All options remain open after the Nov 19 general elections as the outcome of the election remains very difficult to predict and political alliances may shift after the final seat allocation has become clear, in our view. The three main political players in the election are the senior ruling Barisan Nasional (BN), the main opposition Pakatan Harapan (PH) and the junior ruling Perikatan Nasional (PN). BN, PH and PN remain rivals in the election, but in case no political power manages to gain a majority of 112 seats, two or even three of the main political forces might be forced to work together to forge a majority. BN's PM candidate Ismail Sabri recently confirmed that BN is willing to work with other coalitions in order to form a government, as otherwise we would have a hung parliament.
Thus, any combination between PN, PH and BN remains possible depending on the outcome of the election. In addition, parties participating in one of the three coalitions can also break away and form post-election coalitions with other political forces. What is expected, according to polls, is that no coalition is likely to gain a majority on its own as the vote remains divided between the three coalitions. BN and PN compete for the Malay Muslim vote, whereas PH remains the favourite to win the Indian and Chinese vote. This paints a completely different picture from the Johor and Melaka state elections from early 2022 and late 2021 when BN managed to snap a convincing victory and formed a state government on its own. The reasons for the recent weakness in BN, as seen by polls, might be due to the internal frictions in BN, discontent with Ismail Sabri's government, or the recent conviction of former BN leader Najib Razak to 12 years in prison in relations to a corruption scheme involving a subsidiary of the ill-famed 1MDB fund. Moreover, BN has removed many veterans from its list of candidates for the election, as BN leader Zahid is actively trying to consolidate power in the party and ensure the loyalty of MPs elected in the new parliament.
At any rate, we think that some government headed by BN with the participation of one other competing party or coalition is likely to emerge from the election. BN's PM candidate Ismail Sabri remains a favorite to become PM, according to voters' preferences, while the chances of his main opponents PN leader Muhyiddin and PH leader Anwar to become PM are much slimmer. Muhyiddin is unlikely to return to the PM post as PN is expected to lose a lot of seats in the upcoming parliament. On the other hand, Anwar remains a divisive figure in Malaysian politics due to his ideas to reform the privileges given to Malay people at the expense of the Indian and Chinese minorities. Thus, we think that a PH-led government remains a low probability outcome which can transpire only if PH wins convincingly the upcoming elections. Meanwhile, former PM Mahathir, who led the PH bloc in the 2018 elections, has become a marginal figure on the political scene largely due to his advanced age and the fact that he chose to fight on his own in the upcoming elections under the banner of the Gerakan Tanah Air (GTA) alliance.
At the same time, these elections will be the first time when people aged 18-21 will be able to vote after the constitutional changes made earlier this year. In total, some 1.4mn new voters aged 18-21 will be able to vote. Moreover, the 18-29 demographic will be the most important in the election, accounting for 6mn out of the 21.2mn eligible voters. The opposition PH is likely to be the main beneficiary from the influx of young voters due to its stronger focus on social issues and its electoral pact with the youth-focused party Malaysian United Democratic Alliance (MUDA). Chinese and Indian voters will also play a pivotal role in elections as their importance will rise when the Malay Muslim vote remains divided.
In addition, no government will likely be formed without support from seats elected in East Malaysia, which account for 57 out of the 222 seats in parliament. The vote in East Malaysia is likely to benefit the ruling BN due to the strong support for the Gabungan Parti Sarawak (GPS) which is currently allied with BN in parliament. Even though GPS has refused to confirm a post-election pact with BN, their support for a BN government is almost guaranteed if BN is in position to form a government.
Main political players and their programmes
Barisan Nasional (BN)
Barisan Nasional is the main ruling party in Malaysia, having ruled the country for 61 years before it lost the elections in 2018 to the opposition Pakatan Harapan. BN returned to power in March 2020 after the Malay party PPBM party exited the multi-racial PH coalition in an elaborate coup (so-called Sheraton Move) that removed former PM Mahathir from power. BN is dominated by the United Malays National Organisation (UMNO), but it also includes the smaller Malaysian Chinese Association (MCA) and Malaysian Indian Congress (MIC). It is predominately a Malay-focused coalition, even though it includes parties targeting the Chinese and Indian minorities.
BN has revealed a very ambitious election manifesto which promises a substantial increase in social spending to tackle the rising costs of living. Most importantly, BN aims to implement a universal basic income worth MYR 2,208/month by 2025 for a single household, which will ensure that no households have incomes below that threshold. In addition, it promises to make higher education and pre-school childcare free for everyone. Budget 2023 is supposed to be based on the principles included in the BN manifesto and already incorporates measures from the manifesto such as the 2% tax cut for the middle class. All in all, BN's election pledges are more ambitious than those of his rivals and the coalition might struggle to find financing for its landmark basic income pledge by 2025 as such policy would certainly require tax hikes.
