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Ismail floods Malaysia with cash then calls snap polls

Malaysian Leader Flip-flops His Position By Calling Early Elections Just Days After Tabling Nation’s Biggest-ever ‘feel Good’ Budget

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Malaysian Prime Minister Ismail Sabri Yaakob has called early polls in move seen as acquiescing to UMNO party heavies. Image: Facebook

SINGAPORE – Malaysia is headed toward a controversial early general election at a time when parts of the nation are expected to face heavy flooding due to monsoon rains. Prime Minister Ismail Sabri Yaakob confirmed the dissolution of parliament in a televised address on Monday (October 10), paving the way for snap polls to be held within 60 days.

The announcement follows days of speculation that the legislature would be dissolved soon after the tabling of the biggest-ever Malaysian government budget worth 372.3 billion ringgit (US$80 billion) for 2023 on October 7. The record spending plan has not yet been passed, raising questions about the country’s fiscal roadmap in the event of a change in government.

Elections could have been held at the latest by September 2023, but Ismail has been under intense pressure from his United Malays National Organization (UMNO) to call an early vote to capitalize on recent state election victories by the ruling Barisan Nasional (BN) coalition and get ahead of economic headwinds that are expected to worsen next year and potentially hit UMNO and BN’s popularity.

The premier said that by dissolving parliament, the public will have a chance to cast off years of political uncertainty by voting in a new, more stable government. But by rushing to hold an election, Ismail is disregarding flood warnings from Malaysia’s Meteorological Department and advice from climate experts who recommend that polls should be held only after the monsoon season.

Hoping to win a stronger mandate for UMNO after it was historically toppled in the 2018 election, Ismail said the looming vote would “put an end to doubts on the validity of the government or claims that this is a ‘backdoor government’” – reference to a label that critics often use to describe his administration, which was formed last August through parliamentary maneuver rather than direct election.

“The people’s mandate is a powerful antidote for the country to manifest political stability and create a strong, stable and respected government after the general election,” Ismail added. With opposition parties largely disunited and on the back foot, analysts see BN as the favorite to win at the coming polls, the date for which will be set by the country’s Election Commission.

Ismail confirmed that he received royal consent for the dissolution during an unscheduled audience with the nation’s constitutional monarch on October 9, who recently called for thorough preparations to counter the risk of large-scale flooding after being briefed on the year-end flood situation ahead of expected peak rainfall in November and December.

The nation suffered worst-in-a-century floods last December that killed at least 54 and displaced tens of thousands, prompting broad criticism of Ismail’s administration for its perceived as slow disaster response. UMNO’s push for early polls has thus been widely criticized, and a number of opposition-held states have ruled out holding state legislature elections due to flooding concerns.

Anwar Ibrahim, opposition leader and chairman of the Pakatan Harapan (PH) coalition, panned the government’s early election push, saying it would destabilize the country’s politics and scare off foreign investors. Twelve ministers in Ismail’s own cabinet also broke with the premier over the timing of the polls and have petitioned the king against holding the early vote.

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King Abdullah is apparently disappointed by the decision to call flood season polls. Image: Facebook

A statement issued by the national palace said King Sultan Abdullah Sultan Ahmad Shah had no choice but to consent to early polls due to “disappointing” political developments – an apparent reference to UMNO leaders’ insistence on holding a vote. The monarch called for elections to be held at the earliest so they do not coincide with heavy mid-November monsoon rains.

Hafidzi Razali, a senior analyst at the BowerGroupAsia consultancy, told Asia Times it is “unprecedented” to have a general election overlapping with the monsoon season. “Major flooding will affect voter turnout in seats that depend on out-of-state voters, hindering their return and hence reducing the chances for the opposition to cause an upset,” he suggested.

Ismail had been at odds with corruption-accused UMNO President Ahmad Zahid Hamidi over the timing of the election, intoning about the risk of holding polls amid rising inflation while Zahid – who is thought to covet the top job for himself – boasted he would wade through floodwater to ensure a BN victory. Zahid has dismissed weather risks as a “myth” spun by the opposition.

