Increasing Government Efficiency in Malaysia through a New Act

Posted on August 29, 2025 by Tricia

This article was first published on Fulcrum, the ISEAS-Yusof Ishak Institute platform, on 20 August 2025 here.

A new Act to improve government efficiency in Malaysia would help streamline the bureaucracy and reduce regulatory burdens. It could be improved, however, by adding some parliamentary oversight.

Since taking office in November 2022, Malaysia’s MADANI government has rolled out at least 12 official national master plans and policy frameworks. Under the 13th Malaysia Plan, it aims to deliver 95 per cent of government services fully online by 2030, positioning Malaysia as a “high-income digital economy powered by artificial intelligence (AI)”.

Yet, the implementation of such plans remains a perennial question. Monitoring and evaluation of these targets are rarely done or reported. To address this, Prime Minister Anwar Ibrahim is banking on the Government Service Efficiency Commitment Act 2025. This was passed earlier this year to “enhance the quality, efficiency and effectiveness of the government service” by streamlining the bureaucracy, reducing regulatory burden and introducing service performance ratings.

The Public Service Department, which will lead reforms with the Ministry of Economy and the Malaysia Productivity Corporation (MPC), aims to transform work culture and strengthen public-private sector collaboration. These efforts also align with the new Chief Secretary (CS) Tan Sri Shamsul Azri Abu Bakar’s plans to revamp the civil service.

The Act enshrines principles of service efficiency, governance responsibility, structural reform and regulatory effectiveness. Significantly, it embeds governance, integrity, and transparency — language rarely adopted by the civil service — against a backdrop where 43 per cent of those detained by the Malaysian Anti-Corruption Commission (MACC) in 2024 were civil servants.

Under the Act, Government entities are required to reduce the regulatory burden by at least 25 per cent every three years, as well as review the procedures under their regulatory instruments. Then Economy Minister Rafizi Ramli had said in August 2024 that the intention was for the legislation to reduce bureaucracy and simplify procedures for businesses. However, which entities will be required to do so and how exactly “regulatory burden” is defined or measured is not stated within the Act.

Notably, the Act provides wide powers to the CS to design rating methods for service delivery, issue directives and require heads of government entities to prepare and submit periodic service performance reports, and “any other information as may be directed”.

This is a significant development. While the CS already oversees the administration of ministries and their agencies, this law extends reporting to statutory bodies, state government entities and even local governments, which are not currently under the CS’ purview. If the reporting line for state government entities and local governments bypasses state governments, this potentially further centralises authority within federal hands. Clarification on how the provisions relate to individual statutory bodies’ Acts is also required.

The CS may at his discretion request reports “from time to time”, without a standardised rating procedure or schedule across all government entities. Ministers may appoint qualified persons to examine and assess these reports, the findings of which are submitted to the CS. However, without an independent verification process, self-reporting risks becoming both highly subjective and perfunctory. Since better ratings can lead to greater federal recognition and funding, the stakes for these assessments are high.

Accountability gaps still remain. Ministers are not obliged to table performance reports in Parliament; the Act only says they “may” do so. A “Government Service Efficiency Commitment Report” on overall performance is to be prepared every three years. At the very least, a redacted version of this report should also be published online and tabled in Parliament for public access.

The Act provides a broad framework to improve service performance in Malaysia, but detailed governance mechanisms are needed to truly transform the public service’s work culture.

The third element of the Act that is striking is that service performance reports can be submitted voluntarily by any state government entity to the CS. This is consequential to federal-state fiscal relations in the country, given that these reports – and ratings contained therein – can be used as criteria to determine federal financial allocations to the state entity.

Apart from federal-to-state grants based on population, road coverage, revenue growth and ecological indicators, other forms of federal government transfers to state governments have no formula. In the past, the politicisation of development funds took place, favouring states aligned with the ruling government. While some performance requirements already exist for some federal-state transfers, the new Act links performance to financial rewards in a more direct and concrete way.

The Act provides a broad framework to improve service performance in Malaysia, but detailed governance mechanisms are needed to truly transform the public service’s work culture. This could drive a culture shift in the country’s public service, if implemented transparently and fairly. However, without sufficient checks and balances, it risks consolidating power in the hands of the federal executive through the CS, whom the government of the day appoints.

One way of improving the Act’s governance is to introduce parliamentary scrutiny on top of existing executive oversight. Lower House Standing Orders were recently amended to enhance executive accountability to Parliament, by elevating the status of Special Select Committees to Standing Select Committees. This made them permanent. That said, however, important public institutions like the MACC do not fall under the purview of any permanent select committees. A new select committee could be set up to oversee government service efficiency, where the Government Service Efficiency Commitment Report could be reviewed.

Finally, federal and state-level government-linked investment companies and government-linked companies (GLICs and GLCs) could be included under the Act, while a separate State-Owned Enterprise (SOE) Governance Act should also be enacted. These moves would strengthen transparency and accountability, ensuring the government fulfils its promise of delivering a more efficient and responsive public service. They would also help the government to implement policies and plans more effectively.

Posted in Public Administration, Transparency and Good Governance | Leave a comment

Mahathir Mohamad at 100: Monumental Achievements, Mixed Legacies

Posted on July 21, 2025 by Tricia

by Tricia Yeoh and Francis Hutchinson

This was first posted on Fulcrum (ISEAS-Yusof Ishak Institute platform) on 10 July 2025, the 100th Birthday of Tun Dr Mahathir Mohamad here.

An edited version of this opinion piece was republished on the South China Morning Post portal platform here, under the title of “Malaysia’s Mahathir Mohamad: a 100-year mixed legacy”, on 20 July 2025.

To live a long political life in Malaysia is not unusual; to have a century’s longevity and the lengthiest career guarantees its two-time former premier ‘Dr M’ a unique place in the history books.

Mahathir Mohamad, the spry two-time prime minister of Malaysia, turns 100 today. Visionary but detail-oriented, charismatic yet divisive, Mahathir has profoundly shaped the country’s politics, economy, and society over the past six decades.

Mahathir’s incursion into electoral politics was a milestone. In 1964, he first ran for parliament for the United Malays National Organisation (UMNO) in Kedah. In contrast to UMNO’s urbane first-generation leaders, Mahathir came from a rural background and articulated a more ethnically focused vision for the country than was then the norm.

Following a brief period in the political wilderness due to his disagreements with Malaysia’s first prime minister (PM), Tunku Abdul Rahman, Mahathir rejoined UMNO in the wake of the May 1969 racial unrest. His rhetoric and worldview fit in with Malaysia’s conscious pivot towards addressing wealth disparities between different ethnic groups.

Becoming PM in 1981, Mahathir led the country for an unprecedented 22-year term. During this period, his economic stewardship was, at the macro level, laudable. Mahathir was committed to balanced budgets, having a relatively open economy, investing in infrastructure, and attracting foreign direct investment. The result was an average annual growth rate of between six and seven per cent per year.

Mahathir was determined to make Malaysia a modern, self-sufficient, and “fully developed” nation by 2020. His quest was further enabled by Malaysia’s deep reservoirs of petroleum, whose rents burgeoned in the 1980s. Mahathir’s ensuing infrastructure drive transformed the country’s landscape with landmarks such as the Kuala Lumpur International Airport, the Petronas Twin Towers, and the questionable Multimedia Super-Corridor.

