Macro Note Malaysia: Voting For Change In GE14 - UOB Group
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Global Economics & Markets Research
Email: GlobalEcoMktResearch@uobgroup.com
URL: www.uob.com.sg/research
Macro Note
Malaysia: Voting For Change In GE14
Thursday, 10 May 2018 In a tight contest, Malaysia’s 14th general election (GE14) delivered a simple majority for the
opposition alliance, Pakatan Harapan (PH). This is the first time in Malaysia’s political history
that the incumbent Barisan Nasional (BN) was defeated. The voter turnout was lower at 76%
from 84.8% in GE13, but considered high for a mid-week polling day.
Julia Goh
Senior Economist The Opposition coalition led by former Prime Minister Mahathir Mohamad secured 122 or 55%
Julia.Gohml@uob.com.my
of the 222 parliamentary seats. The alliance won in 5 states so far, retaining control of
Alvin Liew Selangor and Penang, and gaining Negeri Sembilan, Melaka and Johor.
Senior
Economist
Alvin.LiewTS@uobgroup.com
BN secured 79 or 35.6% of the 222 parliamentary seats. BN managed to retain Perlis, Pahang,
and Sarawak, but support for the party dropped in Sabah. The Islamic party, PAS, secured 18
parliamentary seats in Kelantan and Terengganu. Three states currently have hung assemblies
- Perak, Kedah and Sabah.
The surprise opposition win reflects the Malaysian people’s concerns about the rise in cost of
living, transparency and governance. However, the immediate concern is the uncertainty over
the formation of the next government.
We believe that Malaysia’s fundamentals remain strong and with greater clarity on the plans
and proposed measures over the coming months, risks will be reassessed. Key to watch over
the next 100 days include candidates for key ministerial posts and policy measures, also how
the new government delivers on areas of institutional reforms as highlighted in their manifesto.
Specific key economic policies of concern include infrastructure development and projects, and
fiscal consolidation. A day before election, the PH released its 100-days fiscal reform plan.
Local markets will be closed today and Friday in conjunction with a nationwide public holiday.
We expect the Ringgit to remain volatile pending further details. The recent weakness in
Ringgit is in line with softer Asia EM FX that coincides with the dollar rally since late April.
USD/MYR closed at 3.94 pre-election.
GE14 – A Moment In History For Malaysia As Country Votes For Change
This is an historic win by the Opposition alliance and is the first time the country will witness a
change of government since its independence from the British in 1957.
The immediate concern is the uncertainty over the formation of the next government. Barisan
Nasional (BN) won 79 or 35.6% of the 222 parliamentary seats while Pakatan Harapan (PH) (which
comprises Bersatu, PKR, DAP and Amanah) and its ally, Parti Warisan Sabah, won 122 (113 + 9)
or 55% of the 222 parliamentary seats. The Yang di-Pertuan Agong (King) of Malaysia, Sultan
Muhammad V, (who is also the Sultan of Kelantan) is now expected to swear in Mahathir as the
seventh Prime Minister on Thursday (10 May, 5pm SG time), according to Malaysia’s national news
agency, Bernama. Prior to the election, Mahathir has pledged to serve only as interim prime
minister if the PH managed to pull off a victory, and that they would seek a royal pardon for PKR
Macro Note
Thursday, 10 May 2018
1|P a g eleader Anwar Ibrahim and allow him to compete for a seat in Parliament, and if he wins, allow him
to assume the role of PM. Anwar Ibrahim is currently serving a prison term until June 2018.
For the incoming government, key economic concerns of the people that need to be addressed
include the rise in cost of living, transparency and governance. In an interview, Mahathir said the
new government aimed to restore the rule of law. As such the incoming government would need to
deliver on various areas of institutional reforms as highlighted in their manifesto - two-term limit for
the Prime Minister, reform of the political funding system, transparency of government contracts,
repeal the anti-fake news bill and abolish oppressive laws. They also vouched to set up Royal
Commissions of Inquiry to investigate institutions such as 1MDB, Felda, MARA and Lembaga
Tabung Haji, and set up a special Cabinet Committee to return the rights of Sabah and Sarawak
under the 1963 Malaysian Agreement.
