The WIR data is chilling given that Minister in Prime Minister’s Department Idris Jala had earlier warned that Malaysia could go bankrupt by 2019, if the government was not allowed to embark on a subsidy-slashing program to reduce debt.Wong Choon Mei, Malaysia Chronicle
The worst is still far from over for Malaysia, which recorded an 81 percent plunge in foreign direct investment last year as investors bet that Prime Minister Najib Razak will not be able to steer his country to safe shores.
“From their point of view, Malaysia is beginning to look more like Thailand each day. They don’t think Najib is in control at Umno anymore and they are worried about the next handover of power,” PKR strategic director Tian Chua told Malaysia Chronicle.
“The second-line Umno leaders like Muhyiddin, Hishammuddin are not inspiring. Then the type of politicking displayed by people like Khir Toyo and Ibrahim Ali frighten investors even more. And that’s why they bail out. And I’m not talking about foreign investors but also Malaysians themselves. Both categories are running away.”
Najib has to call for a general election latest by March 2013, but pundits beleive it will happen before October 2011.
Sore thumb amongst ASEAN nations
Indeed, Malaysia was the only country in the region to record negative FDI in 2009. According to the World Foreign Investment Report 2010 released by the United Nations on Friday, Malaysia received only US$1.38 billion.
This is even less than Philippines’ US$1.95 billion and pales in comparison with Singapore’s US$16 billion. Only Cambodia, Myanmar, Brunei, Laos and Timor-Leste received less than Malaysia.
The WIR data is chilling given that Minister in Prime Minister’s Department Idris Jala had earlier warned that Malaysia could go bankrupt by 2019, if the government was not allowed to embark on a subsidy-slashing program to reduce debt.
But experts and opposition politicians have dismissed Idris’ arguments as masking the real problems, arguing that the reasons for the economic downfall was due to endemic corruption, a weak political and administrative system.
In particular, Opposition Leader Anwar Ibrahim has lashed out at Najib, who is also Finance Minister, for offering piecemeal solutions rather an integrated and structural revamp."Burdening the people on the pretext of reducing deficit and using 'government savings' to fund government excesses must be stopped immediately," said Anwar.
He warned that subsidy cuts, which would trigger prices hikes, should only be used as a means to cut the national deficit. However, Malaysia’s national debt has soared to record high and the fiscal deficit was 7 percent of GDP last year, he pointed out.
DAP chief economist Tony Pua was also unconvinced by Najib's five-year plan unveiled last month. This aims to bring the deficit down to 5.3 percent this year, and reduce government debt as a proportion of GDP to 49.9 per cent in 2015 compared to 52.9 per cent in 2010.
“What was previously unimaginable, that we may one day be compared to countries such as Cambodia and Myanmar, is now a real possibility,” said Tony, pointing to the WIR data.
“The government cannot use the excuse of global financial crisis as the reason for the precipitous drop in FDI as we have performed the worst compared to all other countries big and small in the region.”
Najib's roadshows failed to inspire
The WIR data also showed that despite its current problems Thailand recorded a 30.4 per cent drop, Vietnam 44.1 per cent and Indonesia 44.7 per cent.
The other ASEAN nations Singapore, Brunei, Philippines and Myanmar managed to register positive FDI growth despite stiff challenge from East Asian dragons like China and Hong Kong.
Earlier this month, Anwar had suggested 4 key measures to bolster public and investor confidence. These include the immediate announcement of drastic reforms for a transparent government procurement system; restructure of gas subsidies for Independent Power Producers; vigilant management of Government-Linked Companies and government agencies and lastly, stepping up efforts to combat corruption and to stop political meddling in the Malaysian Anti-Corruption Commission and the Attorney-General's Chambers.
“It is not a mystery at all why we did so badly. Investors fear not the Pakatan Rakyat but Umno and BN. They are afraid Umno might instigate or trigger a political stalemate if they lose at the next General Election. Bear in mind some Umno leaders have hinted they would fight to the end not to lose political power,” Tian said.
“We also have to look at the performance of Najib as Finance Minister. He has done poorly and should relinquish the post to someone more capable immediately. So far, his New Economic Model has disappointed and the weak FDI numbers are another testament to his inability to draw in funds despite numerous expensive road shows. He spends too much money on frivolous thing like public relations and media advertisements to boost his image and on the political front - too much time on negative politicking.” - Malaysia Chronicle
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