Waning Government Credibility, Eroded Trust, and the Rise of Conspiracy Politics
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A Policy Analysis
February 2026
ABSTRACT
Malaysia’s Madani government finds itself caught between a reformist mandate and the corrosive arithmetic of coalition survival. Successive institutional failures—from the implosion of 1MDB to the procurement scandals rocking the armed forces, and most recently the complete withdrawal of all corruption charges against Deputy Prime Minister Ahmad Zahid Hamidi—have generated a crisis of legitimacy that extends well beyond elite politics. This analysis examines the structural drivers of institutional distrust in Malaysia, catalogues the principal conspiracy narratives that flourish in the resulting epistemic vacuum, and proposes a tiered reform agenda grounded in comparative governance literature and the most current empirical data from Transparency International, CSIS, and the East Asia Forum.
I. Introduction: The Anatomy of a Credibility Crisis
Malaysia in early 2026 presents a paradox that would perplex casual observers of its politics. On one hand, the country has recorded its highest-ever Corruption Perceptions Index score—52 out of 100, ranked 54th globally, and third among ASEAN nations—marking a genuine, if modest, upward trajectory under the Madani administration. On the other hand, public cynicism about governance has arguably never been deeper, with conspiracy theories circulating on social media platforms at a velocity that the country’s fact-checking infrastructure is wholly unequipped to counter.
This paradox is not, in fact, contradictory. CPI improvements are perception-based and lag behavioural reality; they can measure the international expert community’s reading of reform intent without capturing street-level disillusionment among ordinary Malaysians. The chasm between institutional optics and lived experience is precisely where conspiracy narratives take root—not in a vacuum of information, but in a surplus of contradictory signals: charges dropped, prosecutions stalled, powerful men acquitted, and journalists assaulted.
“Corruption scandals remain the most corrosive trend, eroding public trust and straining the unity government’s cohesion. Anwar’s administration, elected on anti-graft rhetoric, faces scrutiny over selective prosecutions and dropping of charges in cases involving high-profile politicians.”
— East Asia Forum, February 2026
This analysis is structured in four parts: a diagnosis of the sources of institutional distrust; a typology of the conspiracy theories that have emerged from this environment; an assessment of the political economy constraining meaningful reform; and a phased, concrete set of recommendations for the Madani government.
II. Sources of Institutional Distrust
2.1 The 1MDB Legacy and the Unresolved Architecture of Impunity
No analysis of Malaysian governance credibility can begin anywhere other than 1MDB. The state investment fund, used to siphon an estimated USD 4.5 billion from Malaysian public coffers, inflicted damage on Malaysia’s institutional fabric that extends far beyond the direct financial losses. The scale and audacity of the theft—involving a sitting Prime Minister, a major American investment bank (Goldman Sachs, which paid USD 2.9 billion in settlement to the US Department of Justice), and the sovereign wealth management architecture of the state itself—established a template in the public imagination: that Malaysia’s most powerful institutions were not merely susceptible to corruption, but structurally organised around it.
The Malaysian Conference of Rulers itself characterised the revelations as causing “a crisis of confidence” in government. This framing is significant: when the constitutional monarchs, typically the most conservative guarantors of institutional stability, articulate a legitimacy crisis in those terms, the epistemic damage is far-reaching.
Najib Razak’s additional sentencing in December 2025 to 15 years in prison and a fine of USD 2.8 billion was greeted not with a restoration of faith in the justice system, but with renewed demands for structural reform. Activists correctly noted that convicting a former prime minister, while necessary, is insufficient if the institutional conditions that enabled 1MDB remain intact. The question Malaysians are asking is not whether wrongdoers can be punished after the fact, but whether the system itself has been reconfigured to prevent the next theft.
“After Najib’s additional sentence, activists called on the government to enact lasting institutional reforms to prevent another 1MDB scandal.”
