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Challeges of Mahathir Mohamad as new Prime Minster of Malaysia

Challeges of Mahathir Mohamad as new Prime Minster of Malaysia

2018 election for PM in Malaysia

In a historic election upset in a country that has been governed by just one coalition for decades, a Malaysian opposition bloc led by the 92-year-old former Prime Minister Mahathir Mohamad swept to a majority in national parliamentary elections. The opposition had won 122 seats in Parliament, 10 more than needed to form a new government.  Prime Minister Najib Razak, who is accused of stealing hundreds of millions of dollars in government funds, gave an emotional national address on May 10, saying that he would “accept the verdict of the people.” In the Malaysian general election, 2018, Barisan Nasional were defeated for the first time in the nation’s history, winning 79 seats out of 222 in the Dewan Rakyat. Najib accepted the results of the election and promised to help facilitate a smooth transition of power.

 Following a decisive victory for Pakatan Harapan in the 2018 election, Mahathir was sworn-in as Prime Minister on 10 May 2018. At 92, he is the world’s oldest sitting head of government. He is the first Malaysian Prime Minister not to represent the Barisan Nasional (or preceding Alliance). He is also the first Malaysian Prime Minister to serve from two different parties and on non-consecutive terms. After leaving office, Mahathir became a strident critic of his hand-picked successor Abdullah Ahmad Badawi in 2006 and later, Najib Razak in 2015. His son Mukhriz Mahathir was the Chief Minister of Kedah until early 2016. On 29 February 2016, Mahathir quit UMNO in light of UMNO’s support for the actions of Prime Minister Najib Razak, in spite of the 1Malaysia Development Berhad scandal. On 9 September 2016, the Malaysian United Indigenous Party was officially registered as a political party, with Mahathir as chairman. On 8 January 2018, Mahathir was announced as the Pakatan Harapan coalition candidate for Prime Minister for the 2018 general election, in a plan to pardon Anwar Ibrahim and hand a role to him if the campaign was successful.

With victory, Mr. Mahathir, who led the country for 22 years before retiring at 78, would return to power as the world’s oldest elected government leader. Mr. Mahathir had left Mr. Najib’s party over the financial scandal and joined the opposition to help oust him.   Among the important jobs that Mahathir is expected to do is to stitch together a governing coalition that includes followers of Anwar Ibrahim, his onetime nemesis, who was released from prison after serving five years on charges that were widely seen as politically motivated. Mr. Najib waged a desperate election-eve attempt to gain support, promising that if his coalition wins he would exempt everyone 26 or younger from paying taxes and declare two public holidays next week, but he lost.

Challenges before the new government

Malaysia is grappling with many economic challenges. Its Debt-GDP ratio is described as unsustainable while its fiscal deficit is also high. Malaysian economy is also a victim of crony capitalism since the old regime and the country is in need of economic reforms to keep on the path of sustained and interrupted growth.  Over the years, former PM Mr. Najib has been accused of having ties to a murder, taking kickbacks from the purchase of military hardware and helping concoct a criminal prosecution against a rival. The image of the government in the past was entrenched in corruption.
Najib Razak, former Prime Minister who lost in the 2018 election, faced allegations of  siphoning off billions of dollars from sovereign wealth fund 1MDB.

Moody’s Investors Service has maintained (June 13) its estimate of Malaysia’s direct government debt at 50.8% of GDP in 2017. It said its assessment of contingent liability risks posed by non-financial sector public institutions has also not changed following some statements by the new Federal Government led by Pakatan Harapan which won the 14th General Election.  It pointed out that the new administration’s treatment of large infrastructure projects that may be placed under review but have benefited from  government-guaranteed loans in the past, and outstanding debt from state  fund, 1Malaysia Development Bhd (1MDB, unrated), will play an important role in determining risks that contingent liabilities pose to the credit profile.


Najib’s tenure as Prime Minister has been marked by economic liberalisation measures, such as cuts to government subsidies, loosening of restrictions on foreign investment, and reductions in preferential measures for ethnic Malays in business. After the 2013 election his government was marked by the pursuit of a number of its critics on sedition charges, the imprisonment of opposition leader Anwar Ibrahim following a conviction for sodomy, the implementation of a Goods and Services Tax (GST), and an ongoing scandalinvolving state investment firm 1Malaysia Development Berhad (1MDB) which led to rallies calling for Najib’s resignation, spearheaded by the grassroots movement Bersih. These protests culminated in the Malaysian Citizens’ Declaration by Mahathir Mohamad, Pakatan Harapan and NGO’s to oust Najib. Najib’s response to the corruption accusations has been to tighten his grip on power by replacing the deputy prime minister, suspending two newspapers and pushing through parliament a controversial National Security Council Bill that provides the prime minister with unprecedented powers. Najib’s various subsidy cuts have contributed to soaring living costs, while fluctuating oil prices as well as fallout from the 1MDB scandal have led to a steady depreciation of the Malaysian ringgit.

1MDB Scandal

The 1Malaysia Development Berhad Scandal involves came to light in 2015 in Malaysia as a political scandal occurring involving former Malaysia’s Prime Minister Najib Tun Razak, who allegedly channeled over RM 2.67 billion (nearly $700 million) from 1Malaysia Development Berhad (1MDB), a government-run strategic development company, to his personal bank accounts. The event triggered widespread criticisms among Malaysians, with many calling for Najib Razak’s resignation – including Tun Dr. Mahathir Mohamad who has served as the fourth and now the seventh Prime Minister. Political leader Anwar Ibrahim has openly questioned the credentials of 1MDB. He told Parliament that according to the records held by the companies commission, the company “has no business address and no appointed auditor.” According to its publicly filed accounts, 1MDB has nearly RM 42 billion ($11.73 billion) in debt. Some of this debt resulted from a $3 billion state-guaranteed 2013 bond issue led by Goldman Sachs, who is believed to have made as much as $300 million in fees from that deal alone, although it disputes this figure. Conference of Rulers in Malaysia has called for the investigations by the government to be completed as soon as possible, saying that the issue is causing a crisis of confidence in Malaysia.

After the 14th general election, the newly elected Prime Minister Dr. Mahathir Mohamad said there was enough evidence to reopen a probe on the 1MDB scandal. Having filed complaints alleging that more than $ 4.5 billion was diverted from 1MDB and laundered through a web of shell companies and bank accounts located in the United States and elsewhere, the U.S. Department of Justice said it would continue to pursue investigations into 1MDB and looked forward to working with Malaysian law enforcement authorities. On 18 May 2018, Malaysian police seized a huge haul of designer handbags, many of them stuffed with cash and jewelry, in searches of homes and offices linked to Najib Razak. Later he signed a pipeline deal with China which was also suspected as a deal to garner money to pay off the debt taken from 1MDB sovereign fund in an unauthorized manner. The pipeline deal was one of a series of big-ticket, Beijing-backed projects signed during Najib’s leadership, fuelling suspicions China was helping the scandal-mired leader pay off debts racked up by the stricken fund.

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