BMI: Fuel subsidy cuts can trigger dissent, friction within component coalition parties in Madani gov’t

EVEN as the Madani government’s recent efforts in pushing ahead with tough reforms will be positive for the economy, policymaking challenges are expected to persist amid deepening divisions within the already-fragmented governing coalition, thus slowing the pace of Prime Minister Datuk Seri Anwar Ibrahim’s reform agenda.

This is reflected in the uptick in Malaysia’s governance risk by BMI Country Risk And Industry Research which has risen from 26.9 in June 2023 to 27.7 in June 2024.

For starters, the research house views the government’s subsidy rationalisation plans beginning with the withdrawal of diesel subsidies effective June 10 as a double-edged sword.

“Indeed, removal of the blanket diesel subsidy is likely to generate RM4 bil (0.2% of GDP) worth of savings annually and facilitate Malaysia’s fiscal consolidation plans which is aligned with our forecast for Malaysia’s fiscal deficit to narrow from 4.9% of GDP in 2023 to 4.3% in 2024.,” noted BMI.

“Yet, the move could adversely impact PM Anwar’s approval rating which has been on a gradual decline since the beginning of his term in November 2022.

“Timelier insights from a survey conducted by (think tank) Ipsos Malaysia further showed that between January and March 2024, the percentage of respondents who believe the government is headed in the wrong direction rose from 40% to 47%.”

Worse still, BMI also expressed concern over on-going signs of friction between component parties of the ruling coalition government.

“Illustrating this, a citizenship briefing programme organised by the Johor DAP branch has been postponed amid confusion caused by a poster promoting the June 30 event,” opined BMI.

“The programme was poorly received by UMNO Youth which called for the session to be cancelled rather than postponed. For his part, Johor UMNO Youth chief Nor Azleen Ambros asserted that the session would have ignited public unrest if it had been allowed to proceed.”

Moving forward, BMI foresees that race-based considerations will likely continue to guide policies in Malaysia despite Anwar’s PH coalition having repeatedly disavowed ethnic preferential policies in favour of needs-based policies.

“In April 2024, various parties strongly opposed the temporary admission of non-Bumiputera students to the Universiti Teknologi MARA’s (UiTM) specialised post-graduate cardiothoracic programme – a suggestion put forth by the Malaysian Medical Association (MMA) to prioritise public health and address the acute shortage of cardiothoracic surgeons.

“Partnering with the National Health Institute, UiTM is Malaysia’s sole public university accredited to train cardiothoracic surgeons and the shortage is exacerbated by the fact that overseas-trained surgeons are not recognised in Malaysia.”

Nevertheless, BMI reckoned that there is a silver lining for Anwar in that “Perikatan Nasional’s strength appears to be waning”. – June 24, 2024

Subscribe and get top news delivered to your Inbox everyday for FREE