As PM, Mahathir focused on revitalising the bureaucracy. Leading by example, he prioritised excellence and professionalism, introducing name badges for civil servants, time-keeping, and a Client’s Charter to promote accountability. In addition, the Public Complaints Bureau and Anti-Corruption Agency were strengthened during his tenure.   

At the international level, Mahathir was a supporter of the Non-Aligned Movement. He espoused moderate Islam, cementing Malaysia’s reputation as one with whom the West could engage. He also promoted a “Look East Policy”, aimed at learning from the successes of Japan and South Korea, and deepened Malaysia’s engagement with China.

At his best, Mahathir articulated a vision based on pride and nationalism, the pursuit of economic growth, and technological ambition that unified Malaysia. Although the country has yet to attain high-income status even now, Mahathir’s economic stewardship during his first administration underpins the residual goodwill he enjoys today, recent political events notwithstanding.

Beyond economic management, increasing state capacity, and mobilising Malaysians around a specific vision, however, Mahathir’s legacy in many areas is mixed. In some cases, middling results were caused by his seeking to maintain rhetorical ambiguity, and in others, his formidable personality played a role.

Perhaps the best way to sum up Mahathir is as someone with great ambition, high standards, and an exceptional work ethic, but who also has an uncompromising nature that undermined many initiatives.

As to the first factor, Mahathir modelled Malaysia as a moderate Muslim country but undercut this narrative to outflank UMNO’s existential rival, the Islamic party, Partai Islam SeMalaysia (PAS). In response, he co-opted Anwar Ibrahim, then leader of the Malaysian Islamic Youth Movement into UMNO. Once in government, Anwar promoted increasing Islamisation, including boosting religious education in schools. Mahathir’s consequent pronouncement in 2001 that Malaysia is an “Islamic State” provided a rhetorical opening to his opponents.

Throughout his career, Mahathir supported ethnic-based affirmative action, while seeking to galvanise Malays by accusing them of being lazy, lacking a long-term perspective, and ungrateful. Operationally, he sought to build on Malaysia’s affirmative action programmes to uplift Malay and indigenous communities by hand-picking businessmen to receive preferential concessions for water provision, rail, airlines, and auto production. While the goal was to create genuine corporate leaders, the reliance on non-market mechanisms made many of these debt-fuelled corporate empires untenable, leading to massive corporate bailouts.

As for his personality, Mahathir’s ability to chart clear directions made him intransigent. This undermined leadership succession, as seen by Mahathir’s diatribes against subsequent prime ministers, including but not limited to Abdullah Badawi, Najib Razak, and his protégé-turned-nemesis, current PM Anwar Ibrahim.  

This inflexibility impacted the country’s institutions. In UMNO, Mahathir centralised power in the office of party president. In government, he weakened checks on the executive by maintaining tight control of the media, constraining the country’s royalty, and eroding the institutions of the judiciary and Parliament. The budget, size and reach of the Prime Minister’s Office expanded rapidly under his tenure, even absorbing parliament’s own civil service. The role of state governments was also curtailed through enhanced budgetary controls and constitutional amendments to reduce their scope.

Mahathir had an autocratic side. In 1987, with the questionable rationale of preventing racial riots, he orchestrated a crackdown on political activists, opposition politicians, and students, detaining them without trial under the Internal Security Act. In 1998, Mahathir sacked his deputy, Anwar Ibrahim, on the alleged grounds of sexual misconduct and corruption, igniting a national Reformasimovement in response.

After 21 years — and scenting a potential electoral defeat for UMNO and its coalition, Barisan Nasional — Mahathir voluntarily stepped down in 2003. His second stint as prime minister and his subsequent downfall are a perfect case study of the mixed record of his legacy.

The effects of Mahathir’s concentration of power in the PM’s position were made manifest under Najib Razak’s tenure. To contain the effects of the multi-billion-dollar exposé of the national investment fund, 1MDB, the latter used the awesome power of the prime minister’s office to remain in power.

To unseat Najib, Mahathir exited UMNO to set up a new party, Bersatu. He then partnered with former foes including Anwar Ibrahim’s Pakatan Harapan (PH) coalition. Drawing on his achievements and oratory, Mahathir was instrumental in appealing to Malay-majority constituencies, allowing PH to cobble together a parliamentary majority and seize power.

In office for the second time, Mahathir had a unique opportunity to fix the structural excesses of the structures he created. However, Mahathir’s distaste for Anwar eventually overcame his desire for continuity, as his constant toying with the handing over of power without doing so became untenable.

Had he ceded leadership to a named successor, Mahathir would have been able to credibly claim he restored Malaysia’s democracy. However, caught between giving way to Anwar or allying with Najib Razak and his faction in UMNO, Mahathir sought to lead a “unity government” that brought together all parliamentary factions. When this was not forthcoming, Mahathir resigned. This led to one of the most turbulent periods in Malaysia’s political history, with an unprecedented four governments in three years.

Since the end of his second prime ministership, Mahathir has shifted from being a mainstream politician to one on the fringe. Gone are his association with UMNO and Bersatu. In the 2022 general election, he suffered an electoral defeat — not even garnering enough votes to keep his deposit.

Perhaps the best way to sum up Mahathir is as someone with great ambition, high standards, and an exceptional work ethic, but who also has an uncompromising nature that undermined many initiatives. This depiction explains his longevity, physical and political. That no prime minister who has followed him can live up to his expectations and that Malaysia has yet to attain high-income status fuel this centenarian’s angst and drive.

2025/224

Tricia Yeoh is a Visiting Senior Fellow at the ISEAS – Yusof Ishak Institute and is an Associate Professor of Practice at the University of Nottingham Malaysia’s School of Politics and International Relations. 

Francis E. Hutchinson is Senior Fellow and Coordinator of the Malaysia Studies Programme, ISEAS – Yusof Ishak Institute.

Posted in Economics, General Politics, International Relations, Public Administration, Reflections | Leave a comment

Featured on BBC World Questions Panel

Posted on June 25, 2025 by Tricia

I was recently invited to be a panellist at the BBC World Questions programme, recorded live in a studio with an audience of 150 people in Kuala Lumpur.

This programme has been conducted in over 100 countries around the world. Questions are posed randomly to the panel, and we do not know the questions beforehand.

The programme was recorded live on 10 June 2025.

The edited video podcast version.

Here is a fuller radio (audio only) version of the session.

Posted in Academia, Civil Society, Economics, Ethno-Religious Politics, General Politics, Human Rights, International Relations, Politics, Public Administration, Transparency and Good Governance | Leave a comment

The 2025 ASEAN Summit Creates an Opportunity for Canada

Posted on June 25, 2025 by Tricia

This commentary was first published on the Asia Pacific Foundation of Canada website on 17 June 2025, and can be found here.

The recent ASEAN Summit in Kuala Lumpur, Malaysia — held against the backdrop of rising U.S. protectionism and U.S. President Donald Trump’s second-term tariffs — was an opportunity for Southeast Asian nations to coalesce and deepen their existing trade and economic ties. 

The theme of Malaysia’s 2025 ASEAN chairmanship is ‘inclusivity and sustainability,’ with an emphasis on ASEAN centrality and economic integration. At their May 26–27 Summit, ASEAN leaders adopted and signed the Kuala Lumpur Declaration on ASEAN 2045: Our Shared Future, a 20-year roadmap to guide the bloc in navigating global ‘megatrends’ while reinforcing its role as a community. 

