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The central bank’s new measures exempted loans for the purchase of owner-occupied houses and flats, industrial facilities and theme parks to boost the tourist industry. Punters are also still allowed to borrow in order to buy shares in initial public offerings by infrastructure companies. Following the announcement of these measures, banks have suspended margin financing until they have calculated their existing exposure. The market looks set for a bearish period. This year’s surge of mega projects could also have an effect on the macro economy for the first time. The finance ministry forecasts GNP growth at 8%, down slightly on last year’s estimated 8.2%. Exports are forecast to reach M$204.5 billion, up from an estimated M$187 billion in 1996. Imports are expected to reach M$194.5 billion, up from M182.4 billion. The current account, bane of most south-east Asian countries, is forecast to be in deficit to the tune of M$11.5 billion, down from last year’s M$13 billion and its peak of M$18.7 billion in 1995. But figures from the central bank are less sanguine. Bank Negara forecasts 1997 growth at between 7.8% and 8.2%. It puts exports at M$206.5 billion and imports at M$199.3 billion. Added to differences on the invisible side, Bank Negara believes the 1997 current account deficit could rise to almost M$15 billion. Much will depend on the expected recovery in exports of electronic goods. But towards the end of the year an import bulge is likely, as expensive equipment for projects connected with the Commonwealth Games pours in – avionic equipment for the new airport, toll road and railway equipment and a new aircraft order. The go-go growth strategy is also sparking social dissent. Unsurprisingly, a growing number of Malaysians, while proud of the spectacular development the country has enjoyed in the past decade, believe the break-neck pace of change, and the sheer number and size of planned projects in the run-up to the games, is putting an unacceptable strain on the economy and on Malaysia’s social fabric. Mahathir, an exemplar of the “can-do” spirit who is widely given the credit for Malaysia’s exceptional progress in the last few years, doesn’t agree that a slowdown is either necessary or desirable. But the social, economic and financial stress on the country is becoming apparent. Unwanted side effects of the hyperactive national development programme range from traffic jams and pollution in what can still claim to be one of Asia’s most attractive capital cities, to power blackouts, a rise in corruption and an outbreak of complaints over the behaviour of the two million immigrant workers, who now make up one fifth of the workforce. The government has been taken by surprise by the side effects and has had difficulty in reacting to public concern. In the 1980s, it established a national car programme, giving tax breaks to a local company which produced the 1,600cc Proton sedan in collaboration with Mitsubishi of Japan. The predictable outcome, as Malaysians rushed to buy the low-cost car, was increasing traffic jams, especially into the capital from the commuter suburbs, and a rise in pollution. Efforts to resolve traffic problems by improving public transport have been unsuccessful – a light rail transit is not yet popular and buses are poorly organized. The latest scheme – to reduce the number of parking places in the downtown area – was treated with scepticism. At the end of April, Malaysians were shocked to hear that 50,000 Bangladeshis were poised on Malaysia’s border with Thailand, waiting for a chance to cross the border for a job on a construction site. Labour shortages have developed in plantations, hotels and tourism facilities and in domestic work. After a crackdown earlier this year on workers without visas, Indonesia despatched a naval destroyer to bring home thousands of illegal Indonesian plantation workers facing deportation. There has been a backlash against immigrant Bangladeshi workers who have been scapegoated for an increase in crime. In January, suspicions that corruption was worsening hardened when Muhammed Muhammed Taib, chief minister of Selangor state, which surrounds Kuala Lumpur and is a focus of big projects, was arrested in Australia. He had tried to depart for New Zealand carrying a suitcase containing just under $1 million in cash. In April he resigned his ministerial post, reportedly in response to a demand from the prime minister, who had earlier strongly condemned “money politics” at a ruling party congress. The role of the state has contributed to Malaysia’s pace of development. Under the country’s federal system, land is controlled by the states, not Kuala Lumpur. “Every state wants an airport or a highway or a shopping mall or a housing estate,” says one analyst. “It’s easy for a developer to get projects approved and it also contributes to corruption.” Even schoolchildren were moved to protest about poor development planning, writing to the New Straits Times newspaper to urge the cancellation of a property project planned in Kuala Lumpur’s central Lake Gardens, a green lung long regarded as one of the capital’s most attractive features. But so far, the protests seem to have had little effect. Mahathir is not slow to complain when Malaysians don’t seem to be keeping up with the new standards. In a speech last month he berated the public for hanging their underwear out to dry on balconies, for continuing to patronize traditional but unhygienic food stalls and restaurants, for refusing to live in high-rise apartments, opting instead for houses with gardens, and for cluttering buildings with unsightly television aerials and satellite dishes. He proudly noted, however, that Malaysians did not urinate in lifts, a problem seen in neighbouring Singapore, with whom Malaysians recently had a serious tiff. Comparisons with Singapore may be one reason why Mahathir and other Malaysian leaders are so determined to push ahead with fast development. The ethnic-Chinese-dominated city state, now with a per capita income of $23,000 compared with Malaysia’s $4,666, is only a few hours drive away by expressway. Many Malaysians, and Singaporeans, are frequent visitors to the southern Malaysian state of Johor Baru, near Singapore. When former Singapore prime minister Lee Kuan Yew described Johor as a haven for car jacking and muggings, Malaysians were outraged. Lee apologized twice, and Singapore was shocked at one point by reports that Malaysia would break off relations. Tempers have now cooled but there is no doubt that the comment hit a raw nerve. Some of the