Q+A-Opposition plans Malaysia subsidy protest

By David Chance

KUALA LUMPUR, July 27 (BestGrowthStock) – Malaysia’s tame effort to
trim its subsidy bill will be attacked by the country’s
opposition parties on Wednesday as they seek to rally support
for a planned protest in the capital Kuala Lumpur.

Two weeks ago, Prime Minister Najib Razak announced petrol
prices would be hiked by 2.8 percent, liquefied petroleum gas
by 5.7 percent and sugar prices by 15.2 percent.
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The petrol price hike was around half that recommended by a
government think tank advising on subsidy reform, and there was
no commitment to price hikes for gas, electricity and rice. The
cuts will save 750 million ringgit ($233.3 million) this year.
Subsidy spending was 24.5 billion ringgit in 2009.

WILL THE OPPOSITION GALVANISE MASS PROTESTS?

Disruptive mass protests are unlikely as Malaysians are
only paying around an extra 94 U.S. cents to fill up a family
saloon.

Recent political protests here have been small and the
police act quickly to break them up. Even the sodomy trial of
opposition leader Anwar Ibrahim has failed to garner mass
protests unlike at the time of his previous trial.
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Those most hard-hit by the price hikes are rural Malays who
are more likely to support the government than the opposition.

The opposition will most likely use protests to highlight
what it says is continued corruption and waste in government.
Anwar himself supports reform of subsidies.

ARE INVESTORS BUYING MALAYSIAN REFORMS?

There are few signs investors are making big bets on
economic reforms pledged by Najib. While the Indonesian stock
market (.JKSE: ) has surged 20 percent this year to record highs,
Malaysia (.KLSE: ) has risen just 5.7 percent. Foreign ownership
of Malaysian stocks is 20.6 percent of market capitalisation,
according to data from Bursa Malaysia; that figure has been
static since Najib took office in April 2009.

Foreign direct investment (FDI) inflows were $1.38 billion
in 2009, less than a fifth of those in 2008, according to UN
data. Even though one year’s data does not necessarily
represent a trend, flows into neighbouring Thailand and
Indonesia held up far better during the recent global economic
crisis. Malaysia has seen its share of FDI into Southeast Asia
slide over the years.

That means market reaction to protests will be muted too.

WHY WERE THE SUBSIDY CHANGES SO CAUTIOUS?

Najib doesn’t want a repeat of the 2008 polls when the
National Front government suffered record losses in national
and state polls, losing its cast-iron two-thirds parliamentary
majority. Najib cannot afford to alienate rural Malay voters
who are being wooed by an opposition Islamist party.

The government won the support of 58 percent of Malays in
the 2008 polls, down from 63 percent in 2004.

Najib faces state polls in Sarawak on Borneo island, known
as the National Front’s “fixed deposit”, before mid-2011.
Sarawak provides a fifth of the government’s MPs.

If the Sarawak polls go well, they could tempt Najib into
an early national election, some political analysts say. An
early election would be before 2013, although Najib has emerged
as a cautious leader rather than a risk taker.

With oil prices around half their recent peak, Najib faces
fewer pressures to take drastic action to cut the budget
deficit, which will likely come in smaller than the 5.6 percent
forecast this year thanks to stronger than expected economic
growth.

DOES NAJIB FACE AN INTERNAL POLITICAL CHALLENGER?

While Najib’s electoral performance in recent by-elections,
with one parliamentary seat win and one state seat win, has
been little better than his predecessor’s, he does not face any
serious challenge to his power at the moment.

Some press reports have identified potential rival power
bases emerging in the United Malays National Organisation
(UMNO), the largest coalition party. These centre on Najib and
his deputy, Muhyiddin Yassin, a conservative. So far no split
has appeared and Muhyiddin, whose call to oust Najib’s
predecessor propelled Najib into power, has been loyal.

However, UMNO does face serious problems.

In Selangor state, Malaysia’s richest that abuts the
capital of Kuala Lumpur, splits are appearing in the party.

Najib’s key performance indicator is to win back Selangor
which The government lost for the first time in 2008.

Internal UMNO battles over power and money are also playing
out in some of Malaysia’s other 13 states.

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(Reporting by David Chance; Editing by Andrew Marshall)

Q+A-Opposition plans Malaysia subsidy protest