The goals, as articulated in the declaration, include significantly increasing intra-ASEAN trade and investment, making ASEAN “the industrial and manufacturing hub of the Indo-Pacific with dynamic micro, small and medium enterprises (MSMEs),” and using the ASEAN Digital Economy Framework Agreement (DEFA) to double the value of the region’s digital economy to US$2 trillion by 2030. 

ASEAN meetings have long been criticized for failing to deliver meaningful progress, stemming from members’ adherence to the principles of consensus and non-interference. Nevertheless, the recent summit stood out in a number of ways. 

One of its most significant achievements was the first-ever ASEAN-GCC-China Summit, which took place at the same time as the ASEAN Summit. (Members of the GCC, or Gulf Cooperation Council, include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.) This linkage with the GCC is significant: its total commodity trade with China was nearly US$298 billion in 2023 and it accounted for 36 per cent of China’s total crude oil imports that year. It is also ASEAN’s seventh-largest trading partner. 

This bringing together of three of the world’s fastest-growing regions for a trilateral meeting was historic, in that it blended old trading ties with present-day geopolitical urgency. While ASEAN and the GCC had previously held formal meetings, it was the first time China was brought into the fold. This three-way intersection melds financial leverage from the Gulf, technological capabilities from China, and the ASEAN market’s dynamic demand and supply chain linkages. Among the commitments made by the three partners were enhanced economic collaboration, improved connectivity, co-operation on sustainable development, and a more active role for the Global South in global governance. 

The talks also touched on de-dollarization and financial self-reliance, with delegates advocating for interoperable cross-border payment systems to buffer against external volatility. Collectively, these developments indicate that the Global South is responding to what it perceives as an increase in U.S. trade isolationism. Less than two months after Trump’s April 2 ‘Liberation Day’ reciprocal tariff announcement, the implications are already reverberating in this region, with new trade and geoeconomic relationships rapidly developing as a way to hedge against overdependence on the U.S. 

That China featured prominently was no surprise; Premier Li Qiang, who attended the trilateral summit, said that China is willing to join hands with ASEAN and the GCC to “fully harness the synergy of one plus one plus one being greater than three” to share “common Asian values of peace, cooperation, openness and inclusiveness.” 

This statement comes on the back of Chinese President Xi Jinping’s recent Southeast Asia tour, described as a ‘charm offensive’ at a time when the U.S.-China trade war was heating up. Although talks between Washington and Beijing have just concluded, the uncertainty that has pervaded 2025 is sufficient to force ASEAN states to forge new friendships elsewhere. Hence, the bloc’s member states have advanced negotiations on both the ASEAN Trade in Goods Agreement (ATIGA) and the ASEAN-China Free Trade Agreement 3.0 (ACFTA), both major steps toward deeper economic integration and greater supply chain resilience. Specifically, the ACFTA upgrade introduced nine new chapters on the digital economy, green economy, and supply chain connectivity, and aims to build a “China-ASEAN mega market” premised on a shared future and promoting “common prosperity and development.” 

However, geopolitical positioning notwithstanding, questions remain as to whether anything substantial and concrete was achieved at the recent ASEAN Summit. For instance, Malaysia, as ASEAN Chair, had previously encouraged bloc members to take a common ASEAN stance in response to the U.S tariffs, but Vietnam, among the hardest hit in the region, sent negotiators directly to Washington, D.C., with Malaysia  following suit. 

In the end, the ASEAN Summit’s position was to reaffirm its commitment to refrain from imposing any retaliatory measures in response to U.S. tariffs. While individual members will proceed with bilateral negotiations with Washington, ASEAN leaders have also formed a task force to co-ordinate the regional response. Malaysian Prime Minister Anwar Ibrahim has also reached out to Trump to hold a U.S.-ASEAN Summit. Further negotiations and strategizing, rather than a hardline position, seem to be the likely approach. 

Other challenges include Myanmar and the South China Sea. During the summit, there was a renewed push for the Five-Point Consensus (5PC) for resolving Myanmar’s crisis. A statement on “an extended and expanded ceasefire” was endorsed, urging all parties to build on the temporary April 2025 ceasefire following that country’s devastating earthquake the previous month. As for the more delicate South China Sea issue, the summit statement reaffirmed strong support for a legally binding ASEAN-China Code of Conduct based on international law, including the 1982 United Nations Convention on the Law of the Sea (UNCLOS). 

It will be an uphill battle, however, to arrive at a common position on the South China Sea, given that individual states have different territorial claims. The Philippines has been singularly vocal in pushing back against China’s infractions in the West Philippine Sea and is calling for ASEAN states to collectively adopt the transparency initiative it launched in February 2023 by publicly releasing photos and videos of a Chinese vessel using a military-grade laser against a Philippines coast guard ship. This transparency initiative is intended to expose China’s actions in the South China Sea, which Manila hopes will unite ASEAN around the desire to defend its territorial waters. 

Other ASEAN states, including Malaysia, have been reluctant to sign on to this initiative, which it fears could lead to more aggression from China and run counter to the bloc’s preference for quiet diplomacy. At a dialogue on ASEAN maritime security in Manila in May 2025, ASEAN diplomats, think-tankers, and academics discussed common solutions for this ongoing problem, while upholding a commitment to a UNCLOS- and rules-based order. However, attendees were highly skeptical that the ASEAN-China Code of Conduct would be concluded within the next decade and doubted its effectiveness in maintaining peace and order in the South China Sea. 

Considering the group’s ability to make tremendous progress on the trade front, ASEAN could benefit from a stronger and more united position on the South China Sea issue, one that would not provoke China but rather affirm that the Southeast Asian region needs long-term security and defence-related stability to see the greatest returns from its trade and economic integration.

Another major milestone at this ASEAN Summit was an announcement that the regional bloc will admit its newest member, Timor Leste, this year. With Timor-Leste soon becoming a full member of the bloc, ASEAN will now include every sovereign state within the geographic boundary of Southeast Asia. This could support and expand ASEAN’s commitment to multilateralism, as Timor-Leste is a member of the Community of Portuguese Language Countries, which, notably, includes Brazil. 

While there was initially some concern about Timor-Leste’s capability and readiness, as a small nation, to join ASEAN, regional neighbours have contributed to its institutional and diplomatic readiness. For example, in the past, Malaysia, Indonesia, and the Philippines have contributed to Timor-Leste’s civil service training and technical capacity. This is therefore a historic moment for ASEAN, welcoming the entry of a nation that fought hard to achieve its independence. Further, Timor-Leste is one of only three Southeast Asia member states — the others being Indonesia and the Philippines — that are part of the international Open Government Partnership platform, a transparency initiative that promotes accountability, inclusion, and participation, and could encourage other ASEAN member states to participate and reinvigorate their commitments to transparency and accountability. 

These developments are significant to ASEAN’s dialogue partners, including Canada, the European Union, and other Western powers. As global trade uncertainties continue, ASEAN will present itself as a hub in an increasingly multipolar world. As the ASEAN-GCC-China Summit shows, ASEAN can harness its ability to bring together communities across the globe. 

For Canada, this is an opportunity for its new prime minister, Mark Carney, to deepen relationships with the region. In October 2024, then-prime minister Justin Trudeau joined ASEAN leaders at an ‘ASEAN-Canada Special Summit on Enhancing ASEAN Connectivity and Resilience.’ In May 2025, at the 22nd ASEAN-Canada Dialogue, held in Laos, Canada reaffirmed its commitment to its strategic partnership and co-operation across areas such as maritime co-operation, cybersecurity, and combating transnational crime. As the Joint Declaration on ASEAN-Canada Enhanced Partnership (2021-2025) expires at the end of this year, Canada’s leaders should anticipate the adoption of the new ASEAN-Canada Plan of Action for 2026-2030, especially in the run-up to the partner summit in late 2025. 

