The message was simple. Jump-start domestic investment and help the government generate economic activity, said financial executives familiar with the meeting.
Najib is concerned because not only were foreign direct investment flows slowing, but key businessmen were also moving out of the economy.
Only months before the meeting, Asia’s richest businessman and Malaysia’s top corporate figure Robert Kuok sold off his long-established interests in the sugar importing and refining business. Save for his Shangri-La hotels nationwide, Kuok has little visible business interests left in Malaysia.
Meanwhile, casino operator Genting, engineering and property group YTL, and the telecommunications and multimedia holdings controlled by tycoon Ananda Krishnan have been restructuring their respective corporations in recent months.
They want to channel financial resources generated locally to finance overseas expansion plans.
Whether Najib’s cajoling of these corporate chieftains will force them to search inward for business opportunities is not clear.
But the vandalism of several churches nationwide over the use of the word ‘Allah’ by Christians will weigh heavily on their plans for future investments.
“It has all the hallmarks of a self-created problem which will trouble investors — not just foreign but domestic ones as well,” said Manu Bhaskaran of Centennial Asia Advisors in Singapore. “They would have noticed that the majority ethnic group in Malaysia appears insecure and how and why this insecurity has been bred.”
Malaysia stands at a crossroads in its economic development.
The country’s export-led economic model is sputtering because of weak global demand, while higher labour costs are forcing companies to consider other investment locations. Meanwhile, state-led infrastructure development that has kept the construction sector humming has dried up.
The boom in commodities is fading and exposing the government’s overdependence on its revenue from petroleum to fund the country’s bloated civil service and development programmes.
Najib has declared that he will unveil an economic blueprint next month that will detail the government’s plans to create a new economic model, which can help chart Malaysia’s transformation to a high-income economy.
But private economists said he faces several challenges and chief among them will be tackling structural gaps such as the shortage of skilled labour, a weak education system and a state-dominated economy that leaves little room for private sector competition.
Furthermore, the government’s reluctance to dismantle barriers that fuel a vast political patronage system has bred inefficiencies. These include the awarding of contracts on a negotiated basis rather than competitive bidding.
“The (new economic) model needs to be holistic and should go beyond economics and trade. Malaysia needs more openness,” Dr Mohamed Ariff, head of the Malaysian Institute of Economic Research (Mier), told a regional conference in Singapore recently.
Official figures show that approved investment for the first nine months of last year totalled RM19.1 billion, of which RM12.2 billion was foreign direct investment.
That is a far cry from the RM62.8 billion of approved investments in the previous year, with just over RM46 billion in the form of foreign capital.
Mier estimates that the economy contracted by up to 3.3 per cent last year. The independent think-tank believes the economy will grow by as much as 3.7 per cent this year.
But private economists said the rebound will be clouded by several factors, such as a swelling fiscal deficit and abnormal capital outflow. According to government officials, close to RM117 billion flowed out in 2008 and a further RM54 billion in the first half of last year.
Najib’s immediate challenge is to recreate an environment that will encourage investment. As a percentage of the nation’s gross domestic product (GDP), private investment currently hovers at around 11 per cent, from about 36 per cent during the mid-1990s.
Private economists like Bhaskaran of Centennial believe that Malaysia needs to get private investment to around 20 per cent of GDP quickly. To meet that target, Najib will need to implement a “thoroughgoing reform to reverse the degradation of institutions” such as the civil service, judiciary, police and the country’s universities, said Bhaskaran. — The Straits Times
No comments:
Post a Comment