Opposition Breakthrough in Malaysia

MOU sets basis for unprecedented working together

Malaysia’s main opposition coalition Pakatan Harapan, has used the instability  of the newly created coalition government of Ismail Sabri to obtain a role in influencing the composition of the country’s budget, that is unique in the country’s history. The gain  by the opposition on the key political event of the political year confirms a new confidence by Anwar Ibrahim’s team following the departure of the former prime minister Muhyiddin Yassin.

The result is likely to be the inclusion of a number of proposals that the Pakatan Harapan has worked out to improve the response to the pandemic and the social welfare.  While the ideas may not be exceptional, the significance is in the process. 

Policies on gender and education

Ideas likely to be proposed by the Pakatan Harapan ranges from broad policies such an expansionary budget to revive the economy, gender responsive budgeting, higher allocation for education, to very  specific detailed spending such as  increasing funds to the D11 branch of the police — a specific section that deals with domestic abuse. 

Prime minister Ismail Sabri has made this ground-breaking concession to the opposition to bolster his position as prime minister and UMNO as the leading party in the ruling coalition. The opposition for its part sees an opportunity to demonstrate to the Malaysian people that it wants to play a role in the country’s recovery from the pandemic. Politicians from both sides have also responded positively to the advice of the King to put aside their differences and create a new political landscape.  

PM depends on Pakatan Harapan for survival

If his very survival is the carrot for the prime minister, the opposition also has a stick: this is the withdrawal of their support for the Budget if their policy ideas are not included, or if ideas are included to which they are resolutely opposed. The PM knows that if the Opposition were to vote against the Budget in early December, there is a real possibility that he may not have the numbers to continue to hold power.

The process of discussion between the Government and the Opposition has been given a formal structure enshrined in a memorandum of understanding (MOU) to which both sides have signed up. This is distinguished from the Confidence and Supply Agreement by the inclusion of a steering committee, and a number of milestones or points in time, by which juncture some specific reform goals are to have been achieved.

The consequence of the failure to achieve such milestones is equally clear to the signatories to the MOU. The MOU was drafted  by two innovative Opposition lawyers Wong Chen and William Leong, both of whom are MPs with the People’s Justice Party (PKR) led by Anwar Ibrahim.

No evidence of Unity Budget

The MOU came into force on 13 September2021, shortly after UMNO’s Ismail Sabri replaced Muhyiddin Yassin of the Bersatu party as prime minister. While the MOU presents an unusual degree of collaboration between Government and Opposition — two groupings typically facing each other with hostility across the parliamentary chamber– the MOU is not evidence of a Unity budget, says Wong Chen. 

The formation of a Unity government was thought to have been proposed by the Agong in the dying days of the Muhyiddin administration, when the governing coalition was unstable and it appeared a pact with the opposition might preserve some measure of stability, especially as Malaysia was being oppressed by a failure to deal with the ravages of the Coronavirus.

Government listening

“This is not a unity budget as there will be differences in spending priorities but if the budget is not terribly off-tangent or obscene, or morally wrong then we will elect to either support or abstain at the budget vote. We have revealed  to them [the Government] our core demands  and they are listening and I hope they will agree to incorporate the bulk of our demands in the budget,” said Wong Chen.

Wong Chen, a former corporate lawyer and head of policy to Anwar Ibrahim is part of the pre-budget team in talks with the government. The Government’s side is led by Tengku Zafrul, the finance minister, who is a former banker CEO of CIMB  and previously with Citibank.

It is understood the Prime Minister  — not an economist or financier — has placed considerable confidence in the decisions of Mr Zafrul to formulate the budget and manage the economy.

The opposition and Zafrul’s team have met at a number of pre-budget meetings and these will continue for the rest of the month.

Amicable meetings

“The meetings with the government up to now have been amicable,” said Wong Chen. “The Government, at least in principal, is in agreement with many of the policy issues that we raised, not the particular details but the broad policy outlook”.

 “We can’t expect them to table a budget that we all can agree 100% on, as such the MOU has a process  to resolve such issues. In the meantime, all the other reforms in the MOU are continuing at different paces and in different manners.”

It is also agreed by both sides that the opposition will not comment or seek to interfere with the government’s jurisdiction in making tax-raising decisions.

Expansionary budget

So far as an understanding of the country’s economic position is concerned, all parties are agreed that Malaysia needs an expansionary budget, says Wong Chen. “The deficit may be bigger and we are both aware of the revenue pressures that exist due to the pandemic.

“Malaysia  had to shut down for 4 months and that has hurt corporate earnings  and reduced corporate income tax. Unemployment is still hovering around 4.8%. Personal income tax has also been hit and sales tax revenue is also down due to slower consumption in the last 4  months. These pressures on revenue will mean  a relatively higher fiscal deficit.”

Pragmatism not idealism

The key to the Opposition approach is realism rather than idealism and they insist their grip on the economy is based on data. There is no excess of unrealistic optimism.

“We understand the lay of the land, we are not living in some fantasy world, we know what is going on. We are trying to find a way to get a better economic recovery through the budget.”

The final outcome of the budget will be determined by what the Opposition calls a process of budget ‘rectification’, whereby it assesses the extent to which government has embraced opposition responses to the Budget.

Controversial parts of budget

“If there are any controversial parts of the budget then the Government and the Opposition are supposed to sit down and negotiate further and find a resolution. Depending on the rectification, the Opposition will make a decision whether to abstain or to support the budget vote. This will be based on prior consultation and agreement,” he continued..

“Eventually, we will have to make a political decision as rectification cannot be expected to go 100% as we wish. So that leaves us with a political decision, whether we withdraw or continue with the terms of the MOU ,”  said Wong Chen.

Resistance to sectarian interests

The Opposition’s eventual vote will be based on the extent to which their ideas have been taken on board by the government following a process of negotiation and debate. The new process of collaboration could fall as soon as it is tested if government is inflexible, or the Opposition too ideological. On the other hand, the new MOU could bring out pragmatic and compromising forces on both sides, with everyone realising that this was in the interest of the country rather than narrow sectarian interests, the historic bane of the political process.

Other parts of the MOU

“The steering committee that oversees the implementation of the MOU has met twice. There have been some other meetings with the Minister of Finance both at the policy-making and at the working levels,” said Nik Nazmi bin Nik Ahmad, a Malaysian politician from the People’s Justice Party who represents Setiawangsa in Kuala Lumpur.

He said the Electoral Commission had taken steps towards lowering the voting age from 21 to 18 and automatic voter registration. This had been resisted by the government but some young voters sued the government and the Government lost. It did not appeal the decision. “

They have now committed to implementing it and they are asking Malaysians aged 18 and above to check their details so that they can put the names onto the Electoral Roll, said Nazmi.

“This was our promise and we initiated it during our time and I think it is something we can be proud of,” he said.

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