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No. 66
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RESEARCHERS AT ISEAS – YUSOF ISHAK INSTITUTE ANALYSE CURRENT EVENTS
Singapore | 29 August 2019
Power Distribution and Decentralisation in New Malaysia
Kai Ostwald*
EXECUTIVE SUMMARY
• Malaysia’s former opposition had long called for a redistribution of power across
the country’s three tiers of government. Several promises in Pakatan Harapan’s
manifesto specifically address that objective through reform of the Prime Minister’s
Department, reviving federalism (empowering states), and strengthening the local
level of government.
• Having unexpectedly secured power, PH faces competing demands to rapidly
deliver results and to undergo the complex process of restructuring Malaysia’s
ossified institutions, while simultaneously projecting stability and competence to a
diverse electorate, elements of which remain resistant to fundamental change.
• Malaysia’s predisposition towards strong and centralized leadership, in conjunction
with Mahathir’s predilection to decisive and sometimes unilateral decision-making,
has led PH to prioritize rapid results. In doing so, it has delivered meaningful
economic and policy reform, but has left the general concentration of power
relatively unchanged in practical terms.
• The high degree of procedural complexity involved in decentralizing power,
together with concerns around the potential for such reforms to aggravate racial and
religious tensions, have further hindered deep institutional restructuring.
* Kai Ostwald is Assistant Professor at the University of British Columbia’s School of
Public Policy & Global Affairs and the Department of Political Science. He is also
Associate Fellow at ISEAS-Yusof Ishak Institute. Contact him through Twitter
@KaiOstwald or email: kai.ostwald@ubc.ca. The author would like to thank Tricia Yeoh,
Kenneth Cheng, and Francis Hutchinson for their helpful insights.
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INTRODUCTION
Of the reasons for the Barisan Nasional’s unprecedented defeat in 2018, the personal
unpopularity of Najib Razak is among the most important: the widespread perception that
he flagrantly abused power, enriching himself and his family in the process, drove pivotal
voters towards Pakatan Harapan.
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Najib’s excesses, most apparent in the 1MDB scandal,
were enabled by the decades-long concentration of power in the federal level generally, and
in the Prime Minister’s Department (PMD) in particular.
Recognizing this, Pakatan Harapan followed its predecessors in calling for the greater
distribution of power across institutions and tiers of government, as articulated in its pre-
election manifesto (Pakatan Harapan 2018): Promise #12 addressed reform of the PMD,
while Promise #24 sought to “Revive the true spirit of federalism” by (re-)empowering the
states, and Promise #25 sought to “Strengthen the role and powers of the local authorities.”
One year into Malaysia’s first post-UMNO government, some movement of power away
from the PMD has been initiated, but in practice it remains heavily concentrated in the hands
of Mahathir and the PMD. The general balance of power between the federal and state levels
remains largely as before. Local elections, which are to strengthen the local tier, have not
been reinstated. In short, despite meaningful reforms in other areas, the distribution of power
under PH remains generally unchanged, leaving those hoping for a rapid restructuring of
Malaysia’s institutions disappointed.
What explains this outcome? Given the unprecedented nature of Malaysia’s transition, PH
has faced competing demands to deliver rapid results to an anxious electorate and to
restructure many of Malaysia’s ossified institutions, all while projecting stability and
competence. With Mahathir remaining a dominant political force, the new government has
prioritized the former set of demands. Several factors reinforce this orientation: the
Malaysian electorate shows a predisposition towards strong, central leadership.
Furthermore, the procedural complexity of institutional restructuring, together with a
perception that it may aggravate racial and religious tensions, has led PH to adopt a cautious
approach.
POWER CONCENTRATION IN UMNO’S MALAYSIA
As per the 1957 Federal Constitution, Malaysia has a federal structure with power divided
between federal and state tiers of government. A local tier is also described. Centripetal
forces, present since the Merdeka-era, have strongly empowered the federal tier at the
expense of the states (Loh 2009; Hutchinson 2014). This occurred both formally through
institutional changes and informally through UMNO’s dominance of politics, which left
“the BN state governments behav[ing] more like branches than partners of the federal
government” (Wong and Chin 2011, p. 208). This rendered Malaysia a “centralized unitary
system with federal features” (Loh 2009, p. 195).
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The local tier of government played an instrumental role in the establishment of democracy
prior to Malaya’s independence. Yet the “third vote” for local government representation
was suspended in 1965 and removed entirely through the 1976 Local Government Act,
following which local councils have been constituted through state appointees. This has left
the local tier operating largely as an extension of the state tier. Attempts in Penang and
Selangor to re-introduce local elections in the years prior to GE14 were blocked by federal
court decisions.