The incoming ruling coalition has promised fiscal reforms in the first 100 days in office to focus on
federal budget and finances, asset-liability management and government debt obligations. This
includes review of all major public projects especially those financed outside of the development
project and related contingent liabilities, operating expenditure, ensure government procurement by
open tender, improve accountability of state-owned enterprises and other public assets.
The incoming ruling coalition’s manifesto highlights plans to review mega projects but the only
project that is not part of the reform agenda is the Pan Borneo Highway projects (Sarawak and
Sabah) as completion of these projects will be prioritised.
The incoming ruling coalition has also promised to abolish the GST and revert to Sales and
Services Tax, as well as provide targeted fuel subsidies. They also aim to plug the gap in revenue
by trimming wastage in government expenditure.
BN Continues Downward Trend As Opposition Alliance Pakatan Harapan (PH) Rises To A New Dawn In GE14
*In GE14, Pakatan Harapan (PH) comprises Bersatu, PKR, DAP and Amanah. Parti Warisan Sabah is not part of Harapan but is an ally of the
coalition. As such, seats won by Warisan will be included under Harapan.
Source: Media, Election Commission
Macro Note
Thursday, 10 May 2018
2|P a g eOpposition Wins Across West Coast States And Southern In Peninsula
Parliament Share,
Seats %
State/Territory State BN PH* PAS Others Total BN PH PAS Others
Assembly
Federal Territories N/A 2 10 0 1 13 15.4 76.9 0.0 7.7
Kedah Hung 2 10 3 0 15 13.3 66.7 20.0 0.0
Penang PH 2 11 0 0 13 15.4 84.6 0.0 0.0
Perak Hung 11 13 0 0 24 45.8 54.2 0.0 0.0
Selangor PH 2 20 0 0 22 9.1 90.9 0.0 0.0
Negeri Sembilan PH 3 5 0 0 8 37.5 62.5 0.0 0.0
Melaka PH 2 4 0 0 6 33.3 66.7 0.0 0.0
Johor PH 8 18 0 0 26 30.8 69.2 0.0 0.0
Pahang BN 9 5 0 0 14 64.3 35.7 0.0 0.0
Perlis BN 2 1 0 0 3 66.7 33.3 0.0 0.0
Sabah Hung 10 6 0 9 25 40.0 24.0 0.0 36.0
Sarawak BN 19 10 0 2 31 61.3 32.3 0.0 6.5
Kelantan PAS 5 0 9 0 14 35.7 0.0 64.3 0.0
Terengganu PAS 2 0 6 0 8 25.0 0.0 75.0 0.0
TOTAL 79 113 18 12 222 35.6 50.9 8.1 5.4
* Pakatan Harapan (PH) comprises Bersatu, PKR, DAP and Amanah. Parti Warisan Sabah is not part of PH
but is an ally of the coalition. As such, seats won by Warisan under others will be included under PH.
Source: The Star, Malaysia Kini, as of 10 May 2018, 5:00am Malaysia local time
Promises Under BN And PH Manifestos
Barisan National (BN) Pakatan Harapan (PH)
- Focus on high impact projects - Focus on urban rural gap
- Creation of 3 million new jobs including high skilled jobs e.g. - Incentives for SMEs to develop technology
technology, O&G, construction - Review existing infrastructure projects
- Intensify downstream O&G sectors - Ensure big corporations cannot monopolise government
- Identify new investment location, relocate existing industrial zones, - Improve the implementation of affirmative policies
develop economic zones in border regions - Increase oil royalties for Sabah, Sarawak, Kelantan and Terengganu to
- Strengthen SMEs through financing schemes, soft loans and 20% from current 5%
assistance programs - Two-tier system for government contract allocation for Bumiputeras
- Promote the digital economy - Introducing a loan scheme for FELDA settlers
- Promote Bumiputera entrepreneurship - Halving the price of broadband internet while doubling its speed
Economy
- Increase salary distribution ratio to 40% of GDP Mandate will be given to Sabah & Sarawak to eliminate trade barriers
- MYR2bn to improve telco coverage in Sabah and Sarawak and tariffs to be competitive economically
- Trans Sabah Gas Pipeline worth MYR4.3bn to stabilize electricity - Provide a fixed allocation of MYR60m to new villages and Chinese
supply and spur state growth fishing villages in first term
- 30% of decision makers in all sectors comprise of women - Reduce 40% carbon emissions by 2020, increase renewable energy to
- Introduce investment scheme for Malaysian Chinese (MCA initiative) 20% (from 2% currently) by 2025, no nuclear power plants
- Monitor fair and effective implementation of government policies
(MCA initiative)
MCA Belt and Road Centre to strengthen ties with China (MCA
initiative)
- Target near balanced budget - Abolish GST and revert to Sales and Services Tax
- GST to diversify government revenue base - Provide targeted fuel subsidies
Fiscal
- Provide GST relief and zero-rated supply on specific items - Tax incentives for companies that focus on affordable housing
- Revise individual and corporate tax rates to ensure Malaysia remains - Trim the budget for the Prime Minister Office
Macro Note
Thursday, 10 May 2018
3|P a g ecompetitive - Review personal income tax for M40 and abolishment of tax for B40
- Rationalise subsidies, targeted assistance - Provide income tax relief via transferrable tax allowance between
- BR1M handouts conditional on recipient behavior e.g. enrolled in husband and wife
skills training, children immunised - Corporate tax exemption for companies that host strengthening family
institution activities
