February 13, 2018 1:00 pm JST
Asia Insight

Malaysia's Najib deploys policy firepower in duel with Mahathir

In election run-up, PM dangles public benefits as his mentor strikes back

CK TAN, Nikkei staff writer

Malaysia's former Prime Minister Mahathir Mohamad, left, was once a mentor to Prime Minister Najib Razak. (Original pictures by Getty Images, Reuters)

KUALA LUMPUR -- For Mahathir Mohamad, visibility is half the battle. Malaysia's nonagenarian former prime minister and current opposition leader is making a point of appearing in public these days, hoping to reconnect with the country's 15 million registered voters and overcome his political camp's limited resources. On a recent outing to the cinema, he watched "Star Wars: The Last Jedi" with his wife, Siti Hasmah Ali. 

The next election must be held by August, but it is likely to be called much earlier. So Mahathir is swinging into campaign mode. He takes questions on weekly Facebook webcasts, in an effort to reach younger voters. Even after he was hospitalized with a chest infection on Friday, the feisty 92-year-old tweeted a photo of himself in hospital garb and a sarong, writing: "Taking a short break. The fight will go on."

The upcoming campaign is expected to be dominated by bread-and-butter issues -- not the unending multibillion-dollar scandal swirling around state fund 1Malaysia Development Berhad and Prime Minister Najib Razak. Voters have more pressing concerns, like the surging cost of living.

Rafisah Atrae, an assistant at a bakery, blames the goods and services tax introduced in April 2015.

"My family of five couldn't get by with a single source of income," said the mother of three children, ranging in age from 5 to 11. "With 50 ringgit ($13) before the GST introduction, you could buy milk and diapers for the kids, but not anymore."

To save money, the 30-year-old commutes from the outskirts of Kuala Lumpur on a pillion on her husband's motorbike, rather than taking the train. Her family receives a yearly cash handout of 1,200 ringgit from the state, under a program Najib initiated in 2012 for households earning less than 3,000 ringgit a month.

Najib is presiding over brisk economic growth and low unemployment as he heads to the polls. The economy expanded at its fastest pace in three years in the July-September quarter -- 6.2% on the year -- driven by private-sector investment and increased exports. This, coupled with bright growth prospects for 2018, gave the central bank the confidence to raise its policy interest rate by 25 basis points on Jan. 25, to 3.25%. It was the first hike in three and a half years.

Yet low-income earners like Rafisah are feeling the brunt of higher living costs brought on by the GST, as well as the depreciation of the ringgit since 2014. A November poll by the Merdeka Center For Opinion Research captured the mood: 72% of the respondents cited the economy as their main concern, eclipsing security and political issues. 

"Our exports may be doing well, but the figures don't trickle down to the people on the street," Liew Chin Tong, a member of parliament with the opposition Democratic Action Party, said in an interview. He suggested that the combination of economic hardships and the 1MDB scandal have caused Najib's popularity to plunge from over 60% during the previous election in 2013 to less than 30%.

With 50 ringgit ($13) before the GST introduction, you could buy milk and diapers for the kids, but not anymore.
Rafisah Atrae, mother of three in Malaysia

But Najib has plenty of tools for getting the public back on his side -- tools he can use against Mahathir.

On Feb. 4, the prime minister reopened state-backed shops for branded necessities nationwide. These stores, designed to help the lower-income set, sell at least 50 household items at competitive prices. This assistance comes on top of the 1,200 ringgit annual stipends to be distributed later this month to some 7 million people.

Najib is also courting the middle class, which includes a large proportion of pro-opposition city dwellers. Individuals with annual taxable income of less than 70,000 ringgit will get a 2% break this year, under a government budget billed as "inclusive" and "people-centric." 

"Let's together ensure a big victory for Barisan Nasional in the 14th general election," Najib said in parliament at the end of the budget presentation last October, referring to the coalition he leads.

Najib's efforts to improve relations with China may be paying off as well. Ethnic Chinese, many of whom support the opposition due to the government's long-standing affirmative action policies for ethnic Malays, give the prime minister credit for sparking an influx of investment from China. 

"Orders from China are always huge," said Yap Pek Khoon, a scrap metal trader. In the past, he only closed local transactions involving less than 50 tons. But Yap's deals with Chinese clients are double that size.

There is no guarantee the ethnic-Chinese business community will line up behind the ruling party on election day, but the current government offers appealing stability. Najib's re-election for a third term would provide certainty for high-value infrastructure projects, such as the high-speed rail line linking Kuala Lumpur with Singapore, said Adib Zalkapli, an analyst with Singapore-based risk adviser Vriens & Partners.

The electoral system itself gives the Barisan Nasional, or National Front, a built-in advantage.