bigger projects in Malaysia’s long list are designed to cut the dependence of the country on its neighbour to the south. One is Port Klang, a container port on the Straits of Malacca on Malaysia’s west coast north of Singapore. As much as half of Malaysia’s M$200 billion of annual exports are shipped via Singapore. In an effort to get back its business, Malaysia has upgraded Port Klang since 1991, doubling the volume of container traffic it can handle to more than one million containers – still less than 10% of Singapore’s capacity and only one third of the three million container shipments annually dispatched through Singapore. The port owner plans to spend M$990 million by next year to expand capacity to three million containers. It has succeeded in getting large ships to call by cutting costs and is highly automated, with a staff of only 400 people. Another project is the offshore Labuan banking centre, on an island off the east coast. Here Malaysia plans to build on its success in wresting stock exchange trading away from Singapore to Kuala Lumpur. The new airport is designed to compete with Singapore’s successful Changi regional hub. Many Malaysians believe that a breathing space is becoming essential if Malaysia is to make the jump to the next stage of development. “We’ve done very well,” says Yusli Mohamed Yusoff, chief general manager of Sims Merchant Bankers. “Now we need fine tuning. We have to avoid gridlock and set priorities, like improving education and productivity and reallocating resources. One of the reasons we have so many foreign workers is that our existing staff is poorly allocated. We need time to catch up with new ideas and systems, like information technology.” He also points to a range of social ills, from drug taking among young people, to a strain on families due to overwork and stress, to lack of creativity and discipline in schools and universities and to the need for a better civic consciousness as areas which need attention. “Malays have come a long way,” he says. “People are no longer ignorant or lazy, they are aware of the importance of earnings and of making sacrifices. People now want to see social improvements. This can also take time.” The level of complaints now arising in Malaysia also points to a social change which could eventually have political effects. The growth of the Malay middle class, now equally affected by traffic jams, crime, shortages of maids and other problems as the formerly better-off Chinese, means a considerable proportion of the population is speaking with one voice. “Malaysian society is changing from a racial structure to a class structure,” says Seow of Dresdner Kleinwort Benson. Such a change could eventually have far-reaching implications in a country in which the Malays dominate the ruling party. The Barisan Nasional has an inbuilt majority in a society divided along racial lines. The party won the last election with a substantial majority, picking up strong support from ethnic Chinese voters who were impressed by the government’s ability to develop the economy and support business. The racial divide has been successful in promoting racial harmony, but some Chinese and Malays would now like to see more integration. “We still don’t have companies in which Malays and Chinese work together on an equal basis,” says one senior businessman. “That’s a pity.” Malaysia will need to make the most of all its potential synergies if it is to succeed with the Multimedia Super Corridor (MSC), the one visionary project that all critics agree is not only good for the country, but also well timed. The corridor is a 15km by 50km strip of land between Kuala Lumpur and the new airport containing two new intelligent garden cities – Putrajaya, and Cyberjaya for multimedia companies. The corridor will be linked by a high-capacity fibre-optic backbone backed by international links and low telephone charges. The idea is to establish a purpose-built south-east Asian Silicon Valley, with highclass facilities – housing, entertainment, leisure, communications and transport with links to the new airport and a high-speed train and a modern service culture to attract local and international companies to set up research and development facilities in Malaysia. Mahathir has launched a global marketing campaign for the MSC and has signed up a number of senior electronics industry figures to his MSC advisory panel, including Bill Gates, chairman of Microsoft. More than 400 local companies have signed up to participate. He has pledged no censorship of the internet and a range of new laws will be drafted covering intellectual property rights, digital signatures, computer crime, electronic medicine and electronic government. The government will establish a multimedia university in the zone and will itself get involved in seven flagship multimedia industries: electronic government; smart schools; tele-medicine; a national multipurpose smart card; setting up research and development clusters to develop new multimedia industries; establishing regional, borderless centres such as back offices, telemarketing and data processing; and operational backup for companies through world-wide manufacturing webs, covering design, manufacturing and distribution. The concept builds on previously successful export-oriented industrial zones. Companies that invest in the MSC will have tax-free privileges for 10 years, or a 100% investment tax allowance, multimedia equipment will come in duty free, and employment of foreign workers, foreign ownership of companies and foreign borrowing are unrestricted. Preferential access to government contracts in the flagship multimedia industries has been promised and the Multimedia Development Corporation has been set up to provide a one-stop shop for investors. Speedy resolution of any problems through immediate access to the prime minister and his deputy, who both chair MSC committees, is guaranteed. If successful, the MSC should provide a profitable way of building skills through the training provided by incoming foreign “knowledge workers” in modern industries. Planned over 20 years, it will be funded at least partly by foreign investment so is not likely to cost a great deal in the early stages, compared with some of the other projects planned nation-wide. If Malaysia can realign its focus on the construction and property side of infrastructure, towards educating and training the people who provide the infrastructure for an information-based society, then Mahathir’s vision appears likely to be successful. The risk is that easy gains will simply prove too tempting in the short term. |