- Decentralise Federation’s fiscal administration system in stages so that
50% of tax revenue collected in Sabah and Sarawak will be spent on
development needs
- Higher BR1M handouts, with new category for household incomes - Maintain BR1M but conditional on the recipients
MYR4k-5k , handouts conditional on recipient behavior e.g. staying employed
involvement in skills training and children immunized - Increase maternity leave to 120 days from 90 days
- Special incentive payment for Felda settlers, write-off extreme debt - Abolish tolls by taking over toll concessionaires stage by stage
- Abolish differential pricing in Sabah and Sarawak under “One Nation, - Improving the inclusion of Indians in economic & social development; a
One Price” special fund of MYR4bn for the first 10 years
- Establish Fair Works Commission ensure equitable salaries in private - Widen rent-to-own scheme for first time house
sector buyers
- Special bank to facilitate loans for affordable housing MYR300k and - Provision of health insurance of MYR500 for young people with
below household income below MYR3K/month
- Tax exemptions for housing rental income - Introducing MYR500 marriage incentive for young couple below 35
- Tax incentives to encourage banks and housing developers offer years of age
rent-to-own - Introducing EPF schemes for housewives – a 2% contribution from
- TN50 Public Transport Pass husbands’ salary and an additional MYR50/monthly
- Women entrepreneurs transformation center in every state - Provide MYR150 contribution to every senior citizen
Social - Intensify Environmental Quality Monitoring Program - Tax incentives for those who decide to return to work after retirement
- Improving welfare of senior citizens, people with disabilities and - Monthly public transportation pass worth MYR100
children - Dissolving the National Civics Bureau and National Service Program
- Flexible working hours for public sector, incentives for companies that (PLKN)
adopt - Reduce excise duties on imported cars below 1600cc for the first car,
- 1Malaysia products to manage rising costs one per family with household income below MYR8,000/month
- Salary increments for 1.6m civil servants totaled at MYR1.46bn - Provide compulsory pneumococcal vaccination for all children under 2
- Extending tax incentives to 24 months for women returning to job years old
market - Ensure that child care services are available
- Individual income tax exemption for parents medical expenses - Young people to start repayment of study loans when monthly salaries
doubled to MYR10k reach MYR4,000/month
- Monthly electricity bill subsidies to over 1m consumers - To study and create a mechanism for a new Malaysian society that
practices centripetal-based political model; a system based on
moderate principles and reject extremism
- Platform for brainstorming, consultation and reconciliation between
races and religions
- Institutions of learning in science, technology, engineering, and - Free education at public universities within 10 years
mathematics - Focus on Technical and Vocational Education and Training (TVET)
- Child care centers in new office buildings - Expand German Dual Vocational Training (GDVT)
- Introduce coding in schools - PTPTN borrowers to pay back loans after their income exceeds
- Apprentice programs MYR4,000 per month and repeal on the black-listing policy
- Discounts and extended repayment for education loans under PTPTN - Higher minimum monthly wage to MYR1,500 in the first term and rate
- Increasing number of subjects in Dual Language Program reviewed every 2 years
- Introduction English medium schools in Sabah and Sarawak as pilot - Income tax deductions to those who return to work after retirement
program - Creating a Teacher’s Assistance post for teachers for administration
Education
- Special Education Program for differently-abled children duties
and Labor
- Raise minimum wage to MYR1.5k over 5 years - Improving access and usability of information and technology systems
- Implement appropriate classroom size, and appropriate teacher in school
administrative workload - Reduce number of foreign workers from 6 million to 4 million in first
- Incentives to capable graduates and retired language teachers to term
administer online services - Will establish trade unions to negotiate via collective bargaining
- Special assistance for government funded schools including national - Flexible working hours for mothers and incentives for companies that
Chinese and Tamil schools provide support for female employees
- Increase intake of non-Bumis into public universities
- Reduce dependency on foreign workers to 15% of workforce
- Transparency in government procurement - Limit the tenure of the Prime Minister to 2 terms and will not
- Transparency in Local Councils using digital simultaneously hold other ministerial posts, also applicable to MBs and
- Periodic Town Hall sessions chief ministers
- Draft Political Funds Act - Reform the political funding system
- Public Petition mechanism for major issues - Royal commission of Inquiry will be established to audit Felda.
