Malaysia in 2021: Pandemic, Emergency, and Reprieve

The year began with prime minister Muhyiddin Yassin (of UMNO-clone party Bersatu) struggling to hold his coalition together. Comprising Bersatu, UMNO, the Malaysian Islamic Party (PAS), and several junior partners, Perikatan Nasional (National Alliance, PN) had assumed power following the collapse (via defections) of the Pakatan Harapan (Alliance of Hope) government in February 2020. Its (presumed) razor-thin parliamentary majority had been under intense pressure throughout 2020 due to internal tensions, mounting frustrations over the government’s pandemic response, and a legitimacy deficit resulting from its “backdoor” entry into power.

Facing the ever-growing threat in early 2021 of a confidence vote in Parliament that could unseat his government, Muhyiddin asked King Sultan Abdullah Sultan Shah to consent to an emergency proclamation (an earlier request in October 2020 was denied). To some surprise, the king consented, triggering the first period of emergency rule in Malaysia since the 1969 race riots, officially from January 12 to August 1. This suspended Parliament, allowing Muhyiddin to rule directly through his cabinet without parliamentary oversight and ensuring that no vote of confidence could be called. A series of emergency ordinances granted greater spending power and sharpened limitations on dissent, including through a new “fake news” bill and a prohibition on public gatherings. The latter led to a surreal scene in which riot police were called on to block opposition MPs from marching to Parliament.

The emergency was presented as necessary to curb the rise in COVID-19 cases, which had steadily increased in the preceding weeks. While it facilitated proactive measures against the pandemic, the political space it gave Muhyiddin’s embattled government to consolidate support at both the grass-roots and elite levels was likely the primary motivation: Muhyiddin desperately sought the boost in mass support that a modest economic rebound or demonstrable progress in containing the pandemic would have brought. The reprieve also gave him an opportunity to strengthen his fragile coalition from within. He secured few victories in either arena in the subsequent months, however.

The Malay-unity composition of the PN government makes it inherently conflict-prone, since its three most influential parties (Bersatu, UMNO, and PAS) share the same Malay-Muslim core constituency but have no reliable internal mechanism to resolve disputes (Ostwald 2020). UMNO, accustomed to political dominance, struggled to accept its supporting role in the PN government; Muhyiddin’s refusal to offer concessions to the “court cluster” of UMNO elites who faced charges related to the 1MDB financial scandal added further tinder. In the absence of economic or public health breakthroughs to celebrate, the tensions within the coalition reached untenable levels by March, leading UMNO to announce that it would not cooperate with Bersatu in the next election. This ended the long-term viability of the coalition and increased pressure on it in the near term.

A steep rise in COVID-19 cases through May and frustrations with a new lockdown in early June set the stage for a further escalation of the political crisis. On July 7, UMNO president Ahmad Zahid Hamidi announced that UMNO had withdrawn its support for the PN government and called on Muhyiddin to resign, citing the latter’s failures in pandemic management. In the midst of the ensuing political turmoil, the king publicly rebuked the Muhyiddin government for failing to secure the Palace’s consent for the revocation of the emergency ordinances. Such a public and overtly political intervention from the largely ceremonial king was without precedent in Malaysia’s recent history, and further eroded Muhyiddin’s already marginal legitimacy. The king’s intervention was well received in public circles, and demonstrates the growing political influence of the Malaysian monarchy, whose past public interventions have been controversial. By mid-August, Muhyiddin was forced to concede that he did not command the confidence of Parliament. A last-ditch effort to regain support by offering a broad reform package failed to gain traction. On August 16 Muhyiddin stepped down, ending his troubled 17-month tenure as premier.