It should be noted that the U.S. is still a major player in ASEAN’s foreign direct investment (FDI), accounting for 32 per cent of the total as of 2023. Because of this, and because of other geopolitical and geoeconomic factors, ASEAN will not shut its doors on negotiating on tariffs or anything else trade-related with the U.S. However, as the U.S. has shown itself to be an increasingly unpredictable and unreliable partner, Canada is well-placed to position itself differently. 

Canada can do so while reaffirming its commitment to a rules-based international order, which ASEAN also supports. For decades, Canada’s international position has been tied so closely to that of the U.S. that for partners outside of North America, the two countries have been nearly indistinguishable. For the benefit of Canada’s international relations, it should brandish its own credentials, standing strong on its foundations as a middle power, and foster stronger and deeper relationships with ASEAN through various means. Encouraging ASEAN’s commitment to multilateral free trade, international rules-based order, and strategic neutrality is one way to do so; introducing concrete strategic pathways to develop economic and trading relationships would accelerate this further. 

• Edited by Erin Williams, Director, Programs, Vina Nadjibulla, Vice-President Research & Strategy, and Ted Fraser, Senior Editor, APF Canada 

Posted in Economics, International Relations, Outside Malaysia, Politics, Public Administration | Leave a comment

Reviving UMNO: Party Institutionalization and Coalition Management in Selangor and Malacca

Posted on June 20, 2025 by Tricia

This is my latest publication by ISEAS-Yusof Ishak Institute, released on 13 June 2025. The full version can be downloaded here.

I did ground research in the states of Selangor and Malacca to investigate the former dominant party UMNO’s party institutionalisation status (or its deinstitutionalisation), as well as how the Pakatan Harapan and Barisan Nasional coalitions are currently being managed within those states – as an indicator of broader, national-level trends.

Here is an Executive Summary of the paper.

  • Since Malaysia’s independence in 1957 until 2018, the United Malays National Organisation (UMNO) was the single dominant party in control of an authoritarian regime, having been the main party within the long-ruling National Front (Barisan Nasional, or BN). Since its fall from power in 2018, key events have reshaped its party structure, leadership and overall support. Today, it sits in a large-tent coalition at the federal level, is part of the state government in seven states, and of these, controls the position of chief minister in three.
  • Using the states of Malacca and Selangor as case studies, this paper examines UMNO’s current state of leadership, how the PH-BN coalition is being managed and how this relationship is being communicated to the grassroots, and how these key elements contribute to the deinstitutionalization of the party.
  • While grappling with party factionalism and leadership gaps at the national level, UMNO in both Selangor and Malacca has also undergone significant leadership changes. Serious efforts are being made to strengthen state-level leadership, but these remain overshadowed by the gaps in the party’s central leadership.
  • As political operatives of UMNO and Pakatan Harapan (PH) work together, there is some indication that this cooperation is beginning to coalesce, although resistance from the grassroots remains apparent within both the selected states.
  • UMNO is in a unique position of being positionally stable but institutionally weak, and the cases of Selangor and Malacca offer some insight into how its internal dynamics play out on the ground. A revival of UMNO in its original form is highly unlikely given its significant hollowing out over the last four years.
  • Whether or not the formerly dominant party will revive is dependent on the current leadership’s decisions over cooperation with PH. While the party may never fully reclaim its past strength, it can, however, leverage its existing resources and use this period to reorganize and strengthen its institutional foundations.

Trends in Southeast Asia 2025/13, June 2025

Posted in General Politics, Selangor | Leave a comment

PKR Party Elections Will Shape Malaysia’s Political Future

Posted on May 27, 2025 by Tricia

This commentary was first published on ISEAS-Yusof Ishak Institute’s platform, Fulcrum, on 23 May 2025 here.

The upcoming Parti Keadilan Rakyat elections will influence Malaysia’s political future.

The tremendous national attention on the Parti Keadilan Rakyat (PKR) elections in Malaysia is unsurprising; it is, after all, the first time that the party is holding its elections while also helming the federal government. The stakes are undeniably high in the central elections today (the polls were brought forward a day from tomorrow). Whoever eventually occupies the positions of deputy president and vice president will be seen as potential successors to the current PKR President and Prime Minister Anwar Ibrahim. The 16th GE is due to take place by 2027, and if, as in GE2022, no single party wins an outright parliamentary majority, PKR may remain central to the survival of a multi-coalition government. These elections are not merely party matters; they are of national consequence.

The divisional leadership elections conducted (in April) indicate the political significance of the PKR election, which is further intensified by the upcoming race for the deputy presidency between incumbent Minister of Economy Rafizi Ramli and Nurul Izzah Anwar – daughter of the prime minister. Rafizi has championed reformist ideals and grassroots engagement, while Nurul Izzah advocates unity, renewal and strategic focus.

Over the last month, the party conducted its divisional leadership elections, where more than 20,000 delegates voted for division chiefs and leaders of women’s and youth wings across 222 divisions nationwide. 289 objections were lodged over alleged discrepancies, but the party’s central election committee has strongly refuted these allegations. Notably, this is the first time PKR has deployed blockchain technology in its electoral process, which the party says strengthens electoral integrity. It also defended an audit report that found no evidence of electoral fraud.

While PKR maintained its “one member, one vote” system for divisional polls, the more influential central leadership election will revert to a delegate-based system. This switch could arguably increase the likelihood of political bargaining and more influence-peddling to secure branch leadership support.

The divisional elections have already delivered some shocks. Several senior figures lost their division chief positions, including Natural Resources and Environmental Sustainability Minister Nik Nazmi Nik Ahmad in Setiawangsa and Deputy Minister of Energy Transition and Water Transformation Akmal Nasir in Johor Bahru. Other high-profile casualties included Deputy Youth and Sports Minister Adam Adli and Petaling Jaya MP Lee Chean Chung.

Many of these individuals are reportedly aligned with Minister of Economy Rafizi Ramli, whose relationship with Anwar has long been speculated as strained, stemming from opposing views over PKR’s political strategy. His role in the government has been interpreted by some as marginalised. Many key monitoring and policy functions, including the MADANI Report Card, are housed within the Ministry of Finance, bypassing the Ministry of Economy entirely.

That the deputy presidency is being contested at all is of some surprise; the top two party positions were initially not up for contest to maintain party stability. But the spotlight is on the ensuing duel between Rafizi and Nurul Izzah.

Nurul Izzah has received outright support from party leaders aligned to the prime minister, a sign that her candidacy has been explicitly endorsed by Anwar himself. However, even with her political credentials and intellectual competence, her win would invite scrutiny over nepotism, given her familial ties.

Rafizi, a two-term MP and known as a party maverick who has preferred to run things his own way, received public accolades over his role in unveiling the National Feedlot Corporation scandal for which he was jailed. He founded the National Oversight and Whistleblowers Centre (NOW) and Invoke Malaysia, where public funds were channelled to finance PKR candidates in the GE2018 campaign. His brazen challenge of party orthodoxy has made him a popular public figure. But this both elevates and isolates him within the PKR ranks.

