Reuters: “After facing down scandal, Malaysia’s Najib vulnerable on rising costs”

Sat May 6, 2017 | By Joseph Sipalan and Praveen Menon | KUALA LUMPUR

Malaysia’s 1.6 million public servants have long been one of the most reliable vote banks for Prime Minister Najib Razak’s ruling coalition, but as he prepares to seek re-election he faces warnings that soaring living costs risk eroding that support.

Prices have risen sharply since Malaysia cut state subsidies and launched a national goods and services (GST) tax to plug a hole in its finances caused by falling oil and gas revenues, and rank-and-file government workers say they are feeling the pinch.

Malaysia’s annual inflation hit an eight-year high of 5.1 percent in March, among the quickest in Southeast Asia and far outpacing Singapore, Indonesia, the Philippines and Thailand.

Private sector wage growth is expected to average 5.7 percent between 2013 and 2017, based on data compiled by the Malaysian Employers’ Federation.

But public sector wage growth was between 2 and 3 percent over the same period, according to the Congress of Unions of Employees in the Public and Civil Service (Ceupacs).

Ceupacs President Azih Muda said civil servants have ended up heavily indebted to manage rising living costs, to the point that more than 60,000 of them risk bankruptcy.

“This is a direct effect of the hike in cost of living. Civil servants end up taking up a lot of loans and this is unsustainable and they are unable to manage their finances,” Azih told Reuters.

Adib Zalkapli, an analyst with political risk consulting firm Vriens & Partners, agrees cost-of-living issues threaten to eat into a core component of UMNO’s support.

“The hardest hit would be the rank-and-file civil servants working and living in major cities like Kuala Lumpur or Penang,” Adib said, adding that civil servants had less flexibility to take part-time jobs than other low-paid urban workers.

Najib last month assured the public that managing cost of living remained his government’s priority, arguing that Malaysia remained among the cheapest countries in the region.

“We have done a lot of work to ease the people’s burden related to the rising cost of living,” the 63-year-old son of a former prime minister said in a statement.

The government had increased payouts for poor households, implemented measures to control prices and provided affordable housing and healthcare, Najib said.

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