Published January 5, 2009

MALAYSIA INSIGHT
Tough times ahead - both economic and political

Acid test in March - when Umno polls will show dominant party's future direction

By S JAYASANKARAN
KL CORRESPONDENT
Email this article
Print article
Feedback

2009 will see the financial crisis impacting the real economy, with the only good news being that Malaysia is unlikely to slip into recession.

Growth last year in real gross domestic product (GDP) terms was probably at the high end of 5 per cent, and the consensus estimate among private economists is for Malaysia to grow 2-3 per cent in 2009. However, there are a few who think growth could be flat.

Deputy Prime Minister Najib Razak has said that the government is prepared to step in with another financial boost if the situation deteriorates. This is apart from the RM7 billion (S$2.93 billion) spending package announced last year.

Since no government in the world seems worried about budget deficits right now, Mr Najib's pledge could well be necessary given that the country's macro- economic indicators are all heading south. Exports, industrial production and tourist arrivals are all in decline against a backdrop of increased capital flight as foreigners flee Malaysian assets.

Given the portents, it's likely that the central bank will cut rates further, perhaps by as much as 100 basis points over the year. The gloomy economic outlook will be compounded by higher political temperatures.



In March, Mr Najib, 55, is expected to become the new president of the United Malays National Organisation (Umno) and will therefore assume the premiership when incumbent Abdullah Ahmad Badawi steps down.

The new premier will take over in very trying times with a resurgent opposition and a political climate that seems beset with problems of race and religion. He will have to balance championing Malay interests against governing multiracial Malaysia, and it isn't at all clear if he can pull it off given the increasingly strident noises emanating from Umno vis-à- vis Malay rights.

More to the point, it isn't clear if Umno really wants to reform itself from a narrow, sectarian party to a more inclusive one that caters - or seems to cater - to all Malaysians.

In his press interviews so far, Mr Najib has made all the right noises about Umno having to 'reinvent itself to stay relevant' or that the party 'has to recognise that Malaysia is getting increasingly race blind'. But you wouldn't know that from watching the party.

Perhaps the acid test will come in the party polls in March. Central to the party's direction going forward is the battle for deputy president who, by convention, becomes deputy prime minister. The most qualified candidate is obviously International Trade Minister Muhyiddin Yassin but his grassroots appeal isn't as great as Ali Rustam, the chief minister of Malacca and even Mohamad Muhammad Taib, the Minister for Land and Regional Development.

In a bid to plug Mr Muhyiddin, former prime minister Mahathir Mohamad described the latter two candidates as 'jokers' - but the joke could be on him. An outsider could just become Malaysia's deputy premier if Umno doesn't get its act together.

The elections will also decide the political future of Khairy Jamaluddin, Mr Abdullah's son- in-law, who is running for Umno Youth chief against two strong candidates - Dr Mahathir's son Mukhriz and former Selangor chief minister Khir Toyo. And the talk is that Mr Khir could be surging ahead.

Mr Khairy is much maligned as the architect of his father-in- law's political downfall but one suspects that he is more sinned against than sinner. It would be a pity if Umno throws out the baby with the bathwater.