Emboldened after being recently acquitted of 40 graft charges, Zahid has been unyielding in his push for early polls, though it is unclear whether he will be allowed to contest. The UMNO president, a key ally of jailed former premier Najib Razak, faces a court ruling next month in relation to 47 separate corruption-related criminal charges and may be disqualified from standing if ruled guilty.

It was only at a UMNO political bureau meeting on September 30 that Ismail publicly joined other top party leaders in agreeing for the first time that the national polls should be held this year, ahead of the government’s tabling of what some analysts have deemed a “populist” supply bill stacked with a slew of subsidies, cash handouts for low-income families and middle-income tax cuts.

Peter Mumford, a Southeast Asia analyst with the Eurasia Group consultancy, said the fact that the government’s rich spending plan had not been approved in parliament prior to the legislature being dissolved was “very unusual and creates significant investor uncertainty, as a change of government would result in new 2023 budget being drafted.”

There is a precedent for holding elections in the middle of the budget process. In 1999, parliament was dissolved days after a budget tabling. A new budget similar to the one presented was unveiled the following year by the then-BN government. “In 1999, politics was considerably more predictable than now, with the outcome of that election a near certainty,” cautioned Mumford.

BowerGroupAsia analyst Hafidzi believes that “with a new cabinet and power dynamics in place, the budget will see some changes.” He said that while investors had factored in such uncertainty, how the government intends to sustain high spending with lower projected revenue, the lack of any significant tax reform and continued reliance on commodities were more prevalent concerns.

Malaysia’s latest spending plan largely lived up to “feel good” pre-election expectations, albeit tempered by narrowing fiscal headroom. The 2023 spending plan is 12% larger than last year’s 332.1 billion ringgit ($71.3 billion) budget if additional Covid-19-related fiscal support is excluded, with development and operational expenditures up 26.8% and 16.6% respectively.

Direct cash aid to families will cost the government 7.8 billion ringgit ($1.6 billion), with more than 450,000 households eligible to receive monthly welfare assistance, while a 2% reduction in income tax for middle-income individuals is expected to benefit 1 million taxpayers. Spending on social aid and subsidies will reportedly double from 5.2% in 2022 to 11.3% of operating expenditure.

Despite announcing an expansionary budget, Finance Minister Tengku Zafrul Aziz said the fiscal deficit would be narrowed from 5.8% this year to 5.5% in 2023, with 272.6 billion ringgit in expected revenue collection. He added that based on the medium-term fiscal framework, the deficit level from 2023 to 2025 is expected to decrease to a 4.4% average.

The finance minister also announced that the economic growth target for 2022 was being revised up to a range of 6.5% to 7% from an earlier 5.3% to 6.3% after growth in the first half of the year exceeded expectations. Tengku Zafrul noted that economic growth is expected to moderate in 2023 to between 4% and 5% as major economies continue to tighten monetary policies.

Dividends from state-oil company Petronas are the main source of Malaysia’s non-tax revenue. Amid higher global energy prices, the firm made one of its highest-ever dividend payments for 2022, totaling 50 billion ringgit ($10.7 billion). Lawmakers have questioned how next year’s budget will be paid for if Petronas’ contribution falls below the expected 35 billion ringgit ($7.5 billion).

“One key watchpoint will be global oil and crude palm oil prices next year. If these turn out to be lower than the average assumed in the 2023 budget, the government will face potential revenue shortfall, which will, in turn, mean spending cuts or an increase in the fiscal deficit,” Eurasia Group analyst Mumford told Asia Times.

“It is simultaneously a fairly prudent budget, trimming the deficit slightly, while also fairly populist in terms of the raft of pre-election measures,” Mumford added. “The focus has perhaps been more on one-off or short-term pre-election goodies for voters than measures that will boost Malaysia’s long-term productivity. But that is not surprising in the current political context.”