A COMBINATION of prolonged economic sluggishness, rising cost of living and fracturing interfaith relations have led to low confidence in the government even with the expected rebound in the markets in the second half of this year, said analysts.

“Many in the elite and middle class have lost faith, although they may be silent,” said Lim Teck Ghee, director of the Centre for Policy Initiatives at UCSI University.

“The religious and racial divide is especially demoralising, and is worsening as a result of politicians and their proxies using the religious card,” said Lim, a former World Bank senior social scientist.

Stoking interfaith tension was the government allowing PAS president Abdul Hadi Awang to table a bill in May seeking harsher punishments for shariah offences.

Last month, the Home Ministry ordered a shutdown of a Christian revival gathering in Malacca, citing Muslim sensitivities.

“The cloud of negativity and uncertainty has actually worsened in the last year because of the continuing lack of confidence in the BN government and Prime Minister Najib Razak’s leadership, as well as the disorder within the opposition.

“There seem to be new political scandals, cases of massive corruption, mismanagement or abuses of power conveyed ever so often through social media, even if the print media ignores or underplays them,” he said.

The US Department of Justice (DoJ) filed its third suit last month, seeking to seize US$1.7 billion (RM7.3 billion) in assets believed to be bought with money stolen from 1Malaysia Development Berhad (1MDB). The suit brings the total value of allegedly misappropriated assets to US$4.5 billion.

Najib has consistently denied wrongdoing. Umno leaders have accused the American authorities and the opposition of working together to overthrow the government.

“Unfortunately, the government is in denial and sees the negativity as an opposition-orchestrated strategy. It could not be more wrong,” Lim said.

Meanwhile, economic growth appears to be recovering. In the first quarter of the year, the gross domestic product (GDP) grew 5.6% over the same period a year ago, above market expectations of 4.8%.

The ringgit managed to strengthen in the second quarter on the back of rising exports and firm commodity prices.

The currency dropped to a 19-year low of RM4.52 against the US dollar last December, its weakest level since January 1998 during the Asian financial crisis.

The Malaysian consumer sentiment remains weak, but a rebound is expected based on an uptrend in real private consumption, Maybank Investment Bank said in a research report last month.

However, Malaysia still ranks 25th out of 140 countries in a recent WEF Global Competitiveness report, slipping in areas, such as primary school enrolment and tech readiness.

The Malaysian Institute of Economic Research’s (MIER) consumer sentiment index (CSI) has also been tracking below 100 for 11 consecutive quarters since the third quarter of 2014.

Malaysia now has lower foreign reserves than Indonesia. As of May 31, Malaysia had US$98 billion in reserves compared with Indonesia’s US$125 billion, according to OCBC Bank.

Independent pollster Merdeka Center director Ibrahim Suffian told a forum in Singapore last month bread-and-butter issues still topped voters’ concerns.

“Top of the mind in terms of what voters care about is the cost of living issues. Those, rather than the 1MDB issue, are the main factors affecting the public mood,” he was quoted as saying by the Straits Times.

“If we ask the man on the street what concerns them, most would say it’s the economy. Younger people want jobs that commensurate with their qualifications, those aged 25 to 35 are concerned about housing prices, and those older are concerned about their retirement and whether they have more than the minimum to sustain themselves,” he added.

A 6% goods and services tax (GST), introduced in April 2015, was to cover an initial RM11 billion shortfall in government revenue.

Putrajaya collected RM41 billion last year and expects to collect a further RM42 billion this year.

On June 19, the Royal Customs Department sought to impose GST on 60 additional food items effective July 1, before withdrawing the order.

“Many Malaysians have actually gone beyond the issue (1MDB), and this has been bundled together in what they perceive to be leadership weaknesses,” said Ibrahim, who is a World Fellow at Yale University.

Ibrahim told The Malaysian Insight that public mood has generally been “pessimistic for quite a while”.

“It is largely driven by a dim view of the economy and concerns over politics,” he said.

An opposition in disarray has also not helped matters either, driving public apathy lower, said Azmi Sharom, associate professor in law at Universiti Malaya.

“The sense of gloom is not just because of the poor economy, the high cost of living, deteriorating race relations, poor governance and so forth. It’s due to the sense that nothing can be done about them.

“People are gloomy because of there’s a feeling of hopelessness,” he added.

“The government is embroiled in the worse national corruption scandal ever. Yet, it is still in power and will apparently stay there, partly because of gerrymandering. What is there to be cheerful about?”

According to Global Financial Integrity (GFI), Malaysia ranks fifth worldwide for illicit capital flight, after China, Russia, Mexico and India, but tops the list, by far, on a per capita basis.

Malaysia lost US$418.54 billion during 2004-2013, losing US$48.25 billion in 2013 alone.

The illicit capital outflows stem from tax evasion, crime, corruption and other illicit activities, with outflows ending up in banks in the US and the UK, as well as in tax havens like Switzerland, the Cayman Islands or Singapore.

GFI said a common occurrence involves corrupt public officials or family members using anonymous shell companies to transfer dirty money to bank accounts elsewhere.

The opposition has singled out the ruling administration for being complicit in the RM50 billion 1MDB scandal.

In a blog post last month, former prime minister Dr Mahathir Mohamad warned that a national state of emergency could be declared in the event of an opposition victory in the next general election.

“What will happen next is anybody’s guess but this is a dangerous time for the country,” Lim said. – July 11, 2017.