Wednesday, May 9, 2018

Implications on South China Sea geopolitics on return to power of Dr. Mahathir

The victory and return to power of Dr. Mahathir will have repercussions on the geopolitical situation in the South China Sea. Malaysia is one of the coastal states of the South China Sea together with China, Vietnam, Brunei and the Philippines. Malaysia under defeated Prime Minister Najib was perceived to be veering towards China, and received a huge $35 Billion package from China in 2016. it was bigger than the $24 B that PRRD got from China same year. The China loans were among the major issues raised by Mahathir against Najib, citing the debt trap specter that now hounds several countries like Sri Lanka that got too close to China. Mahathir said he would cancel or renegotiate the loans if he won, which he just did. Among the China loans is $14 B for a railway project.
Mahathir demonstrated fierce independence in dealing with powers like the US and EU when he was P.M. I had the privilege of listening to his lecture in Dusit Thani Hotel Makati in the 90s. I expect he, like Vietnam, will stand up to China’s bullying as Najib’s closeness to China was an issue raised by Mahathir during the campaign. IMHO Mahathir’s return will rock the ASEAN alignment with Malaysia, Vietnam and Indonesia resisting China’s bullying tactics. Will the Philippines adjust to this new reality? If we do not change our China leaning alignment, we will be lumped with Laos and Cambodia.

Will this affect Filipinos’ perceptions on Chinese loans and China’s bullying? I believe so.

Mahathir Wins Malaysia Election in Historic Power Shift

  • 92-year-old Mahathir set to become prime minister again
  • Najib’s ruling coalition loses for first time in 61 years
Mahathir Ousts Najib in Malaysian Election
Mahathir Mohamad won a stunning victory in Malaysia’s election. Bloomberg’s Haslinda Amin reports.

Mahathir Mohamad won a stunning victory in Malaysia’s election, ending the six-decade rule of Prime Minister Najib Razak’s party in a landmark shift for the Southeast Asian nation.

Mahathir, Malaysia’s longest-serving premier who defected to the opposition to take on Najib, will return to power at the age of 92. His four-party Pakatan Harapan alliance won at least 112 of 222 parliamentary seats in Wednesday’s vote, official figures from the election commission showed.

Mahathir Mohamad, center, celebrates following general elections in Kuala Lumpur.

Photographer: Manan Vatsyayana/AFP via Getty Images

“We are not seeking revenge,” Mahathir said. “What we want to do is to restore the rule of law.”

Khairy Jamaluddin, a member of Najib’s cabinet, said the prime minister plans to hold a press conference on Thursday.

“We’re going to accept the will of the people,” he said. “Whatever it is, we need to respect the will of the people.”

The result represents a monumental shift in a nation long defined by racial politics that hasn’t seen a transfer of power since independence in 1957. It’s also a win for democracy in Southeast Asia, where generals and authoritarian leaders often lock up opponents and stifle free speech.

“It’s a new beginning for Malaysia," said Ahmad Martadha Mohamed, an associate professor at Universiti Utara Malaysia College of Law.

Markets Hit

The outcome may be bad news for investors who had bet on a Najib victory, sending the benchmark FTSE Bursa Malaysia KLCI Index near a record high on the eve of the election. As results signaled a win for Mahathir, iShares MSCI Malaysia ETF based on the nation’s stocks dropped as much as 2.6 percent to the lowest since February.

Markets are expected to be closed Thursday and Friday after the government declared public holidays. Malaysia’s police advised political parties to not hold rallies that could jeopardize public order.

Mahathir on Wednesday implored government officials to “do what is right according to the constitution and the laws of this country.” He had previously run the country from 1981 to 2003, and wielded power even after he stepped down.

The vote showed that Mahathir still knows how to win elections. The victory was dominant: He swept traditional government strongholds like Johor, Kedah and Negeri Sembilan and neutralized Najib’s advantage in the Borneo states of Sabah and Sarawak.

The Bitter Feud at the Center of Malaysia’s Election

What’s more, Mahathir appeared to decisively win over ethnic Malay voters that had long underpinned the ruling party’s success. The mostly ethnic Chinese Democratic Action Party, previously the largest opposition party, was on pace to win fewer seats than in 2013.

For Mahathir, the fight against his former protege was particularly ugly. The two fell out over a myriad policy issues, including Najib’s decision to abolish the Internal Security Act, his performance in the 2013 general election and a money laundering scandal involving state investment firm 1MDB. Najib has denied wrongdoing.

Ahead of Wednesday’s vote, Mahathir had called Najib a “thief” who “lives in fear even of my photos.” Najib countered by saying Mahathir is “obsessive about control, calling the shots.”

