Malaysian Premier Tells Colleagues He Will Resign, Minister Says

(Bloomberg) -- Malaysia’s Prime Minister Muhyiddin Yassin told his party he plans to resign on Monday, a cabinet member said, potentially fueling further political and economic challenges in the pandemic-hit country.

Muhyiddin, 74, told members of his ruling Parti Pribumi Bersatu Malaysia that he plans to meet the king on Monday and submit his resignation letter, Mohd Redzuan Yusof, a minister in the Prime Minister’s Department, told Bloomberg News. He had earlier disclosed the information to reporters after a party meeting Sunday morning.

The prime minister had explored “the very last option,” the Star cited Mohd Redzuan as saying. Muhyiddin’s press aide and office didn’t reply to calls and text messages seeking comment on his intentions, or to confirm Mohd Redzuan’s comments.

Muhyiddin has resisted repeated calls to step down since taking office in March 2020, making it unclear if he’ll actually submit his resignation. He announced on Aug. 4 that he would finally hold a confidence vote in parliament next month. Last week, he appealed on national television to opposition lawmakers to support a slew of reforms before he calls a general election by July 2022 -- a proposal that was quickly rejected.

“The general incompetence of this government and Muhyiddin’s intransigence” has led to this potential development, said Oh Ei Sun, senior fellow at the Singapore Institute of International Affairs, citing the leader’s attempts to delay parliament. “He should have submitted himself to motions of confidence.”

UMNO Returns?

Muhyiddin’s resignation, if accepted by the monarch, would end his 17-month hold on power that has been beset by constant demands and threats of defection by lawmakers from the largest party in the ruling coalition, the United Malays National Organisation.

Muhyiddin could stay on as caretaker prime minister until a successor is named. Under constitutional law, any lawmaker who can command a majority in parliament can stake a claim to form the government and the king needs to give his assent to formalize the appointment.

Media reports have speculated that Deputy Prime Minister Ismail Sabri Yakcob and veteran politician Tengku Razaleigh Hamzah, both from UMNO, are in consideration for the premiership. If true, that suggests the party could have a chance of regaining control of the government after losing elections in 2018 over an unpopular consumption tax and a scandal involving billions of dollars siphoned from state investment firm 1MDB.

UMNO lawmaker, Nazri Aziz, said he has signed a statutory declaration supporting Ismail Sabri as prime minister and asked parliamentarians from the party to do the same. Earlier in August, Ismail Sabri said several UMNO lawmakers were still backing Muhyiddin, even as the party retracted its support.

“All Umno MPs should support this, including those who are opposed to Tan Sri Muhyiddin Yassin,” Nazri was cited as saying by the Star newspaper. “He is gone now, so there’s no reason not to sign.”

While UMNO has a good chance of consolidating its position by bringing its pro-Muhyiddin lawmakers back into the fold, it will have to placate existing coalition partners and build a simple parliamentary majority of 111 seats out of 220. To do this, UMNO needs support from an Muslim-centric party and Muhyiddin’s Bersatu with offers that could include cabinet positions.

UMNO also needs to win over several east Malaysian parties and ensure that some disgruntled Bersatu lawmakers don’t return to the opposition led by Anwar Ibrahim, which currently holds 89 seats.

Political Uncertainty

The uncertainty in appointing a new premier and forming a government swiftly may worsen the pressure on Malaysian assets, which are already struggling under the weight of the virus outbreak and the prospect of a reduction in U.S. stimulus. The main equities gauge is among the worst performers in the region this year, while the ringgit has underperformed all but two of its emerging Asian peers.

Muhyiddin, who became prime minister after a power struggle following Mahathir Mohamad’s sudden resignation last year, had tried to wield control at the start of 2021 by declaring a state of emergency and suspending parliament. He cited the pandemic as a reason and obtained the king’s consent, yet infections surged and the economy struggled over conflicting government directives.

Last week, Malaysia’s central bank cut its 2021 economic growth forecast for a second time, as renewed movement restrictions and rising Covid-19 infections hamper the recovery. The economy shrank 2% in the second quarter from the first, cutting short a brief uptick and prompting officials to unveil plans over the weekend to ease restrictions on the retail and manufacturing sectors.

“Muhyiddin never stood a chance because he had two fatal flaws,” said James Chin, a political analyst and a director of the Asia Institute at the University of Tasmania in Australia. “First, he was never able to control UMNO, the biggest party in his coalition. Second, he was never able to control Covid-19 despite advanced warning.”

“He had plenty of opportunities to put a plan in place from March to September last year when numbers were low, but he spent all his time fighting with UMNO,” Chin said.

©2021 Bloomberg L.P.