MALAYSIA'S ELECTION SHOCK - THE WORLD TURNED

C O N F I D E N T I A L SECTION 01 OF 02 KUALA LUMPUR 000160 SIPDIS SIPDIS FOR EAP E.O. 12958: DECL: 03/10/2018 TAGS: PGOV PREL KDEM MY SUBJECT: MALAYSIA'S ELECTION SHOCK - THE WORLD TURNED UPSIDE DOWN REF: A. KUALA LUMPUR 158 - FINAL PUSH ¶B. KUALA LUMPUR 154 - CLEAN FINGERS DIRTY ELECTION? ¶C. KUALA LUMPUR 140 - CAMPAIGN UNDER WAY ¶D. KUALA LUMPUR 90 - ELECTION PRIMER ¶E. KUALA LUMPUR 95 - ELECTION DATE SET Classified By: POLITICAL SECTION CHIEF MARK D. CLARK, REASON 1.4 (B AND D). ¶1. (C) Malaysia's March 8 national elections and the unprecedented success of the opposition have stunned the dominant UMNO party of Prime Minister Abdullah Badawi, shattered component members of the National Front (BN) coalition, put 5 of 13 states in opposition hands, and propelled former Deputy Prime Minister Anwar Ibrahim to become a a major opposition force. Based on a simple majority in parliament, UMNO with BN will continue to form the national government, but the political debacle is undeniable. BN lost its two-thirds hold on parliamentary, a key benchmark that ensured BN could amend the constitution at will. UMNO itself suffered substantial losses over its previous margins, down by 31 seats in parliament and 64 state seats. UMNO's Chinese (MCA) and Indian (MIC) partners in BN suffered substantial declines, and were reduced to minor party status; the Chinese-dominated Gerakan party was all but eliminated. Leading members of all BN parties suffered, as voters threw out four BN cabinet ministers (three from UMNO), 10 deputy ministers, two party presidents and other prominent figures. Never before has the BN lost control of more than two states; now the opposition holds four key states across northern Malaysia and the richest, most developed state, Selangor, which envelops the capital. ¶2. (C) The King swore in Abdullah today as Prime Minister in a brief ceremony featuring all the gaiety of a funeral, but due to political damage from the election we believe Abdullah may not be able to serve out a full term. Abdullah could lose his position as UMNO president (on which his Prime Minister position depends) at the UMNO party elections, which could be held as early as September/October, or UMNO elites could approach Abdullah quietly to convince him to step down; less likely, UMNO supreme council members could try to unseat him through a vote of no-confidence. So far, senior UMNO leaders, perhaps as a temporary expedient, have pledged their support for Abdullah and not joined former Prime Minister Mahathir's calls for Abdullah's resignation. It is not clear how much criticism will be leveled at Deputy Prime Minister Najib, who was technically in charge of the election campaign, but Abdullah most likely will bear the brunt of the blame. If Abdullah falls, those tied to him, like ambitious son-in-law Khairy Jamaluddin, also will suffer. ¶3. (C) Former Deputy Prime Minister Anwar Ibrahim has emerged as a major opposition force. Anwar is the lynchpin in the loose opposition alliance; his PKR party is now the second largest in parliament; and PKR controls the key state of Selangor. The opposition has divergent policy views, particularly between the Chinese-led DAP and the Islamist PAS, and almost no experience in working together in positions of power. Whether they can govern effectively is a key question. The opposition passed an important early test as the DAP agreed to let a Malay from PAS assume the Chief Minister post in Perak, even though DAP has the majority of opposition seats in the state (talk of a non-Malay in that post led to a day of rumors of a constitutional crisis). PAS' strong showing does not appear to be a growing endorsement of Islamist views, but a negative vote against UMNO; nevertheless, in Kedah PAS will attempt to apply stricter morals laws for Muslims. ¶4. (C) We face a more difficult challenge in pursuing U.S. objectives in Malaysia in the short to medium term. Abdullah's political standing has suffered a grievous if not fatal blow, leaving him far less able to take difficult policy decisions or work on new initiatives. The cabinet that emerges over the next week will be seen as an interim cabinet prior to resolution of Abdullah's role and the UMNO election. More than ever, Malaysia's leaders will be preoccupied with domestic challenges and internal repositioning. BN has never had to contend with an opposition so potent. Malaysia will have less political will and policy attention for U.S. and other external concerns. The electoral shock to the political status quo strengthens democracy in Malaysia, however, and over the long term could instill greater checks and balances in the political system; bolster rule of law and transparency; cause the government to address minority concerns and reexamine ossified economic and social policies; and give us new opportunities to pursue U.S. KUALA LUMP 00000160 002 OF 002 economic, political and security priorities. KEITH