Presentation by Azrul Azwer, Chief Economist of Bank Islam which caused his suspension for predicting an opposition victory in the coming Malaysian elections.

1. MALAYSIA: ECONOMIC &
POLITICAL OULOOK 2013
AZRUL AZWAR AHMAD TAJUDIN
CHIEF ECONOMIST
Strictly Private & Confidential

2. 2

3. STILL LANGUISHING GLOBAL ACTIVITIES
65
GLOBAL PURCHASING MANAGERS' INDICES (PMI)
60  Spots of deterioration in the global
55
50
economy since 3Q2012 with
45
heightened downside risks – part of
40 sluggish and bumpy recovery OR
35
30
beginning of a more prolonged
downturn? Global economic
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Jun-04
Dec-04
Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Composite PMI Manufacturing PMI Services PMI
challenges:
Sources: JP Morgan & Markit, Bank Islam
o Short-term : Proactive response to short-
OECD LEADING INDICATORS (12-MONTH ANNUALISED GROWTH)
30
run slowdown
o Medium-term: The global economy is
25
20
15
operating in a world of high public debt
10
and/or budget deficits in particular rising
5
doubts over:
0
the viability of the Euro zone as
Sep-96
Sep-97
Sep-98
Sep-99
Sep-00
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
May-96
May-97
May-98
May-99
May-00
May-01
May-02
May-03
May-04
May-05
May-06
May-07
May-08
May-09
May-10
May-11
May-12
-5
weaknesses in the periphery appears to
-10
have spread to core economies
-15
China India Brazil Russia Japan Euro US UK Total
capability of peripheral Euro countries to
deliver the required fiscal and structural
Sources: OECD, Bank Islam
adjustments
3

4. LIMITED IMPROVEMENT TO GLOBAL TRADE
14
ANNUAL WORLD MERCHANDISE TRADE GROWTH  The World Trade Organisation (WTO)
cut its global trade growth forecasts to
12
10
8
6
2.5% for 2012 from 3.7% and to 4.5%
4
2
for 2013 from 5.6%:
0
o given heightened risks on the downside
1971
1972
1973
1974
1975
1976
1977
1978
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1980
1981
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1983
1984
1985
1986
1987
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1989
1990
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1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2013F
2012 F
2014 F
2015 F
2016 F
2017 F
-2
-4
due largely to the prolonged Euro zone
crisis, sub-trend US growth, China’s
-6
-8
-10
-12
slowdown (after expanding by 7.7%
Sources: IMF, Bank Islam during the first 3Qs of 2012, official GDP
30.0
GLOBAL CHIP INDUSTRY growth targets of 7.5% in 2012 and
7.0%-7.5% in 2013) and Japan’s
1.4
25.0
1.2
20.0 1.0
subdued growth
0.8
o Improving trade growth outlook in
15.0
0.6
developing economies given tentative
10.0
0.4
signs of a pick-up in recent export
5.0
0.2 performance could be limited mainly to
0.0 0.0 Asian economies whose supply chain
Sep-95
Sep-96
Sep-97
Sep-98
Sep-99
Sep-00
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
May-95
May-96
May-97
May-98
May-99
May-00
May-01
May-02
May-03
May-04
May-05
May-06
May-07
May-08
May-09
May-10
May-11
May-12
networks closely integrated with China
Global Semiconductor Sales (US billion, LHS) US Book-to-Bill Ratio (RHS)
and could only partially fill up the global
Sources: SIA, SEMI, Bank Islam slack

5. SLOW AND UNEVEN RECOVERY IN SIGHT
65
EU MANUFACTURING PURCHASING MANAGERS' INDICES (PMI)  Potential major causes of
60
disappointing global growth in
55
50 2H2012 and 1H2013:
45 o No let-up in the intensity of the Euro zone
40
sovereign debt crisis
35
o Short-term contractionary effects on
30
growth due to austerity measures and
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Nov-12
May-06
May-07
May-08
May-09
May-10
May-11
May-12
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Eurozone Germany France Italy UK fiscal cutbacks worldwide especially in
Sources: JP Morgan & Markit, Bank Islam Europe in particular peripheral Euro
30
OECD LEADING INDICATORS (12-MONTH ANNUALISED GROWTH)
zone, the US and UK and spillovers on
25 developing countries
20
o Weak financial institutions and
15
inadequate policy responses in key
10
advanced economies
o Tail-off in Japan’s disaster reconstruction
5
0
spending
Sep-96
Sep-97
Sep-98
Sep-99
Sep-00
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
May-96
May-97
May-98
May-99
May-00
May-01
May-02
May-03
May-04
May-05
May-06
May-07
May-08
May-09
May-10
May-11
May-12
-5
-10
o Downshift in prospects for China, India
-15
China India Brazil Russia Japan Euro US UK Total
and Brazil
Sources: OECD, Bank Islam
5

6. SLOW AND UNEVEN RECOVERY IN SIGHT (continued)
o The 11th hour compromised deal only averted the immediate pain of the “fiscal cliff”,
a harsh combination worth US$609 billion of harsh spending cuts (US$109 billion in
defence and non-defence programmes) and sharp tax increases (US$500 billion)
due to take effect 1 Jan 2013 BUT not all possible negative impact:
 another potential political bickering and gridlock in the Congress as early as mid-Feb
2013 over the need to raise the US$16.4 trillion US Federal Govt debt ceiling as the
Treasury Dept exhausts “extraordinary measures” taken since 31 Dec 2012 to finance
about US$200 billion in deficits – possible damage to fragile consumer and business
confidence
 2-month delay to automatic spending cuts or “sequestration” (US Govt’s belt-tightening to
pare down deficits) but to finally take effect on 1 March 2013 – US growth to slow
especially in the 1H2013 but not grind to a halt
o Possibility of waning momentum in domestic demand in developing economies due
to fiscal constraints (Malaysia), overheating concerns (Indonesia) and a host of
other factors
o Stalled E&E turnaround?
 US SEMI book-to-bill ratio, a forward-looking indicator for the global chip industry
remained below parity for the 6th month in a row in November 2012 to 0.79x after
tentative signs of recovery with above the 1x-threshold for a short period of 4 consecutive
months between Feb 2012 and May 2012.
 The World Semiconductor Trade Statistics (WSTS) forecast modest growth in global
semiconductor sales in 2013 and 2014, by 4.5% and 5.2% to US$303 billion and US$319 6
billion respectively vs. a 3.2% decline in 2012 to US$290 billion .

