BN two-thirds win in GE13 a ‘surprise’, says Morgan Stanley

A two-thirds win in Parliament for BN and Najib will surprise investors, says US financial research house Morgan Stanley. — File picKUALA LUMPUR, Feb 26 — A Barisan Nasional (BN) victory of two-thirds of the 222 parliamentary seats will surprise investors, says Morgan Stanley Research, adding that the election outcome will impact Malaysia’s reform agenda.

In a report on this year’s polls, the US financial research house also noted the results will have a huge effect on the Umno election in June 2013.

“The political landscape ... would be important in terms of whether policymakers can engineer a sustainable inflexion point in Malaysia’s structural story,” according to the report made available to The Malaysian Insider.

On the other hand, if the ruling BN loses by winning less than 50 per cent of the seats up for grab, investors would likely see this as a “negative risk event”, Morgan Stanley noted.

These risks would then affect leadership and government stability, postponing the reform agenda undertaken by the country in the near term until political stability is restored.

Morgan Stanley suggested that near-term continuity in policy and reform agenda will come from maintaining the status quo.

The research house also warned that Malaysia is suffering from a “Dutch Disease of sorts” that slows down structural reform, resulting in lacklustre private investment.

“Commodity resources and favourable demographics have provided a comfortable growth buffer, leading policymakers to neglect what is needed on productivity or competitiveness,” the report offered.

In economics, “Dutch Disease” refers to negative consequences arising from large increases in a country’s income.

Morgan Stanley noted that reforms have been implemented since Prime Minister Datuk Seri Najib Razak came into power, but they have failed to address the root of the problem, which is the lack of a suitably qualified labour force.

“These reform measures are steps in the right direction, we think, but more needs to be done,” it said.

Parliament will automatically dissolve on April 28 and elections must be held within 60 days from then. BN lost is super-majority of two-thirds of the seats in Parliament and four states in Election 2008.

But Najib is confident of regaining support from voters, with several BN officials predicting the coalition can win up to 145 seats, nine more than it currently holds.