PETALING JAYA: A win by Perikatan Nasional in Selangor, Penang and, to a lesser extent Negeri Sembilan, will be a setback for the economy.
This is the view shared by economists whom FMT Business spoke to in the run-up to the Aug 12 elections in six states.
They base their conclusion on the gross domestic product (GDP), foreign direct investment (FDI) and projected annual revenue of each state.
PN, comprising PAS, Bersatu and Gerakan are up against the Pakatan Harapan and Barisan Nasional partnership in the battle for Selangor, Penang, Negeri Sembilan, Kelantan, Terengganu and Kedah.
Kelantan, which has remained under PAS rule for most of the last 50 years, is among the poorest states in the country. Selangor, traditionally a BN stronghold until 2008 when it fell to Pakatan Rakyat, is the richest.
Pakatan Rakyat was the precursor to PH.
Figures don’t lie
Geoffrey Williams of the Malaysia University of Science and Technology said any change in Penang, Selangor and Negeri Sembilan would damage the environment for foreign investment.
However, he is confident these states will remain with PH.
The numbers tell the tale. Selangor and Penang, long administered by PH, are the country’s economic powerhouses. Together, they accounted for 30.29% of the nation’s GDP in 2021.
On the other hand, Terengganu, Kedah, Kelantan and Negeri Sembilan together accounted for only 10.88%.
This is despite the fact that Terengganu is one of the top revenue earners. It is expected to make RM1.81 billion this year, mostly from oil royalties.
This is just a wee bit below the RM2 billion Selangor will likely earn.
Negeri Sembilan is somewhat of an outlier. It does not have the inherent economic pluses of Selangor and Penang but then again, it has only been under PH administration for a term.
Veteran economist Ramon Navaratnam said the PH-led government has introduced better socio-economic policies in Negeri Sembilan since it took over in 2018.
He expects stability, economic growth and income distribution to improve if PH, now with BN as its partner, wins again.
Impact of the different outcomes
The consensus is that the state elections will have minimal impact on the economy. Even so, the economists have warned that a poor outing by the PH-BN partnership may still derail Malaysia’s economy.
Williams said a poor performance by Umno would destabilise Ahmad Zahid Hamidi’s leadership and role in the unity government.
“This may lead to a change of government again, which will be damaging for economic stability, investor confidence and FDI,” he said.
He said a “complete alignment with federal policies” would remove a sense of independence and agility at state level, thus restricting opportunities for development.
On the other hand, a partial alignment on key areas of mutual interest would ensure a win-win situation.
However, he said, completely unaligned policies would maximise state independence but it could also slow down efforts to seize mutually beneficial opportunities.
Ramon said a clean and secular government would ensure unity of purpose and direction for the country’s socio-economic development.
“The crucial contribution to GDP is FDI. This could be adversely affected if the six states are taken over by extremists and bigots,” he said.
Ironically, Kedah led with RM11.11 billion in FDIs but most analysts attribute it to its close proximity with Penang, enabling it to benefit from the spillover from the island.
In the same year, Selangor and Penang received RM9.76 billion and RM7.57 billion in FDIs respectively.
In stark contrast, Terengganu registered only RM17.8 million of the same investments, while Kelantan received RM913.3 million.
Taking the long-term outlook, Williams said, it is clear that states under the administration of PAS had “severely underperformed in most economic and social indicators”.
“They are the least attractive for investment, tourism and migration,” he said.
On the other hand, he said, states with a more open and progressive government did better across all economic and social indicators and are benchmarked against regional and even global leaders in development and living standards.