KUALA LUMPUR, April 18 Malaysia's ruling coalition lost significant ground in its stronghold of Sarawak in weekend state assembly elections, setting the stage for a shift in government and economic policy as Prime Minister Najib Razak works to regain support.
The government recorded its worst performance in 24 years in the poll in a result analysts say reflects the mood across the country, which could prompt Najib to switch tack in his plan to recapture the ethnic minority vote and restructure the economy to catch up with Asian neighbours.
In Saturday's poll, the opposition won 15 seats in Sarawak's 71-seat state legislature, giving the ruling National Front coalition a two-thirds majority. But it was the coalition's worst performance in Sarawak since 1987 when it won only 25 of 45 seats. [ID:nL3E7FG07S]
Following are questions and answers on how the poll outcome could reshape Malaysian political and financial policy.
WAS IT A BIG WIN FOR NAJIB?
Not really. The National Front won 77 percent of seats in the 71-member state legislative but the opposition increased its seats to 15 from the 7 it won in the last polls in 2006, a major feat in a state where the ruling coalition has always held near total political dominance.
(Graphic on past voting patterns in Sarawak: link.reuters.com/vur98r)
Mainstream domestic media mostly hailed the Front's performance as a major win, although most newspapers also warned of a further erosion of support.
"With the opposition emerging as an even stronger player in (Sarawak) and willing no doubt to use its greater share of state seats to build support for the next general elections, there is a great need to take stock," the pro-government New Straits Times said in an editorial.
HOW WILL SARAWAK AFFECT NAJIB'S GENERAL ELECTION TIMETABLE?
A general election isn't due until 2013. Some analysts had said a strong showing in Sarawak might have tempted Najib to call an early poll this year. That now looks unlikely.
"We maintain our view that the general elections will be held in 2012 rather than 2011," Credit Suisse Research said in a strategy report on Monday. [ID:nEdghRW3za]
WHAT'S AT STAKE?
Complaints about ethnic and religious discrimination were a major source of voter discontent in Sarawak which helped the opposition to gain ground.
Ethnic Chinese and Indians, who make up about a third of Malaysia's population, complain that their rights have been increasingly eroded as the government panders to the wishes of majority ethnic Malays.
A squabble over the government's seizure of Bibles, allegations of racist slurs by government officials and a dispute over the right of Christians to use the word 'Allah' have all fanned ethnic minority anger.
Najib needs to regain the trust of ethnic minorities as Sarawak and neighbouring Sabah state, which both have a sizeable non-Malay population, hold they key to national power. The two states account for 56 seats in Malaysia's 222-seat parliament.
WHAT DOES NAJIB NEED TO DO, AND CAN HE PULL IT OFF?
Holding general elections later rather than sooner would buy Najib time to regain support but he would need to rethink his approach to economic reform. Instead of proceeding with fuel subsidy cuts and rolling out a goods and services tax, the government could seek other avenues to widen its revenue base without further denting popularity.
But a delay in cutting subsidies and boosting revenues could derail the government's goal of further reducing its budget deficit. The deficit hit a 20-year high of 7 percent of gross domestic product in 2009 before falling to 5.6 percent in 2010 and is projected to be 5.4 percent this year.
The Economist Intelligence Unit said Malaysia's budget deficit would be 3.9 percent in 2015, "somewhat above the level considered prudent".
(For a graph on Malaysia's budget deficit vs GDP: link.reuters.com/sun97p)
On the political front, any move by Najib to placate ethnic minority Chinese and Indians could anger conservative Malay Muslim groups which form a core support base for the ruling coalition.
A coalition of Muslim groups known as Pembela (Defenders) protested last Friday against what they said were excessive government concessions in talks with church leaders to resolve the Bible seizure row.
WHAT ARE THE IMPLICATIONS FOR THE OPPOSITION?
Opposition leader Anwar Ibrahim is expected to try to capitalise on ethnic minority discontent with the government to build on the support the opposition drew in the Sarawak poll.
Analysts say that with the Sarawak outcome, the three-party opposition alliance appears to have stemmed a recent slide in its popularity triggered by a spate of election losses and Anwar's ongoing sodomy court case and his alleged involvement in a sex tape scandal, which he denies. (Editing by Liau Y-Sing and Robert Birsel)