Mon, Apr 29, 2013 - Page 15 News List

Malaysian populist windfall fuels debt fears


It has never been more lucrative to be a voter in Malaysia, where political rivals are showering the public with cash in a desperate electoral battle, stoking concerns over rising national debt.

With Friday’s elections expected to be Malaysia’s closest ever, the long-ruling National Front coalition coalition has given billions of dollars in cash, pay rises and other handouts to civil servants, the poor, the elderly, farmers and students.

The opposition People’s Pact Alliance, which holds four of the country’s 13 states, has likewise made a range of state-level payouts and promises still more perks if it wins federal power for the first time in Malaysia’s 56 years of independence.

The bidding war began shortly after the opposition stung the National Front coalition in 2008 elections, but has spiraled of late.

“It’s been a windfall for Malaysians these past five years,” said Francis Loh (羅國華), president of Aliran, a Malaysian rights group.

The National Front recently denounced opposition campaign pledges as a blueprint for insolvency. However, Malaysian Prime Minister Najib Razak promptly upped the ante with billions in new promises of his own, sparking opposition outrage that he copied their ideas.

The unprecedented giveaways attest to the high stakes of an election in which a ruling elite is desperate to retain power and its rich perks, while the opposition fights to make the most of its best shot yet at governing.

Yet warnings are emerging that Malaysia — which already has Southeast Asia’s highest debt-to-GDP ratio, after Singapore — is at best endangering a goal to gain “developed nation” status by 2020 and at worst, courting disaster.

“Today’s politicians are bent on planting the seeds of an economic crisis for our children to inherit,” said Wan Saiful Wan Jan, who runs the think tank IDEAS.

If Malaysia meets financial catastrophe, “economic historians may well trace back the root cause to this general election,” he added.

Few analysts see an immediate threat of disaster, saying the situation can be managed if some hard post-election choices are made.

However, some say much-needed development spending could shrink further if increasingly hard-fought political battles continue to trump economic planning in a country where populist subsidies have come to be expected by many voters.

Such spending fell from 28 percent of the budget in 2010 to 20 percent this year.

“There is a concern if populist spending were to get in the way of infrastructure spending which will have longer-term repercussions on the economy,” OCBC bank economist Gundy Cahyadis said.

Malaysia’s economic growth was a solid 5.6 percent last year, but much of that is credited to election-minded deficit spending. Debt has doubled since 2007 to 53.7 percent of GDP.

In e-mails to foreign media, Najib said “our debt will never exceed 55 percent of GDP,” but critics say “hidden” public debt such as state-guaranteed loans may have doubled since he took power in 2009.

Malaysian politics analyst Bridget Welsh of Singapore Management University estimates that since taking office, Najib has given out US$19 billion in public funds — US$1,400 per voter — for “political spending” that benefits his coalition.

That is “the most ever in the lead-up to Malaysian polls” Welsh said. “If he wins, it will become a crutch politicians rely on, an extension of money politics.”

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