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Post-election doldrums hit Malaysia

Asia Times - September 19, 2013

Anil Netto, Penang Roused by the soaring rhetoric of pre-election campaign promises, many Malaysians have settled into a state of post-election despondency as the economy weakens and politics return to business as usual. The letdown was palpable on Independence Day, where unlike previous August 31 celebrations few private buildings or cars displayed the national flag.

A sense of lost opportunity has permeated the country in the aftermath of the May 5 general election, a poll plagued by vote-buying, electoral roll irregularities and bogus constituency boundaries that only narrowly returned Prime Minister Najib Razak's long-ruling Barisan Nasional (BN) coalition to power. BN garnered just 47% of the popular vote, compared to the opposition Pakatan Rakyat (PR) coalition's 51%.

The BN retained control of parliament despite widespread complaints about the way constituency boundaries were drawn to give greater weight to remote and rural areas, where the BN benefits from its dominance over the traditional mainstream media and populist schemes and hand-outs targeting the poor. Although the BN won fewer parliamentary seats, the United Malays National Organization (UMNO), the largest party in the ruling coalition, notched more seats than it did at the 2008 election, further entrenching its dominance within the BN.

State institutions have largely blocked opposition challenges to the BN's legitimacy. Petitions brought to court by PR supporters challenging individual constituency results have been almost universally rejected, mostly on legal technicalities. At the same time, election courts have slapped sizeable legal costs on losing petitioners. In Penang, for example, where witnesses reported seeing long lines of people queuing up for post-election payouts in areas where BN candidates had won, the state's Anti-Corruption Commission inexplicably closed the case on July 9.

The lack of legal recourse for PR supporters has underscored long-time questions about judicial independence. Eyebrows were raised when the Court of Appeal recently acquitted two Special Action Unit officers, part of then deputy prime minister and defense minister Najib Razak's security detail, of the controversial murder of Altantuya Shariibuugiin, a Mongolian model who served as an interpreter in a government deal to acquire French submarines. Abdul Razak Baginda, another of Najib's aides, was earlier acquitted of Shariibuugiin's murder by C-4 explosives.

The Court of Appeal is now hearing a government appeal against a High Court decision that allowed the Catholic Church to use the term "Allah" in its Herald weekly newspaper. Many Christians in the states of Sarawak and Sabah speak Malay and the church maintains that they have always used the word "Allah" to refer broadly to God, whereas the government argues that the term should be confined to Muslims. Muslim groups aligned with the BN and some Christians have turned up outside the court, adding tension to the high-stakes legal showdown.

While such court cases signal a return to politics as usual, economic concerns are also rising. After the BN's unprecedented cash handouts, pay hikes and other government projects and schemes doled out ahead of the May general election, Najib's government is scrambling for ways to raise revenues to narrow the fiscal deficit. Many Malaysians fear that they will now have to pick up the tab for the BN-led government's pre-election spending spree.

Negative outlook

Two days after Independence Day, the government raised petrol prices by around 11%, saying it needed to reduce subsidies and channel the savings to cash transfers for low-income households. Najib's government also said it would delay certain infrastructure projects to stem deterioration of the current account. It is also considering the imposition of a new goods and services tax as part of the 2014 fiscal budget, due for deliberation next month.

The announced fiscal tightening comes in apparent response to credit rating agency Fitch Ratings' announcement in July that it had downgraded Malaysia's credit outlook from "stable" to "negative". Fitch said a "further erosion of the current account surplus, particularly a 'twin deficit' situation where failure to consolidate the budget is associated with the emergence of a sustained current account deficit".

Whether Najib's belt-tightening will be enough to calm market jitters is uncertain, particularly considering the BN's history of corruption and patronage in past state spending schemes. Questions are already being raised about Najib's announcement of new measures to bolster ethnic Malays' and other indigenous races' (known collectively as "bumiputera") stake in the economy.

Known as Pemerkasaan Ekonomi Bumiputera, the plan was announced on September 14 in Najib's first major policy speech since his re-election in May. The move appears to be driven more by politics than economics, as Najib rewards the bumiputeras who by his estimate collectively represent around 69% of the population for supporting UMNO and BN at the recent general election.

The redistributive scheme will create a new 10 billion ringgit (US$3 billion) unit trust tasked with raising Malays' equity stakes in local corporations. Najib's speech also committed state-linked companies and national oil giant Petronas would dole out more projects and business to Malay-owned companies and hundreds of millions of ringgit to state agencies tasked with incubating entrepreneurs.

The scheme signals a reversal of Najib's earlier commitment to overhaul the New Economic Policy, a government scheme that has long favored majority Malays over minority Chinese and Indians in business, education and government positions. The discriminatory policy has led to a brain drain of minority Chinese and Indian professionals, an exodus of talent that has hampered economic growth and development.

The new scheme also comes ahead of UMNO intra-party elections, where top leadership positions are determined. Some political analysts contend that Najib has grown quiet on ethnic and religious issues and downplayed his multiethnic "1Malaysia" slogan ahead of the pivotal meeting.

While Najib hopes to consolidate his tenuous hold through the election of his known loyalists to top UMNO posts, politicians aligned with former prime minister and UMNO stalwart Mahathir Mohammad will also vie to move up the party hierarchy. Regardless of which faction wins, Najib's campaign trail promise of new politics and buoyant economics is nowhere in sight after four months in office.

[Anil Netto is a Penang-based writer.]

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