Malaysian Prime Minister Muhyiddin Yassin resigns after 17 months in power

Political uncertainty may worsen the pressure on the country’s assets

Malaysian Prime Minister Muhyiddin Yassin and his cabinet have resigned after 17 months in office, citing a lack of parliamentary support, but agreed with the king to remain caretaker premier until a government can be formed.

Mr Muhyiddin, 74, will stay on as a caretaker prime minister until a successor is named, the palace said in a statement on Monday after he met the country’s king that day.

The king had accepted his resignation and said a new election was not the best option during a pandemic. Malaysia is beset by a surge in coronavirus cases.

Confirmation of the resignations first surfaced on an Instagram story posted by Science, Technology and Innovation Minister Khairy Jamaluddin.

The palace made the official announcement before Mr Muhyiddin addressed the country, signalling how strained ties had become.

His resignation brings to a close an administration beset by repeated demands from opposition politicians and coalition allies to step down.

Mr Muhyiddin has resisted these calls since taking office in March 2020.

On August 4, he said he would hold a confidence vote in parliament next month. Last week, he appealed on national television for opposition politicians to support reforms and said he would call a general election by July 2022. That proposal was swiftly rejected.

Under constitutional law, any politician who can command a majority in parliament can stake a claim to form the government, and the king must give his assent to formalise the appointment.

Media reports have speculated that Deputy Prime Minister Ismail Sabri Yaakob and veteran politician Tengku Razaleigh Hamzah, both from UMNO, are in consideration for the leadership. If true, that suggests the party that ruled Malaysia for decades could regain control of the government.

UMNO lost the 2018 elections over an unpopular consumption tax and a scandal involving billions of dollars siphoned from state investment firm 1MDB.

The uncertainty in appointing a new prime minister and forming yet another government 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 US stimulus.

“Malaysia’s domestic political situation remains highly uncertain, and the Covid outbreak shows no sign of flagging,” said Alvin Tan, head of Asia currency strategy at RBC Capital Markets in Hong Kong.

“So I would remain very cautious on MYR in the near-term until there are indications that power will be transferred to a new viable government, plus signs that the current Covid-19 outbreak has peaked.”

The main equities gauge, which is among the worst performers in the region this year, fell as much as 0.7 per cent, while the ringgit neared its July 2020 low on Monday.

Mr Muhyiddin became prime minister after Mahathir Mohamad’s sudden resignation in March last year

He tried to wield control at the start of 2021 by declaring a state of emergency and suspending Parliament, citing the pandemic as a reason.

The king consented, yet infections surged and the economy struggled over conflicting government directives.

Last week, Malaysia’s central bank cut its 2021 economic growth forecast for the second time, amid renewed movement restrictions and rising Covid-19 infections.

The economy shrank 2 per cent in the second quarter from the first, cutting short a brief surge and prompting officials to unveil plans at the weekend to ease restrictions on retail and manufacturing.

“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.”

Updated: August 16th 2021, 9:10 AM
EDITOR'S PICKS
NEWSLETTERS