BN's PM candidate is incumbent PM Ismail Sabri, according to a decision of the party's Supreme Council. Ismail is not BN's leader, but he has become the "poster boy" of the alliance due to the corruption trials facing current BN leader Zahid. Zahid has tried to cement his control over the party by removing several senior UMNO members from the coalition's candidates list in order to ensure that he has people loyal to him and not Ismail in parliament. In addition, there has been speculation that Zahid might try to become the PM himself despite the fact that Ismail is the official PM candidate.
Pakatan Harapan (PH)
The PH coalition is the main opposition force in Malaysia which includes the Democratic Action Party (DAP), the People's Justice Party (PKR) and the National Trust Party (Amanah). It is the main multi-racial coalition in Malaysia and its support among the Indian and Chinese minorities remains very high. PH is likely to strive for higher racial equality if it comes to power. For this reason, it is disliked by many Malay Muslim voters as they accuse it of being dominated by non-Malay parties like DAP.
PH's PM candidate is Anwar Ibrahim who will seek revenge for the February 2020 Sheraton Move as he would have become PM if the PH government had stayed in place. These elections are likely to be the last chance for him to become PM given that PKR's younger deputy leader Rafizi is quickly gaining popularity and is likely to be Anwar's successor.
PH's election manifesto focuses on alleviating the cost of living crisis for households and eradicating corruption. They promise to reduce goods prices by cracking down on cartels and increasing production incentives. In addition, they plan to eradicate poverty by providing micro-credit financing for the financially vulnerable. PH also promises to address issues such as eliminating gender inequality, fighting climate change and empowering the regions of Sabah and Sarawak.
Perikatan Nasional (PN)
Perikatan Nasional is the former ruling coalition of ex-PM Muhyiddin. It includes Muhyiddin's PPBM party and the Islamist PAS party. To remind, PPBM was founded by PM Mahathir, but he was exiled from the party in 2020 following the Sheraton Move. PN mainly targets Malay Muslim voters and has very little support among the ethnic Chinese and Indian minorities.
PN's PM candidate is Muhyiddin, who retains relatively high public rating even after he was forced out of the PM post in 2021. PN's political manifesto seems to be the weakest out of the three main coalitions as it includes a long list of 234 promises to voters and 30 strategies how to achieve them. One of its key pledges is to create 1mn high-paying jobs by fostering the digital economy over the next 5 years.
The key question regarding the Perikatan Nasional alliance is whether the two constituent parties PPBM and PAS will remain united after the election. PAS had a choice to stick with PPBM or make an alliance with BN, but it chose the former in order to defend the Malay-Muslim interests better. However, in case that BN can form a majority with PAS, we think that PAS might decide to leave the coalition and support BN.
Gerakan Tanah Air (GTA)
GTA is a newly-formed political alliance which includes the party of former PM Mahathir Pejuang and three smaller parties that are not represented in parliament. GTA is the fourth main political force in the election and they will contest in some 121 parliamentary seats. The party failed to make an election pact with any of the other main political forces. Overall, GTA is expected to win only a couple of seats in parliament thanks to the respect garnered by former Malaysian PM Mahathir. Mahathir, aged 97, said that he is ready to make one last fight against the graft-tainted BN government.
Opinions polls have given a mixed picture, with some favouring PH and others to BN. According to the main poll cited in local media, the one by Merdeka Center, BN commands 24% support from voters compared to 26% for the opposition PH, and 13% for PN. In addition, BN's support has declined gradually over the past six months from 29% in May, 28% in July, 27% in September to 24% in October. Thus, Merdeka was confident that no coalition will be able to attain a majority and two or three coalitions will have to work together in order to form a government.
Another recent poll by Endeavour-MGC found that BN remains in the lead with 31% support among voters compared to 23% for PH and 15% for PN. The same conclusions were also made by an Ilham Centre polls and an ISEAS poll which both estimated that BN remains the most popular coalition. At the same time, another O2 Malaysia poll gave the lead to PH with 39% support compared to 26% for BN, albeit the results are presented as percentage of active voters rather than total voters.
It should be noted that the percentage of undecided voters remains quite high at an average of 30.5% among four polls. This is likely because many BN voters have become disillusioned and have joined the ranks of the undecided following the corruption trial against former PM Najib Razak and other factors.
Overall, the influx of young voters, the large portion of undecided voters and the inherent uncertainty related to the first-past-the-post election system makes it extremely difficult to predict potential seat allocations in the election. Most races might be decided by the personal qualities of candidates in the race. According to the Endeavour-MGC poll, BN might win 58 to 73 seats in parliament compared to 67 to 82 seats for PH and 10 to 40 seats for PN.
BN government without need for support from PN or PH (10% chance)
The most positive outcome for markets would be if BN manages to outperform its projected outcome in opinion polls and win a majority only with support from its traditional allies such as the Sarawak-based GPS party. This outcome would guarantee the best political stability and policy predictability, in our view. Such government might be led by BN leader Zahid as a very strong showing by BN might increase the odds that BN will change its PM candidate and opt for Zahid over Ismail. A strong BN government can be expected to fully implement BN's political manifesto which includes the ambitious proposal for a universal basic income. In addition, Budget 2023 will be approved largely as initially proposed as BN will simply re-table the budget proposal of the Ismail government.