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Much of the power usurped from the state and local tiers has amassed in the PMD, which
was the driver—particularly during Mahathir’s first stint as Prime Minister—and primary
beneficiary of power concentration (Ostwald 2017). Through strategic modification of
institutions and procedures, leverage over personnel at lower tiers of government, and the
creation of alternative institutions that bypass potentially obstinate offices, the PMD
exercised a remarkable degree of control over Malaysia’s economic and political
development. An anecdote underscores the magnitude of this dominance: in 2012, the
PMD’s budget was approximately ten times larger than the entire state budget of Selangor,
Malaysia’s most populous and economically powerful state (Yeoh 2011).
POWER (RE)DISTRIBUTION IN MALAYSIA BAHARU
The PMD
Many of the reforms outlined in PH’s Manifesto aim to redress the excesses of power
concentration under recent BN governments and to prevent their recurrence. Promise #12
addresses the PMD, seeking to reduce its number of ministers and cut its budget. Both have
occurred: the PMD now has only three ministers and an annual budget of approximately
RM7.4 billion, relative to RM17 billion under Najib’s last government—with much of the
decrease coming from items that have been repealed or transferred to appropriate ministries
(Joshi 2018). Mahathir also ended the long-standing practice of the PM holding the Minister
of Finance position, thereby severing the PMD’s direct control over that vital portfolio.
Equally notable is the movement of several important agencies—including the Election
Commission (EC), Malaysian Anti-Corruption Commission (MACC), and the Public
Prosecutor’s Office—out of the PMD and under parliamentary oversight.
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The potential
impact of a more independent EC is particularly noteworthy, given its role in managing and
administering Malaysia’s (at least formerly) biased electoral process (Fann 2019).
Other measures seek to strengthen parliament, making it a more effective counterbalance to
the PMD. Of these, the introduction of parliamentary select committees is noteworthy, as—
in principle—they introduce a systematic check on the ability of the PMD to act unilaterally
on key appointments and decisions. Several committees have been formed, including on the
Budget, Major Public Appointments, Defense and Home Affairs, and Federal State
Relations.
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These reforms are laudable: if fully functional, they provide clear mechanisms to reduce the
concentration of the power in the PMD, and consequently to reshape the dynamic of
Malaysian politics.
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Their practical impact in the one year since PH took power, however,
has not matched that potential. In some instances, it is too early for their full effect to be
realized, for example with the reformed EC, which has not yet overseen a major election.
In other instances, the fledgling checks on the PMD have been bypassed in the name of
political expediency, justified by the need to act quickly in the aftermath of the
unprecedented transition. Two examples stand out. Mahathir’s strong top-down control over
the cabinet and reliance on external advisors like Daim Zainuddin—who appears to have
played a major role in the renegotiation of mega-projects and other significant economic
reforms—undermines the formal constraints on the PMD. Likewise, his unilateral
appointment of Latheefa Beebi Koya as Commissioner of the MACC bypassed the select
committee, which was to play a role in the appointment of key positions like hers.
Federalism and the autonomy of the states
In promise #24, PH pledged to “revive the true spirit of federalism” by strengthening the
states vis-à-vis the federal level and restoring elements of their autonomy. Aside from
curbing the excesses of power concentration, fulfilling this would allow Malaysia to capture
the many theoretical advantages of a decentralized structure.
The manifesto noted a four-pronged approach towards that end, comprised of (1) respecting
the Ninth Schedule of the Constitution that specifies the rights and responsibilities of the
states; (2) decentralizing suitable jurisdictions like water management, public
transportation, welfare, and social services; (3) returning at least 10 percent of income tax
generated in a state to that state; and (4) focusing development expenditures on the five
poorest states during the administration’s first three years.
The IDEAS (2019) Projek Pantau—a report card on PH’s progress in fulfilling its manifesto
promises—assesses prongs (2) and (4) as “on track”, (3) as “in trouble”, and (1) as “not
started”. This may be an optimistic reading of progress. On decentralizing jurisdictions,
only water management has seen significant decentralisation to the states. While PH has
announced that half of tourism tax collected would be distributed back to the state
governments, it has not moved on the redistribution of income tax. Furthermore, as Yeoh
(2019) notes, PH has also maintained the Federal Development Offices, through which the
PMD disperses funds to local development projects, providing a channel to effectively
bypass the state governments.
Local Governments
The manifesto’s promise #25 seeks to “strengthen the role and powers of the local
authorities.” The logic for this is well established from a theoretical perspective, as local
governments have a better understanding of local needs than does the more distant central
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government. The former is also thought to be more accountable to local citizens, again by
virtue of proximity. Local elections are the clearest mechanism for ensuring both the
necessary autonomy and bottom-up accountability of local governments.
