[Kabar-indonesia] 3 Articles: Analysis: Malaysia's red tape gives investors the blues

[Joyo at aol.com]

also: The Age: While Malaysia fiddles, its opportunities are
running dry [Op-ed by Michael Backman; Malaysia's ruling
party rebuffs demands by Mahathir, ethnic minorities

Analysis-Malaysia's red tape gives investors the blues

By Liau Y-Sing

KUALA LUMPUR, November 14 (Reuters) - Foreign investors have
little enthusiasm for Malaysia -- but it has little to do
with traditional business factors such as production costs.

Rather, their lack of interest has more to do with a litany
of more esoteric issues such as mountains of red tape,
opaque decision-making, affirmative-action policies, a lack
of skilled workers and hints of religious tension.

"There is really an increasingly widespread perception that
conditions of doing business here in Malaysia are not that
attractive anymore," said Thierry Rommel, ambassador of the
EU Commission to Malaysia.

>From U.S. electronics makers to Indian IT firms, foreigners
looking to expand in Southeast Asia are increasingly
overlooking Malaysia in favour of Vietnam's cheap labour,
Indonesia's big emerging market or Singapore's sophisticated
workforce.

Long dwarfed by Asian giants China and India, Malaysia is
now also spurned in favour of some smaller economies,
cutting foreign investment into the country and casting
doubt over the future of one of Southeast Asia's fastest
growing economies.

Foreign direct investment into Malaysia fell 14 percent to
$3.97 billion last year, and the country dropped four places
to rank sixth out of 10 Southeast Asian countries in
attracting foreigners, United Nations data showed.

The decline came amid a 45 percent jump in foreign direct
investment into Southeast Asia last year and it marked the
first time that Malaysia fell behind less-developed
neighbour Indonesia.

Foreign direct investment inflows into Malaysia have been
almost stagnant since 1990, according to the U.N. data. From
1990 to 2000, the country drew an average $4.7 billion in
foreign investment each year, roughly the same as the figure
in 2004.

China, in contrast, sucked in $72.4 billion in foreign
investment last year, more than double the average yearly
amount it absorbed between 1990 and 2000.

CLSA deputy chief economist Eric Fishwick said the problem
speaks volumes about the whole economy.

"The relatively small amount of FDI reflects the broader
growth environment which is still overprotectionist,
uncompetitive," Fishwick said.
"Going forward, Malaysia is going to underperform its
potential. It needs to allow competition in its economy and
part of competition is that non-viable businesses be allowed
to go out of business."

OPAQUE POLICIES, RELIGIOUS RAIDS

Malaysia was one of the first Asian nations to set up an
offshore manufacturing hub for Western firms, having
launched an aggressive pitch for foreign investment in 1972
with a free-trade zone in the northern state of Penang.

Tech firms such as Intel Corp , the world's largest maker of
computer chips, and telecoms firm Motorola have been
operating from Penang for decades.

Malaysia has also recently wooed German graphite-electrode
maker SGL Carbon and chipmaker Infineon to set up
operations. But nowadays, it is much more difficult to
capture major investments like these.

An example of the red tape: foreigners say it can take half
a year to get a work permit, compared with less than a week
in neighbouring Singapore. There are also a plethora of
different government bodies to deal with.

Malaysia has been passed over in recent years by electronics
firm Solectron Corp , Dutch energy company SHV Holdings and
semiconductor firm Advanced Interconnect Technologies.

Malaysia still depends heavily on foreign money to drive its
manufacturing industry and, increasingly, its services
sector. So falling foreign investment, and complaints about
red tape and delays, have jolted the government into action.

In September, it set up a cabinet team led by Deputy Prime
Minister Najib Razak to speed up approval for foreign
investment projects involving large and technology-intensive
industries.

Last month, Najib said the new team had approved high-tech
projects worth $11 billion over five years involving two
local firms and a foreign one. He did not reveal any project
details.

But there are also gripes about a lack of transparency.

"The Malaysian government can do a better job in making
regulations less imposing to businesses," said Vince
Leusner, president of the American Malaysian Chamber of
Commerce.

