Malaysia’s ruling Barisan coalition, which has held power ever since independence from Britain in 1957, won another term last Sunday. It gained 133 out of 222 parliamentary seats, despite losing the popular vote, as the electoral system is skewed towards Barisan’s rural heartlands. However, markets, which had feared a hung parliament, were relieved. Local stocks jumped by almost 4% on the news.
What the commentators said
“Phew. Now the politics are done, it’s back to business,” as Lex put it in the FT. The result should mean the continuation of the government’s Economic Transformation programme, essentially a big infrastructure push to bolster domestic demand and spur private investment.
However, that alone won’t be enough to secure Malaysia’s economic future. Growth has been humming along at over 5% in recent years, but “cracks in the engine are beginning to appear”, said Bloomberg.com. Western demand for Malaysian-produced electronics is down, leaving the country more dependent on exports of commodities such as oil, palm oil and rubber.
Household debt is relatively high at 80% of GDP and public debt of 53% of GDP is one of the worst figures in the region, partly because of “a budget bloated by subsidies”, added Bloomberg.com. The worry now, said BBC.co.uk, is that Malaysia’s development has stalled and it is stuck in the “middle-income trap”: “unable to compete with advanced economies in innovation and high-tech industries, nor with low-wage countries producing cheap goods”.
Another key issue is an affirmative action policy for the previously marginalised majority Malay population, at the expense of ethnic Chinese and Indian Malays. This, said the FT, has “ossified into a system of patronage and cronyism” and become “corrosive”.
With the Chinese population all but deserting the government at this election, society has become increasingly polarised, said Andy Mukherjee on Breakingviews.com. Add this longer-term threat to the country’s other challenges, and investors’ relief at the vote “may prove short-lived”.