On the campaign trail, the opposition mainly focused on bread-and-butter issues. Najib faced rising discontent over a goods-and-services tax that helped inflation accelerate last year at nearly the fastest pace in a decade.


What comes next is unclear. Mahathir helms an unwieldy four-party coalition that includes Malaysia’s largest ethnic Chinese party, and he plans to step aside once de facto opposition leader Anwar Ibrahim gets out of jail on a sodomy charge. Mahathir said he would seek a pardon for Anwar.

“I have to manage four presidents of four different parties,” Mahathir said. “It’s going to be a headache.”

Mahathir has pledged to set term limits for prime minister and reduce its power, while promising to scrap the GST within 100 days in power.

It’s uncertain whether the outcome will fundamentally reshape race relations in Malaysia. Najib’s party had long staked its legitimacy on providing preferential treatment for the bumiputera, or “sons of the soil,” which include ethnic Malays and indigenous groups.

Mak Hon Hoe, a 46-year-old ethnic Chinese voter, on Wednesday deplored the fact that Malaysians were separated in different racial categories.

“I want to see a fairer system,” he said while casting his ballot. “Race is still an issue. We want a Malaysian identity.”

— With assistance by Pooi Koon Chong, and Yudith Ho

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    Mahathir Says Malaysia Opposition Set for Shock Election Win

    • Opposition win would oust Najib, end coalition’s 61-year rule
    • Official results still trickling in at election commission

    Malaysia Goes to the Polls

    Mahathir Mohamad claimed his opposition alliance was heading for a surprise election win that would end the ruling coalition’s 61-year grip on power in Malaysia.

    The election commission showed Mahathir’s four-party Pakatan Harapan coalition leading Prime Minister Najib Razak’s Barisan Nasional alliance with nearly half of the seats counted. Unofficial results showed Mahathir’s bloc with a wider lead. 

    “From our unofficial counting, they are lagging far behind and the likelihood is that they will not be forming the government,” Mahathir, 92, told reporters in Kuala Lumpur on Wednesday night. “People must know what is their duty and they must do what is right according to the constitution and the laws of this country.”

    An opposition victory would represent a monumental shift in a nation that hasn’t seen a transfer of power since independence in 1957. Mahathir, who served as Malaysia’s leader for more than two decades, effectively came out of retirement and joined the opposition in a bid to oust Najib, who has faced corruption allegations and rising discontent over a goods-and-services tax.

    Shares Drop

    Investors were expecting a win for Najib. The iShares MSCI Malaysia ETF based on the nation’s stocks dropped as much as 2.6 percent to the lowest since February.

    Ahead of the vote, the benchmark FTSE Bursa Malaysia KLCI Index closed near a record high reached in late April. The ringgit has outperformed all its emerging Asian peers this year, gaining 2.5 percent against the dollar. Markets were closed on Wednesday for the election.

    Mahathir has pledged to set term limits for prime minister and reduce its power, while promising to scrap the GST within 100 days in power. He would be expected to serve as interim prime minister only until Anwar Ibrahim, the de facto leader of the opposition, can take over.

    Both Najib and Mahathir, who have traded insults during the campaign, sought to court the support of the ethnic Malays who make up around 60 percent of all voters. Mahathir’s alliance also includes Malaysia’s largest ethnic Chinese party.

    Najib Razak

    Photographer: Brent Lewin/Bloomberg

    Wild Card

    One wild card is a splinter group known as the Pan-Malaysian Islamic Party, or PAS, which may hold the balance of power in case neither party secures a majority. PAS ran with the opposition coalition in the 2013 election, but formed an informal alliance with Najib’s government after he backed moves to broaden the power of Islamic courts.

    Unofficial results showed the opposition gaining seats in Johor, which Najib dominated in 2013, as well as the Borneo states of Sarawak and Sabah.

    The opposition bloc has highlighted bread-and-butter issues while also keeping the spotlight on a money-laundering scandal involving state fund 1Malaysia Development Bhd., which has implicated Najib. He has denied any wrongdoing.

    Najib had said in an interview last month that he was confident of a better showing than 2013. In that election, his Barisan Nasional coalition won 133 constituencies -- roughly 59 percent of parliamentary seats -- in its worst performance ever.

    Mahathir is known for pegging the ringgit during the Asia financial crisis in the late 1990s and for public attacks on western institutions like the International Monetary Fund. On the campaign trail he hinted he might be less welcoming of foreign investment, including from China, if he’s back in power.

    — With assistance by Anuradha Raghu

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