FocusMalaysia petchems cautious after elections

10 March 2008 04:53  [Source: ICIS news]

By Hong Chou Hui

SINGAPORE (ICIS news)--The mood in Malaysia’s petrochemicals industry is turning cautious after the ruling Barisan Nasional (BN) coalition surrendered its two-third majority in the general elections, industry players and analysts said on Monday.

The BN took 140 seats in Malaysia’s 222-seat Parliament, a loss of 52 seats from the 192 it held before Saturday’s voting.

The loss was exacerbated by the capitulation of four states – Kedah, Penang, Perak and Selangor – to the opposition Barisan Alternatif (BA). The state of Kelantan was held by one of the BA’s component parties, the Parti Islam SeMalaysia (PAS) since 1990.

While the election result gives the BN a simple parliamentary majority to govern the country, it may face obstacles in implementing policies, analysts said.

The loss of the ruling coalition’s two-thirds majority in Parliament could lead to a revision of Malaysia’s Constitution in which the economic privileges accorded to indigenous Malays are enshrined, they added.

Much of the blame for Saturday’s outcome has been laid at Prime Minister Abdullah Badawi’s door, with calls for his resignation as the country’s leader and head of the United Malays National Organisation (UMNO) led by his predecessor, former Prime Minister Mahathir Mohammed.

Market watchers felt that Malaysia’s economy and its petrochemicals industry would remain cautious until the country’s leadership issues were resolved.

“The full impact of the elections will only come home to roost when the leadership has been sorted out within UMNO and the federal government,” CIMB-GK Research’s southeast Asian regional economist, Song Seng Wun, said.

“UMNO’s internal elections were slated for the fourth quarter but it’s highly likely that this will be brought forward,” he said.

“Badawi was caught in a perfect storm as he inherited a lot of economic problems that were brought about as a result of Mahathir’s pet projects. These include the petroleum subsidies that the Malaysian people are so used to now and they can’t live without it,” Song said.

He added that Selangor, Perak and Penang were key contributors to Malaysia’s economy so this would certainly have an impact.

“Time will tell whether the opposition parties in the BA can really work together,” said Song.

Market sources said that the Malaysian market was already growing cold post-elections.

“It’s difficult to forecast what will happen. Up to today, however, I’ve had nothing much by way of discussions or orders,” said a trader of acrylates based in Singapore.

“I’m a little concerned about the aftermath (of the election), because the newly elected candidates from the opposition parties are new guys, so we’ll have to see if they can do the job,” said a Malaysian plastics processor.

Other industry players, however, stated that it would be business as usual even with the changes in Malaysia’s government.

Toray, a Japanese acrylonitrile-butadiene-styrene (ABS) producer in Penang, which currently runs a 330,000 tonne/year ABS plant in the state, said that there is no cause for concern, given that the pro-investor policy remains the same under the new Chief Minister, Lim Guan Eng of the opposition Democratic Action Party (DAP).

“We don’t see any problem as we will receive the same benefits at the free industrial zone in Penang,” a company source said.

“We are quite happy with the result although politics have so far had minimal impact on our business as they cannot stop investments in certain parts of Malaysia, such as Selangor,” an emulsion and paints maker in Malaysia’s southern state of Johor said.

“It is a new situation for all of us, therefore we are not sure of how things will turn out,” he added, “it is the worst victory for the coalition in their history although they are still the majority.”  

Shedding a positive light on Saturday’s election results was another local plastics processor who said, “It is a good development for the public as there will be more transparency in the awarding of government projects”.

Clive Ong, Helen Yan, Chow Bee Lin and Helen Lee contributed to this article.

By: Hong Chou Hui
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