Given this, PH’s minister responsible for local government—Zuraida Kamaruddin—
expressed an intention to reinstate local elections within three years of GE14. At a recent
public forum in Penang, she noted the ministry is preparing a working paper to table in
Cabinet, but that it would take time to ensure that the proposed model could accommodate
the particularities of the Malaysian context. In the meantime, workshops and forums would
be organized to prepare communities for their eventual implementation, likely beginning in
Penang.
Support for the restoration of local elections has not, however, been universal. Notably,
Mahathir has spoken out against them on several occasions, stating explicitly last December
that the government will not reinstate them due to potential unintended consequences. As
the requisite legal amendments can proceed only with the Cabinet’s support, progress is
uncertain as long as Mahathir remains in power. Expecting a protracted fight, advocates in
civil society have prepared recommendations for strengthening local government in the
absence of local elections.
INSTITUTIONAL STICKINESS
Why has PH’s first year in government produced relatively little in terms of decentralizing
power, despite that objective being a central pillar of the Reformasi agenda over the past
two decades? The transition away from six decades of dominant party rule was a once-in-
a-lifetime occurrence that placed competing—and perhaps irreconcilable—demands on the
new government. The first was an urgent need to produce results and demonstrate a clear
distinction from the BN, while projecting steady leadership to the segments of the electorate
left anxious by the change. The second was to undergo the complex and often tedious
process of restructuring institutions left ossified by decades of misuse and mismanagement
under the BN.
PH has skewed strongly towards the former by prioritizing economic reforms and high-
visibility policy changes that alter the look of Malaysia’s political landscape. As outlined in
this Perspective, deep restructuring of institutions, especially those involving the
concentration of power, has by contrast had rather limited practical effects. Several reasons
for this are notable.
The first is a predisposition in Malaysia towards strong, centralized leadership, which has
allowed Mahathir to prioritize his preferred agenda. This predisposition is broad-based: in
a poll conducted several months after GE14, roughly two-thirds of respondents indicated
that they preferred power to be concentrated at the central level in the form of a strong PM,
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rather than in the states, localities, or traditional institutions (Ostwald 2019). Notably, this
sentiment was strongest among PH supporters, suggesting that having now captured power,
many see a decisive leader as key to rapidly changing the country’s course. As the original
architect of personalizing power in the prime minister (Slater 2003), Mahathir clearly is
receptive to assuming this mandate. In fact, while decentralizing power was a long-standing
Reformasi-era demand that Pakatan Rakyat fully embraced, it is unclear to what extent
Mahathir shares the conviction. Given his instrumental role in securing the BN’s defeat
(Abdullah 2018) and his clear control over the Cabinet now, he is unlikely to be overridden
in the foreseeable future.
The second is a strong reluctance in Malaysia to undertake actions that risk—or are
perceived as risking—stability. Institutional reform is procedurally complex and often
produces unanticipated outcomes. It is worth recalling Indonesia’s “big bang”
decentralisation, in which an extensive set of competencies was shifted from the central
level to localities in the wake of Suharto’s overthrow in 1998. While this achieved the main
objectives of preventing the fragmentation of Indonesia and the return of a personalistic
dictatorship, it also created a lengthy list of governance problems that the country has spent
much of the past 15 years trying to correct (Ostwald, Samphantharak, Tajima 2016).
In the Malaysian case, it is clear that getting both the sequencing and balance of
decentralisation right is a difficult undertaking. Deliberations around restructuring the local
and state tiers provide a good example. As the autonomy of the states was hollowed out
over the past half century, they increasingly came to rely on the local tier to act as their
agents, without which they would struggle to function properly. Consequently, if the local
tier is granted greater autonomy before the states are themselves strengthened, the states
may lack the capacity to carry out their responsibilities, compounding the “missing middle”
problem that already plagues Malaysia (Hutchinson 2017). Understanding this, the states
are likely to resist the reform, as are those now in Cabinet with recent experience at the state
level. In short, while ostensibly independent issues, decentralisation to the state and local
tiers must happen in closely coordinated manner, which significantly increases its
complexity.
Furthermore, the growing collaboration between UMNO and PAS—whose political
relevance is in large part reliant on Race, Religion, and Royalty remaining salient—
complicates PH’s reform agenda. This is because any reform that can be framed as hostile
to the interests of the three R’s can be used to mobilize resistance against PH, in the process
creating at the very least unnecessary distractions. Whether warranted or not, there are
concerns that some elements of the decentralisation agenda are vulnerable to this trap.
Mahathir himself, for example, justified his resistance to local elections by stating that they
could aggravate racial tensions. Given the concerns around a growing Malay and Islamist
backlash (Saat 2019; Rahman 2018), PH’s caution around these issues is hardly surprising.