7. SLOW AND UNEVEN RECOVERY IN SIGHT (continued)
15
QUARTERLY REAL OR CHAINED GDP GROWTH OF SELECTED BRIC & OECD COUNTRIES (YoY %)
 On 9 October 2012, the IMF downgraded
10
its global growth forecasts to 3.3% (from
3.5%) for 2012 and 3.6% (from 3.9%) for
5
2013 – global slowdown to persist
0
especially in the earlier part of 2013 on:
1Q95
3Q95
1Q96
3Q96
1Q97
3Q97
1Q98
3Q98
1Q99
3Q99
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
-5
o Lacklustre US recovery
o Flimsy turnaround from recession in the
-10
US UK EU Japan China India Brazil
Euro zone and the UK
Sources: IMF, national authorities, Bank Islam o Stalled recovery in Japan
International Monetary Fund's Forecasts
o Sub-par growth in China, India and Brazil
17-Apr-12 16-Jul-12 9-Oct-12
Selected Economies
World Output
2008
2.8
2009
-0.6
2010
5.3
2011
3.9
2012 F 2013 F
3.5 4.1
2012 F 2013 F
3.5 3.9
2012 F 2013 F
3.3 3.6
 Asia will continue to power the global
Advanced Economies 0.0 -3.6 3.2 1.6 1.4 2.0 1.4 1.9 1.3 1.5 growth at a faster clip than the global
* United States -0.3 -3.5 3.0 1.7 2.1 2.4 2.0 2.3 2.2 2.1
* Euro Zone 0.4 -4.3 1.9 1.5 -0.3 0.9 -0.3 0.7 -0.4 0.2 economy despite risks of the Asian growth
* Japan -1.0 -5.5 4.4 -0.7 2.0 1.7 2.4 1.5 2.2 1.2
* United Kingdom -1.1 -4.4 2.1 0.7 0.8 2.0 0.2 1.4 -0.4 1.1 slowing to levels last seen during the 2009
* Canada
* Newly Industrialized Asia
0.7
1.8
-2.8
-0.7
3.2
8.5
2.4
4.0
2.1
3.4
2.2
4.2
2.1
2.7
2.2
4.2
1.9
2.1
2.0
3.6
global financial crisis.
* Malaysia 4.8 -1.6 7.2 5.1 4.4 4.7 4.0 4.7 4.4 4.7
* China 9.6 9.2 10.4 9.2 8.2 8.8 8.0 8.5 7.8 8.2
* India 6.2 6.6 10.6 7.1 6.9 7.3 6.1 6.5 4.9 6.0
Sources: IMF, Bank Islam
7

8. 8

9. GRAVITY-DEFYING FIRST 3QS OF 2012
 Stronger-than-expected GDP showing in
QUARTERLY DEMAND SIDE PERFORMANCE (% YoY)
40.0
the first 3Qs of 2012 in particular the
30.0
20.0
surprise 5.2% YoY pace in 3Q2012 and
10.0
0.0
the upgrade in 2Q2012 reading to 5.6%
YoY from 5.4% YoY. Key takeaways in
1Q2006
2Q2006
3Q2006
4Q2006
1Q2007
2Q2007
3Q2007
4Q2007
1Q2008
2Q2008
3Q2008
4Q2008
1Q2009
2Q2009
3Q2009
4Q2009
1Q2010
2Q2010
3Q2010
4Q2010
1Q2011
2Q2011
3Q2011
4Q2011
1Q2012
2Q2012
3Q2012
-10.0
-20.0
3Q2012:
-30.0
o 3.0% YoY contraction in exports, the first
Overall GDP Private Consumption Public Consumption Private Investment
Public Investment Exports Imports decline on a quarterly basis since 3Q2009
Sources: BNM, Bank Islam after decelerating for 2 consecutive Qs
25.0
QUARTERLY SECTORAL PERFORMANCE (% YoY)
(2Q2012:+2.1% YoY, 1Q2012:+2.8% YoY)
20.0
– external demand to remain a major drag
15.0
10.0
on the Malaysian economy at least until
5.0
1H2013
0.0 o Very robust domestic demand, sustaining
1Q2006
2Q2006
3Q2006
4Q2006
1Q2007
2Q2007
3Q2007
4Q2007
1Q2008
2Q2008
3Q2008
4Q2008
1Q2009
2Q2009
3Q2009
4Q2009
1Q2010
2Q2010
3Q2010
4Q2010
1Q2011
2Q2011
3Q2011
4Q2011
1Q2012
2Q2012
3Q2012
-5.0 double-digit growth of 11.4% YoY
-10.0
(2Q2012:+14.0% YoY, 1Q2012:+10.0%
-15.0
YoY), led by both public and private
-20.0
Overall GDP
Manufacturing
Agriculture
Construction
Mining & Quarrying
Services
sectors in particular:
Sources: BNM, Bank Islam