"Often it seems like the proper consultation with the
business community hasn't been made," he added.

Some foreigners are also unhappy with an affirmative action
policy in favour of ethnic Malays. They say the government
sometimes favours Malay-run firms at the expense of foreign-
run businesses, citing the case of DiGi.Com which recently
lost out on a 3G telecoms licence to smaller, local rivals.
DiGi.Com is controlled by Norway's Telenor .

Some businessmen say Malaysia's image as a moderate Muslim
nation has also been tarnished, amid local complaints that
fundamentalist interpretations of Islamic law are gaining
ground.

In October, Islamic religious police raided the home of a
Christian American couple who were wrongly suspected of
being unmarried Muslims committing "close proximity".

"The Islamic rhetoric has been increasing," said Malaysia-
based political economist Charles Santiago. "Foreigners are
quite concerned that the government is unable to control
Islamic fervour."

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The Age
Wednesday, November 15, 2006

While Malaysia fiddles, its opportunities are running dry

Michael Backman

MALAYSIA'S been at it again, arguing about what proportion
of the economy each of its two main races - the Malays and
the Chinese - owns. It's an argument that's been running for
40 years. That wealth and race are not synonymous is
important for national cohesion, but really it's time
Malaysia grew up.

It's a tough world out there and there can be little
sympathy for a country that prefers to argue about how to
divide wealth rather than get on with the job of creating
it.

The long-held aim is for 30 per cent of corporate equity to
be in Malay hands, but the figure that the Government uses
to justify handing over huge swathes of public companies to
Malays but not to other races is absurd. It bases its figure
on equity valued, not at market value, but at par value.

Many shares have a par value of say $1 but a market value of
$12. And so the Government figure (18.9 per cent is the most
recent figure) is a gross underestimate. Last month a paper
by a researcher at a local think-tank came up with a figure
of 45 per cent based on actual stock prices. All hell broke
loose. The paper was withdrawn and the researcher resigned
in protest. Part of the problem is that he is Chinese.

"Malaysia boleh!" is Malaysia's national catch cry. It
translates to "Malaysia can!" and Malaysia certainly can.
Few countries are as good at wasting money. It is richly
endowed with natural resources and the national obsession
seems to be to extract these, sell them off and then
collectively spray the proceeds up against the wall.

This all happens in the context of Malaysia's grossly
inflated sense of its place in the world.

Most Malaysians are convinced that the eyes of the world are
on their country and that their leaders are world figures.
This is thanks to Malaysia's tame media and the bravado of
former prime minister Mahathir Mohamad. The truth is, few
people on the streets of London or New York could point to
Malaysia on a map much less name its prime minister or
capital city.

As if to make this point, a recent episode of The Simpsons
features a newsreader trying to announce that a tidal wave
had hit some place called Kuala Lumpur. He couldn't
pronounce the city's name and so made up one, as if no-one
cared anyway. But the joke was on the script writers - Kuala
Lumpur is inland.

Petronas, the national oil company is well run, particularly
when compared to the disaster that passes for a national oil
company in neighbouring Indonesia. But in some respects,
this is Malaysia's problem. The very success of Petronas
means that it is used to underwrite all manner of excess.

The KLCC development in central Kuala Lumpur is an example.
It includes the Twin Towers, the tallest buildings in the
world when they were built, which was their point.

It certainly wasn't that there was an office shortage in
Kuala Lumpur - there wasn't.

Malaysians are very proud of these towers. Goodness knows
why. They had little to do with them. The money for them
came out of the ground and the engineering was contracted
out to South Korean companies.

They don't even run the shopping centre that's beneath them.
That's handled by Australia's Westfield.

Next year, a Malaysian astronaut will go into space aboard a
Russian rocket - the first Malay in space. And the cost?
$RM95 million ($A34.3 million), to be footed by Malaysian
taxpayers. The Science and Technology Minister has said that
a moon landing in 2020 is the next target, aboard a US
flight. There's no indication of what the Americans will
charge for this, assuming there's even a chance that they
will consider it. But what is Malaysia getting by using the
space programs of others as a taxi service? There are no
obvious technical benefits, but no doubt Malaysians will be
told once again, that they are "boleh". The trouble is,
they're not. It's not their space program.

