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Why It Matters

Reality check for Malaysia

Analysts are debating whether Prime Minister Najib Razak's Budget 2017 indeed signals an election year, given that last Friday's announcement featured very targeted giveaways to the Malay population instead of blanket largesse.

The embattled Malaysian leader needs to go to the polls only by the August 2018 deadline, but turning voters to his side is a challenge that needs to be addressed now. Happiness with his government fell to an all-time low of 23 per cent at the end of last year, making it necessary for him to reverse the tide as early as possible.

There is much public unhappiness over high inflation that includes spikes in food and transport costs, and the high prices of houses.

So there were some smart handouts to demographics which could swing things his way, thanks to electoral maps that prioritise rural and Malay-dominated areas.

But there is also concern that he is merely kicking Malaysia's structural problems down the road, rather than taking hard measures to tackle them now. Economists have flagged the question of a bloated mostly-Malay civil service, 1.6 million strong, whose salaries continue to take up a larger proportion of government expenditure each year.

And there are worries that dishing out more cash under the 1Malaysia People's Aid (BR1M) to half the population, costing the government RM6.8 billion (S$2.3 billion), will now be seen as an annual entitlement. He is also handing out cash and grants to cabbies, farmers, students and mosque workers.

Such spending will have to be severely cut as an ageing population and lower birth rates will sooner or later hit both tax revenue and economic growth.

With PM Najib expected to win the coming elections due to chaos in the opposition camp, he will eventually need to focus on making the civil service more efficient, reduce public handouts and zoom in on raising workers' marketable skills.

After all, the days of Malaysia relying on its oil and gas exports to grease the freebies are over.

A version of this article appeared in the print edition of The Straits Times on October 25, 2016, with the headline 'Reality check for Malaysia'. Print Edition | Subscribe