Former Malaysia minister returns to support Najib government

[KUALA LUMPUR] A former Malaysia government minister who shifted allegiance to the opposition has returned to the ruling party, according to Prime Minister Najib Razak.

Muhammad Muhammad Taib, known as Mat Taib, is rejoining the United Malays National Organisation from the People's Justice Party, or PKR, Mr Najib told reporters on Sunday. Local reports earlier in the day said a "major announcement" would be made, sparking speculation Mr Najib would announce snap elections.

The government is touting Mat Taib's return ahead of an election as a sign the opposition can't deliver on its promises, especially to the ethnic Malay majority. A vote must be held by August 2018 but could come before the end of the year as Mr Najib seeks to capitalise on disarray in the opposition.

"He realised that the opposition's struggle, namely PKR, is in vain," Mr Najib said in a Twitter posting after the Sunday briefing, referring to Mat Taib.

"I am certain he is able to contribute to the success of Umno" and the broader Barisan Nasional ruling coalition, he said.

Mr Taib doesn't hold any parliamentary or state assembly seat, and it's not immediately clear what he brings to the table for Umno. He was dropped from the cabinet in April 2009 when Mr Najib came to power and reshuffled his team.

Mr Taib was minister for rural and regional development at the time and had lost an Umno party vote the prior month to become its deputy president.

He joined the main Islamic opposition group Pan-Malaysian Islamic Party, or PAS, in 2013 before leaving two years later. Most recently he was a member of the PKR.

At stake for Mr Najib is the unbroken rule for 60 years of Umno and the coalition it leads. While the opposition won the popular vote for the first time in the 2013 election, it has failed to sustain momentum, beset by infighting over policies.

The four-party opposition alliance hasn't yet named its candidate to take on Mr Najib. Pakatan Harapan - or the Pact of Hope - plans to seek a royal pardon for jailed de facto leader Anwar Ibrahim if it wins, but it would need an interim premier, and right now it can't say who that might be.

Mahathir Mohamad - who was the country's longest serving premier and has become Mr Najib's mentor-turned-chief critic - is a possible interim leader. But at 92 he's been out of office for 14 years, and it's unclear how much voter support he can garner.

MALAYSIA'S OPPOSITION ISN'T SURE

There are other reasons for Mr Najib to hold an election soon. Malaysia's economic growth is gaining momentum, inflation is moderating, and the ringgit is headed for its first annual gain in five years.

Growth has beaten estimates for four straight quarters and the central bank is expected to keep interest rates unchanged until the second half of 2018. The benchmark stock index has more than doubled from 2008 lows and is now the world's longest-running bull market.

Still, a key election issue is likely to be living costs. Since 2010, the government has spent more than RM1.9 billion (S$611 million) on low-income households. The poor and very poor - earning less than RM460 a month in some places - fell from 3.8 per cent of the population in 2009 to 0.6 per cent in 2014, according to the most recent data. The income gap between urban and rural households has narrowed.

Even so, many Malaysians feel less secure. There remains resentment over a goods and services tax introduced two years ago, while consumer sentiment is well below the level deemed to show confidence.

BLOOMBERG