Nurul Izzah, a three-term MP, is no stranger to Malaysian politics. Dubbed the ‘Reformasi Princess’, she rose to political prominence alongside her father’s Reformasi movement following his sacking in 1998. Since then, she has carved out her own identity, participating in several policy initiatives, most recently launching her own think tank Polity to promote inclusive development. Anwar initially appointed her as his senior advisor on economics and finance, but this was reversed after public backlash. She then co-chaired a secretariat of an advisory panel within the Finance Ministry.

Nurul Izzah has received outright support from party leaders aligned to the prime minister, a sign that her candidacy has been explicitly endorsed by Anwar himself. However, even with her political credentials and intellectual competence, her win would invite scrutiny over nepotism, given her familial ties. She has rejected these claims, saying that she has earned her place in PKR on merit. Yet the top two positions featuring father and daughter will fuel debate over dynastic politics in Malaysia (Anwar’s wife, Wan Azizah Wan Ismail, served as party president while he was incarcerated).

Four vice presidents will also be elected on 24 May, with 12 individuals contesting, including incumbents Chang Lih Kang (Minister of Science, Technology and Innovation), Nik Nazmi Nik Ahmad, Amirudin Shari (Selangor Chief Minister) and Aminuddin Harun (Negeri Sembilan Chief Minister). While Chang, Nik Nazmi and Aminuddin are known to support Rafizi, Amirudin has declared support for Nurul Izzah; the eight new challengers are predominantly aligned with Nurul Izzah. Political secretary to the Finance Minister, Muhammad Kamil Abdul Munim, is the sole nominee for the youth chief, while the women’s chief post will be a contest between incumbent and Education Minister Fadhlina Sidek and Ampang MP Rodziah Ismail.

The most significant contest is that for the deputy presidency. No matter the outcome, PKR’s future trajectory will be altered. Whoever wins, another round of factionalism looms, a reminder of the 2020 party crisis. Then, Deputy President Azmin Ali defected and was later expelled. He brought with him an entourage of supporters and triggered a major split that contributed to the downfall of the Pakatan Harapan government. A Rafizi loss may lead to a similar party split. Further, Rafizi has said he would resign from his ministerial post if he loses, which will have major implications for economic policy and lead to a Cabinet reshuffle.

However, in typical nonconformist Rafizi fashion, he has also encouraged members to vote for Nurul Izzah as her defeat would be interpreted as a rejection of Anwar’s leadership. If Nurul Izzah does lose against the odds, she faces marginalisation within the party leadership and Anwar himself may lose influence over party direction and appointments – especially if Rafizi uses this opportunity to consolidate control over party machinery.

The nation will be watching as members vote today; PKR’s election outcome will ignite the party’s succession planning and undoubtedly leave a lasting impact on Malaysia’s political landscape.

Posted in Elections, General Politics | Leave a comment

Abdullah Badawi – An Understated and Underrated Leader

Posted on May 8, 2025 by Tricia

This piece that was co-authored with Dr Francis Hutchinson of ISEAS-Yusof Ishak Institute was first published in Fulcrum on 6 May 2025, here.

Abdullah Badawi’s brand melded the best of two worlds, namely rising living standards and technological ambition minus the angst and aggression of the Mahathir period.

Abdullah Badawi, Malaysia’s fifth prime minister, passed away on 14 April. Fondly known as “Pak Lah”, he was in office from 2003 to 2009. He is best remembered for the see-saw in Barisan Nasional’s (BN) electoral fortunes: the massive electoral victory in 2004 which netted 90 per cent of seats in Parliament, and the coalition’s loss of its two-thirds parliamentary majority four years later.

Abdullah Badawi came to power just after Mahathir Mohamed, who had ruled Malaysia for 22 years. Hailing from a religious but multi-ethnic background, Pak Lah was known as “Mr Clean” and preferred a consensual approach. His brand promised the best of both worlds, namely a focus on rising living standards and technological ambitions — but minus Mahathir’s angst and aggression.

One of  Pak Lah’s most significant achievements was a focus on good governance, in particular combating corruption. He transformed the Anti-Corruption Agency (ACA) into the Malaysian Anti-Corruption Commission (MACC), a larger and more institutionalised organisation with wider-ranging powers. Amongst the MACC’s early cases were Perwaja Steel and Port Klang Free Zone (PKFZ), both examples of failed mega-infrastructure projects and crony capitalism linked to Mahathir.

In 2004, Abdullah Badawi formed a Royal Commission of Inquiry (RCI) to enhance the performance of the Royal Malaysia Police. This came at a time when the force faced mounting allegations of abuse, deaths in custody and corruption. The RCI recommended establishing an Independent Police Complaints and Misconduct Commission. The recommendation held promise but was strongly opposed by the police force — foreshadowing the structural constraints on his leadership.

Beyond the measures he implemented, Pak Lah’s most important legacy is what he did not do — namely misuse the awe-inspiring authoritarian apparatus at his disposal.

Pak Lah advocated Islam Hadhari, a form of moderate Islam promoting harmony and inclusivity. He opened up spaces for conversations around current issues, including religion, and proposed establishing the Interfaith Commission of Malaysia. Although the proposal was shelved after intense opposition, unofficial groups continued to foster interfaith dialogue, including events and television shows such as “Dialogue Harmony”. This new zeitgeist also included greater political freedoms. It was under his leadership that current Prime Minister Anwar Ibrahim was released from prison in 2004.

Abdullah Badawi’s administration had a special focus on education. His National Education Blueprint 2006-2010 aimed to improve access to education, raise quality and efficiency, and promote language proficiency and human capital development. His administration also emphasised regional development, agriculture, and support for small and medium enterprises.

Pak Lah’s first general election was held in 2004, one year after his ascent to power. Malaysians enthusiastically gave the newly helmed BN an overwhelming mandate (Figure 1). However, this level of support did not last; Abdullah Badawi’s shine gradually lost its lustre. He led BN to a high-water mark in the 2004 elections, but it was downhill thereafter. After an initial flurry, his anti-corruption drive lost steam. The new freedoms of speech and media also allowed long-simmering tensions to bubble to the surface.

In 2007, the Lina Joy case took centre-stage. This involved a Muslim lady who attempted but failed to convert to Christianity. This sparked widespread discussion on the balance between constitutional rights and religious laws. In the same year, the Hindu Rights Action Force (HINDRAF) and first Bersih street rallies took place. The former focused on the position of Hindus in Malaysia and the latter on political freedoms and electoral reforms. These demonstrations put Abdullah Badawi in the awkward position of having to contain the forces he unleashed. Pak Lah also faced discontent within United Malays National Organization (UMNO), as alluded to in his 2009 speech on the future and survival of the party.

Pak Lah’s Shine Loses Its Lustre

Figure 1. Barisan Nasional’s Proportion of Seats in Parliament (1955-2018), in per cent

From the heights of 2004, BN’s cachet descended to the lows of 2008. That year’s election took place against the backdrop of the rallies, a growing perception that Pak Lah was “low energy”, and Mahathir’s constant carping. BN lost its two-thirds majority in Parliament as well as an unprecedented number of state governments. Unused to electoral drubbings and nervous about their own prospects, UMNO leaders such as Najib Razak and Muhyiddin Yassin pushed hard for him to cede power.

