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At a time when Southeast Asia desperately requires regional leadership, Malaysia's political parties are fracturing so profoundly that some feel the country is on the cusp of political instability that could push the country off course.

Malaysia, although hardly a bastion of democratic vibrancy, is one of the region's more stable countries. With Thailand still in post-coup limbo and Indonesia's outsider president grappling with the realities of ruling among the old Jakarta elite, Malaysian Prime Minister Najib Razak could have been the natural choice for a voice of reason. While not exactly inspiring, he might have been able to project authority in the Association of Southeast Asian Nations (ASEAN) at a time when the Rohingya migrant crisis exposed just how self-interested and disunited Malaysia and other nations are in this supposed year of ASEAN integration.

Mr. Najib squandered his chance to lead in the region and build a sense of shared responsibility for transnational issues. He went about consolidating his power base in Kuala Lumpur after he won the country's most recent general election only narrowly – leading his United Malays National Organization (UMNO) party and the ruling Barisan Nasional coalition to its worst result in nearly 60 years.

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He has since clamped down on civil society and enraged human rights organizations by pursuing the prosecution of opposition leader Anwar Ibrahim on sodomy charges. The country's democracy looked grim enough when Mr. Anwar was jailed. But last week, the opposition People's Alliance coalition – made up of an Islamic party, a party supported by many ethnic Chinese Malaysians, and a centrist multi-ethnic party – disbanded over an internal rift, effectively leaving Mr. Najib's ruling party unchallenged.

Although bad news for the quality of Malaysian democracy more generally, this should have been good news for Mr. Najib and his coalition.

But the opposition's disintegration has only amplified infighting and criticism from within UMNO, and of Mr. Najib in particular. He faces mounting questions about the wealth of those close to him – as well as his wife, who has been photographed with Hermès handbags that can cost well over $100,000 each, despite Mr. Najib's comparatively modest salary. More seriously, this degenerating political crisis also risks conferring more influence on the Pan-Malaysian Islamic Party, which recently passed a proposal to introduce Islamic criminal law (including hand amputations for theft) in the northern Malaysian province of Kelantan, which it controls.

These are hardly positive developments. But things have recently got even worse. Mr. Najib, despite appearances, is not actually the most powerful autocrat in Malaysia. That mantle firmly belongs to Mahathir Mohamad, nearly 90, who served for 22 years as Malaysia's prime minister between 1981 and 2003. He effectively appointed his predecessors, including Mr. Najib, and casts a paternalistic – rather Lee Kuan Yew-like – shadow over the nation. His criticism of Mr. Najib in a recent interview with The New York Times was unprecedented and stark, and included accusations of nefarious dealings at an investment fund chaired by Mr. Najib.

"I had always supported Najib. I was in a way instrumental in his becoming Prime Minister," Mr. Mahathir said. "[But] the apparent disappearance of huge sums of money. This is not good. He has never been able to explain how the money was spent. He wants to leave his own legacy. But what he does is verging on criminal. He's going to lose in the next election."

Mr. Mahathir suggested the breakup of coalition unity meant no one will definitively win the next election, and that things may become unstable – even to the point of endangering economic growth. The situation is not exactly helped by drastically lower oil prices.

There is also a very real possibility that the fracturing of the parties – some of which are based on faith or ethnicity – could divide Malaysian politics and politicians even further by race and religion; this could eventually slide into pandering toward certain groups or regions with crass, discriminatory policies, in a country where the Malay majority has already benefited from preferential hiring over Chinese and Indian populations.

Kai Ostwald, an assistant professor at the University of British Columbia's Institute of Asian Research, says schisms within Malaysia's ruling party are hardly new. But this time, the accompanying breakdown of unity among the party's coalition partners means the chaos is likely to have policy implications, such as "doubling down on the Malay-first agenda" and making concessions on Islamic law, actions that are sure to strain relations with minority groups.

"Malaysia is one of the true [Southeast Asian] success stories from a developmental perspective," he says. "It's too big of a ship to suddenly sink, but this is a genuine crisis that undoes much of the hard-fought progress of the past decade or two."

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