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FACTBOX-Key political risks to watch in Malaysia

April 2, 2010
02 Apr 2010 02:27:58 GMT

Source: Reuters

By Razak Ahmad KUALA LUMPUR, April 1 (Reuters) – The government’s commitment to push through economic reforms via its New Economic Model (NEM) amid a growing political backlash is a key challenge facing Prime Minister Najib Razak as he prepares for elections which are due by 2013 but may be held as early as next year. Wary of upsetting the critical majority Malay votebank, many of whom will be initially hit by the pledge to reduce crippling subsidies and a rollback of a controversial affirmative action policy envisioned by the NEM, Najib may delay or water down reforms needed to win back lagging foreign investment. Sovereign 5-year credit default swaps <MYGV5YUSAC=R> are trading at a spread of around 124.5 basis points, compared to 104 a month ago. Following is a summary of key Malaysia risks to watch: * POLITICAL CONFLICT The National Front ruling coalition’s dominance through 52 years in power was dented by historic losses in 2008 polls, shifting the political landscape and increasing political friction. The coalition lost control in five states and its once iron-clad two-thirds control of parliament. Many voters, especially the country’s Chinese and Indian ethnic minorities, abandoned the National Front in favour of the three-party opposition and show little signs of returning to the coalition. Most parties in the 12-member National Front saw a drop in voter support, but it was the non-Malay component parties which suffered the worst damage. Opposition leader Anwar Ibrahim’s ongoing trial on sodomy charges will also provide a flashpoint. Malaysia’s political stability has deteriorated, and investment will be further damaged if that trend continues. What to watch: — Anwar’s trial. Opposition supporters widely regard the case as politically motivated, and it is likely to further dent Malaysia’s attractiveness for foreign investors. A contentious verdict would anger Anwar supporters and any marked increase in political tensions could see more foreign money pulled from Malaysia’s markets, pulling down stocks <.KLSE>, bonds and the ringgit <MYR=>. But with limited foreign portfolio investment still in the country, the impact will be muted. — A state election in the Borneo state of Sarawak, a National Front bastion that provides the ruling coalition with 30 of its 137 seats in parliament. Sarawak’s next state polls are not due until June 2011 but many expect it to be held late this year, with the government hoping for a strong showing to boost confidence ahead of national polls that would follow in 2011.– A parliamentary by-election in the opposition-held central state of Selangor will be a barometer of the political mood. * ECONOMIC REFORM The government’s commitment to economic reform is being put to the test with the NEM, meant as a replacement for a four-decades-old Malay affirmative policy known as the New Economic Policy (NEP). That regime, adopted after race riots in 1969, gave a wide array of economic benefits to ethnic Malays who make up 55 percent of the population. Investors complain that abuse of the NEP has led to a patronage-ridden economy, resulting in foreign investment increasingly moving to Indonesia and Thailand. Since taking office in April last year, Najib has rolled back elements of the NEP, and axed the rule that companies must offer stakes to indigenous ethnic Malays. What to watch: — The phased rollout of the NEM. Following an initial release of the NEM’s broad outline on March 30, public reaction will be sought before the final measures are announced in June. — Markets barely shifted when it was announced, reflecting scepticism over the government’s record on implementation after price rises and a new tax were put on the backburner. — The government’s moves to reduce crippling fuel and food subsidies. Past fuel price hikes have drawn an intense public backlash which Najib appears wary of attracting. Malaysia was supposed to cut its fuel subsidy bill from May this year as part of the 2010 budget to tackle its budget deficit which in 2009 hit a more than 20 year high of 7.4 percent of gross domestic product, but that measure was withdrawn as it was “unpopular” with voters. Similarly, plans to debate a goods and services tax (GST) in the current parliamentary session were withdrawn due to the risk of hurting the government’s popularity, as were proposals for electricity price hikes. * RACE AND RELIGION Race and religion have always been explosive issues in Malaysian politics. Najib took power pledging a more inclusive approach to ethnic Chinese and Indian minorities, but his United Malay National Organisation (UMNO), linchpin of the ruling coalition, is beginning to cast this approach aside in a bid to woo conservative Malays. The caning of three women under strict Islamic laws last month for having illicit sex signalled the government’s increasing adoption of a stronger Islamic agenda, which has worried some investors. A heated row over the use of the word “Allah” by Christians, which sparked attacks on religious establishments, is also threatening to prolong minority unhappiness with the government. What to watch: — If religious tensions worsen, the government may decide to put on hold further measures to withdraw special privileges for ethnic Malays in case this worsens Malay discontent and undermines support for the government. — If the government tries to woo Muslim voters with more conservative policies based on Islam, investors may be spooked.– A severe worsening of tensions could raise the spectre of sectarian unrest, but this is not regarded as likely for now. * CORRUPTION Malaysia used to be regarded as one of the region’s more reliable countries, but worsening corruption and a perceived lack of judicial independence have damaged investment. What to watch: — Government efforts to deal with a scandal over a port trade zone close to Kuala Lumpur that exposed links between politics and business. False government guarantees given when the bonds were sold have triggered concerns among holders of $1 billion of bonds that they might not be repaid. (Editing by Andrew Marshall)
One Comment leave one →
  1. yeo siew lian permalink
    April 7, 2010 12:42 PM

    How does Chua Soi Lek treat his personal friends ???
    Yaks,Yaks,Yaks,He gets them to “hisap” his cigar,
    That is not the right way to treat your personal friends !!! CSL !!!
    Refer to CSL personal interviewon TV,
    Chua: I’m the one in sex video
    Jan 1, 08 4:32pm

    Health Minister Chua Soi Lek today openly admitted that he was the person featured in a video depicting a man having sex with a woman purportedly in a hotel room.

    Chua, 60, who is also MCA vice-president, made the confession at a press conference this afternoon in his parliamentary constituency in Labis, Johor.

    However, he said that he will not resigned as minister but will instead let Prime Minister Abdullah Ahmad Badawi to decide on his fate.

    The senior MCA leader, who is married with three children, also said that the 30-something woman featured in the video clip was a personal friend.

    Over the past three days, the Chinese dailies have reported that free DVDs – allegedly showing the politician in various sexual antics with a woman – were first distributed in Muar and later, Batu Pahat and Seremban.

    The scandal first broke on Saturday when copies of the DVD were anonymously placed in various streets in Muar town for people to collect. Some copies were even distributed by unknown individuals to a number of shops in the area.

    As a fellow doctor in dental specialist line I would like to share these thoughts with you,
    Personal friends are people who stands by through all thick and thin episodes of this life..
    They rejoice with you in all your happy occasions,
    They lend you their shoulders to cry upon during your saddest moments,
    They are concerned for your heart,mind and soul,
    That is the way my personal friends treated me when I went through the messy divorce papers with my senior politician and sexually wayward husband,
    I am a dentist and I tell you that the mouth is a wonderful creation,
    It is meant to eat,talk and sing,
    It is meant to kiss your lover,
    Read through the wonderful lives of the Four Great Beauties of China,
    They brings joy and happiness to their men without having to hisap their cigar,
    I am very angry that the past eras Japanese egoistic men asked their women to kneel in front of them,
    But now in the woman’s rights 21st centuary how can the head of Malaysian Chinese Association forces a beautiful woman to hisap his cigar ???

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