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In short, one year into the post-UMNO era, the power of personalistic politics and urgent
need to deliver tangible results have limited the practical redistribution of power through
deep institutional restructuring. It remains entirely possible that several of the relevant
initiatives will be fully implemented in the coming years, thereby clearly distinguishing the
PH state from its predecessor’s. But it is also possible that the waning momentum of the
transition and the ongoing complexity of Malaysia’s racial politics continue to thwart that
objective.
References:
Abdullah, Walid Jumblatt. 2019. “The Mahathir effect in Malaysia’s 2018 election: the
role of credible personalities in regime transitions.” Democratization, 26(3): 521-
536.
Bersih 2.0. 2019. First Year Report Card of Pakatan Harapan: On Electoral, Political &
Institutional Reforms 2018-2019. Prepared by the Steering Committee and
Secretariat of BERSIH 2.0.
Cheng, Kenneth. 2018. “Restoring the People’s ‘Third Vote’”, New Naratif.
Fann, Thomas. 2019. “Malaysia Begins Rectifying Major Flaws in its Election System.”
ISEAS-Yusof Ishak Institute Perspective, No. 55.
Hutchinson, Francis. 2017. “(De)centralization and the Missing Middle in Indonesia and
Malaysia.” Soujourn: Journal of Social Issues in Southeast Asia, 32(2): 291-335.
Hutchinson, Francis. 2014. “Malaysia’s Federal System: Overt and Covert centralisation".
Journal of Contemporary Asia, 44(3): 422-442.
IDEAS. 2019. Projek Pantau: Report Card No. 2. Authored by Faiz Zaidi, Aira Azhari,
and Laurence Todd.
Joshi, Darshan. 2018. “Key Changes to Development Expenditure in Malaysia’s Budget
2019.” Penang Institute Issues.
Loh, Francis. 2009. “Federation of Malaysia.” In Foreign Relations in Federal Countries,
edited by H. Michelmann. Montreal: McGill-Queen’s University Press.
Ostwald, Kai. 2019. “Local Elections, Decentralisation, and Institutional Reform.” In
Minorities Matter: Malaysian Politics and Peoples Vol III, edited by Sophie
Lemiere. Singapore: ISEAS-Yusof Ishak Institute.
Ostwald, Kai. 2017. “Federalism without Decentralization: Power Consolidation in
Malaysia.” Journal of Southeast Asian Economies, 34(3): 488-506.
Ostwald, Kai, and Steven Oliver. 2019. “Four Arenas: Malaysia’s 2018 Election, Reform,
and Democratization.” Association of Asian Studies 2019 Conference Paper.
Ostwald, Kai, Krislert Samphantharak, and Yuhki Tajima. 2016. “Indonesia’s
Decentralization Experiment: Motivations, Successes, and Unintended
Consequences.” Journal of Southeast Asian Economies, 33(2): 139-156.
Saat, Norshahril. 2019. “A Complicated Political Reality Awaits the Malays.” ISEAS-
Yusof Ishak Institute Perspective, No. 40.
Slater, Dan. 2003. “Iron cage in an iron fist: Authoritarian institutions and the
personalization of power in Malaysia.” Comparative Politics, 36(1): 81-101.
Pakatan Harapan. 2018. Buku Harapan: Rebuilding our Nation, Fulfilling our Hopes.
Rahman, Serina. 2018. “Was It a Malay Tsunami? Deconstructing the Malay Vote in
Malaysia’s 2018 Election.” The Round Table, 107(6): 669-682.
Rahman, Serina. 2018. “Should Malaysia Expect an Islamist Backlash?” ISEAS-Yusof
Ishak Institute Perspective, No. 54.
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Wong Chin Huat, and James Chin. 2011. “Malaysia: Centralized Federalism in an
Electoral One-Party State”. In Varieties of Federal Governance: Major
Contemporary Models, edited by R. Saxena. Jayanagar: Cambridge University Press
India.
Yeoh, Tricia. 2011. “What’s in the Budget for State Governments.” Penang Monthly.
Yeoh, Tricia. 2019. “Reviving the Spirit of Federalism: Decentralisation Policy Options
for a New Malaysia.” IDEAS Policy Paper, No. 59.
1
As Serina Rahman (2018, p. 669) notes, a close evaluation of what drove the electorally pivotal
rural Malay vote suggests that it was primarily “against former Prime Minister Najib Razak, and
not necessarily … in support of the then-opposition.” Ostwald and Oliver (2019) argue that it was
precisely this vote that was critical in bringing about the BN’s defeat.
2
See Cheng (2018) and Ostwald (2019) for a full discussion of local elections.
3
See the Bersih 2.0 (2019) report for a comprehensive discussion of these reform initiatives.
4
It is important to note that several of these reforms have not yet been codified in law, limiting
their current efficacy and creating uncertainty about their future form.
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