BN-led government with support from PN or only PAS (40% chance)
The most likely scenario after the elections will be a BN-led government either with support from the entire PN coalition, or only from PAS if the latter decides to split from PN. In addition, votes from the Sarawak-based GPS party will be almost certainly needed in such a scenario. The big question will be whether PAS, BN and GPS will have enough votes to form a government, or the party of PN founder Muhyiddin PPBM will also have to participate. In our view, the former option will be more stable as PPBM and BN have proven to have difficulties working together. On the other hand, PAS and BN were until recently considered to be potential coalition partners for the upcoming elections.
In essence, such government would be very similar to the last two governments that were elected with the support from BN, PN and GPS. It would be almost certainly led by outgoing PM Ismail who remains on good terms with partners from the PN coalition in contrast to BN leader Zahid. In such scenario, the government can be expected to continue the policies of the outgoing government with some proposals included from the BN and PN political manifestos.
BN-PH coalition without PN (25% chance)
One of the big speculations that have circulated in media over the past month is about a potential post-election pact between the leader of the main opposition PH Anwar and BN leader Zahid. The speculation stems from a leaked phone conversation released last year between Zahid and Anwar in which they were heard to discuss the current political situation in a friendly manner. The authenticity of the conversation was denied by both Zahid and Anwar. At any rate, Zahid seems to prefer working together with PH rather than PN, which explains why he rushed to dissolve the current parliament and call for snap elections despite BN's unclear chances to dominate the next parliament. That said, Anwar has dismissed rumours about a pact with BN and said that his party PKR remains committed to the PH alliance.
If BN and PH form a post-election coalition, it is uncertain whether the Chinese minority DAP will participate in such a government given the opposition to DAP among BN's members. Still, we think that Anwar will want to preserve PKR's ties with DAP for future elections if he decides to form a coalition government with BN.
Overall, there is much uncertainty what a PH-BN government will look like, what its policies will be and who will be the PM in such a scenario.
PH-led government with support from smaller parties without BN (15% chance)
If PH manages to win the elections convincingly it might be able to convince other parties such as the Sarawak-based GPS or PH's former allies from PPBM to support a government led by PH leader Anwar. We think that BN will go into opposition in such case as they are unlikely to accept the role of second fiddle to PH. In addition, PAS will certainly not support a PH government due to religious differences. PPBM's support for a PH government also remains dubious as relations between PH and PPBM remain strained after the former decided to leave the PH bloc in 2020 which led to the collapse of the PH government. In addition, PPBM includes a sizeable faction of former PKR members that split from Anwar's party in disagreement with him. That said, such scenario will be possible only if PH outperforms its current rating in opinion polls, and possibly if it manages to mend ties with PPBM.
Such government would be markedly different from the outgoing government as it will include a new FinMin and a new draft budget 2023. It addition, a convincing victory in the elections would give PH a mandate to tackle the issue of affirmative action policies in the country targeting the Malay majority.
Hung parliament and grand coalition including all parties (10% chance)
In the case that no feasible government is possible in the next parliament with the participation of one or two coalitions, the King might call on all political parties to form a grand coalition government to approve Budget 2023 and steer the country during the upcoming uncertain economic times. To note, the King can appoint for PM anyone who he believes can command a majority in parliament, but the PM must still be a Dewan Rakyat member. Ministers in the cabinet can be either from Dewan Rakyat or Dewan Negara, which leaves possibility for technocrats to be appointed as senators and included in the government. At any rate, we think that a grand coalition government supported by all parties will be relatively short-term and will likely precede the formation of a new government after political alliances shift or the dissolution of parliament and the scheduling of new snap elections in 2023.
Elections will be held for the 222-seat lower house (Dewan Rakyat) as well as in the state assemblies of Pahang, Perak and Perlis. MPs are elected under the first-past-the-post system for a term of up to 5 years. Some 165 members will be elected in constituencies located in Peninsular Malaysia, while other 57 will be elected from East Malaysia (Sabah, Sarawak and federal territory of Labuan). The upper house Dewan Negara (Senate) is composed of some 70 senators, of which 26 are elected by state legislative assemblies and 44 are appointed by the King.
According to the Constitution, the King appoints as PM someone who in his judgement can command the confidence of parliament. There is no requirement for the PM to come from the largest party in parliament. In addition, there is no need for a confidence vote to confirm the King's choice of PM. Still, the PM candidate is likely to present to the King a list of statutory declarations from MPs that prove he is indeed supported by a majority in parliament.
It should be noted that a new constitutional amendment was passed earlier this year (so-called anti-hopping law) which prevents MPs from changing their party allegiance without losing their seat in parliament. This in theory should increase political stability in the country by essentially MPs splitting from their party. However, the anti-hopping law does not prevent parties from leaving a coalition which still leaves possibility for political instability after a government is formed.