Back in July, the Government announced that it would spend
$RM490 million on a sports complex near the London Olympics
site so that Malaysian athletes can train there and "get
used to cold weather".

But the summer Olympics are held in the summer.

So what is the complex's real purpose? The dozens of
goodwill missions by ministers and bureaucrats to London to
check on the centre's construction and then on the athletes
while they train might provide a clue.

Bank bale outs, a formula one racing track, an entire new
capital city - Petronas has paid for them all. It's been an
orgy of nonsense that Malaysia can ill afford.

Why? Because Malaysia's oil will run out in about 19 years.
As it is, Malaysia will become a net oil importer in 2011 -
that's just five years away.

So it's in this context that the latest debate about race
and wealth is so sad.

It is time to move on, time to prepare the economy for life
after oil. But, like Nero fiddling while Rome burned, the
Malaysian Government is more interested in stunts like
sending a Malaysian into space when Malaysia's inadequate
schools could have done with the cash, and arguing about
wealth distribution using transparently ridiculous
statistics.

That's not Malaysia "boleh", that's Malaysia "bodoh"
(stupid).

---------------------------------------------------

Malaysia's ruling party rebuffs demands by Mahathir, ethnic
minorities

By SEAN YOONG, Associated Press Writer

KUALA LUMPUR, November 14 (AP) -- Malaysia's ruling party on
Tuesday scorned former leader Mahathir Mohamad's efforts to
oust the current prime minister, and vowed to prevent ethnic
minorities from eroding the Malay Muslim majority's
privileges.

Top leaders in the United Malays National Organization
delivered fiery speeches at the party's annual congress that
framed their biggest internal and external challenges
Mahathir's criticism of current leader Abdullah Ahmad
Badawi, and other ethnic communities' demand for more
equitable racial and religious policies.

In a clear warning to Mahathir, UMNO's women's wing chief
Rafidah Aziz stressed that "any individuals who demand that
only their voice be heeded are manifestly opposed to the
process and concept of democracy."

"The dissatisfaction of individuals, no matter who they are,
shouldn't be the reason to topple a leader or jeopardize the
party and the government," Rafidah said. "Nobody has the
right to make false accusations or pure slander."

Mahathir has been a thorn in Abdullah's side over the past
year, accusing his successor of nepotism, corruption and
mismanaging the economy. But he has received no public
support from UMNO leaders, who insist Abdullah should be
supported to prevent infighting within the party that has
formed Malaysia's governmental core since 1957.

Mahathir, who handed power to Abdullah in 2003, dropped out
of UMNO's five-day assembly after suffering a mild heart
attack on Thursday.

Abdullah launched congress proceedings Monday by telling
some 2,500 delegates that his focus is on economic and
social development, especially for Malay Muslims, who
comprise nearly 60 percent of Malaysia's 26 million people
but lag behind the ethnic Chinese minority that controls
more corporate wealth.

Hishamuddin Hussein, UMNO's youth chief, said Malays won't
compromise on issues such as affirmative action policies
benefiting Malays and the right of Islamic courts to rule
exclusively in cases involving Muslims.

"Do not dispute, threaten or play lightly with the position
of the Malay people and Islamic religion in this nation,"
Hishamuddin said, adding that UMNO also won't tolerate
criticism by foreign governments about its policies.
Hishamuddin singled out neighboring Singapore over its elder
statesman Lee Kuan Yew's recent claim that the Malaysian and
Indonesian governments have "systematically marginalized"
Chinese citizens. Lee subsequently apologized for causing
offense to Malaysia, but did not retract the remarks.

"Such irresponsible and insulting statements that chide our
policies are meant to hide their own weaknesses," said
Hishamuddin, the son of Malaysia's former Prime Minister
Hussein Onn.

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Joyo Indonesia News Service
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