10. GRAVITY-DEFYING FIRST 3QS OF 2012 (continued)
YoY GROWTH (3-MONTH MOVING AVERAGE BASIS)
30.00
 22.7% YoY spike in GFCF
(2Q2012:+26.1% YoY, 1Q2012:+16.1%
20.00
YoY), supported by both domestic and
10.00 foreign investments of which public
investment was up by +22.4% YoY
0.00
(2Q2012:+28.9% YoY, 1Q2012:+10.3%
Feb-08
Apr-08
Feb-09
Apr-09
Feb-10
Apr-10
Feb-11
Apr-11
Feb-12
Apr-12
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Nov-08
Nov-09
Nov-10
Nov-11
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Aug-08
Aug-09
Aug-10
Aug-11
Aug-12
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
May-08
May-09
May-10
May-11
May-12
-10.00
YoY) and private investment by +22.9%
-20.00
YoY (2Q2012:+24.6% YoY,
1Q2012:+19.8% YoY)
-30.00
IPI Gross Exports
 8.5% YoY jump in household spending
Sources: Department of Statistics, MATRADE, Bank Islam (2Q2012:+8.8% YoY, 1Q2012: +7.4%
130
MIER INDICATORS YoY), lifted by Govt cash transfers and
120
assistance benefits while public
110 consumption was up by 2.3%
100 YoY(2Q2012:+10.9% YoY, 1Q2012:
90 +9.1% YoY)
80
70
60
50
1Q98
3Q98
1Q99
3Q99
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
Consumer Sentiment Index Business Conditions Index
Sources: MIER, Bank Islam

11. GRAVITY-DEFYING FIRST 3QS OF 2012 (continued)
o Growth moderation across almost all sectors:
 Construction sector remained the major growth leader: +18.3% YoY (2Q2012:+22.2%
YoY, 1Q2012: +15.5% YoY), led by the civil engineering sub-sector spanning across
various industries/sub-sectors in particular roads/highways/bridges, transportation,
utilities, oil & gas and services related as well as residential sub-sector
 Pick-up in services output growth to 7.0% YoY (2Q2012:+6.6% YoY, 1Q2012:+5.7% YoY),
underpinned domestic-oriented activities
 Apparent slowdown in manufacturing activities, increasing by just 3.3% YoY
(2Q2012:+5.6% YoY, 1Q2012:+4.4% YoY) on moderation in export-oriented and
domestic-oriented industries
 Return to the positive territory for the agriculture sector despite a marginal 0.5% YoY
growth (2Q2012:-4.7% YoY, 1Q2012:+2.1% YoY) thanks to a turnaround in CPO output
 Unexpected slump in mining activities with a 1.2% YoY drop (2Q2012:+2.3% YoY,
1Q2012:+0.3% YoY) as a result of lower natural gas production due to planned facility
shutdowns

12. MALAYSIA: 2013, YEAR OF 2 HALVES?
 The progress of economic rebalancing
YoY GROWTH RATES OF LEADING, COINCIDENT & LAGGING INDICATORS
12.00
7.00
and transformation, on a journey to
become a developed, high-income
2.00
nation by 2020 to gain traction.
Oct-97
Oct-98
Oct-99
Oct-00
Oct-01
Oct-02
Oct-03
Oct-04
Oct-05
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Apr-97
Apr-98
Apr-99
Apr-00
Apr-01
Apr-02
Apr-03
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
-3.00
 Pockets of weakness in the 1H2013 with
-8.00
o erratic export performance given the still
tentative global recovery
-13.00 Leading Index Coincident Index Lagging Index o uncertainties related to GE13
Sources: Department of Statistics, MATRADE, Bank Islam  A pick-up in Malaysia’s growth
130
MIER INDICATORS
momentum in 2H2013 with significant
120
110
export recovery on the widely expected
100 global turnaround thanks to:
90
o Clarity about resolution to the Euro zone
80
70
crisis - resumption of recovery by mid-
60 2013 particularly for core countries and
50 return to growth for all nations by 2014
1Q98
3Q98
1Q99
3Q99
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
o More conclusive signs of sustainable
Consumer Sentiment Index Business Conditions Index
bottoming out in the US and China
Sources: MIER, Bank Islam

13. PROSPECTS IN 2013
GROWTH (%) 2008 2009 2010 2011 1H2012 2012 BI 2012 MoF 2013 BI 2013 MoF  Notwithstanding a multitude of
GDP (constant prices, 2000=100) 4.8 -1.5 7.2 5.1 5.1 5.1 4.5-5.0 5.3 4.5-5.5 uncertainties in the global economy and
Demand Side financial environment, the latest official
Final Consumption Expenditure 8.4 1.4 5.8 8.9 8.1 7.8 7.9 5.2 4.2 GDP growth guidance of between 4.5%-
* Private Consumption 8.7 0.6 6.6 7.1 8.1 8.0 7.0 6.2 5.7 5.0% for 2012 and 4.5%-5.5% for 2013
* Public Consumption 6.9 4.9 2.9 16.1 8.4 7.2 11.3 1.2 -1.2
seems reasonably realistic - In-house
Gross Fixed Capital Formation (GFCF) 2.4 -2.7 10.4 6.5 21.3 19.9 13.5 10.2 9.3
GDP growth forecasts of 5.1% for 2012
* Private Investment 0.1 -7.4 15.5 12.2 22.4 19.7 11.7 11.7 13.3
* Public Investment 5.2 2.9 5.0 -0.3 19.5 20.1 15.9 8.3 4.2
and 5.3% for 2013 respectively exceed
Domestic Demand 6.6 0.3 7.0 8.2 11.8 11.1 9.4 6.6 5.6 or at the upper-end of official targeted
Exports 1.6 -10.9 11.3 4.2 2.5 1.4 1.6 4.2 2.8 ranges:
Imports 2.3 -12.7 15.6 6.2 7.5 6.5 5.1 5.7 3.6 o Domestic demand (+11.8% YoY during
Supply Side the first 3Qs of 2012), proven so far to
Agriculture, Fishing & Forestry 3.8 0.05 2.4 5.9 -1.5 -0.6 0.6 1.8 2.4 be more than adequate to withstand
Mining & Quarrying -2.4 -6.5 -0.4 -5.7 1.3 1.0 1.5 2.5 2.7 external headwinds and absorb external
Manufacturing 0.8 -9.0 11.9 4.7 5.0 4.3 4.2 5.1 4.9 shocks, will continue to anchor growth
Construction 4.4 6.2 6.0 4.6 18.9 18.1 15.5 11.0 11.2 on disposable income enhancement
Services 8.6 2.9 7.2 7.0 5.8 6.0 5.5 5.9 5.6 measures and other domestic demand
supportive incentives under Budget
Sources: BNM, Economic Report 2012/2013, Bank Islam 2013, particularly led by:
13