— CSIS, January 2026
2.2 The Zahid Hamidi Cases: A Study in the Perception of Selective Justice
If 1MDB was the catalytic event that broke Malaysians’ trust in the BN establishment, the handling of corruption charges against Deputy Prime Minister Ahmad Zahid Hamidi has become the defining test of whether the Madani government represents genuine rupture with the past or merely a reshuffling of impunity.
The sequence of events warrants careful examination. Zahid had faced 47 criminal charges of criminal breach of trust, corruption, and money laundering related to his charitable foundation Yayasan Akalbudi, as well as a further 40 charges in a separate visa system contract case. By January 2026, both cases had effectively collapsed—the first via a Discharge Not Amounting to Acquittal (DNAA) in September 2023 followed by the Attorney General’s decision to take no further action, and the second via outright acquittal after the judge found prosecution witnesses to be neither credible nor reliable.
The political geometry of these outcomes is hard to read as coincidental. Zahid heads UMNO, whose parliamentary support is arithmetically indispensable to Anwar Ibrahim’s unity government. The timing of the DNAA application—filed after UMNO joined the coalition, at a stage when the prosecution had already established a prima facie case—struck the Malaysian Bar Council, civil society, and prominent legal practitioners as deeply problematic.
“An utter waste of public funds in proving a prima facie case and a waste of all the hard work of members of AG’s Chambers. An explanation is definitely owed to the public.”
— Ambiga Sreenevasan, lawyer and rights activist, quoted in Benar News
The Malaysian Bar’s formal press release was unusually direct, stating that the AGC had “tarnished its own reputation and credibility” by applying for the DNAA after a prima facie case had been established, and noting pointedly that the timing—post-GE15, post-coalition formation—supplied legitimate grounds for public suspicion of political interference. Reformist civil society group Bersih declared that the verdict brought Anwar’s anti-graft credentials into “serious doubt.”
What makes the Zahid cases particularly damaging for institutional trust is not merely the outcomes themselves, but the structural lesson they encode: that in Malaysia, political utility provides effective insulation from legal accountability. This lesson, once absorbed by the public, generates a cynicism that no single prosecution—however high-profile—can easily dislodge.
2.3 Defence Procurement: Normalised Corruption in a Closed Sector
The defence sector occupies a special position in Malaysia’s corruption landscape because its opacity is structurally protected. Procurement decisions are shielded by Official Secrets Act provisions, public audit is limited, and parliamentary scrutiny is episodic. The result has been a series of scandals that are individually staggering in scale and cumulatively devastating to public confidence in defence institutions.
The Scorpène submarine procurement—two vessels purchased for over RM 6.7 billion from a French-Spanish consortium with intermediary fees that generated international investigations including a French judicial probe—established the template. More recently, the RM 11 billion Littoral Combat Ship (LCS) programme has failed to deliver a single vessel more than a decade after contract award, representing one of the most visible examples of defence procurement failure in Southeast Asian history. In January 2026, Prime Minister Anwar froze military and police procurement pending compliance reviews after investigations revealed systematic misappropriation, and the MACC charged both the former army chief and former armed forces chief with offences including money laundering, abuse of power, and criminal breach of trust.
The cumulative public message of these revelations is that the defence sector—tasked with the ultimate guarantee of national sovereignty—operates as a rent-extraction mechanism for senior officers and politically connected intermediaries. This is not merely a fiscal or security problem; it is a sovereignty legitimacy crisis.
2.4 The MACC’s Credibility Problem
Compounding the picture is the structural vulnerability of the Malaysian Anti-Corruption Commission itself. MACC Chief Commissioner Azam Baki has faced persistent accusations of conflicts of interest, most notably arising from a 2022 controversy over shareholdings allegedly held in his name. The protest activity captured in the Straits Times photograph of demonstrators outside MACC’s premises in February 2026 reflects a broader public sense that the anti-corruption body has itself become a political instrument rather than an independent watchdog.
The Malaysian Bar’s statement on the Zahid case pointedly noted the proximity of the MACC chief’s contract extension date to the DNAA application, adding yet another thread to a pattern that, in aggregate, suggests institutional capture rather than institutional independence. When citizens cannot trust the anti-corruption body, the entire enforcement architecture loses its deterrent function—and conspiracy theories about deep-state coordination between law enforcement and the political class gain an empirical foothold.
