| KUALA LUMPUR, April 17
KUALA LUMPUR, April 17 Malaysian Prime Minister
Najib Razak will likely put key economic reforms on ice as he
tries to rebuild voter support after his ruling coalition
recorded its worst performance in 24 years in a local election
in a key stronghold.
Bets are largely off for a snap general election to take
place this year, with Najib expected to rethink his strategy of
promoting inclusive growth in the Muslim-majority multi-cultural
nation to win back the minority vote, analysts said.
In Saturday's state poll, Najib's ruling National Front
retained control of its stronghold Sarawak, which accounts for a
fifth of its parliamentary seats, but the opposition more than
doubled its seat tally as ethnic Chinese mostly voted against
the government. [ID:nL3E7FG07S]
Structural economic changes such as further scaling back
fuel subsidies, introducing a goods and services tax and
reforming a decades-old race-based policy would be relegated in
Najib's list of priorities for now, analysts said.
"After the outcome in Sarawak, Najib will need a general
election mandate before making any big moves," said Ibrahim
Suffian, director at the independent opinion polling firm
"Enacting fuel subsidy cuts and a goods and services tax
will just add to the political issues that he will have to deal
with ahead of the general election."
The opposition won 15 seats in the 71-seat state
legislature, giving the ruling coalition a two-thirds majority.
But it was its worst performance in Sarawak since 1987 when the
coalition won only 25 out of 45 seats.
In the last state election in 2006, the opposition won only
seven seats. On Saturday, the ruling National Front's losses
came mainly from areas dominated by ethnic Chinese, with its
main Chinese party in the state losing 13 of the 19 seats it
Financial markets are expected to be little changed on
Monday as past state elections have had minimal bearing on
trade, although the expected delay in introducing reform could
reinforce the stock market's laggard position versus its
Najib took office in 2009 pledging to woo investment, widen
the country's tax base with a goods and services tax and cut the
country's subsidy bill and budget deficit which hit a 20-year
high of 7 percent of gross domestic product in 2009.
Once a magnet for foreign investment, Malaysia has lost much
of its shine as its neighbours move faster in implementing
reforms amid strong economic growth.
In a March report by Bank of America Merrill Lynch, Malaysia
ranked as the second least popular market after Colombia among
global emerging market fund managers and tied with India for
least favourite among Asia-Pacific asset managers.
Analysts are uncertain about the timing for the next general
election after the Sarawak poll although most agree that Najib
was unlikely to call one this year, as he might have if he had
won more decisively in Sarawak. The next general election is not
due until 2013.
Asked whether the state poll would be a barometer for
calling a general election, Najib was quoted by local media as
saying: "No, this is only at state level. There are other things
to consider at Sabah and the peninsula as well."
Apart from highlighting ethnic minority unhappiness towards
the government, the Sarawak poll has thrown up other political
headaches for Najib including the retirement of the state's
long-serving chief minister Abdul Taib Mahmud.
The ruling coalition campaigned on a promise of Taib's
impending retirement to placate voters disenchanted with the
state leader's alleged corruption and nepotism. But analysts say
Taib's departure could create a leadership vacuum and increase
political tensions ahead of national polls.
The poll result is also expected to help revive the People's
Alliance opposition headed by former deputy premier Anwar
The Alliance has lost some traction of late as Anwar battles
a lengthy court case involving charges that he sodomised a
former male aide and more recently, that he was caught on tape
having sex with an unidentified woman. Anwar has denied both
"With the opposition's gains, a new political configuration
of politics has emerged, an important factor for Najib to
consider before calling for the next general elections," said
Johan Saravanamuttu, visiting senior research fellow at the
Institute of Southeast Asian Studies in Singapore.
(Editing by Liau Y-Sing and Andrew Marshall)