While Pak Lah presided over the electoral decline, there were deeper forces at play. The groundswell against BN had actually begun before 1999 with the drift away from Mahathir in the wake of Anwar Ibrahim’s sacking. The 2004 electoral boom was also a one-off bump in a long-term tail-spin. This was due to dynamics like slower economic growth after the Asian Financial Crisis, higher rates of urbanisation (which were at odds with BN’s traditional rural focus), a more diverse media landscape, and a more consolidated opposition. Indeed, Pak Lah’s successor Najib Razak went on to witness further disappointment in 2013. Five years later, BN suffered a cataclysmic defeat in 2018 and lost its grip on power.

Some of Pak Lah’s reforms only yielded fruit long after they were implemented. A diluted version of the Independent Police Conduct Commission (IPCC) was eventually formed, and came officially into force in 2023. The blossoming of more open discussion set the nation on a course towards an examination of socio-economic policies and greater electoral freedom. Pak Lah’s collection of regional economic corridors, while not immediately impressive, highlighted the need to foster economic growth outside the Klang Valley.

Beyond the measures he implemented, Pak Lah’s most important legacy is what he did not do – namely misuse the awe-inspiring authoritarian apparatus at his disposal. Centralisation measures wrought by Mahathir within UMNO and the government had made the party president and Malaysian PM well-nigh invulnerable. After BN’s dismal performance in 2008, especially in Selangor, Abdullah Badawi stepped in to calm rising emotions within UMNO. He defied those wanting to “cause problems”, insisting that electoral loss was part of the democratic process and stating that “sometimes we win, sometimes we lose”.

Faced with increasingly strident calls from within and without UMNO to step down, Pak Lah could well have resisted. However, there were no media muzzles, party purges or constitutional conundrums for him. When the dust settled, Pak Lah read the room and then took his leave — like a gentleman.

Posted in Corruption, Economics, Education, General Politics, Public Administration, Reflections | Leave a comment

Trump’s On-off Tariffs Could Disengage Southeast Asia Further from the U.S.

Posted on April 23, 2025 by Tricia

This was first published on the Asia Pacific Foundation of Canada website here on 15 April 2025.

The reciprocal tariffs announced by U.S. President Donald Trump on April 2 – what he referred to as “Liberation Day” – hit Southeast Asian economies particularly hard. While they and others received a brief respite in the form of a 90-day pause, with a universal lowered reciprocal tariff of 10 per cent, tariffs on goods from China spiked to 145 per cent. The increasingly inconsistent and erratic policymaking from the Trump administration will ultimately push Southeast Asia away from making deals with the U.S., an increasingly unreliable trade partner. 

Given the questionable economic basis of Trump’s original tariff calculations, the relatively high tariffs initially imposed on the region can best be explained through political reasoning. The tariffs – which ranged from 49 per cent for Cambodia, 48 per cent for Laos, 46 per cent for Vietnam, 44 per cent for Myanmar, 36 for Thailand, and 24 per cent for Malaysia and Brunei – were most likely intended to pressure these developing countries to seriously reconsider their close economic ties with China. 

However, Trump’s punitive tariff strategy may have the opposite effect as Southeast Asia disengages from the U.S. to be pushed into the welcoming arms of China. Already, China’s President Xi Jinping is making a much-publicized visit to Malaysia, Cambodia, and Vietnam from April 14-18, which will invariably result in high-level bilateral trade and economic commitments that will strengthen these countries’ relationships with China. This ‘charm offensive’ is a highly strategic move by President Xi, given Malaysia’s chairmanship of the Association of Southeast Asian Nations (ASEAN) this year, especially with ASEAN members Cambodia and Vietnam among the hardest-hit countries on Trump’s original (April 2) reciprocal tariffs list.

Before April 2, most Southeast Asian countries were unwilling to take a clear side in the U.S.-China trade war. That said, the State of Southeast Asia 2025 Survey, recently conducted by the ISEAS-Yusof Ishak Institute, revealed that the U.S. was preferred over China should the region be forced to align with one or the other. Events of the past weeks, however, may alter this sentiment – particularly since the previous year’s survey saw respondents preferring China over the U.S., indicating Southeast Asian economies will readily switch allegiances in their own strategic best interests. 

That the U.S. is willing to force this decoupling is surprising given that it needs Southeast Asian allies in the region, particularly in the context of escalating disputes in the South China Sea, where China lays claim to territorial waters that are also claimed by Malaysia, the Philippines, and Vietnam. Even the Philippines, the U.S.’s longtime ally in the region, was slapped with a 17 per cent tariff. 

Semiconductor-exporting countries in Southeast Asia breathed a sigh of relief when they saw that semiconductors were among the exemptions listed by Trump on April 11, with some pullback by the president just days later. Malaysia accounts for approximately 20 per cent of the U.S.’s semiconductor imports, while Vietnam accounts for more than 10 per cent of semiconductor chips imported by the U.S. As the White House continues to vacillate on this exemption, ultimately, it may not last. While some goods such as copper, pharmaceuticals, semiconductors, and lumber articles are not currently subject to the reciprocal tariffs announced on April 2, they may be subject to future tariffs under Section 232 of the 1962 US Trade Act. 

These tariffs on semiconductors should not be surprising, as this sector represents precisely the type of manufacturing industry Trump envisions reshoring to the U.S. Trump himself had previously shared intentions of placing tariffs as high as 25 per cent on semiconductor imports. Further, not all semiconductors are exempt at present, such as graphics processing units (GPUs) and servers for training artificial intelligence models. 

If Trump’s broader tariffs on Southeast Asia are followed through on, the implications will be severe and long-lasting. ASEAN countries combined accounted for 7.2 per cent of global Gross Domestic Product (GDP) in 2024 and 8.7 per cent of global GDP growth over the past decade (2014-2024). If an economic recession were to hit Southeast Asia, those with the lowest GDP per capita, such as Myanmar, Laos, and Cambodia, would be especially hard hit. Myanmar, which has been embroiled in a civil war since 2021 and was recently hit by a devastating earthquake with a death toll of more than 3,500, will be left in shambles. 

There are already anecdotes of Chinese investors based both in Mainland China and Vietnam looking to diversify their manufacturing bases elsewhere in the region. Malaysia and the Philippines, which are facing relatively lower tariff rates, may stand to gain, but at the expense of their neighbours. Meanwhile, individual Southeast Asian countries may be increasingly tempted to impose trade barriers on Chinese goods to protect their domestic industries, as exports that would otherwise have been destined for the U.S. are redirected to Southeast Asian markets. This move, however, could be economically self-defeating given the region’s tightly interlinked supply chains and shared reliance on Chinese inputs. It would also run counter to the principle of ASEAN centrality and economic integration.

Ultimately, Southeast Asia may not be able to break ties completely with the U.S. American foreign direct investment (FDI) into ASEAN represented 32.4 per cent of the region’s total FDI inflows in 2023. As a result, all Southeast Asian countries have prioritized diplomacy, sent negotiation teams, and committed to working closely with Washington. 

Malaysia, as ASEAN Chair in 2025, is leading a unified regional response to the April 2 tariff announcement. At a Special ASEAN Economic Ministers’ Meeting on April 10, ASEAN articulated a common position to engage in a “frank and constructive dialogue with the U.S. to address trade-related concerns” and not impose any retaliatory measures in response. 