14. PROSPECTS IN 2013 (continued)
 investment revival, both private and public
 consumer spending notwithstanding expectations of public consumption slowdown given
limited room for further fiscal stimulus
o Across-the-board expansion in all sectors in 2013 with construction, services
and manufacturing sectors as growth leaders:
 double-digit growth rates for construction activities, anticipated to persist in 2012 and
2013 with huge multiplier effects on the overall economy
 increase in services activities to sustain above 5.5% underpinned particularly by robust
activities in financial, real estate, communications segments
 respectable manufacturing output growth, driven by both export-oriented and domestic-
oriented industries
14

15. PROSPECTS IN 2013 (continued)
 Direct measures to further boost foreign and domestic direct investments
(FDIs and DDIs), private or public sector led:
o RM3 billion allocation to accelerate the implementation of the Entry Point Projects
(EPPs) under the 12 National Key Economic Areas (NKEAs) including the RM1
billion Domestic Investment Strategic Fund under the Malaysian Investment
Development Authority (MIDA) announced in July 2012 to promote DDIs and
accelerate the participation of Malaysian companies in the global supply chain
while leveraging on outsourcing activities and acquisition of technology by
Malaysian companies
o RM6 billion allocation under the Private Finance Initiatives (PFI 2) to implement
various projects such as refurbishment and maintenance of schools & health
clinics, housing development, water tanks, flood mitigation plans and sport facility
building to ensure the people’s well-being while spurring investment activities
15

16. PROSPECTS IN 2013 (continued)
 Notwithstanding the marginal 0.6% YoY increase in exports during the first
3Qs of 2012 of which the 3Q2012 suffered a 3% contraction as evidence of
the impact of global slowdown, the baseline scenario points to improving
prospects towards 1H2013, paving the way for a commendable acceleration
especially towards 2H2013 and in 2014 due to:
o Optimism from stimulus measures such as aggressive monetary easing and/or
reflationary fiscal policy or other pro-growth macroeconomic policies already or will
be undertaken by the world’s major economies, coordinated or otherwise
 After spending US$2.3 trillion in QE1 and QE2, the US QE3 was announced in mid-Sep
2012, comprising a monthly programme to purchase mortgage-backed bonds worth
US$40 billion until a sustained turnaround in the job market, most probably after the
unemployment rate dips to way below 7% (although still above the desired 5%-6% range)
while helping to nurse the housing market to recovery
 China’s CNY1 trillion infrastructure stimulus package over 3 to 8 years to build subway
lines, railways, roads, highways, ports, etc announced in early Sep 2012
 Launch of the Outright Monetary Transactions (OMT) in September 2012 (but ready to
activate from Day 1), the European Central Bank’s (ECB) new bond buying programme to
calm financial markets and bring down sovereign bond spreads of troubled countries (with
high borrowing costs) – sterilised purchase of unlimited amounts of sovereign bonds of
Euro zone countries that seek assistance and agree to fiscal adjustment programmes and
sound economic policies
. 16

17. PROSPECTS IN 2013 (continued)
 A 10-trillion yen extension, announced in Sep 2012 to Bank of Japan’s asset-buying
programme amounting to 80 trillion yen in total – 5 trillion yen on short-term bills by June
2013 and another 5 trillion yen on long-term bonds by end-Dec 2013
o Tentative signs of a shift in US household borrowing patterns in 2Q2012 and
3Q2012, indication of the beginning of an end to the long private sector’s
deleveraging process in particular households who may demonstrate greater
willingness to loosen their purse strings despite muted income growth as debt has
increasingly become less of a burden – if corporate deleveraging subsides at the
same time, then deleveraging will no longer be a big drag on the economy
o Rather stable commodity prices in particular related to energy and food could to a
certain extent cushion the downside risks to global growth although it may not be
able to spur a meaningful economic recovery. Lower commodity prices:
 help boost domestic demand to partially make up for sluggish exports thanks to improved
capacity to spend with better consumers’ purchasing power and businesses’ balance
sheets
 provide the scope for monetary policy support as central banks should be able to maintain
or even lower interest rates if necessary
 come as a relief for Governments struggling to pay national subsidy bills
17

18. DOMESTIC AREAS OF VULNERABILITY?
 Some domestic-driven risk factors that could potentially constrain growth
potential in 2013:
o Delay in holding the 13th General Election (GE13) - negative for the economy given the
inclination among both businesses and consumers to adopt a wait-and-see attitude,
deferring their spending decisions as well as a potential burden on the Federal Govt’s
finances if the ruling party continues dishing out more generous handouts
o Delay in the full start-up of Malaysia’s Gumusut-Kakap deep-sea oilfield (2nd deepwater
development after Kikeh field offshore Sabah) with a full production capacity of up to
135,000 bpd to the 2H2013 (instead of the 2H2012) due the longer-than-expected time
needed to construct the floating production facility - protracted modest growth for the
mining sector. However, its maiden production was made possible since Nov 2012 via an
interim crude evacuation system (ICES) by tying back or linking its 2 wells to the existing
Kikeh field and is expected to hit the maximum of 25,000 bpd.
o Limitations of domestic demand after 4 straight quarters of beyond expectations -
concerns whether it has further leg to hold up and provide support to Malaysia’s economic
growth if the global slowdown prolongs; sudden upturn in inflationary pressures especially
from food and fuel prices; escalating household and Govt indebtedness which may
require some macroeconomic policy tightening and pending potential policy shift in
general in particular post-GE13
18

