A week after opposition leader Anwar Ibrahim laid claim to the premiership citing enough parliamentary support to form a new government, the political situation is fluid and the power to decide what happens next rests with a king who is currently hospitalised.
Fitch Solutions said the upheaval since March was risky for Malaysia's long-term growth at a time when its neighbours compete for investments from firms diversifying manufacturing away from China.
"Malaysia could find it difficult to pitch its attractiveness to investors given the existence of lower-cost centres such as Vietnam and Indonesia on the one hand, and more stable politics in countries such as Singapore," its Senior Asia Country Risk Analyst Darren Tay told Reuters.
The power struggles that have ensued since the end of decades of unbroken rule by one party in 2018 could sap confidence among multinationals beset by coronavirus-related problems, analysts and business groups said.
"Political instability ranks high on corporations' considerations because it would have a ripple effect on policies," said the American Malaysian Chamber of Commerce CEO Siobhan Das.
Muhyiddin Yassin unexpectedly emerged as prime minister in March after forging an alliance with opposition parties to gain a parliamentary majority.
He was accused of stealing power by shifting alliances instead of earning an electoral mandate and has rejected Anwar's claim of legislative backing.
Japanese firms long present in Malaysia are watching closely, and decision makers back home are worried it could complicate future plans, said Daiji Kojima, president of the Japanese Chamber of Trade and Industry.
Bank Islam economist Adam Mohamed Rahim said equities investors were anxious about the possibility of a new election, while Jeffrey Halley, senior market analyst at OANDA, said a change in government could pose problems for new investments.
"Malaysia may struggle to attract foreign inflows when the country's governance is in such a state of constant flux," he said.
A smooth power transition, however, could see Malaysia's appeal restored in about six months, Halley said.
(Reporting by Liz Lee; Editing by Martin Petty)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.