Following a brief interregnum, Ismail Sabri Yaakob emerged as Malaysia’s ninth prime minister. Much like Muhyiddin before him, Ismail was not the obvious choice for the position. Though an UMNO veteran with several ministerial appointments to his record, Ismail was a newcomer to UMNO’s inner circle, and only the third-highest-ranking member at the time of his PM appointment. Consequently, he was perceived as potentially weak, with a tenuous grip over his party and a fraught relationship with its president and vice president. Furthermore, while Ismail is not a typical firebrand, his history of stoking ethnic tensions for political gain raised questions about his suitability as a uniting figure during a time of national crisis (Ooi 2021). Aside from his profile, there was little question about the difficulty of the task he had inherited, as Malaysia’s dual economic and public health crises remained acute, and he faced the same ambiguous and unstable majority that ultimately sunk his predecessor (Norshahril 2021).

The king urged that the next government give the opposition opportunities to contribute to governing the country, and Ismail made a series of overtures to inclusivity, including through a new vision he called Keluarga Malaysia (Malaysia family). He invited opposition leaders to meetings and publicly called for MPs to collaborate toward the collective good. This was favorably received among the public, where frustrations with the long-running political stalemate and pandemic management were pronounced, as well as among the opposition, who hoped for a greater say in government and the incorporation of technocrats.

The cabinet that Ismail announced in late August, however, bore a striking resemblance to that of his predecessor (Hutchinson 2021). With 31 ministers and 38 deputy ministers—nearly two-thirds of government MPs—it was again a supersized cabinet that appeared to prioritize keeping the fragile coalition together. It was also remarkably similar to Muhyiddin’s in composition, with only a handful of personnel changes, and the same general power-sharing formula between UMNO, Bersatu, PAS, and the East Malaysian Gabungan Parti Sarawak (GPS) for senior ministerial appointments. In short, it was far from the fresh model that some hoped for.

Despite the similarities between cabinets, there was a clear shift in power from Bersatu to UMNO, both in the number and the importance of appointments. Specifically, aside from the crucial PM portfolio, UMNO gained control of three key ministries—Rural Development, Housing and Local Government, and Communications and Media—that are vital for grass-roots mobilization and shaping public opinion; these strengthen UMNO’s position heading into the next election, which must be called by mid-2023. In a sign of ongoing divisions within UMNO, however, Ismail conspicuously excluded UMNO’s president and deputy president, and one of the three vice presidents, from his cabinet. Importantly, the crucial Ministry of Religious Affairs came fully under the control of PAS, which for the first time was given the minister and deputy minister posts; this will be closely watched for signs that contentious elements of PAS’s agenda, including the nationwide implementation of hudud (Islamic criminal law) and the jurisdictional expansion of shariah (Islamic) courts, are further mainstreamed at the federal level (Musa 2021).

Ismail’s appointment as PM returns UMNO to power after a brief three-year interlude. It does not, however, necessarily mark the resumption of UMNO dominance (Dettman 2021). Ismail’s parliamentary majority remains thin, and while the climate may be unfavorable for destabilizing leadership challenges from the opposition in the foreseeable future, UMNO’s ability to dictate politics is significantly constrained, as UMNO does not occupy the same hegemonic position in the current coalition that it customarily did in the long-ruling Barisan Nasional coalition. It will thus be forced to compromise with coalition partners, on which it relies for survival. Even within UMNO itself, Ismail’s grip remains fraught, so much attention will be directed inward before UMNO’s party elections in 2022, and caution will be exercised where factional interests diverge.

If Ismail’s cabinet composition was interpreted as an indication that his predecessor’s politics would be continued, the mid-September announcement of a political agreement between the government and opposition leaders complicated the picture. The Memorandum of Understanding on Transformation and Political Stability laid out a short but important list of proposed reforms, presented as a political ceasefire. They included such long-discussed items as parliamentary reform, greater independence of the judiciary, a two-term limit for the PM position, an anti-party-hopping law, the implementation of UNDI-18 (lowering the voting age to 18), automatic voter registration, and a revisit of the Malaysia Agreement 1963, among other measures.