19. TAME INFLATION OUTLOOK
ANNUAL HEADLINE CPI GROWTH
 Very subdued inflationary pressures as
18.0
16.0
14.0
headline CPI growth in Nov 2012 remained
12.0
10.0
stuck at 1.3% for 3 months in a row, the
8.0
slowest pace since March 2010, reflecting:
6.0
4.0
o high base effects
2.0 o price declines for communications;
0.0
recreation services & culture and clothing &
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012 BI
2013 BI
footwear
Sources: Department of Statistics, Bank Islam o slowdown in price gains for food & non-
20.0
CPI vs. PPI (YoY Growth)
alcoholic beverages; transport; alcoholic
15.0 beverages & tobacco and housing, utilities
10.0
& fuels
5.0
0.0
 Continued easing in core inflation to
below 1.0% YoY since July 2012 and
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Nov-06
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Nov-12
May-06
May-07
May-08
May-09
May-10
May-11
May-12
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
-5.0
negative PPI growth since June 2012, an
-10.0
indication of cooling price pressures or
-15.0
Headline CPI Headline PPI
limited pass-through effects on the ground.
Sources: Department of Statistics, Bank Islam
19

20. TAME INFLATION OUTLOOK (continued)
 However, remain cautious of the upside risks to inflation emanating from both
external and domestic factors such as:
o Sudden reversal in global commodity prices particularly related to energy, food and
building materials – surge in global surplus liquidity; rising risk premium of global oil
prices due to heightened geopolitical concerns; supply chain disruptions due to natural
catastrophes and adverse weather conditions due to climate change
o Strict implementation of the PEMANDU’s Subsidy Rationalisation Programme (SRP) –
removal or significant reduction to subsidies (price hikes and upward tariff reviews) that
have shielded somewhat the impact of higher global commodity prices on selling prices of
goods & services in Malaysia and their impact on the Malaysian economy
o Sticky food inflation could bump up the overall CPI as the Food & Non-Alcoholic
Beverages is the largest CPI component (30.3%)
o Income effects from the implementation of minimum wage policy for some 3.2 million
private sector workers and 7%-13% increments for some 1.4 million civil servants
20

21. TAME INFLATION OUTLOOK (continued)
 Notwithstanding these upside risks to inflation and the relative strength in
domestic demand, the current easing cycle in inflation should be able to sustain
thanks to:
o Significant excess capacity in the economy that should help contain inflationary
pressures despite robust domestic demand
o Cost-push and demand-pull inflation dynamics have yet to show signs of a breakout in
the absence of significant price pressures from labour market, credit expansion or
supply bottlenecks
o Moderate pressures from food and energy inflation as global commodity prices in
particular agricultural commodities and oil & gas are expected to stay within
acceptable/manageable ranges despite expectations of much improved global
economic conditions in 2H2013
o Relatively well-anchored inflation expectations
 Assuming no upward revision to retail prices of subsidised items in particular
petrol and diesel and barring other unforeseen circumstances, CPI growth:
o may have hit bottom at 1.3% YoY in November 2012
o may gain some ground in December 2012 but still to average around 1.7% in 2012
(way below the BNM’s targeted range of 2.0%-3.0%) vs. 3.2% in 2011
o should average below 2.5% in 2013 with a spike nearing the implicit tolerance
levels of 3% in the 2H2013 on base-effect lapses, changes to administrative prices by
21
mid-2013 and an uptick in demand-pull inflation

22. OPR PAUSE TO CONTINUE WITH A SLIGHT UPSIDE RISK
ACTUAL AND FORECAST REAL SHORT-TERM INTEREST RATES
8.0  The outlook for both growth and inflation
6.0 should be carefully assessed to avoid
4.0
over or under adjustment of monetary
2.0
policy.
 While rather benign inflation outlook in
0.0
Oct-04
Oct-05
Oct-06
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Oct-13
Aug-04
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
Aug-11
Aug-12
Aug-13
Apr-04
Feb-05
Apr-05
Feb-06
Apr-06
Feb-07
Apr-07
Feb-08
Apr-08
Feb-09
Apr-09
Feb-10
Apr-10
Feb-11
Apr-11
Feb-12
Apr-12
Feb-13
Apr-13
Dec-04
Dec-05
Dec-06
Dec-07
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Dec-11
Jun-11
Dec-12
Dec-13
Jun-12
Jun-13
-2.0
-4.0
2013 provides the scope for OPR cuts or
-6.0
CPI OPR Real OPR
at least extended rate-pause, there is a
Sources: Department of Statistics, Bank Islam
minor tightening risk to OPR towards
the later part of 2013 especially if growth
25 YoY GROWTH OF SELECTED CPI COMPONENTS
20
turns out much stronger than expected,
15
10
exerting a strain on inflation.
5  Deemed accommodative and adequate to
0
support domestic demand while
Jan-06
Jan-07
Jan-09
Jan-10
Jan-12
Sep-06
Jan-08
Nov-06
Sep-07
Nov-07
Sep-08
Nov-08
Sep-09
Nov-09
Sep-10
Nov-10
Jan-11
Sep-11
Nov-11
Sep-12
Nov-12
May-06
May-07
May-08
May-09
May-10
May-11
May-12
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
-5
-10 preventing a build-up of financial
-15
-20
imbalances, OPR should remain at
-25
Headline CPI
Food CPI
Adjusted or Non-Food CPI
Housing, Utilities & Fuel CPI
normalised levels of 3% throughout 2013.
Transport CPI
 Stable OPR outlook in 2013 while the
Sources: Bank Negara Malaysia, Bank Islam
earliest rate-hike delayed to 1H2014? 22

