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Gold/Mining/Energy : An obscure ZIM in Africa traded Down Under -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (406)	10/28/2002 12:25:45 AM
From: TobagoJack	Read Replies (1) \| Respond to of 867

Malaysia online.wsj.com Looking For A New Model By LESLIE LOPEZ KUALA LUMPUR, Malaysia -- Malaysian Prime Minister Mahathir Mohamad recently summoned a group of local manufacturers to his new administrative capital of Putrajaya and delivered an urgent message: The economy can no longer rely on foreign investment to power growth and local businesses must to step into the breach. "He told us that there was only so much that the government could do and that we had to bump up investments to generate economic activity at home," says an ethnic Chinese Malaysian businessman who attended the meeting. Like the rest of Southeast Asia, Malaysia is discovering that the export-oriented development strategy that powered growth for the last two decades is threatened by the rise of China as a global manufacturing center. The evidence is mounting. In the government's recently released annual economic report, Kuala Lumpur estimated that foreign direct investment would amount to about four billion ringgit (1.05 billion) this year, down sharply from 9.4 billion ringgit in 1999. As if to confirm the drying up of new investment, the A.T. Kearney Foreign Direct Investment Confidence Index, which tracks the top 25 most attractive investment locations in the world, dropped Malaysia -- which had ranked 22 in the index since June 1999-from its listing. There are other potential trouble spots. Malaysia's reliance on electronic component exports -- its largest single manufactured export -- leaves the country vulnerable to the global economic slowdown. What's more, state-protected industries such as Malaysia's coddled auto and steel businesses, won't be able to compete international rivals when tariff barriers come down over the next three years under multilateral trade pacts. Malaysia: Economic Overview So far, Malaysia has avoided a sharp economic slump through increased state spending and interest-rate cuts following Asia's 1997 financial crisis. Kuala Lumpur's 2003 budget deficit, the sixth in a row, is expected to equal 3.9% of gross domestic product, down from 4.7% this year. Many private economists believe that the pump-priming and still resilient domestic consumer demand will keep the economy moving in the short-to-medium term. Uday Jayaram of ING Research in Malaysia expects Malaysia's inflation adjusted growth in gross domestic product of 3.9% this year and 4.5% in 2003. What's more, as a net oil exporter, the economy also could benefit from a spike in oil prices in the event of a war in the Middle East. That, in turn, would increase government revenues and allow Kuala Lumpur to keep spending without stretching its own financial position, says Mr. Uday. But pump-priming can't go on for too much longer and government economic planners concede that Malaysian old economic growth model needs an overhaul. To this end, Kuala Lumpur has begun dishing out generous tax breaks in a bid to spur domestic investment in small and medium-sized enterprises and expand its services sector in fields such as shipping, tourism and technology. There has been limited success. Malaysia's Tanjung Pelepas port-owned by prominent Malaysian entrepreneur Syed Mokhtar Al-Bukhary and Denmark's Maersk Sealand International -- has begun to compete vigorously with Singapore. "It will help capture export income at a time when manufacturing income is falling," says Daniel Lian of Morgan Stanley in Singapore, who has long advocated that countries like Malaysia must reduce their dependence on export-based manufacturing and concentrate on stimulating domestic demand to spur growth. But Mr. Lian, like other private economists, says that Malaysia will have to do much more before it finds "economic winners." One may be Malaysia's ambitious plan to develop a Southeast Asian Silicon Valley -- like the high-tech zone known as the Multimedia Super Corridor, or MSC, near Kuala Lumpur. Until a year ago, this $4 billion undertaking looked as if it might never get far off the ground as initial investor interest appeared slight. Not anymore. Development is rapidly picking up pace at Cyberjaya, the city at the center of the new zone, a 15-kilometer-by-50-kilometer strip hard-wired with fiber optic links that runs from the 88-story Petronas Twin Towers in Kuala Lumpur south to the international airport. Cyberjaya already hosts an impressive roster of international tenants who have set up data hubs, call centers and technology research centers here. Among them are Bermuda-based air express giant DHL International, Royal Dutch/Shell Group and Fujitsu Ltd. HSBC Holdings PLC and German luxury car maker Bayerische Motoren Werke AG are putting the final touches to plans to build their research and data handling facilities. "A year ago I was pretty skeptical," says Datuk Abdul Karim Abu Bakar, the chief executive officer of Setia Haruman Sdn. Bhd, a government-controlled entity which is responsible for developing the MSC. "Now things are taking shape very fast and we are on track." DHL is a case in point. The company has spent more than 200 million ringgit on a data hub for DHL operations in the Asia-Pacific region and the Middle East. It employs 400 people and according to Balan Krishnan, its finance and commercial services manager, books about 4,000 room-nights at two Malaysian hotels a year to host visiting employees and clients. This creates lucrative business spinoffs: With DHL travel expenses out of Malaysia exceeding two million ringgit annually, its main travel agent has set up a dedicated office to cater for DHL's needs, Mr. Balan says. Datuk Karim dismisses concerns that the government's interest in promoting Cyberjaya could wane when Dr. Mahathir, the project's main driving force, retires late next year. "Cyberjaya will survive [Dr. Mahathir]. It already has the momentum to move on its own." --Mr. Lopez is a staff reporter in The Wall Street Journal's Kuala Lumpur bureau. Write to Leslie Lopez at leslie.lopez@wsj.com Updated October 28, 2002