Malaysian premier Najib Razak recently unveiled an expansionary national budget for 2018, a politically strategic spending plan to lower middle income earner taxes and increase welfare benefits broadly ahead of general elections that must be held by next August.
Najib promised to maintain fiscal prudence despite a 7.5% year on year budgetary rise during a parliamentary address that emphasized bread and butter issues linked to rising living costs. The national leader referred to the plan in a three-hour speech as “the mother of all budgets.”
“The (people) must benefit from our economic policies,” the national leader said. “We must make sure that levels of income and the quality of life for Malaysians is improving.”
The ramped up spending is consistent with Najib’s ruling United Malays National Organization’s (UMNO) past electoral tactics, where hand-outs and cash transfers are dished out to win over voters in the run-up to polls.
Government critics and opposition politicians say the spending is tantamount to vote-buying, which combined with other complaints of tainted electoral rolls, truncated campaign seasons, aggressive gerrymandering and unequal access to media unfairly tilts the electoral playing field in favor of UMNO.
Najib gave an upbeat assessment of his government’s economic performance, recently buoyed by rising crude oil prices and a full-year growth forecast between 5.2 % to 5.7%, the highest projection since 2014. Malaysia’s gross domestic product grew 4.2% last year.
The ringgit, Asia’s worst-performing currency this year, has also recently swung back with rising prices of exported commodities and an uptick in foreign investment.
At the same time, Malaysians have blamed the government for inflating the cost of living due to the dismantling of decades-old fuel subsidies after the 2013 elections and the introduction in 2015 of an unpopular Goods and Services Tax (GST) set at 6%.
Consumer spending power has also been pinched by the weakened ringgit, which tumbled to a 17-year low in August 2015 amid the political fallout of the still unresolved 1Malaysia Development Berhad (1MDB) graft scandal that has ensnared Najib and is currently under investigation in six countries. Najib has denied any wrongdoing.
Najib’s pre-election tax cuts clearly aim to ease the economic anxieties of key constituencies, namely the bottom 40% as well as the middle 40% of the population, statistically the country’s two largest income blocs. Income taxes will be cut by 2% for Malaysians earning between 20,000 ringgit (US$4,731)–70,000 ringgit (US$16,560) a year.
Malaysia’s 1.6 million public servants, long considered one of the UMNO-led Barisan National (BN) coalition’s most reliable vote banks, will receive more flexible hours and increased medical and education-related benefits, in addition to cash bonuses. Najib also apportioned funds to support farmers, fishermen, rubber tappers and other rural constituents.
The budget also offers reductions on outstanding student loans to appeal to young voters. A recent survey by the Merdeka Center for Opinion Research, a local pollster, found that 57% of young voters believe their country is headed in the wrong direction, with almost half citing concerns over about the economy.
Cash handouts to low-income earners under the government’s Bantuan Rakyat 1Malaysia (BR1M) scheme, widely derided by government critics as a bald form of vote-buying, are also set to continue.
Single Malaysians who earn less than 2,000 ringgit (US$473) per month and households earning less than 4,000 ringgit (US$956) are eligible to receive state pay-outs in installments three times a year. Seven million of the country’s 28.3 million population claimed aid through the program in 2017.
Meanwhile, toll road collections will be lifted for specific highways in the battleground states of Kedah, Johor and opposition-held Selangor. Najib’s address to parliament, where he bid to take credit for a recovering economy, also took hard aim at the opposition Pakatan Harapan coalition.
PH’s reaction to the spending plan was mixed. Mohamed Azmin Ali, Selangor’s chief minister, conceded that the budget would lower living costs and benefit lower and middle-income earners, while claiming the policies in the spending plan mirrored those implemented by his state’s administration.
Tony Pua, another opposition parliamentarian, criticized the budget for relying on higher government revenue collection rather than prudent spending, claiming the proportion of operating expenditure in the plan would be the highest in Malaysia’s budget history.
Najib’s 2018 budget speech “was littered with political sniping and peppered with a litany of election-year goodies,” according to Pua. “It contained no meaningful reforms in economic policies and institutions to end corruption and wastage.”
PH chairman and former premier Mahathir Mohamad likewise chastised the spending plan, characterizing welfare measures as “sweets” used to distract voters from the controversies surrounding the 1MDB debacle, currently under criminal investigation in six countries, including neighboring Singapore, Switzerland and the US.
Malaysia’s general election is expected by some to be one of the tightest in decades due to the 92-year-old Mahathir’s decision to come out of retirement and join the ranks of his former rivals in the PH opposition.
The former premier commands strong influence in states such as Kedah and is viewed the opposition’s best chance to win over crucial support from rural Malays with former opposition leader Anwar Ibrahim languishing in prison on a sodomy conviction.
While PH is expected to make inroads in non-Malay constituencies, analysts are spilt on whether the disparate coalition is cohesive enough to pose a significant electoral challenge to Najib’s UMNO and BN.
There are early signs its main anti-corruption campaign message is losing certain resonance. An “anti-kleptocracy” rally held by PH leaders in October garnered around one-sixth of its participation target of 30,000 people. Media reports noted a lackluster mood at the event and a low youth turnout.
Yiswaree Palansamy, a journalist with the Malay Mail Online, reported that attendees appeared more moved by speeches that addressed daily concerns such as rising living costs, rather than anti-Najib talking points associated with the multi-billion dollar 1MDB graft scandal.
PH offered an alternative budget, including a plan to abolish the unpopular GST and cover the revenue losses through higher corporate income taxes, extractive fees from import and excise duties, real property gains taxes and motor vehicle licenses that are projected to rise with an incipient consumption boom.
PH is now angling for ways to win swing votes away from UMNO and BN in key seats that have traditionally been open to supporting opposition candidates.
Its chances of gaining enough ground to convert crucial rural Malay voters has been complicated by speculation that PAS, an Islamist opposition party, may join hands with BN to drive forward an ethno-nationalist pro-Malay campaign message.
While the BN struggles to appeal to a significant swathe of urban and non-Malay voters, unresolved graft allegations that have hounded Najib’s tenure have apparently faded among other constituencies. Najib’s latest spending plan, on the other hand, will give the economy a boost just as voters head to the polls.