23. RATHER BULLISH MYR OUTLOOK
 Although we can expect some volatility in
the 1H2013, the general uptrend that MYR
has experienced since August 2012
should persist for much of 2013 without
being out-of-synch vis-à-vis its regional
MYR PERFORMANCE VS. USD & EUR
peers. Asian currencies should draw
strength from:
o Capital inflows particularly portfolio funds
Sources: Bloomberg, Bank Islam
in search of high-yielding assets. The
Institute of International Finance (IIF)
estimates that private flows into emerging
markets to hit US$1.1 trillion in 2013 trillion
(vs. US$1 trillion in 2012) of which 46.3%
or US$0.51 to reach Asia. By default,
Asian currencies should benefit since Asia
vis-à-vis other regions:
COMPARATIVE NORMALISED PERFORMANCE : MYR, SGD, KRW, TWD  is projected to be the world’s fastest-
growing region with the most reliable and
exciting growth story
Sources: Bloomberg, Bank Islam
 has solid underlying fundamentals 23

24. RATHER BULLISH MYR OUTLOOK (continued)
o Boost to risk appetite for emerging
currencies due to rosier economic
prospects especially for Asian economies
thanks to some form of stimulus measures
to be or already undertaken by the world’s
largest economies to stem the slowdown –
improving export outlook for trade-
COMPARATIVE NORMALISED PERFORMANCE : MYR, CNY, THB, IDR
dependent economies hence widening
current account surpluses
Sources: Bloomberg, Bank Islam
o Reduced safe-heaven appeal of USD due
8.88 SPOT PERFORMANCE OF SELECTED ASIAN CURRENCIES VS. USD (%) -1 JAN 2012 TO DATE to QE3 in favour of other currencies with
7.64
7.00
5.68
better economic growth potential and more
4.50 4.33 3.82
favourable yield prospects such as Asian
2.00 1.20
0.20
currencies
KRW PHP SGD TWD MYR THB CNY HKD INR IDR JPY
-3.00
-2.76  Asian currencies may gain significant
-8.00
-6.03 grounds towards year-end and hence,
MYR may end at a RM2.97-3.02
-13.00 -12.17 range from RM3.052 as at end-2012.
Sources: Bloomberg, Bank Islam
24

25. 25

26. GE13: D-DAY IS A GUESSING GAME
The Gap Period Between Two Consecutive Election Dates
Polling Date Interval Period
 The constitutional Parliamentary
GE1: Wednesday, 19 August 1959
GE2: Saturday, 25 April 1964 4 years 8 months
term is valid from 29 April 2008, the
GE3: Saturday, 10 May 1969
GE4: Saturday, 24 August 1974
5 years
5 years 3 months date of the Parliament’s first sitting after
GE5: Saturday, 8 July 1978 3 years 10 months
GE6: Thursday, 22 April 1982 3 years 9 months the 12th General Election (GE12). As
GE7: Sunday, 3 August 1986 4 years 3 months
GE8: Sunday, 21 October 1990 4 years 3 months such, the Parliament must be dissolved
GE9: Tuesday, 25 April 1995 4 years 6 months
GE10: Monday, 29 November 1999
GE11: Sunday, 21 March 2004
4 years 7 months
4 years 4 months
by 28 April 2013. From the dissolution
GE12: Saturday, 8 March 2008
GE13: March 2013?
3 years 11 months
5 years?
date, the GE13 must be held within 60
days. Historically, Malaysia has never
Sources: Election Commission, Bank Islam
come close to the full term of 5 years
except for the GE3 in 1969 and GE4 in
1974.
 Given deep changes in Malaysia’s
political landscape since 8 March 2008,
it’s difficult for the PM to arrive at a
perfect time to dissolve the Parliament
and to hold the GE13.
Sources: Election Commission, Bank Islam
26

27. GE13: FREE & FAIR ELECTION?
SEAT DISTRIBUTION AT HOUSE OF REPRESENTATIVES AND STATE LEGISLATIVE ASSEMBLIES
Perlis
Dewan Rakyat
3
Dewan Undangan Negeri
15
 As at 16 August 2012, explosion in the
Kedah 15 36
Penang
Perak
13
24
40
59
number of registered voters, crossing
Selangor
Negeri Sembilan
22
8
56
36
the 13 million mark to 13.05 million
Melaka 6 28
Johor 26 56 people and surging by 19.5%:
Pahang 14 42
Terengganu
Kelantan
8
14
32
45
o compared to a very mild growth of ONLY
Sarawak
Sabah
31
25
71
60
between 6%-7% as at GE10, GE11 and
FT Kuala Lumpur
FT Putrajaya
11
1
N/A
N/A
GE12
FT Labuan
TOTAL
1
222
N/A
576 o from just 10.92 million at GE12, equivalent
Sources: Election Commission, Bank Islam to 2.13 million increase, the biggest in
VOTER BASE Malaysia’s history
Year No of Registered Voters Growth (in number) Growth (%)
1959 2,171,097 o out of whom 274,247 people or 2.1% are
1964
1969
2,763,077
3,843,782
591,980
1,080,705
27.27
39.11
absent voters comprising armed forces,
1974 4,132,032 288,250 7.50 police and overseas voters – Top 3 states
1978 5,059,689 927,657 22.45
1982 6,081,628 1,021,939 20.20 with most absent voters are Federal
1986 6,964,960 883,332 14.52
1990 7,968,640 1,003,680 14.41
Territory of KL (40,543 people), Perak
1995 9,012,173 1,043,533 13.10 (38,367) and Johor (25,058) while Selangor
1999 9,564,071 551,898 6.12
2004 10,284,591 720,520 7.53 has the highest number of overseas voters
2008 10,922,139 637,548 6.20
2012* 13,052,374 2,130,235 19.50
with 579 people
Sources: Election Commission, Bank Islam
27

