News analysis

Budget 2016 a minefield of issues for Najib

PM under pressure to assure diverse group of voters as talk of no-confidence vote mounts

KUALA LUMPUR • Prime Minister Najib Razak faces his most excruciating tight-rope walk yet when he presents Malaysia's Budget for 2016 on Friday.

The politically embattled leader will have to find a way to assure a diverse group - voters, backbenchers and investors - even as the battered economy leaves him with few sweeteners to offer.

In other years, increasing cash handouts to low-income households and ensuring steady economic growth was enough to tick the necessary boxes.

But this time, Datuk Seri Najib, who will be presenting the budget as Finance Minister, will have to negotiate a minefield of issues.

These include grumblings in his ruling Barisan Nasional (BN) coalition about alleged financial impropriety, addressing the rising cost of living with limited fiscal resources and recent foreign investor flight.


  • • The Malaysian economy is expected to expand by 4.5 per cent next year, said Moody's Investors Service, from the expected 4 to 6 per cent growth forecast by the central bank this year.

    • The World Bank sees slower growth next year as "the commodity downturn and its impact on public revenues and the currency constrain investment".

    • A third of Malaysia's government revenue comes from oil and gas, mostly from national oil firm Petronas. One official said Petronas paid dividends of RM29 billion to the government in 2014 and RM26 billion this year, with an expected RM18 billion next year.

    • The 6 per cent goods and services tax introduced in April this year should net RM6.6 billion, but this has been allocated for various welfare programmes.

    • The central bank has said consumer inflation is expected to rise by 2 to 3 per cent this year. It has not made a forecast so far for 2016.

    Shannon Teoh

"Almost every single commodity price is at a cyclical low, while the cost of living has gone up," said Johor MP Anuar Manap two weeks ago.

The claims of missing billions from 1Malaysia Development Berhad's (1MDB) coffers, and lingering questions over US$700 million (S$969 million) deposited into PM Najib's private accounts, have driven momentum for talk of a no-confidence vote.

The Premier has denied any wrongdoing and the anti-corruption commission has said the money in his accounts is political funding from Middle Eastern donors.

Adding pressure to Mr Najib, opposition lawmaker Hee Loy Sian on Saturday filed formal notice for a motion of no-confidence against the Prime Minister during the Parliament session that convenes today. He cited Mr Najib's failure to adequately explain the 1MDB issue and the funds deposited into the Premier's personal accounts.

The PM will thus have to keep an eye out for potential mutiny when the House reconvenes.

But lawmakers and analysts admitted that such a move is unlikely to succeed. As pointed out by influential former premier Tun Dr Mahathir Mohamad recently: "The only way left to ask now is a vote of non-confidence in the leader. Of course, there are a lot of things that people in power can do to prevent people from stating their real views. Maybe they get something, maybe they are threatened."

Political sources have indicated that the Najib administration can be ousted if his Budget is rejected.

For Mr Najib, it may all be too much to try to please everyone this year, and he may save his fiscal ammunition for a general election due in 2018. PHOTO: EUROPEAN PRESSPHOTO AGENCY

Under Commonwealth legislative convention, a government is unable to function if it cannot gain approval for the use of the public treasury and will have to resign.

One negotiator told The Straits Times that "many could end up being absent for the vote instead", although he admitted it would be a tall order given that BN controls 134 out of 222 seats in Parliament.

The combined opposition bench has 88 seats, meaning at least 24 BN MPs must support the no-confidence vote against Mr Najib. Alternatively, 47 of them must absent themselves from the vote to approve the budget, so that only 87 BN MPs would remain in the House.

Still, the Premier's need to ensure support from his backbenchers means he will have to make concessions to them when deciding where to spend at least RM270 billion (S$89 billion) next year.

He must also keep an eye on the deficit reduction plan to calm investor concerns of government overspending.

Malaysia is expected to narrow its 2016 budget deficit to 3.0 per cent from 3.2 per cent this year, said Second Finance Minister Ahmad Husni Hanadzlah.

The GDP grew by 5.3 per cent in the first half and is forecast by the central bank to grow by between 4 to 6 per cent this year.

Despite the politically antagonistic mood against him, the Prime Minister himself has not hinted at a Budget that will raise morale. Closing a recent business forum, he admitted that "whereas the government was able to stimulate growth after the 2008 global financial crisis via" RM67 billion in stimulus packages, "we now have a more limited public fiscal scope".

A public survey for Budget 2016 wishlists on Mr Najib's own website saw cost of living far outstripping other concerns.

This week, he has been hearing loud complaints over the sharp hike in toll rates for major Malaysian highways.

For Mr Najib, it may all be too much to try to please everyone this year, and he may save his fiscal ammunition for when it really matters - a general election due in 2018.

After all, he has managed to cling on to power despite being under pressure for most of this year, and BN may not want to risk losing power altogether by moving against him in Parliament, as this might allow a window for a few renegades to form a new government with opposition MPs.

As longtime Mahathir lieutenant Sanusi Junid said this week, the situation is complex for those in BN who want Mr Najib removed.

"The whole scenario is easy for the opposition. If we want Umno and BN to lose, it is very easy to get Najib out. In our case, we want Najib out but we want Umno and BN to win (remain in power)," said the former Umno secretary-general.

A version of this article appeared in the print edition of The Straits Times on October 19, 2015, with the headline 'Budget 2016 a minefield of issues for Najib'. Print Edition | Subscribe