BN two-thirds win in GE13 a ‘surprise’, says Morgan Stanley 

(The Malaysian Insider) – A Barisan Nasional (BN) victory of two-thirds of the 222 parliamentary seats will surprise investors, says Morgan Stanley Research, adding that the election outcome will impact Malaysia’s reform agenda.

In a report on this year’s polls, the US financial research house also noted the results will have a huge effect on the Umno election in June 2013.

“The political landscape … would be important in terms of whether policymakers can engineer a sustainable inflexion point in Malaysia’s structural story,” according to the report made available to The Malaysian Insider.

On the other hand, if the ruling BN loses by winning less than 50 per cent of the seats up for grab, investors would likely see this as a “negative risk event”, Morgan Stanley noted.

These risks would then affect leadership and government stability, postponing the reform agenda undertaken by the country in the near term until political stability is restored.

Morgan Stanley suggested that near-term continuity in policy and reform agenda will come from maintaining the status quo.

The research house also warned that Malaysia is suffering from a “Dutch Disease of sorts” that slows down structural reform, resulting in lacklustre private investment.

“Commodity resources and favourable demographics have provided a comfortable growth buffer, leading policymakers to neglect what is needed on productivity or competitiveness,” the report offered.

In economics, “Dutch Disease” refers to negative consequences arising from large increases in a country’s income.

Morgan Stanley noted that reforms have been implemented since Prime Minister Datuk Seri Najib Razak came into power, but they have failed to address the root of the problem, which is the lack of a suitably qualified labour force.

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