“TI-M stresses that these events, though recent, will have long-term consequences for Malaysia’s governance credibility… Reform commitments must now translate into concrete action.”
— Transparency International Malaysia, November 2025
2.5 The Digital Amplification Infrastructure
Malaysia’s crisis of institutional trust does not unfold in an informational vacuum; it unfolds in one of the most hyper-connected media environments in the world. By 2024, 97.4% of Malaysia’s 33.6 million citizens were online, 83.1% were active on social media, and Malaysia topped Southeast Asia in social media penetration at 81%. By early 2025, the country had 43.3 million mobile connections—121% of its population. Three in four internet users rely primarily on social media for news.
Within this environment, the viral dynamics of disinformation are well-documented. MIT research has established that false information spreads approximately six times faster than truthful reporting on social media platforms. TikTok, with 19.3 million users aged 18 and above in Malaysia as of early 2025, has become a principal vector for politically charged content, conspiracy theories, and ethnoreligious narratives that traditional gatekeeping mechanisms are structurally unable to contain. A July 2025 analysis by The Star found that only three in ten Malaysians verify information they encounter online—meaning 70% of the population consume and share content without epistemic scrutiny.
This is the algorithmic substrate upon which conspiracy theories flourish: a high-penetration, low-verification information environment where institutional failures provide the raw material, and engagement-maximising recommendation systems provide the distribution.
III. A Typology of Malaysian Conspiracy Theories
The following typology identifies the principal conspiracy narratives circulating in Malaysian public discourse, their empirical basis (where any exists), and their political function. It is analytically important to distinguish between conspiracy theories that are objectively false, those that are reasonable inferences from ambiguous evidence, and those that represent legitimate public suspicion of documented institutional behaviour.
3.1 The “Gentleman’s Agreement” Narrative (Political Patronage Theory)
The most prevalent and arguably best-evidenced narrative in Malaysian political conspiracy theory holds that the dropping of charges against Ahmad Zahid Hamidi was the result of an explicit or implicit political bargain: UMNO’s parliamentary support for Anwar’s government in exchange for the curtailment of prosecutions against UMNO leaders. This theory is not marginal—it is articulated by the Malaysian Bar, Bersih, prominent legal activists, and academic commentators at institutions such as the University of Tasmania and the East Asia Forum.
The factual record does not definitively prove or refute this theory, but it does supply it with structural plausibility. The sequence—coalition formation, DNAA application, AGC’s final withdrawal of charges—is consistent with the theory. What distinguishes this from unfounded conspiracy thinking is that it proceeds from documented institutional behaviour rather than speculative inference. Its danger, however, lies in the degree to which it generalises: once the public accepts that all prosecutorial decisions are politically determined, the credibility of legitimate enforcement actions also collapses.
3.2 The “Deep State” Military-Industrial Complex Narrative
In the wake of the armed forces procurement scandals, a second family of conspiracy theories has gained traction, centred on the claim that Malaysia’s defence establishment operates as a semi-autonomous patronage network with interests orthogonal to—and capable of suborning—civilian oversight. This narrative holds that the succession of procurement scandals (submarines, LCS, the “ye ye” parties exposed in late 2025) reflects not individual malfeasance but a structural arrangement between defence contractors, senior officers, and politically connected intermediaries that has persisted across multiple governments.
This narrative draws on genuine documented pathologies. The CSIS has noted that the scandals “damage Malaysia’s reputation with international investors, potentially stunting the investments the government has worked so hard to attract.” The theory becomes conspiratorial when it extends beyond documented patronage to claims of organised foreign influence, hidden sovereign military capabilities, or coordinated cover-ups reaching to the highest levels of government—claims for which documentary evidence is thin but social media amplification is extensive.