This position, however, may just be about safeguarding economic interests and diplomatic relations with the U.S. in the current moment while the bloc simultaneously works out alternative long-term measures. Those measures may include upgrading the ASEAN Trade in Goods Agreement (ATIGA), finalizing negotiations on the ASEAN Digital Economy Framework Agreement (DEFA), and, importantly, upgrading the ASEAN-China Free Trade Agreement (ACFTA) and ASEAN-India Trade in Goods Agreement (AITIGA), as recently suggested by Malaysia’s Minister of Investment, Trade and Industry. 

Moving in on these measures would indicate that Southeast Asia is indeed seeking deeper economic co-operation with China in the immediate future. The Regional Comprehensive Economic Partnership (RCEP), the free trade agreement that brings together China and the 10 ASEAN member states, as well as Japan, South Korea, Australia, and New Zealand, will also be an increasingly attractive instrument to solidify partnerships within the Asia Pacific region. 

Amid this confusion and the flip-flopping of policies from the Oval Office, there is a unique opportunity for Canada to be the reliable and stable trading partner that Southeast Asian economies seek. Canada’s 2022 Indo-Pacific Strategy can be strengthened and updated to reflect current circumstances. A statement issued by the ASEAN Economic Ministers on April 10 drew parallels with that strategy and reaffirmed ASEAN’s support for a “predictable, transparent, free, fair, inclusive, sustainable and rules-based multilateral trading system”.

Canada, along with other regional bodies such as the European Union, should now brandish its credentials as a stable and reliable global player that adheres to these rules-based norms, helping to shore up the certainty that Southeast Asia currently needs. The institutions the U.S. was once part of creating but is now dismantling should continue to be upheld. While the existing free trade system may have weaknesses, a complete dismantlement of the global order at this speed – predicated on economic protectionism alone – cannot be absorbed by the majority of the world’s economies, least of all those in Southeast Asia. Canada’s participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which brings together 12 member countries, including Singapore, Malaysia, Brunei and Vietnam, also gives it an advantage the U.S. does not have. 

Trump’s tariff policies are pushing Southeast Asia further away from the U.S. at a time when Washington needs regional allies in both economic and security matters. The long time lag for reshoring manufacturing to the U.S. will mean that in the near term, America will still require goods that are critical for its supply chains; even cars made in the U.S. will need auto parts from the rest of the world. Even if Southeast Asian countries would prefer a more balanced and diversified trade relationship that still includes the U.S., the region’s short-term strategic adjustments to shift its focus to China might become a long-term, permanent shift if current U.S. policies and tariff regimes endure. Will the U.S. recognize that there are severe long-term consequences of its recent actions in time to mend already fractured relations, or will it cede economic leadership in the region for good in its own misguided self-interest? 

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Should Selangor Take Kuala Lumpur Back?

Posted on December 24, 2024 by Tricia

This was first published by ISEAS-Yusof Ishak Institute on its Fulcrum platform on 18 December 2024, here.

There is talk of integrating Kuala Lumpur into Selangor again. However, before considering reintegration, the capital’s governance and residents’ needs must be addressed.

In November 2024, Selangor’s Chief Minister Amiruddin Shari expressed interest in reclaiming Kuala Lumpur if the opportunity arises despite not having any concrete plans. Reintegrating the capital, the country’s financial and commercial hub, into the state would have far-reaching implications, especially for residents of the capital who do not have democratic representation.

Kuala Lumpur, once part of Selangor, became a city in 1972 and a Federal Territory two years later under an agreement stating it would revert to Selangor if it ceased to be the federal capital. The 1974 agreement to cede Kuala Lumpur to the federal government is bound by two conditions: its status as the federal administrative centre and the location of the Parliament building in the capital. With Putrajaya serving as the administrative centre, only the latter condition remains. Selangor taking Kuala Lumpur back would have significant financial, administrative and political implications. These include potentially increasing Selangor’s revenue base and also possibly straining its expenditure bill. More importantly, it would ensure the inclusion of more local and democratic governance where currently none exists.

Kuala Lumpur is governed by the Kuala Lumpur City Hall (Dewan Bandaraya Kuala Lumpuror DBKL), which reports directly to the Ministry of Federal Territories. This ministry appoints DBKL’s mayor and Board of Advisors, who oversee urban planning and socioeconomic development. Senior civil servants and professionals typically fill the city’s top management positions. DBKL controls an annual budget of between RM2.6 billion (US$584 million) and RM2.9 billion, larger than the combined budgets of Penang, Kedah, and Perlis.

Given its significant budget and administrative control, the lack of democratic representation is concerning. Since its leadership is appointed and not elected, reintegrating into Selangor would allow Kuala Lumpur residents to vote for state leaders accountable for DBKL’s administration. Under Malaysia’s Federal Constitution, local governments fall under the jurisdiction of democratically elected state governments.

Second, while DBKL has made strides in enabling citizen participation through online budget consultations, communication with residents remains limited, often leaving developers and service providers as intermediaries. This has caused frustration, as residents expect DBKL to handle local issues. A recent billboard controversy — stemming from a peremptory directive that all commercial signage must include Malay — highlighted the disconnect between DBKL and local businesses. This incident suggests that granular matters like advertisements or the popular peeve of potholes may be better managed by an elected state entity rather than the federal government.

Given its significant budget and administrative control, the lack of democratic representation is concerning.

The Selangor state government could more effectively address urban planning and service delivery through the principle of subsidiarity — delegating authority to the level closest to the affected community. Reintroducing local government elections, a cause Pakatan Harapan once championed, would further increase accountability. Synergising policy planning to reduce overlap between Selangor and Kuala Lumpur would also reduce duplication of efforts.

For instance, cleaning and rejuvenating the Klang River, which flows through both Selangor and Kuala Lumpur, has been challenging because coordination is needed between the state and federal governments. When both entities are not politically aligned, decision-making is complicated. Unifying governance would streamline such initiatives.

That said, maintaining Kuala Lumpur as a neutral administrative hub independent from state control may appeal to investors. Shah Alam could continue to serve as a governance capital to address Selangor’s needs. Managing Kuala Lumpur’s hefty budget may strain Selangor’s administrative capacity, and resources may be allocated towards urban rather than rural areas. However, Kuala Lumpur’s high property value would mean that Selangor can derive higher revenue from the land tax (also known as quit rent) charged on the city’s properties. In addition, reintegrating Kuala Lumpur into Selangor may also entail the transfer of assets, which could generate further state government income.

What is certain is that having Selangor reincorporate Kuala Lumpur into its state would have significant electoral implications. Kuala Lumpur currently has 11 parliamentary seats, of which the Democratic Action Party (DAP) and People’s Justice Party (PKR) control five seats each, with the United Malays National Organisation (UMNO) controlling one. With parliamentary seats mainly containing two to three state legislative seats, Kuala Lumpur’s reintegration into Selangor would add between 22 and 33 state seats to Selangor’s existing 56, depending on how the Election Commission delimits the boundaries.

This would mean a major redistribution of electoral power, as there may be a significant increase in the proportion of Parti Keadilan Rakyat (PKR) and DAP state seats within the new Selangor legislature. This would also lead to further political consolidation of the Pakatan Harapan coalition, which may well be the very reason why the proposal is being highlighted at present.

Before considering reintegration, however, Kuala Lumpur’s governance needs to be addressed. Replacing the Advisory Board with appointed councillors, as suggested by the DAP Federal Territories chapter recently, is one immediate way to improve accountability. This would require amending the Federal Capital Act 1960 to limit the board’s role to advising the mayor on matters connected with the city’s administration or addressing questions referred to by the ministry or mayor. This could also be a stepping stone towards restoring local council elections, enhancing democratic participation and ensuring Kuala Lumpur citizens have a say in their city’s administration.

