May 16 (Bloomberg) -- Malaysia Prime Minister Najib Razak stocked his Cabinet with party stalwarts ahead of a leadership test after a poor showing by his coalition’s ethnic Chinese partners led to its narrowest election win since independence.
Najib tapped leaders of his ruling United Malays Nasional Organisation for key positions before party polls later this year that will determine whether he stays on as prime minister. He also gave posts to the heads of Malaysia’s biggest bank, a corruption watchdog and a Hindu rights group. Two of the new line-up are Chinese, compared with more than a dozen previously.
“The Cabinet reflects a prime minister concerned about retaining the premiership and the presidency of UMNO,” said Edmund Terence Gomez, a professor at the University of Malaya in Kuala Lumpur. “I don’t see any move in the direction to talk about reconciliation and transformation and inclusivity in this cabinet.”
Najib’s coalition retained power in the May 5 election even after losing a majority of the popular vote for the first time since 1969, which the prime minister attributed to a loss of support from Chinese voters. Besides an ethnic divide, his administration faces a weakening economy, with Malaysia’s growth slowing to less than 5 percent for the first in seven quarters.
“Slower growth was led by a contraction in exports and weak government spending,” Chua Hak Bin, an economist with Bank of America Corp., wrote in a note. “We had expected stronger government spending in the lead up to elections, and slightly stronger investment spending.”
Gross domestic product rose 4.1 percent in the three months through March from a year earlier, after a revised 6.5 percent gain in the previous quarter, the central bank said yesterday. That’s lower than all 22 estimates in a Bloomberg News survey. The monetary authority kept its full-year growth forecast at as much as 6 percent.
The ringgit declined 0.3 percent to 3.0124 per dollar as of 3:01 p.m. in Kuala Lumpur after reaching 3.0176 earlier, the weakest level since May 6, according to data compiled by Bloomberg. It’s the second-best performer this year among the 11 most actively traded Asian currencies tracked by Bloomberg, up 1.5 percent.
The FTSE Bursa Malaysia KLCI Index, which has underperformed benchmarks in the Philippines, Indonesia and Thailand this year, fell 0.8 percent to 1,769.61, poised for its biggest loss since May 3.
Najib’s coalition won 133 seats, topping the 89 seats claimed by Anwar Ibrahim’s three-party opposition, which captured 51 percent of the popular vote. Anwar has said he’ll challenge about 30 seats, enough to swing the result, and has held rallies in different states after the election.
Ethnic Chinese parties in the government won nine seats compared with 23 in the 2008 election. Chua Soi Lek, president of the Malaysian Chinese Association, said on May 6 the party wouldn’t take up its allotment of Cabinet posts.
Najib said he has reserved the transport minister’s position for the party in case it changes its mind when it meets to select a new leader.
“We are a balanced cabinet and the transport ministry will be given to MCA once they have decided,” Najib said in Putrajaya, the country’s administrative capital.
UMNO held about half the seats in a Cabinet with almost 60 members. Najib remained finance minister, while Muhyiddin Yassin kept his posts as deputy prime minister and education minister. Ahmad Zahid Hamidi, one of three UMNO vice presidents, moved to home affairs from defense, swapping jobs with Hishammuddin Hussein.
Several key UMNO members joined the Cabinet, including party Secretary-General Tengku Adnan Tengku Mansor, youth chief Khairy Jamaluddin -- a son-in-law of former Prime Minister Abdullah Ahmad Badawi -- and Supreme Council member Shahidan Kassim, who in 2010 called for Facebook to be blocked if users posted insults to Malaysia’s leaders and Islam.
“Over the past months and years, divisions have opened up in Malaysian society,” Najib said in a statement yesterday. “Now it is time for all of us, in government and beyond, to put the bitterness behind us, and work towards national reconciliation - and national unity.”
Ethnic Chinese account for about a quarter of the population, while Malays and indigenous groups make up about 60 percent. Najib faced voters for the first time as leader after taking over mid-term four years ago.
One of the ethnic Chinese members new to the cabinet is Paul Low, president of the local arm of Transparency International. Malaysia was ranked last among 30 nations surveyed in the Berlin-based advocacy group’s 2012 Bribe Payers Index.
Najib appointed six ethnic Indians, including P. Waytha Moorthy, chairman of the Hindu Rights Action Force. The non-governmental organization, known as Hindraf, staged street protests before the 2008 election demanding an end to alleged racial discrimination of ethnic Indians.
Abdul Wahid Omar, chief executive officer of Malayan Banking Bhd., is the only new face from the private sector. He joins Idris Jala, who formerly ran Malaysian Airline System Bhd., in overseeing Najib’s plans to transform the economy.
“I look forward to applying the experience I have gained throughout my career in the private sector for the benefit of Malaysia,” Abdul Wahid said in an e-mailed statement.
Since taking charge in April 2009 during a recession, Najib has opened up more industries to foreign investors and implemented a minimum wage. A return to power allows the premier to advance his so-called economic transformation program aimed at drawing $444 billion in investments this decade in projects including mass rail and oil storage.
Net exports of goods and services slumped 36.4 percent in the first quarter from a year earlier, after falling 9.3 percent in the final quarter of 2012, yesterday’s report showed.
Total consumption rose 6.1 percent in the January-to-March period from a year ago after climbing 4.9 percent in the earlier quarter, it showed.
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