3.3 The “Reformasi Betrayal” Meta-Narrative
A third and perhaps the most politically consequential conspiracy narrative is what might be termed the Reformasi Betrayal—the claim that Anwar Ibrahim’s entire reform identity was constructed as a long-term stratagem, and that the Madani government was always destined to replicate the patronage structures of the UMNO establishment it ostensibly overthrew. This narrative draws its emotional power from the 25-year arc of Anwar’s political career: imprisoned, tortured, and exiled for opposing Mahathir’s UMNO, only to return to power in coalition with the same UMNO he spent his career opposing.
The social media commentary that erupted when the DNAA was granted—”25 years of Reformasi, only to see Zahid Hamidi walk free today”—captures the emotional register of this narrative precisely. It functions less as a specific factual claim than as an interpretive frame that renders all subsequent evidence of coalition compromise as confirmation of a foundational betrayal. This makes it particularly resistant to falsification: every reform concession to coalition partners becomes evidence of the conspiracy rather than the normal friction of governing.
3.4 The “MCMC Censorship” and Press Freedom Conspiracy
A fourth cluster of theories concerns the regulatory and enforcement environment surrounding journalism and online speech. The March 2025 arrest of investigative journalist B. Nantha Kumar, shortly after he exposed an alleged migrant trafficking cartel at KLIA involving a retired senior immigration officer, generated immediate and credible accusations of retaliatory prosecution. The sequence—exposure, arrest on bribery allegations—followed a pattern that civil society figures including Ambiga Sreenevasan characterised as deliberately chilling investigative journalism.
Transparency International Malaysia condemned a subsequent journalist assault in November 2025 as a “deeply disturbing escalation” and noted explicitly that “Malaysia cannot speak of reform while those who expose wrongdoing face intimidation, threats or violence.” In this context, theories about coordinated government suppression of journalism are not simply paranoia; they reflect documented incidents whose full context has not been officially explained. The MCMC’s periodic blocking of websites—including Medium.com and Asia Sentinel during the 1MDB era—supplies historical precedent that gives these theories their empirical grounding.
“This erosion of trust has created a vacuum eagerly filled by influencers, pseudo-journalists, and algorithmically amplified conspiracy theorists.”
— Bernama Thoughts, September 2025
3.5 Ethnoreligious Conspiracy Narratives and the “Green Wave” Amplification
The final category of conspiracy theory operates at the intersection of governance distrust and Malaysia’s constitutional ethnic-religious architecture. TikTok-driven content exploiting the “green wave”—the rightward Islamist-Malay nationalist political shift that began accelerating in 2020—has generated a set of narratives framing governance failures not as systemic corruption but as ethnic or religious persecution, elite cosmopolitan betrayal of the Malay-Muslim majority, or foreign (particularly Chinese or Jewish) subversion of national institutions.
The Center for the Study of Organized Hate’s July 2025 analysis documented how social media platforms have become “low-cost megaphones to amplify ethnoreligious narratives and conspiracy theories that inflame social anxieties.” These narratives are particularly dangerous because they redirect legitimate public anger about institutional failure into communal antagonism, making constructive reform politics harder to sustain. The ISEAS-Yusof Ishak Institute has documented TikTok’s failure to catch 90% of misleading election content in comparable contexts, highlighting the structural gap between platform responsibility and actual moderation.
IV. The Political Economy of Reform Constraints
Understanding why the Madani government has not moved faster on anti-corruption reform requires engaging with the political economy constraints that structurally limit what any prime minister can do within Malaysia’s coalition arithmetic. As Fair Observer’s January 2026 analysis observed, Anwar’s overarching strategy since consolidating power has prioritised coalition survival over potentially divisive reforms—a rational response to the knowledge that two of his reform-minded predecessors (the first Mahathir-era Reformasi government and Muhyiddin’s administration) collapsed within 22 months and 17 months respectively.
The contradiction is structural and not easily resolved by individual political will. The parties Anwar requires for a working parliamentary majority—UMNO chief among them—have historically been the primary beneficiaries of the patronage networks that anti-corruption reform would dismantle. Asking coalition partners to support legislation that criminalises their own historical conduct is not merely politically awkward; it is mathematically suicidal for a government without an outright parliamentary majority.