28. GE13: FREE & FAIR ELECTION? (continued)
 Although there are still about 3.2 million unregistered eligible voters (out of
16.3 million eligible voters), concerns whether this phenomenon of sharp
increases in voter registry really reflects increased voter awareness, growing
political interest and voter registration efforts by political parties– rising
pressures on the Election Commission (EC) to:
o speed up the clean-up of the electoral roll from dubious entries
o address the 8 demands by BERSIH especially related to free and fair electoral
system and election process
28

29. GE13: CHALLENGES OF PREDICTING
 The unprecedented Opposition’s victory on 8 March 2008 at the GE12 and
continued close cooperation of Opposition parties even post-GE 12 until the
establishment of Pakatan Rakyat (PR), the first cohesive, credible and viable
alternative coalition in Malaysia since Independence to challenge BN has
fundamentally transformed expectations of what could be the outcome of
future elections.
 As no two GEs can provide almost exactly the same reading and in view of the
surprise GE12 results, predicting the outcome of the GE13 could prove very
challenging and a highly speculative attempt. However, we will focus only on
the outcome for Parliamentary seats since that will determine the composition
of the Federal Government.
 While acknowledging that economists are in no way political analysts, we will
try to predict the outcome of GE13 and look for clues by:
o Analysing:
 current voter profile (age groups, gender, ethnic groups, urban-rural, income brackets,
etc), etc
 past voting trends in all GEs in particular GE12
29

30. GE13: CHALLENGES OF PREDICTING (continued)
 results of all 16 by-elections where both BN and PR secured an equal share of 8 seats of
which the final 5 by-elections were captured by BN with bigger majorities compared to
GE12 (Kerdau in Pahang, Merlimau in Melaka, Tenang in Johor, Galas in Kelantan and
Batu Sapi in Sabah)
 results of Sarawak state elections in April 2011 where PR made major inroads (securing
16 state seats from 9 previously with 44.6% of popular votes vs. 38.2% previously) could
provide indications of how “fierce” battles of GE13 will be and voting trends of
Sarawakians and Sabahans
o Taking stock of the feedback from our ground visits to selected areas nationwide to
gauge the underlying voter sentiment
o Identifying election issues, local or national that could affect voters’ decisions
o Assessing possible voting patterns among “wild card” groups that could swing
either way, namely:
 newly registered voters
 young voters
 urban voters
 voters in Sabah and Sarawak (with 56 Parliamentary seats)
 voters in Felda constituencies (54 Parliamentary seats)
 17 “marginal” seats where the winning majority was less than 1,000 votes at GE12 (a
swing of 500 votes in these constituencies may sway the election results either way)
30

31. GE13: GREATER POLITICAL TSUNAMI
 Based on the analysis of selected factors that we think could affect the
election outcome, we have outlined 3 possible scenarios:
o Scenario with moderate probability or best-case scenario: Narrow win for BN,
securing 112-122 Parliamentary seats (narrow loss for PR: 100-110)
 Failure to retake Kedah, Penang, Selangor and Kelantan
 Lose control of Perak and Negri Sembilan
o Scenario with high probability or base-case scenario: Narrow loss for BN,
securing only 97-107 Parliamentary seats (narrow victory for PR: 115-125)
 Failure to retake Kedah, Penang, Selangor and Kelantan
 Lose control of Perak, Negri Sembilan, Terengganu and Perlis
 Narrowly retain Pahang and Johor
 Lose significant grounds in Melaka, Sabah and Sarawak
o Scenario with low probability or worst-case scenario: Big loss for BN, securing
only 82-92 Parliamentary seats (big victory for PR: 130-140)
 Failure to retake Kedah, Penang, Selangor and Kelantan
 Lose control of Perak, Negri Sembilan, Terengganu, Perlis and Pahang
 Narrowly retain Johor and Melaka
 Lose significant grounds in Sabah and Sarawak
31

32. GE13: GREATER POLITICAL TSUNAMI? (continued)
GE RESULTS FOR PARLIAMENTARY SEATS
ALLIANCE/BN OPPOSITION TOTAL
Year No. of Seats Won Change from % of Total Seats % of Popular Votes No of Seats Won Change from % of Total Seats % of Popular Votes No of Seats Registered Voters Voter Turnout
Previous GE Previous GE (million) (%)
1959 74 71.2 51.7 30 28.9 48.3 104 2.17 73.3
1964 89 15 85.6 58.5 15 -15 14.4 41.5 104 2.76 78.9
1969 95 6 66 49.3 49 34 34.0 50.7 144 3.84 73.6
1974 135 40 87.7 60.7 19 -30 12.3 39.3 154 4.13 75.1
1978 130 -5 84.4 57.2 24 5 15.6 42.8 154 5.06 75.3
1982 132 2 85.7 60.5 22 -2 14.3 39.5 154 6.08 74.4
1986 148 16 83.6 57.3 29 7 16.4 42.7 177 6.96 70.0
1990 127 -21 70.6 53.4 53 24 29.5 46.6 180 7.97 72.6
1995 162 35 84.4 65.2 30 -23 15.6 34.8 192 9.01 71.4
1999 148 -14 76.6 56.3 45 15 23.3 43.5 193 9.60 71.1
2004 199 51 90.8 63.9 20 -25 9.2 36.1 219 10.28 73.5
2008 140 -59 63.1 50.4 82 62 36.9 49.6 222 10.92 76.0
2012? 97 to 107? (33) to (43)? 43.7 to 48.2 ? 115 to 125? 33 to 43? 51.8 to 56.3? ? 222 13,052,374* 75 to 80?
* as last gazetted on 16 August 2012 out of whom 12,778,127 ordinary voters and 274,247 absent voters
 Assumptions for the base-case scenario (no 2/3 majority but enough for PR to
form the Federal Govt):
o 2-cornered fights
o 75%-80% in overall national voter turnout
o Conservative but realistic voting tendency/share of votes for BN by ethnic
breakdown: 55%-60% among Malays, 20%-25% among Chinese, 45%-50%
among Indians and 60%-65% among Others
o Electoral fraud cases such as phantom voters, vote rigging, ballot stuffing, etc
32
make up less than 5% of total voter turnout