Ultimately, the decision to reintegrate Kuala Lumpur into Selangor rests with the federal and state governments and the Selangor Ruler and is subject to the Council of Rulers’ assent, as in 1974. Such a move would require the Parliament building to be relocated elsewhere and address the challenges and consequences outlined above. As local governments provide public service delivery that citizens experience on a day-to-day basis, it is imperative that Kuala Lumpur’s local governance is improved, whether it reintegrates with Selangor or not.

Posted in Economics, Federalism, Public Administration, Selangor, Transparency and Good Governance | Leave a comment

Tug of Wealth: Malaysian States Seek a Fairer Deal in Oil and Gas

Posted on November 19, 2024 by Tricia

First published on the Fulcrum platform under ISEAS-Yusof Ishak Institute on 18 November 2024, here.

A potential legal tussle between Sarawak and Petronas has implications for Malaysia’s approach to development and for the country as a whole.

In early September, Sarawak issued an ultimatum to Petronas, Malaysia’s national oil company, to surrender all rights over the distribution and sale of liquefied natural gas (LNG) to its state-owned oil and gas company, Petros, by 1 October. Following this, reports confirmed that Petronas was mulling legal action to defend its monopoly over the country’s natural resources.

Since then, the deadline has passed with no news of legal action. Sarawak Premier Abang Johari’s office issued a statement on 24 September confirming that negotiations were ongoing between the Sarawak state government, Petronas and Petros. This would be concluded soon, the statement added, stating that all parties should abide by federal and state laws. Most recently, reports quoted the Sarawak premier as saying that Petronas has unofficially agreed in principle for Petros to be the sole gas aggregator in the state, with an official letter to follow. He also said that he is ready to go to court if any party disrespects Sarawak’s right to do so.

If true, this is a major development since ceding rights to Petros would impact Petronas’ access to LNG supply in the state. Sarawak contributes almost 90 per cent of Malaysia’s LNG exports. Moreover, Putrajaya is focused on fiscal consolidation, and petroleum-related revenue is declining. In 2009, petroleum-related revenue contributed as much as 41.3 per cent of the federal government’s total revenue. However, this has fallen to 19.6 per cent in 2024. This is projected to further decline to 18.3 per cent in 2025. Moreover, a federal concession to Sarawak may encourage other state governments to follow in Sarawak’s footsteps.

Disputes over oil and gas resources by individual states, however, are not new.

Both Peninsular Malaysia’s east coast states of Kelantan and Terengganu have a long history of this. Under the National Front (Barisan Nasional) administration in the 1990s, oil royalties contractually agreed upon as part of production-sharing contracts were denied to both state governments when they were under the rule of Parti Islam SeMalaysia (PAS). Under the Pact of Hope (Pakatan Harapan) administration in 2018, wang ehsan (goodwill grants in lieu of royalties) were transferred to both states but not in full.

The current Anwar Ibrahim administration has made similar transfers, but the Terengganu state chief minister has claimed that these amounts have only been partially received. Negotiations with the federal government are often required to obtain full transfers. This ought not to be the case since the producing states possess the right over oil royalties as enshrined in the original production-sharing contracts (PSCs).

While the Petroleum Development Act 1974 provides for Petronas’ monopoly on oil and gas exploration and extraction, it is the three-way PSCs signed by Petronas, oil companies and state governments that spell out the revenue-sharing formula. This is made up of oil royalties (5 per cent to the federal government and 5 per cent to the producing state government); cost of oil (between 50-70 per cent as cost recovery to oil companies); and profit of oil (the remaining 20-40 per cent is split among Petronas, oil companies and PITA, or profit-income tax allowance paid to the federal government). It is unclear how the revenue-sharing formula would change if Petronas cedes its LNG monopoly to Petros but this would be one key element of negotiation among all parties involved.

The demands over state natural resource autonomy come most aggressively from East Malaysia. In 2020, Sabah and Sarawak won a court case resulting in their ability to impose a 5 per cent sales tax on petroleum-related products, paid by Petronas. In 2021, regulatory power for gas supply was transferred to Sarawak and, in 2023, to Sabah. While Sarawak had the pre-existing Oil Mining Ordinance 1958, Sabah enacted the Sabah Oil and Gas Ordinance 2020 to assert its rights over oil and gas.

The verdict is still out on whether Sabah and Sarawak will eventually succeed in their bid to fully control oil and gas resources. These recent developments, however, are clear signals for stakeholders to be concerned.

Both states have rejected the Territorial Sea Act 2012, which limits their territorial waters to three nautical miles from the coast. Sabah and Sarawak dispute the 2012 Act and argue that their maritime boundary — and hence their claims to their respective resources as part of the continental shelf, vis-à-vis the Malaysian federal government — should be 200 nautical miles.

Sabah cites the colonial-era North Borneo (Alteration of Boundaries) Order in Council 1954, which details a “continental shelf… contiguous to the territorial waters of North Borneo”. The 1954 document does not state that the continental shelf spans 200 nautical miles but the Sabah government has “opined that its sea boundary should be more than 200 nautical miles”. Similarly, Sarawak says its Sarawak Land Code defines its territory as extending to the continental shelf, up to 200 nautical miles out to sea. Here, the key question is what constitutes the continental shelf. When a similar colonial-era document — the Sarawak (Alteration of Boundaries) Order in Council in 1954 — was issued, the concept of “continental shelf” was not resolved.

The Terengganu state legislative assembly has also recently rejected the Act. Its chief minister has stated that the Act infringes upon the state’s right to explore resources and generate revenue within its maritime borders. The federal government’s only response has been to issue a statement saying that “the Act is still valid and applicable” and that it is the federal government’s responsibility to ensure Malaysian waters are always protected.  

Given the grave importance of natural resources and their contribution to the nation’s coffers, much more clarity and stronger communication are needed.

The verdict is still out on whether Sabah and Sarawak will eventually succeed in their bid to fully control oil and gas resources. These recent developments, however, are clear signals for stakeholders to be concerned. First, if this happens, Petronas will lose its monopoly control and access to the two states’ resources. This is important, given that they hold 70 per cent of Malaysia’s oil and gas reserves.

Second, international oil and gas players more accustomed to dealing with Petronas would have to cultivate relationships directly with Petros and the Sarawak and Sabah state governments.

Third, and most importantly, this would have implications for the approach towards development and, more broadly, for the nation as a whole. The central government has always aimed to address existing regional imbalances through financial and developmental means. If the federal government collects less revenue, this would lead to lower expenditure. If Sabah and Sarawak eventually take over policy and programmatic execution, this may be the solution to ensuring that the federal government does not assume responsibility — and therefore expenditure — of all policy matters. For example, the issue of education is being slowly devolved to Sarawak.

Malaysia is an asymmetric federation, with Sabah and Sarawak possessing significantly more state autonomy than Peninsular states. Although unlikely in the near future, given both states’ current lack of technological capacity in the sector, handing over oil and gas rights to them would be a major shift, both economically and politically. These developments should be watched closely as they may ultimately impact Malaysia’s future.

2024/349

Dr Tricia Yeoh is a Visiting Fellow at the ISEAS – Yusof Ishak Institute and Associate Professor of Practice at the University of Nottingham Malaysia’s School of Politics and International Relations.

Posted in Economics, Federalism, Oil and Gas | Leave a comment