If fully implemented, those reforms could comprehensively transform Malaysian politics and achieve through crisis-induced collaboration what a generation of reform efforts before it could not. But sustaining consensus across coalitions on contentious issues will be immensely challenging, particularly when the range of identity-based policies that advantage Malaysia’s indigenous (bumiputera) population are inevitably brought to consideration (Lee 2021a). Indeed, in the midst of the public health and economic crises, signs quickly emerged that patience for a measured rollout of reforms was thin. Less than a month after the memorandum’s signing, opposition leader Anwar Ibrahim stated in a heated parliamentary exchange that the opposition was dissatisfied with the slow pace of its implementation, and that the government had not demonstrated a commitment to fulfilling the promises it made. Time will tell whether the memorandum marks a watershed moment in Malaysia’s political history, or joins the increasing number of ineffective attempts to break out of the political stagnation that has characterized Malaysia’s recent history.

Late September saw the release of the highly anticipated 12th Malaysia Plan (12MP), the five-year development blueprint that identifies priority areas and goals, and articulates a general strategy for achieving them. Like previous plans, it offers insights into both Malaysia’s future policy directions and current thinking within key ministries. The headline target of the 12MP is to lift Malaysia above the World Bank’s high-income-economy threshold by 2025. To achieve this, it calls for ambitious transformations, including a whole-of-government approach driven by “policy enablers” to bring about an Industrial Revolution 4.0 and foster more sustainable and inclusive growth.

The plan’s aspirations are generally timely, relevant, and desirable. It was quickly observed, however, that the 12MP did not meaningfully engage key questions of implementation and execution (Zainuddin 2021). For example, there is little in the way of concrete strategy to reform government-linked corporations (GLCs), which have a large footprint in Malaysia’s economy and are often associated with distortionary effects. Similarly, while the 12MP acknowledges the need to strengthen the public service, it is ambiguous on how politically sensitive components like skills upgrading and personnel streamlining (Malaysia’s civil service is among the largest in the world on a per capita basis) can be executed. And while it notes an intention to increase wages across the Malaysian workforce, it does not offer a clear roadmap for how the Malaysian economy might wean itself from reliance on low-wage labor, often supplied by foreign nationals. This ambiguity comes across as a missed opportunity in the face of the widely recognized need for comprehensive structural reforms to Malaysia’s political economy, if the country is to realize its aspiration of joining the world’s most developed economies.

The year 2021 marked the 50th anniversary of Malaysia’s New Economic Policy, which systematically set into motion the pro-bumiputera agenda that has structured Malaysia’s political economy since 1971. With current debates becoming vitriolic and tending toward emotive appeals rather than nuanced grappling with the complex questions of preferential policies (Lee 2021b), the 12MP was scrutinized for indications of how the agenda might evolve. To a greater extent than its two predecessors, the 12MP features open engagement with the agenda’s shortcomings. It retains, however, many of the same objectives as previous plans—most notably, the 30% bumiputera equity ownership target—despite these being recognized as increasingly misaligned with Malaysia’s current economic reality. It also does not extensively engage variation in outcomes across different subgroups of the vast bumiputera category; continuing to treat this remarkably heterogenous category as a single group for most policy purposes suggests that political motivations supersede developmental ones. In any case, the 12MP offers little concrete guidance on how elements of the pro-bumiputera agenda might be comprehensively and constructively realigned with the economic realities of Malaysia in 2021.

Malaysia’s economy in 2021 continued to be profoundly impacted by the pandemic. The previous year had seen the GDP contract by 5.6%, the largest decline since the 1998 Asian Financial Crisis. Against that backdrop, officials expressed optimism that 2021 would see a strong rebound, which numerous stimulus packages were intended to support. Repeated pandemic-related lockdowns, however, together with the tepid nature of global economic recovery, continued to weigh on Malaysia’s economy, leading Bank Negara Malaysia in August to revise its 2021 projected growth rate down to 3–4% (from an earlier estimate of 6–7.5%). While the overall unemployment rate looked moderate, at just under 5% at mid-year, concerns were raised about a decline in labor force participation, and high unemployment (13%) among young workers.