- Amending Price Control and Anti-Profiteering Act to allow authorities - Remove direct negotiation practices for all government contracts and
to take action against traders that make excessive profits procurement
- Transformative Salary Scheme for civil servants - Transparency for government contracts
- Women comprise 30% of Dewan Negara with amendment to Federal - Laws to prevent discrimination against women in work force and
Constitution reduce gender wage gap
- Increase representation of persons with disabilities in various sectors - Introduce a budget system on the budget-responsive concept
Institutional including local councils and Dewan Negara - Ensuring at least 30% of policy makers are women
Reform - Introduce water laws to guarantee access to clean water - Parliament sittings will take place at least 100 days per year
- New laws on conservation and sustainable forest management - Lower voting age limit to 18 years
- Implementing Universal Child Care policy - Committed on restoring Sabah & Sarawak to the status accorded by
- Restore the rights for Sabah and Sarawak under the Malaysia the 1963 Malaysia Agreement
Agreement 1963 to be realized by consensus - Repeal Anti-Fake News Act 2018, Sedition Act 1948, Prevention of
Crime Act 1959, Universities and University Colleges Act 1971,
Printing Presses and Publications Act 1971, National Security Council
Act 2016, and any law with mandatory death sentences.
- Abolish several “oppressive” provisions in laws such as the Penal
Code, the Communications and Multimedia Act, Security Offences
(Special Measures) Act, Peaceful Assembly Act, and the Prevention of
Terrorism Act
Source: Media, Budget 2018 Prime Minister’s Speech, Pakatan Harapan manifesto, BN manifesto
Macro Note
Thursday, 10 May 2018
4|P a g eDisclaimer This publication is strictly for informational purposes only and shall not be transmitted, disclosed, copied or relied upon by any person for whatever purpose, and is also not intended for distribution to, or use by, any person in any country where such distribution or use would be contrary to its laws or regulations. This publication is not an offer, recommendation, solicitation or advice to buy or sell any investment product/securities/instruments. Nothing in this publication constitutes accounting, legal, regulatory, tax, financial or other advice. Please consult your own professional advisors about the suitability of any investment product/securities/ instruments for your investment objectives, financial situation and particular needs. The information contained in this publication is based on certain assumptions and analysis of publicly available information and reflects prevailing conditions as of the date of the publication. Any opinions, projections and other forward-looking statements regarding future events or performance of, including but not limited to, countries, markets or companies are not necessarily indicative of, and may differ from actual events or results. The views expressed within this publication are solely those of the author’s and are independent of the actual trading positions of United Overseas Bank Limited, its subsidiaries, affiliates, directors, officers and employees (“UOB Group”). Views expressed reflect the author’s judgment as at the date of this publication and are subject to change. UOB Group may have positions or other interests in, and may effect transactions in the securities/instruments mentioned in the publication. UOB Group may have also issued other reports, publications or documents expressing views which are different from those stated in this publication. Although every reasonable care has been taken to ensure the accuracy, completeness and objectivity of the information contained in this publication, UOB Group makes no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accept no responsibility or liability relating to any losses or damages howsoever suffered by any person arising from any reliance on the views expressed or information in this publication. Macro Note Thursday, 10 May 2018 5|P a g e
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