has denied involvement, Najib cannot realistically take over as prime minister until the dust from this scandal has cleared.

Abdullah’s move will not dull the intensity of the opposition’s campaign to unseat him, however. The PR will continue to apply constant pressure on the government. Datuk Seri Dr Wan Azizah Ismail, the parliamentary opposition leader, recently filed a no-confidence motion against the prime minister and his Cabinet.

Meanwhile her husband, none other than Anwar, continues to try to woo defectors from the BN to the opposition. The opposition needs at least 30 BN lawmakers to cross over in order to form a government.

If this were to happen, then all bets on Abdullah’s future – and indeed on Umno’s – would be off. If not, Abdullah is likely to contest, and win, the Umno leadership election at the party’s annual congress in December. Assuming that he survives as prime minister until mid-2010, the main question over the rest of his term will be what he can achieve in policy terms.

There has been some suggestion that the announcement of his departure plan will turn him into a lame duck. However, his efforts to defuse the immediate political crisis could invigorate the remainder of his term. He will have nothing to lose, and having salvaged enough short-term support from within Umno to head off immediate challenges for the leadership, the question of his personal political future will not hang over every policy issue.

In this scenario, Abdullah could be expected to try to pursue economic reforms more energetically in an effort to establish his legacy. This would be no bad thing. If a grudgingly united Umno could turn its energy away from internal politicking and towards improving the lives of its constituents, it might find a silver lining in its present crisis – and at last begin to address the deficiencies that have led to the calls for Abdullah’s departure.