AN emergency rule of eight months could have the effect of stabilising Malaysia’s political climate, which will in turn boost the economy and investor confidence, said economists.

Arguments about the erosion of democracy aside, they said emergency laws will save the Perikatan Nasional government from falling as it is the losing Umno’s support.

Critics have charged that it is for this reason that Prime Minister Muhyiddin Yassin decided to have the king declare a state of emergency.

Muhyiddin has framed the emergency as a virus-containment measure but critics find his motives suspect over the fact that the declaration came less than a day after a movement-control order (MCO) for the same purpose was issued for many states.

Political stability, however it is achieved, will rebuild investor confidence, said economic adviser Ho Kee Ping of Kingsley Strategic Institute.

The prime minister’s speech should help restore confidence in the stock and foreign exchanges and bond market.

“As long as there is stability, there will be no panic in the capital market. The ringgit today (Tuesday)  fell only slightly and there has been no panic selling or a sharp drop,” Ho said.

The ringgit was 4.072 to the US dollar in the morning a state of emergency was announced, compared with 4.061 at Monday’s close.

Muhyiddin lost the support of Machang MP Ahmad Jazlan Yaakub and Padang Rengas MP Nazri Abdul Aziz, which leaves PN with 109 lawmakers on its side in the 222-seat Parliament.

More Umno MPs are expected to follow suit as the rift between the Malay party and its splinter Bersatu deepens.

Ho said Bersatu-led PN is facing its fourth major test since it ousted Pakatan Harapan last March.

The three other tests were, in order of chronology, the challenge to the appointment of Dewan Rakyat Speaker Azhar Azizan Harun at the start of PN’s reign, opposition leader Anwar Ibrahim’s claim to have bested Muhyiddin at securing majority support in September and uncertainty over how MPs would vote on Budget 2021 at the year-end.

“The state of emergency, however, will stifle any risk that may next arise,” Ho said.

A stable government can ensure economic recovery in the face of good prospects, which exist in the form of demand for Malaysia’s main exports, such as rubber gloves, timber, and palm oil, Ho said.

Oil prices are also expected to continue rising, growing Petronas’ revenue and the government’s coffers as a result.

“The second half of the year will be much better. The domestic economy may be bad in the year’s first two to four weeks because of the MCO but after that people will start spending again.”

Phua Lee Kerk, chief strategist at Phillip Capital, agrees that emergency rule will remove political uncertainty for the next eight months.

The market may have a short-term negative reaction but he expects that it will quickly stabilise in the next few days.

Associate professor of economics at Universiti Tunku Abdul Rahman, Wong Chin Yoong, said any political stability that is achieved will come at the price of parliamentary oversight and checks and balances.

“Some people may think it’s good because there is no political turmoil. That’s not wrong, but we will miss out on the discussion and debate that are necessary for enacting sound policies.

“Even the economic policies introduced last year were not discussed on how to improve its effectiveness, and this is not a good thing,” said Wong.

He is concerned that the MCO might be extended after its January 26 expiry date and the government would enact more policies to deal with the impact of the restriction order without parliamentary debate.

“That there is no political uncertainty for the next eight months is a temporary benefit.

“But we will pay a price, if more economic stimulus plans are introduced later, whether they are good or not, whether the government is right or wrong, there is no democratic channel to debate and make amendments.”

When announcing the state of emergency, Muhyiddin said the government would operate as usual and that Malaysia remains “open for business”.

He also said military rule will not be imposed, nor will there be curfews.

Elections and Parliament will be suspended but GE15 can be held once the pandemic eases.

However, Ho said the government should focus on bringing down the Covid-19 numbers and keeping them low so that consumption activities can recover and avoid another MCO. – January 14, 2021.