Anwar Ibrahim was appointed by Malaysia's king as new prime minister last week, ending days of tense uncertainty after no candidate was able to win a majority in the country's closely contested general election.

Anwar, a pro-democracy figurehead for decades, as well as being the leader of a multi-racial and reform-minded political alliance, is also expected to help improve relations with the European Union that have faltered in recent years over energy disputes. 

The new prime minister is "no stranger in Europe," said Shada Islam, an independent analyst on EU affairs.

"He is widely known and respected among politicians and policymakers in Brussels, a city which he has visited in the past and where he has participated in think tank discussions on democracy and human rights," she told DW. 

Anwar's wife, prominent politician Wan Azizah Wan Ismail, also has good contacts across Brussels and Europe, Islam added.

Malaysia's deadlocked election 

Last weekend's general election led to Malaysia's first-ever hung parliament. None of the three main political alliances could command a majority of parliament's 222 seats and initial coalition talks broke down. 

Instead, the stalemate was resolved after an atypical intervention from the Malaysian monarch, Sultan Abdullah Sultan Ahmad Shah. He appointed Anwar as prime minister last Thursday and compelled Anwar's Pakatan Harapan alliance to form a unity government with its historic arch-rival, Barisan Nasional (BN).

The BN coalition remains dominated by the United Malays National Organization (UMNO), and has ruled Malaysia uninterrupted between independence in 1957 until 2018.

UMNO suffered one of its worst election results last weekend, in part because of its association with vast corruption scandals. Two smaller parties representing Borneo have also pledged their allegiance to the new government. 

"I congratulate the people of Malaysia for a peaceful general election that attracted a higher number of voters than ever before in Malaysian history. In times in which democracy is under stress in many parts of the world, this is an encouraging message," Michalis Rokas, the EU ambassador to Malaysia, told DW.

"The European Union looks forward to continuing to strengthen its excellent relationship with Malaysia, which is based on strong common interests, both bilaterally and regionally," he added.

EU-Malaysia palm oil dispute

Anwar's government is widely expected to pursue a more Western-orientated and liberal foreign policy. However, sore spots remain.

Bridget Welsh, an analyst at the University of Nottingham Malaysia's Asia Research Institute, noted that Anwar's new government will inherit Malaysia's dispute with the EU over palm oil.

Brussels plans to phase out the import of unsustainable palm oil by 2030, but Indonesia and Malaysia, the world's two largest palm oil producers, have filed complaints to the World Trade Organization (WTO) accusing the EU's renewable energy directive of being unfair and "discriminatory."

Malaysia's outgoing Plantation Industries and Commodities Minister Zuraida Kamaruddin has called it "crop apartheid."

A WTO ruling is expected by the end of this year or early 2023. Although the case filed by Indonesia is likely to be resolved first, the results for Malaysia are expected to be similar, as the WTO panel is comprised of the same personnel.

If Malaysia were to lose the complaint, that could put Anwar's new government in a tough situation — although there is now "greater space for dialogue on this issue than before," analyst Welsh said. 

Anwar, whose government is considered too liberal and multicultural by parts of the country's Malay-Muslim majority, may feel pressured toward a nationalist policy of rebuking the EU, analysts say.

On the other hand, he's unlikely to want to jeopardize wider trade with the EU, which has been growing in recent years. EU-Malaysia trade in goods was worth around €41 billion in 2021, up by 26% year on year, according to European Commission data. 

Rokas, the EU ambassador to Malaysia, says both sides will sign a partnership and cooperation agreement on the margins of the EU-ASEAN Commemorative Summit that takes place in Brussels next month.

"It is my hope that this landmark agreement will not be an end in itself, but a springboard for new areas of cooperation with Malaysia," Rokas said. "I look forward to discussing this with the new Malaysian government."

An EU free trade deal for Malaysia?

If Anwar plays his cards right, the EU may also announce at the summit its desire to reopen free trade talks with Malaysia, said analyst Islam.

Talks over a free trade agreement began in 2010 but stalled two years later at the request of Malaysia. A "stocktaking exercise" was carried out by both sides in 2016, but Kuala Lumpur decided against restarting trade talks. However, both sides expressed a new commitment to talks at the end of last year.

Progress has been made in recent months on similar trade deals with Thailand and the Philippines. But given Malaysia's dominant voice within Southeast Asian debates, a free trade deal with Malaysia — after ratifying ones with Vietnam and Singapore — would provide the EU with much-needed momentum as it attempts to improve political relations in the region.

"If, as expected, Anwar moves ahead in developing better ties with the EU, relations between the EU and Malaysia could enter a more stable phase," said Islam.

Edited by: Wesley Rahn