Malaysia's biggest state votes in test for Najib amid scandals

[KUALA LUMPUR] An election in Malaysia's biggest state Saturday is the first chance to assess the level of public support for Prime Minister Mr Najib Razak after nearly a year of political turmoil over funding scandals.

On Borneo island, Sarawak's 1.14 million voters will elect 82 lawmakers to the state assembly for the next five years. Mr Najib's Barisan Nasional coalition, which controls 55 of the current 71 seats, is expected by analysts to return to power with a comfortable margin.

Electoral officials added 11 seats in a boundary redraw last year that critics said would favor the government.

Mr Najib has been a frequent presence in the state in recent months, and has promised billions of development funds. The premier needs a strong showing in the state for his coalition as he fends off a public campaign led by former leader Mahathir Mohamad to get him to quit.

"If they win really well, at least he can go back and convince his own party that he's not a liability, he can still deliver seats in an election," said Ibrahim Suffian, an analyst at the Merdeka Center for Opinion Research in Kuala Lumpur, referring to Mr Najib.

"A Sarawak election that delivered the seats for Barisan is going to be one that gives confidence to Mr Najib as a prime minister."

Millions of dollars were deposited in Mr Najib's personal accounts ahead of the 2013 federal election, and debt-ridden state fund 1Malaysia Development Bhd - whose advisory board the premier has chaired - is the centre of global probes into potential embezzlement.

Both Mr Najib and 1MDB have denied wrongdoing. The government said the funds in Mr Najib's accounts were a donation from the Saudi royal family and most of it was later returned.

While Sarawak voters are typically more concerned with basic issues affecting their lives and support BN because of the popularity of Chief Minister Adenan Satem, in power since February 2014, Mr Najib could also potentially claim a victory in the state as a personal endorsement.

Sarawak and neighboring Sabah contributed about a third of parliamentary seats won by BN in the 2013 general election. The next national poll is due by 2018. The BN-led coalition, which has ruled Malaysia since independence in 1957, retained power in 2013 with its slimmest margin - and could have lost if not for the Borneo states.

A solid win for BN could reassure foreign investors that projects in Sarawak will go ahead. Mr Najib touted development of Sarawak and Sabah in his budget speech in October, pledging to build a 1,796-kilometre highway linking the states at a cost of 28.9 billion ringgit (S$9.84 billion).

Projects in the state are expected to benefit Gamuda and IJM Corp, while companies based there like Hock Seng Lee Bhd, Naim Holdings Bhd, Zecon Bhd and Cahya Mata Sarawak Bhd are potential winners, according to a JPMorgan Chase & Co report.

Shares of Kimlun Corp, which won a contract recently to help build the Pan Borneo Highway, have risen 29 per cent this year.

Outside Malaysia's biggest cities, voters' indifference to the scandals linked to Mr Najib may help him. Chundau Anak Surah, an Iban farmer who has voted each time for BN, said there are benefits to being a BN supporter.

"After waiting a while we can get what we needed from the government, things like a roof, cement and sand," said the 51-year-old, who works odd jobs to supplement his income from farming.

"I'm half-half about Mr Najib. If he speaks the truth then I like him, if he's not then I don't like him. I can't decide if he's being honest or not."

Mr Najib urged voters on Friday at a Sarawak event to re-elect the government, saying only BN could deliver development and progress for the state, the official Bernama news agency reported.

Separated from peninsula Malaysia by the South China Sea, Sarawak was the country's third-largest state or territory contributor to gross domestic product in 2015, accounting for an estimated 10.6 per cent of output. It contributed to half the country's crude oil output and is the sole provider of liquefied natural gas, according to S&P Global Ratings.

Almost 80 per cent of the seats up for grabs are in rural areas. Large parts of the state are covered by mountain highlands and rainforests, with some settlements accessible only by helicopter or a long river trip.

"The election is going to show that as controversial and damaging 1MDB has been in terms of the international financial reputation of Putrajaya, it has limited traction with voters who are in rural areas," said Mr Ibrahim from the Merdeka Centre.

"At the end of the day politics are local and the local politics are determined by which party can mobilize the voters, which party can attend to the needs of the voters."

BLOOMBERG