Najib budgets for Malaysian election

By Kevin Brown, FT.Com

When a middle aged prime minister appears in public in a t-shirt and cycling helmet, it is reasonable to assume that an election is in the offing. Najib Razak, head of Malaysia’s National Front coalition government, said nothing about an early poll when he donned cycling gear at a rally in the opposition held state of Penang last month. But any doubt that an election is likely within months disappeared on Friday with a budget aimed at shoring up the economy and the coalition’s core support among public sector workers and ethnic Malay voters.

The budget offered what Bernama, the national news agency, described as “a gamut of incentives” to strengthen the economy, including a M$6bn ($1.9bn) stimulus package, incentives for the finance, tourism and hospitality industries, support for small businesses and tax breaks to help a proposed Kuala Lumpur financial district get off the ground.

The budget provided assistance for regional development projects and the fast growing Islamic finance industry, together with a cash payment of M$500 to poor households. There were bonuses for 1.3m civil servants and more than half a million public service retirees – a core constituency for the governing coalition and its dominant party, Mr Najib’s United Malays National Organisation.

Mr Najib said the government’s persistent budget deficit would fall to 4.7 per cent of gross domestic product next year from 5.4 per cent in 2011. But the fall appeared to depend on forecast GDP growth of 5 to 6 per cent next year despite the global economic slowdown and soft commodity prices. The Asian Development Bank last month reduced its forecast for 2011 to 4.8 per cent from 5.3 per cent.

A significant slowdown could threaten the government’s prospects in the election, which must be held by 2013. The governing coalition has ruled Malaysia since independence in 1957 but suffered a shock in 2008 when the opposition People’s Alliance coalition won a large minority of parliamentary seats.

The Alliance, which awkwardly groups liberal, social democrat and Islamist parties, has faced problems on religious and social policy issues and is hampered by the long-running trial of Anwar Ibrahim, its leader, on sex charges that he says are a government conspiracy.
To be sure of winning, though, Mr Najib must reassure rural and less well off Malay voters that they can continue to depend on government assistance and positive discrimination, while recovering support from urban Malays and the ethnic Chinese and Indian minorities who favour economic and political reform.

His government’s popularity has improved following a series of economic and civil liberties reform initiatives, including the proposed repeal of laws allowing indefinite detention without trial. But the government also angered many Malaysians by its suppression of a peaceful march for electoral reform in the summer.

“It is a roller coaster in Malaysian politics right now, and Najib’s star is rising a bit,” says Bridget Welsh, a Malaysia specialist at Singapore Management University. “But a lot of it is based on promises rather than delivery.”