In 2013, the coalition won despite ceding 52% of the popular vote to the opposition, thanks to a winner-take-all setup in which rural areas account for more districts. The ruling coalition, which has a strong base in the countryside, took 60% of the seats.

Nevertheless, Mahathir's opposition will not go down without a fight.

"We cannot accept his leadership anymore," the former prime minister told the Nikkei Asian Review in an interview on Jan. 29. Mahathir insisted Najib must be removed from office through the ballot box, since other mechanisms have failed to hold him accountable for the 1MDB case.

In Mahathir's view, Najib's alleged links to the scandal have tarnished Malaysia's image.

Mahathir was something of a mentor to Najib and backed him to take over for his own successor, Abdullah Badawi. Abdullah stepped down after weathering Mahathir's relentless criticism for slightly more than one term.   

Now Mahathir is gunning for Najib as the head of a four-party opposition group known as the Pakatan Harapan, or Alliance of Hope. If the PH clinches power, the former leader would return to the prime minister's office. "I wanted to retire, but things were not right," Mahathir said. 

Najib and 1MDB have denied any wrongdoing, even though authorities from Switzerland to Singapore have penalized banks for lax oversight of transactions related to the fund. The U.S. Department of Justice also investigated the alleged misappropriation of at least $4.5 billion from 1MDB, which authorities believe was spent on luxuries, including the Pablo Picasso painting "Nature Morte au Crane de Taureau."

For their part, Malaysian authorities have cleared Najib of misconduct. A total of $681 million found in his personal bank accounts was later declared to have been a donation from Saudi royalty.

"It may sound illogical, but there are many illogical things in the world that are true," said Shafei Abdullah, a leader in Najib's United Malays National Organization party. Shafei, who served as Najib's political secretary for nine years until 2013, said in an interview that the party has closed ranks and accepted the donation explanation. He echoed his former boss's take on the scandal, blaming the opposition for regurgitating "half-truths" so often that the scandal started to ring true.

A college graduate working as a ride-hailing driver said she does not know much about Najib's involvement in the scandal, but that there might be some truth to it, judging from hearsay and his wife's lavish lifestyle. "I long for the Mahathir era, which was less-burdened with the high cost of living," said the woman, who asked to be called Noor. Despite holding a business degree, she said she became a driver because she could not find a job six months after graduation.

It is people like Noor that the opposition is aiming for.

One question is whether the opposition can hold together. It is an odd grouping. Anwar Ibrahim, leader of the Parti Keadilan Rakyat, or People's Justice Party, was jailed during Mahathir's 22 years in power. So was the DAP's Lim Kit Siang.

"The fight to overthrow Najib is far more important than what happened in the past," Mahathir said.

Anwar, once seen as Mahathir's successor of choice, is currently serving a five-year prison sentence for sodomy -- his second imprisonment on a charge many believe was fabricated.

Even so, Mahathir appears to have united the fragmented opposition, even managing to build a broad consensus on seat allocations.

A total of 222 parliamentary seats will be up for grabs. According to the DAP's Liew, the opposition is aiming to capture 100 of the 165 peninsular seats, up from 78 today. The strategy is to pull off a 10% swing in Malay votes in the ruling alliance's rural strongholds, while seizing 12 seats from two Malaysian states on the island of Borneo. This would give the PH a simple majority.

Without the BN's powerful election machinery, Liew said the opposition will rely on peer-to-peer campaigning, making use of messenger apps like WhatsApp and WeChat. "Data is cheaper and faster now," he said.

The opposition's biggest hurdle might be fear of the unknown. Malaysia has never seen a transfer of power since independence in 1957. "The transition period will be very challenging" if the opposition wins, said Wan Suhaimie, an economist at Kenanga Investment Bank. And while the PH is calling for the abolition of the GST and toll roads, Wan stressed the group needs to produce a "solid plan for government revenue."

Some local political analysts, such as Koh Kok Wee, are warning of a return to authoritarianism if the opposition prevails. Even Liew did not deny that "authoritarian nostalgia" among Mahathir's fans could translate into votes for the opposition, noting the way strongman Rodrigo Duterte was elected in the Philippines in 2016.

Mahathir maintains that he only wants to "put Malaysia back on track." He has said he would pass the reins to Anwar, who would need a royal pardon to become prime minister, after two years.

Adib, the Vriens & Partners analyst, reckons Mahathir may draw crowds at opposition rallies in the countryside but still might not topple the BN.

Either way, Mahathir's recent movie selection was fitting.

As in the "Star Wars" series -- where Anakin Skywalker duels with his master, Obi-Wan Kenobi -- this election is shaping up to be an intense battle between mentor and apprentice. And their clash runs the risk of reopening wounds, including Malaysia's rural-urban divide and its ethnic rifts.

Staff writer Takashi Nakano and Researcher Ying Xian Wong contributed to this article.

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