This dynamic is what political scientists call an “institutional trap”: the actors with the power to reform the system are also the actors with the strongest incentives to preserve it. Breaking out of institutional traps typically requires either an external shock (such as an electoral landslide that makes coalition dependence unnecessary) or the construction of reform constituencies outside the parliamentary system—civil society, international investors, institutional creditors—whose pressure can override veto players within the coalition.
The 2026 electoral cycle creates both an opportunity and a risk. The next general election (expected late 2026 or early 2027) should theoretically create incentives for reform signalling ahead of polling. But the opposition’s disarray—Muhyiddin’s resignation as PN chairman in January 2026, unresolved succession tensions between Bersatu and PAS—paradoxically weakens the electoral pressure on Anwar to deliver, since governing from a position of relative strength relative to a fragmented opposition reduces the urgency of credibility-enhancing gestures.
V. A Tiered Reform Agenda for Restoring Credibility
What follows is a phased set of reform recommendations, organised by time horizon and calibrated to the political feasibility constraints identified above. Recommendations are drawn from comparative governance literature, Transparency International’s empirical framework, and the specific structural deficits identified in this analysis.
Tier 1: Immediate Measures (0–6 months)
1.1 Separate the Attorney General and Director of Public Prosecutions
The most structurally important immediate reform is the formal separation of the Attorney General’s office from the Public Prosecution function. The current dual-role arrangement—which allows the AG to both advise the government and direct prosecutions—creates an irresolvable structural conflict of interest when political allies are defendants. The Malaysian Bar has called for this separation since at least 2023; the government has acknowledged its necessity but offered no timeline. An immediate legislative commitment to separation, with a target implementation date, would signal decisively that prosecutorial decisions will no longer be reviewable by political actors.
1.2 Impose Mandatory Disclosure Requirements on DNAA and Charge-Withdrawal Decisions
The Zahid case exposed a specific procedural opacity: the prosecution can apply for a DNAA with minimal public explanation, leaving the public without the information necessary to evaluate whether the decision reflects legitimate legal reasoning or political interference. A mandatory disclosure framework—requiring the AGC to publish detailed written reasons for any withdrawal or non-prosecution decision involving public officials—would not eliminate political influence, but would make it far more costly by exposing its reasoning to public and judicial scrutiny.
1.3 Accelerate and Operationalise Whistleblower Protection Reforms
The Whistleblower Protection Act amendments passed in 2025 have not yet been brought into force, creating a legally anomalous situation in which protections exist on paper but cannot be claimed in practice. Transparency International Malaysia has specifically flagged the absence of clarity on enforcement timelines. Emergency operationalisation of these provisions—including the establishment of a dedicated whistleblower support unit within the MACC—would both provide practical protection and send a powerful symbolic signal about the government’s seriousness.
Tier 2: Medium-Term Structural Reforms (6–24 months)
2.1 Enact a Freedom of Information Act
Malaysia’s Official Secrets Act (OSA) remains one of the broadest in the region, providing blanket legal cover for the opacity that enables procurement corruption. A Freedom of Information Act—modelled on existing regional examples from Thailand, Indonesia, and further afield from India’s Right to Information Act—would not only enable investigative journalism and civil society oversight, but would systematically shrink the informational darkness in which rent-seeking thrives. Critically, an FOI Act with a public interest override for defence procurement documents would directly address the structural opacity of the sector that has generated the most damaging recent scandals.
2.2 Establish an Independent Parliamentary Oversight Committee for Defence Procurement
The defence sector’s special exemption from conventional procurement transparency rules is not immutable. A cross-party parliamentary committee with independent legal counsel, security-cleared access to procurement documentation, and a mandate to publish annual public reports—redacted where genuinely necessary for operational security—would provide the first meaningful civilian check on a sector that has operated largely autonomously. New Zealand’s Model Standing Committee on Accountability and CSIS’s recommendations on defence oversight provide applicable comparative frameworks.
