Abstract
The three months to the end of December bought several themes to the fore in
the Malaysian defence
sector. One was the announcement by Prime Minister
Abdullah Ahmad Badawi on October 8 that he will
not seek re-election as
leader of the United Malays National Organisation (UMNO). Consequently,
Malaysia will have a new premier in March 2009. Deputy Prime Minister Najib
Razak appears certain to
gain the UMNO leadership, but the prime
ministerial position is not so clear, with polls suggesting greater
support for opposition leader Anwar Ibrahim.
In contrast to the potential
political instability arising from the race for the top job, another key theme
is
the general stability in the country’s internal and external
security situation. Malaysia has maintained
strict controls over its
population, primarily via the use of the Internal Security Act (ISA). Malaysia
has
been particularly successful in controlling the flow of information
and this has contributed greatly to its
ability to monitor and respond to
terrorist threats.
For the time being, we continue to expect that the
Malaysian government will increase defence spending
by 4% annually, in
real terms, over the coming years. Absolute increases will depend in part on
how the
country’s economy fares in the face of the global financial
crisis. Thus far, the economy has contracted
slightly, and BMI’s
real GDP growth forecast for 2009 has dipped below 5.0%; the first time since
2001
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