With Budget 2018, Najib has dithered on election for one full year

It has been one year since the last Malaysian budget, which was also described as an election budget.

By Loke Hoe Yeong

On Friday (27 October), Malaysian Prime Minister Najib Razak, who is also the country’s Finance Minister, presented his government’s 2018 Budget that was characterised as an election budget. It was not the first time in the term of the current Malaysian government that it has been characterised as such.

The 2017 Budget was similarly regarded as an expansionary one that was targeted at shoring up the ruling Barisan Nasional’s support base. Mr Najib has essentially dithered in calling an election for one full year, with plenty of speculation about the timing of the election rife throughout that period.

Nevertheless, the 2018 budget will certainly be the last one before Mr Najib is constitutionally required to call a general election by August 2018.

Friday’s budget was presented in a markedly different political landscape though. Last year, the Malaysian opposition staged an unprecedented walkout when Mr Najib presented the 2017 Budget. He now has to contend with former Prime Minister Mahathir Mohamad fronting the opposition, in his role as chairman of the Pakatan Harapan opposition alliance.

This would make for an interesting budget debate over the coming weeks, with a sitting prime minister being pitted against a former one. So far, the opposition’s alternative budget proposals have focused on the abolition of the Goods and Services Tax (GST), clearly aimed at reaching out to voters by campaigning on bringing down the cost of living.

But the GST, which stands at a rate of 6%, was introduced by Mr Najib’s government back in 2015. Any pain experienced by consumers would hardly be fresh enough for the opposition to capitalise on. Watchers of Malaysia’s economy, as well as businesses are also not excited by the opposition’s proposals for abolishing GST and thereby engender uncertainty over government policy.

Winners of the budget

Budget 2018 includes cuts in personal income of 2 percentage points for those earning between RM 20,000 (US$4,700) to RM 70,000 (US$16,500) a year. The government said this would benefit 2.3 million taxpayers.

Meanwhile, the 1.6 million civil servants in the country will get a bonus of RM 1,500 (US$350), and will also enjoy more flexible work hours and enhanced medical benefits.

And in extending Mr Najib’s newfound enthusiasm in championing women’s rights, maternity benefits feature in the budget too. Women in the civil service can leave work an hour early if they have passed the fifth month of pregnancy. While no one can be sure what is Mr Najib’s motivation, his moves on women’s issues can only serve to broaden his support base.

In the private sector, the budget proposes 90 days of maternity leave, up from the current 60 days, to match what women in the public sector are already getting.

For the larger population, the government has earmarked RM 3.9 billion (US$900 million) towards subsidies for goods including cooking oil and gas, flour, electricity, as well as road tolls.

The 2017 Budget was similarly oriented towards boosting support among lower-income Malaysians for the ruling coalition, especially among the ethnic Malay Muslim majority, and in rural areas. Cash payments to households with lower monthly incomes were increased, for instance.

Malaysia’s economy

The expansionary nature of the budget was not driven by sheer populism though. Malaysia’s economic growth has been more than healthy, especially considering the context of a slowing global economy.

GDP growth for Malaysia this year is now projected to be between 5.2% to 5.7%, up from 4.2% last year. If this forecast for 2017 holds true after the end of this year, it would be Malaysia’s fastest growth since 2014, when a crash in commodity prices brought exports down and the ringgit was markedly weakened.

Commodity exports rebounded in the first eight months of this year when revenue from natural gas leapt 34.6% year on year. The equivalent increase in crude oil earnings was 33.2%.

The government expects domestic demand and exports to continue driving growth at the range of 5.0% to 5.5% for 2018. Domestic demand is forecasted to grow 5.5% in 2018 and will contribute 72.9% to GDP.

Moreover, the government expects the fiscal deficit narrow to 2.8% of GDP in 2018 from the projected 3% this year – even with increased government expenditure next year.

Mr Najib the ditherer

As Najib also holds the finance portfolio, he exercises control over yet one more important lever in government. One, therefore, wonders why he has dithered on calling the election over the past one year. On 17 September, he summoned the United Malays National Organisation (UMNO) party leadership to a gathering, seemingly to convey the imminent dissolution of Parliament. But that turned out to be an anti-climatic announcement that a veteran UMNO politician was returning to the party, after a short period of defection to the opposition. Perhaps the cloud of the 1MDB scandal continues to loom over the ruling coalition.

It is not the first time Mr Najib has found it hard to make up his mind on an election date. He similarly dithered in the lead-up to the previous general election, which eventually took place in May 2013.

This time, he may have missed many a good opportunity when the opposition was in disarray.