2.3 Implement Political Financing Regulation
The absence of political financing regulation—a lacuna that Transparency International Malaysia has repeatedly flagged—creates a structurally enabling environment for the capture of enforcement agencies by donor interests. Without transparency about the financial relationships between political parties and private sector actors, the independence of regulatory and enforcement decisions will always be doubted. A Political Financing Act modelled on comparative ASEAN examples, with mandatory disclosure of donations above a materiality threshold, independent audit, and criminal liability for non-disclosure, is the single most structurally important medium-term reform.
Tier 3: Long-Term Institutional Architecture (24+ months)
3.1 Constitutional Entrenchment of MACC Independence
The current MACC Act provides for independence, but independence that is statutory can be overridden by statute. Constitutional entrenchment of the MACC’s operational independence—including security of tenure for its chief commissioner, parliamentary rather than executive appointment, and direct parliamentary accountability—would require a two-thirds parliamentary majority but would create a durable institutional architecture resistant to future political cycles. The precedent of Hong Kong’s ICAC, while imperfect, offers a regional model for constitutionally entrenched anti-corruption architecture.
3.2 Build a National Critical Thinking and Digital Literacy Infrastructure
The conspiracy theory problem is not solvable by legal enforcement alone; indeed, aggressive use of the Communications and Multimedia Act to prosecute speech breeds further distrust. A durable solution requires building the epistemic capacity of citizens to critically evaluate information. The Edge Malaysia and the Khazanah Research Institute have both emphasised that Malaysia’s educational system treats information literacy as a secondary skill, bundled into cyber-safety frameworks rather than taught as a primary democratic competency. A national curriculum reform embedding source verification, logical fallacy identification, and institutional literacy as core subjects from primary level would, over a generation, create a public less susceptible to epistemic manipulation.
3.3 Target the CPI Top-25 Goal with Structural, Not Communicative, Interventions
The Chief Secretary to the Government’s February 2026 statement that “strategic communication plays a critical role in shaping positive perceptions” through social media is a revealing indicator of where the government’s instincts currently lie: toward perception management rather than structural change. The CPI’s two declining sub-indicators—the Political and Economic Risk Consultancy index and the World Justice Project Rule of Law Index—specifically measure corruption perception and rule of law, not communication quality. Closing the gap to a top-25 ranking by 2033 requires demonstrating structural change through consistent enforcement actions, institutional independence, and legislative achievement. Communication strategy cannot substitute for this; it can only amplify it.
VI. Conclusion
Malaysia’s institutional trust crisis is both severe and tractable. It is severe because it is now decades deep, structurally embedded in procurement systems, enforcement architecture, and coalition politics, and amplified by a digital media environment that rewards outrage and virality over accuracy and nuance. It is tractable because the Madani government retains a working parliamentary majority, a nominal reform mandate, an improving international perception score to defend, and an electoral horizon that should theoretically incentivise credibility-enhancing action.
The conspiracy theories catalogued in this analysis are not simply a communications problem to be managed; they are symptomatic readings of documented institutional failures. Citizens who believe that prosecutorial decisions are politically determined, that defence procurement is structurally corrupt, and that reform rhetoric is instrumentalised for electoral advantage are not primarily wrong. They are drawing rational inferences from available evidence. The route to dislodging these narratives is not more assertive messaging but fewer reasons to believe them.
Transparency International Malaysia’s warning is worth repeating as a conclusion: the current window of opportunity for meaningful reform is open precisely because political stability and parliamentary majority create conditions that may not persist. The cost of inaction—measured in public trust, CPI trajectory, investment credibility, and democratic resilience—will compound with every additional case that confirms the public’s darkest assumptions about how power operates in Malaysia.
“TI Malaysia urges the government to act decisively and systematically, as public expectations are high and the cost of inaction will be reflected in both future CPI scores and public trust.”
— Transparency International Malaysia, February 2026
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