33. GE13: GREATER POLITICAL TSUNAMI? (continued)
FBMKLCI PERFORMANCE PRE-AND-POST GENERAL ELECTIONS
Number of days before or after GE -180 -90 -30 -7 -1 1 7 30 90 180
GE8 -9.1% -23.8% -6.0% 1.6% 1.6% 4.0% 4.9% 0.2% 2.2% 24.9%
GE9 -11.5% 12.0% 1.8% 1.3% -0.3% -1.7% -2.5% 6.6% 7.2% -1.6%
GE10 -0.5% -2.8% 0.4% 1.7% 1.0% -1.5% -2.6% 7.9% 34.4% 18.6%
GE11 22.7% 16.7% 5.0% 2.3% 0.3% 0.5% -1.0% -4.8% -9.1% -5.0%
GE12 0.4% -9.6% -8.4% -4.5% -0.3% -9.5% -7.8% -5.8% -3.7% -16.3%
Sources: Bloomberg, Bank Islam
 We can expect negative, knee-jerk (over)reaction on the first day of trading
of financial markets post-GE13 on fears over political instability,
administrative uncertainties and policy inconsistency; short-term
nervousness over power handover and transition; perceived up-tick in
Malaysia’s political risk, among others:
o Sell-down in equity, bond and foreign exchange markets – the “circuit breaker”
could be triggered in Bursa Malaysia i.e. the KLCI is down by more than 10% in a
trading session; sudden spike in bond yields and slide in MYR
o Other factors mostly external such as emergence of more conclusive signs of
resumption of a global recovery; improving global risk appetite, etc to significantly
limit the downside 33

34. GE13: MID-AND-LONG TERM POSITIVE FOR M’SIA
 In the medium-to-long term, after this mild political “revolution” or the so-
called “Malaysian spring”, the stiff competition for the hearts and minds of
voters will make the PR-led Federal Government always disposed to prove
that it can strike the balancing act between meeting the aspirations of the
people and the needs of the business/investing community i.e. conducive
environment for both the people and businesses not at the expense of the
other within a short period of time by implementing recommended measures
in Buku Jingga.
 Success stories of PR states in particular Selangor and Penang and
thumbs-up from the Auditor-General in his annual report should be a clear
indication what’s in store with a PR Federal Government.
 Malaysia may even emerge as an even more attractive and viable
investment destination as proven by the capability of Penang and Selangor,
2 PR-held states in luring the most approved manufacturing investments in
2010 and 2011.
 Faster reduction in budget deficits and public debt levels as proposed in the
PR Alternative Budget 2013 compared to the BN Govt?
34

35. GE13: MID-AND-LONG TERM POSITIVE FOR M’SIA
(continued)
 Given the anticipated narrow PR win, the presence of relatively strong
opposition in the Parliament should keep the PR government on its toes at all
times and help push through:
o a well functioning and genuine check-and-balance system to protect the rights of all
citizens, consistent with the Federal Constitution
o the reformist agenda acceleration - economic, structural, institutional, political,
social and law reforms, required to raise Malaysia’s long-term competitiveness
o greater transparency, accountability, governance and integrity in all aspects in
particular award of Govt contracts (through open tender), procurement process and
other business practices & dealings, necessary to regain and retain investor
confidence
o promotion of business-friendly and free-market policies without imposing hardship
on the rakyat
o zero-tolerance for corruption and rent-seeking culture as well as dismantling of
monopolies/oligopolies and cumbersome regulations should in turn reduce the
overall costs of doing business in Malaysia and create a more conducive business
environment
o lower long-term risk premium assigned to Malaysia
35

36. GE13: MID-AND-LONG TERM POSITIVE FOR M’SIA
(continued)
 Increased well-being of the rakyat and strengthening of the democratic
process:
o No amendment to the Constitution at whims and fancies since constitutional
amendments under Articles 159 (3), 159 (5) and 161 E require a supermajority of
2/3
o The emergence of a genuine “two-coalition system”, mirroring the “two-party
system” that exists in the UK, the US, etc as well as other changes to the
Governmental system such as limiting to 2 terms a person can hold the position as
PM, limiting to only 1 key cabinet portfolio a minister can hold. For example, the
PM cannot become the Finance Minister to avoid conflict of interest
o Adjustments to the affirmative action such as NEP and other welfare policies that
have deviated from the original objectives; transformation to a needs-based, merit-
based and market-oriented affirmative action for all instead of a race-based
programme to flush out NEP-related shortcomings and abuses in particular
cronyism, corruption and systemic inefficiency while assisting the poor and
marginalized
o Positive changes in policy-making process with policies that serve the interest of
the masses especially the “small people” rather than enriching the politically
36
connected elite group (within the inner circle of people in power)

37. GE13: MID-AND-LONG TERM POSITIVE FOR M’SIA
(continued)
o Higher quality debates in the Parliament and State Assemblies
o Perhaps, more freedom for MPs to vote in the Parliament based on their wisdom
or the feedback from the people they represent?
 Among major concerns if PR unseats BN:
o “Economic sabotage”, resistance and non-cooperation by those in the business
community and civil service who are aligned to the losing coalition
o Perceptions of political instability especially during the period of power transition
with threats of chaos by some political leaders, simmering ethnic and religious
tensions (delicate race-religion relations), protests against the PR’s reform
policies especially the needs-based affirmative action to correct socio-economic
imbalances
o No assurance of continuity of Govt policies and guarantee of the sanctity of
contracts in particular related to lopsided concession agreements
o No introduction of GST, much needed to diversify the Govt’s revenue base
37

38. THANK YOU
Email: azrulazwar@bankislam.com.my
Phone: +603-20888075
Originating Department 38