Malaysia Braces for 100,000-Strong Protest as Venue Banned

Malaysian protesters demanding fair elections plan to rally 100,000 people tomorrow without government permission in a test of Prime Minister Najib Razak’s pledge to allow greater freedom before a national vote.

Stocks (FBMKLCI) fell the most in almost seven weeks as the Coalition for Clean and Fair Elections, or Bersih, vowed to go forward with the demonstration at Kuala Lumpur’s Independence Square. City officials last night ordered the open-air space closed today and tomorrow, risking clashes similar to those that marred a Bersih protest last year.

The order to close the square “doesn’t make any difference,” Maria Chin Abdullah, a member of Bersih’s steering committee, said by phone today. “We will proceed.”

Najib’s handling of any street clashes could affect plans for timing an election after the arrest of 1,600 march participants from the same group in July led to a drop in the prime minister’s approval rating. A delayed vote would prevent the prime minister from taking advantage of a swell in support that followed increases to civil servant salaries and cash payments to poor households.

The police will do what is “proper” tomorrow, Foreign Minister Anifah Aman told reporters in Kuala Lumpur today. “The law still has to be applied.”

Stocks Fall

The FTSE Bursa Malaysia KLCI Index dropped 0.8 percent today, the biggest decline since March 12. While Malayan Banking Bhd. (MAY) led declines for reasons unassociated with the demonstration, lower trading volumes show investors are skittish, said Scott Lim, chief executive officer of Kuala Lumpur-based MIDF Amanah Asset Management Bhd.

“Volume reflects the participation,” said Lim, who manages 380 million ringgit ($125 million). “There is no panic selling but people have turned cautious.”

Najib’s approval rating in peninsular Malaysia fell to a two-year low of 59 percent a month after last year’s protests, according to the Merdeka Center for Opinion Research. It increased to 69 percent in February after the government announced it would give away cash handouts of 500 ringgit ($164) to households with monthly incomes of 3,000 ringgit or less, and overhaul security laws. The margin of error was 3.07 percent.

Resignation Demand

“We can expect Najib to be a lot more careful in how he handles the demonstrators,” said Chua Hak Bin, an economist at Bank of America Merrill Lynch in Singapore. “He should capitalize on the positive mood and just ride on his popularity surge, because it’s very hard to see how things will turn come year end.”

Bersih is demanding that election officials resign after failing to implement all but one of the group’s eight demands, including a minimum 21-day campaign period, co-chairwoman Ambiga Sreenevasan told reporters on April 24. She received a copy today of a court order from Kuala Lumpur Magistrates Court Judge Zaki Asyraf Zubir that prohibits the public from joining any rally at Independence Square from tomorrow to May 1.

Home Minister Hishammuddin Hussein, who last year called Bersih illegal and banned the group’s yellow T-shirts, said yesterday in an earlier statement there was still time for the government and protesters to agree on a location. He canceled a planned press briefing this afternoon.

“While time is running out, I still believe that, working together in the spirit of dialogue and democracy, there is time to find a safe and lawful venue,” he said yesterday. “I urge the organizers to work with us to achieve this.”

Bersih organizers have said 40,000 people joined their protest in 2007 and 50,000 last year. About 6,000 people took part in last year’s rally, according to authorities.

Water Cannons

Police used tear gas and water cannons to break up the July rally attended by opposition leader Anwar Ibrahim, who suffered a head injury in the crackdown. The group, whose name means “clean” in the Malay language, wants its demands met before the next poll, including the use of absentee ballots and a review of the electoral roll to remove dead people and duplicate voters.

Malaysia’s parliament passed a law last year allowing limited public assemblies while maintaining a ban on street protests. Lawmakers are now considering a bill that would reduce the time police can detain suspects without charges to 28 days from two years, replacing a five decades-old law that has been used to detain political opponents.

‘Huge Test Case’

The Bersih protest is “a huge test case” for how much freedom Malaysian authorities will allow, according to Phil Robertson, deputy Asia director at New York-based Human Rights Watch.

“The government is in a pickle,” Robertson said by telephone. “On the one hand they are saying they are reformers, on the other hand they don’t want to do too much and give up real political control.”

Najib’s ruling National Front coalition has made preparations to call an election in May or June, according to four officials who spoke last month. The vote required by early next year will take place amid decelerating growth in Southeast Asia’s third-biggest economy.

Gross domestic product is set to grow 4 percent in 2012 on a weak global outlook, slower than regional rivals Indonesia, Thailand and Vietnam, according to the Asian Development Bank. That compares with last year’s 5.1 percent rise.

“We are rushing because they are rushing,” said Ambiga, whose group is also pushing for foreign election observers. “We want this message that we want a clean and fair 13th general election to get through.”

Election Process

Earlier this month, a parliamentary committee that includes opposition members made 22 recommendations to improve the election process. The government, which agreed to Bersih’s proposal to use indelible ink on fingers to prevent multiple voting, is not legally bound to follow the committee’s advice.

The Election Commission denied that voter registration rolls are flawed and said it would ensure at least a 10-day campaign period, according to a statement on its website.

In 2008, when eight days of campaigning preceded elections, Najib’s National Front coalition won by the narrowest margin since independence in 1957. A Bersih rally held three months before the vote increased momentum for the opposition, according to Joseph Chinyong Liow, associate dean of the S. Rajaratnam School of International Studies in Singapore.

“I’m sure this weighs on Prime Minister Najib’s mind,” he said. “It’s very clear already that the opposition has every intention to piggyback on Bersih.”

To contact the reporters on this story: Gan Yen Kuan in Kuala Lumpur at ykgan@bloomberg.net; Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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