This article first appeared in Forum, The Edge Malaysia Weekly on March 21, 2022 - March 27, 2022

Three major developments over last week suggest that Prime Minister Datuk Seri Ismail Sabri Yaakob is slowly but surely being pushed into making some hard decisions that will determine the fate of the coalition that holds federal power.

The first is his concession to calls that Employees Provident Fund (EPF) contributors be allowed to withdraw up to RM10,000 from their accounts.

This came just two days after Finance Minister Tengku Datuk Seri Zafrul Aziz gave an insight into the impact of the withdrawals allowed so far and the financial losses that resulted for existing contributors and the government.

Ismail Sabri, who had previously opposed the RM10,000 withdrawal, has inevitably bowed to pressure from the Umno “court cluster” led by former prime minister Datuk Seri Najib Razak.

Najib, who stepped down as Umno president in 2018, openly practises the “cash is king” approach to win over voters. It is working well so far — except that the money is coming from the contributors themselves. Najib is well supported by current Umno president Datuk Seri Ahmad Zahid Hamidi.

During the Johor state election, opposition leader and PKR president Datuk Seri Anwar Ibrahim and DAP secretary-general Lim Guan Eng also joined in the chorus, calling on the government to allow a fourth withdrawal from EPF in what was seen as a last-minute attempt to bolster support for themselves. Both parties went on to perform worse than in the 2018 election, showing that their stance on the EPF withdrawal did not improve their standing with the voters.

Notably, Ismail Sabri gave in to pressure from Umno’s Najib and Zahid just before the start of the four-day Umno general assembly.

The decision is far from comforting for disciplined EPF contributors who have kept their savings in the provident fund. The extraordinary withdrawals caused EPF to redeem its investments prematurely and resulted in a reduction in its dividend payout.

Had it not been for the withdrawals, the provident fund could potentially have declared a dividend of 6.7% for 2021 instead of 6.1%, according to Tengku Zafrul. This means that for every RM100,000 that contributors have in EPF, those who did not make any withdrawals lost out on the opportunity to earn RM600 more.

The finance minister also stated that the government’s cost of issuing new debt paper had gone up because of the withdrawals. This could be due to EPF’s role as the primary uptake agent for Malaysian Government Securities.

If the provident fund has less to allocate to its fixed-income portfolio, other institutional funds and insurance companies will have to pick up the debt paper that would normally have been taken up by EPF.

The second major development that has increased pressure on the prime minister is Barisan Nasional’s (BN) resounding victory in Johor, which has led to growing calls for Ismail Sabri to dissolve parliament and hold a general election this year.

Never mind that BN did not have the menteri besar of their choice. More importantly, Najib, who is BN adviser, and Zahid have come out stronger as the duo led the campaign. BN is almost certain to take control of Putrajaya in an early general election, which would put the duo in a better position to face the slew of criminal cases against them.

Najib has been slapped with a 12-year jail sentence in relation to the SRC International fraud and is out on bail. He faces many more charges related to the 1Malaysia Development Bhd (1MDB) scandal. As for Zahid, he has been called to make his defence against corruption charges related to a foundation that he had set up.

A general election before Umno party elections does not favour Ismail Sabri and those within the party who are part of the current government.

One factor relates to his standing in Umno, where he is currently vice-president. Ismail Sabri would have to contend with two others — the deputy president and president — should BN win the general election convincingly, to remain as prime minister.

The wild card is Najib, who may return to power. There are calls to pardon him for his 1MDB-related wrongdoings, a move that could pave the way for him to stand in the general election.

As it is now, Najib cannot stand for election until he is cleared of all charges. Zahid will also suffer the same fate should the courts find him guilty.

Nevertheless, in politics, nothing is certain even though 1MDB is an indefensible fraud and a national embarrassment.

Billions were siphoned out of the Malaysian fund, yet no one has spent any time in jail for it so far. Perplexingly, the police have been unable to nab the main perpetrator Jho Low and his five accomplices.

In the latest revelation on the 1MDB scandal, an agent of the US Federal Bureau of Investigation (FBI) testified in court that US$756 million went into Najib’s account while his stepson Riza Aziz received US$238 million. The FBI agent, Eric Van Dorn, said this in the ongoing trial of former Goldman Sachs banker Roger Ng in the US. Van Dorn testified that he had gone through 59,000 bank transactions in relation to the 1MDB fraud.

In response to Van Dorn’s testimony, lawyers for Najib are reported to have said the “money sources, amounts and recipients have been explained differently in the Malaysian court”.

Nevertheless, 1MDB was not a topic that was debated at the Umno general assembly.

The third major development last week was related to the Circle Line of the Mass Rapid Transit (MRT3) project. Unlike MRT1 and MRT2, the project will be handled by MRT Corp itself.

For MRT1 and MRT2, a MMC-Gamuda joint venture was given the mandate to complete the job on time and within budget. In a nutshell, the execution risk fell entirely on MMC-Gamuda while MRT Corp came up with the financing.

With MRT3, the entire execution, integration and financial risks fall on MRT Corp. It is a good development for the construction industry as more players would be able to get a bigger slice of the project, which could cost the government up to RM50 billion. However, for MRT Corp to effectively carry out its job, there has to be minimal political interference in its operations.

MRT3 is the first major project under the leadership of Ismail Sabri and is supposed to kick off this year. The lobbying for contracts has already started.

For his own political survival, Ismail Sabri probably needs to keep control over the project. Until the various packages are awarded and the work on the ground starts, the lobbying will be intense.

But given the current scenario, it is highly unlikely that a government led by Ismail Sabri will have control over the MRT3 project. Rather, the power is shifting towards Umno and the warlords in the party.

That is, unless the prime minister fends off the pressure from these warlords — starting by not bowing to demands for an early general election.

M Shanmugam is a contributing editor at The Edge

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