These headline economic data do not capture the depth of hardship experienced by many Malaysians in 2021, however, particularly among those in lower income brackets. During the mid-year nationwide lockdown, stories began circulating of families with depleted savings struggling to pull together one meal per day. The #benderaputih (white flag) campaign emerged, in which low-income families signaled acute distress by flying a white flag; communities and businesses responded with deliveries of food and essentials, but extreme precarity remained the reality for many households.¹

In response to the ongoing economic weakness in October, Ismail proposed Malaysia’s largest-ever budget for 2022, totaling 332 billion ringgit (USD 80 billion) and including a range of cash handouts and incentives for industry. Critics from the opposition immediately voiced concerns about how the budget would be paid for, and questioned whether the record expenditures were driven in part by UMNO’s desire to shore up popular support ahead of a potential election in 2022.

It is noteworthy that 2021 saw the conclusion of negotiations for the Regional Comprehensive Economic Partnership (RCEP), which would create a free trade agreement between the ten ASEAN member states and its six FTA partners. RCEP members account for nearly 60% of Malaysia’s trade, so its ratification in Malaysia (scheduled for mid-December, according to the responsible ministry) would provide important signals of policy stability after the last two tumultuous years. While RCEP is less substantive that the Comprehensive and Progressive Agreement for Trans-Pacific Partnership,² analysts nonetheless see its ratification as potentially valuable for Malaysia’s economic recovery (Tham 2021).

Malaysia’s economic recovery is closely tied to its handling of the pandemic. COVID-19 case counts remained low through most of 2020, with a discernable second wave that began in November 2020 and peaked at about 5,000 daily cases in January 2021. A more substantial third wave, driven by the Delta variant, peaked in June 2021 (at just under 10,000 daily cases), before a devasting fourth wave hit in August and September, with daily cases above 20,000. The latter gave Malaysia the dubious distinction of having the most COVID cases per capita in the region. Between January and November 2021, just over 28,000 deaths were linked to COVID-19. From June on, dire warnings were raised about Malaysia’s healthcare system approaching the brink of collapse, but this worst-case scenario was avoided.

With vaccine availability limited in early 2021, Malaysia responded to the rising COVID-19 cases primarily through “movement control orders” (MCOs) that restricted movement (locally, between states, and internationally) and mandated closures of businesses, schools, and other institutions. These were enacted in several phases, which varied in severity and by location. The most comprehensive lockdowns began in June and were gradually loosened in the following months. The MCOs attracted strong criticism as poorly conceived and ineffective, partly due to the perceived inconsistency of enforcement.

Supply issues slowed Malaysia’s initial vaccine rollout. Vaccination rates picked up in May 2021, however, and accelerated dramatically by late June. Coordinating minister of the immunization program Khairy Jamaluddin received accolades during that ramp-up, strengthening his profile as one of UMNO’s few rising stars. By early November, just over 95% of adults had received two doses (mainly of Pfizer, Sinovac, or AstraZeneca), leading the government to announce that it would begin preparing for a COVID-19 endemic phase, during which travel and other restrictions would be gradually lifted.

While a claimant in the South China Sea, Malaysia has had significantly fewer open confrontations with China than the Philippines or Vietnam. This made the early June “intrusion” by 16 Chinese Air Force planes into Malaysia’s Exclusive Economic Zone off the coast of Sabah unexpected and alarming. Malaysia immediately issued a note of diplomatic protest that called on the Chinese ambassador to explain the breach of Malaysia’s sovereignty. It remains to be seen whether this was a one-off event, or the first of more regular confrontations. In either case, the incursion is likely to sharpen discussion around modernizing Malaysia’s armed forces, and potentially catalyze a rebalance back toward conventional conflicts from its current strong focus on counterinsurgency (Wu 2021). More generally, the growing concern with great power rivalry and its manifestations in Southeast Asia, whether in the South China Sea or through new partnerships, including the trilateral AUKUS (Australia, UK, US) partnership, have spurred the Malaysian government to engage its ASEAN partners in managing the rivalry’s regional spillovers.

Published online: February 9, 2022