PRESENT POINT POWER

Many are wondering why this relaxation of the rules is ONLY for the IRD in Johore only? What about the rest of the country? Left to rot and ferment until huge unemployment problems crop up or expect workers in other part of the country make a bee-line to the south seeking better fortunes.

Jeffrey a frequent commenter in Kit Siang's Blog opined:

"Don’t talk of foreign investors, even our own Malaysian entrepreneurs are irked with corruption red tape and bureaucracy here. For one thing giving “incentives” like 10-year tax holidays and exemption from FIC requirement of 30 per cent bumi equity holding or management composition for companies approved by the Iskandar Regional Development Authority (IRDA) is no big deal – it is already subsisting for MSC’s companies – and therefore represents no significant paradigm shift in the affirmative policies of NEP prevailing nation wide that have made the business and cultural milieu difficult to operate.
I sense these limited incentives are even inconsistent with the spirit and letter of Tun Musa Hitam’s call from the deliberations of the advisory council for IRDA. What’s the point of having these incentives, when foreign investors have to put up with, for example delays in the Excise and Customs departments at the ports, the bureaucracy of having to apply to multiple departments for any license or work permit, where work force does not possess proficiency in English nor the ethos of hard work and strenuous exertion and where government’s policies can change every now and then depending on expedience rather than principle?
The obstacle is the cultural milieu and political framework and their premises insofar as these do not change in larger business firmament of the country, giving a few exemptions from NEP in terms of equity and management composition, and 10 year tax holiday within limited, designated and restricted enclaves (not even the whole of Johore) constitute no incentive, in my opinion and will not make IRDA fare better than MSC or Offshore Labuan or other ambitious government projects. The other intangible aspect is also leadership – and perception of firmness and dependability of it that counts in foreign investors’ calculations.
Though investors don’t like corruption, they sometimes tolerate it if they know who exactly they could pay and get things done circumventing bureaucratic delays. But when it is pervasive with many napoleons distributed here and there and at every level to jam and hassle, then it becomes impossible to do business because one either does not know who to pay or has to pay everyone and at every level! Some of you may not believe it but even the top leader and minister wanting to get things done expeditiously sometimes may (whether they admit it or not) have to “pay” to get the bureaucracy (say for example the land office) to get things done.
Otherwise these little napoleons will come out with all kinds of excuses why the forms submitted are not filled up properly, how the file got lost whilst it is on transit from one department to another etc. Now the members of advisory council for the Iskandar Regional Development Authority (IRDA) have a combination of political business credentials – besides Tun Musa Hitam, Tan Sri Samsudin Osman, Malaysian sugar king Robert Kuok Hock Nien, Tan Sri Kishu Tirathai and Datuk Panglima Andrew Sheng. The Council is clear in articulating what everyone already knows – the NEP bumiputra programme puts investors off. Musa said contract awards “will have to be on merit. The Malays will have to face competition.” If the winding down of the NEP bumiputra programme is positive for the IRDA, then it is likewise positive for the whole country.
Why develop IDR’s potential to be a first-class global hub for business, living and leisure when one can do so for the whole country? Why attract foreign investment to IRDA and Johore only when one can by such winding down attract foreign investment as well as buoy up local investment for the whole country? The usual argument will be the political costs : UMNO cannot afford a backlash from constituency not ready to be weaned from the privileges and affirmative policies cast in stone. But when they can ever be ready? We need a bold Malay leadership to what is right.
When the country prospers every one will prosper especially the more equal UMNO elites and the dominant majority community. Selective exemptions from NEP bumiputra policies for designated foreign companies within IRDA will not work and attract foreign investments when the whole country, bureaucracies and system are choking under the blanket of such a system, debilitating and unfriendly to business and investment (except political crony business), not to mention divisive of Malaysians. If they have more foresight and political will, they should take another approach and use IRDA and the rationale given by Musa as a political exit route to commence the first tentative steps towards the dismantling of such a pernicious policy"

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Update: 23 rd Mar 2007

IDR Adopts New Approach To Attract Foreign Investors

PUTRAJAYA, March 23 (Bernama) -- The Iskandar Development Region (IDR) in Johor needs a new approach to attract foreign investors, Datuk Seri Najib Tun Razak said Friday. "This area needs an approach that can draw foreign investors because our intention is to develop the area on a large scale...this cannot be achieved if we don't adopt a new policy and approach to open the area and give as much flexibility as possible to foreign investors," the deputy prime minister said. He was speaking to reporters after chairing a meeting of the National Council on Local Governments here. He was asked to comment on the government's decision to exempt the Iskandar Development Region from policies that favour the bumiputeras in a bid to attract investors.

The government's move was announced by Prime Minister Datuk Seri Abdullah Ahmad Badawi in his keynote address at the Invest Malaysia Conference yesterday. Najib said the capability of the bumiputera community in trade and industry had improved and so too had their participation through the government linked companies.

"If there are certain opportunities available in this area, the bumiputera interest to participate will be given consideration. "For example, if there are six five-star hotels to be built, surely there are bumiputera interests that are capable of participating but at the same time, there are also foreign investors interested in investing there, so they will get more opportunities to invest," he said. He said the federal government would explain the new strategy to the leaders from Johor soon.

KUALA LUMPUR, March 22 (Bernama) -- Prime Minister Datuk Seri Abdullah Ahmad Badawi Thursday announced several measures to boost the equity market, property sector and the South Johor Iskandar Development Region. In his keynote address at Invest Malaysia 2007 Conference here, Abdullah said competitiveness and efficiency of the Malaysian capital market was a top priority and a few measures had and would be taken to achieve the objectives. Abdullah said new rules would be introduced by Bursa Malaysia to enable and regulate direct market access, which would improve trading efficiency and increase value added trading activities on the exchange.

To strengthen Malaysia's position as an international Islamic financial centre, he said, the Securities Commission (SC) and the Dubai Financial Services Authority would establish a mutual recognition regime to facilitate the cross border marketing of Islamic Fund between Malaysia and Dubai. Abdullah said the government would continue with programmes to reduce its stake in government-linked companies that had high concentration of government linked ownership. He said reducing the government's ownership would avoid "exaggerated market disruption" and allow for strategic tie-ups.

"The process will be undertaken in an orderly manner through a combination of private placement and structured commitment to sell such as through Khazanah's (government investment arm) recent issuance of PLUS and Telekom Malaysia exchangeable bonds," he said. Abdullah also announced the establishment of Exchange Traded Funds (ETF's), which would be listed on Bursa Malaysia by year-end. He said GLCs would participate in the ETF's by selling a portion of their portfolios in exchange for units in the ETF's. The ETF's will collectively have an initial fund size of at least RM3.5 billion.

Abdullah was confident that the ETF's would add liquidity and promote greater retail participation in the equity market. Abdullah said the government's approach was to focus on providing the enabling environment to attract new private sector and foreign direct investments.

ABOVE & BELOW: Models of the IDR project

"Emphasis will be placed on projects or industries which can act as catalysts to subsequent investments and expansion in the region concerned," he said. Abdullah also announced a new package of incentives, starting with certain zones within the Iskandar Development Region (IDR) in south Johor. "This will be the first incentive package announced for IDR," he said.

ABOVE & BELOW: Models of the Johor Iskandar Development Region (IDR)

Under the new package of incentives, companies operating within the IDR will be exempted from corporate income tax for activities within the zone and outside Malaysia for 10 years. These companies must be in the creative industry, educational services, financial advisory and consulting, healthcare, logistics and tourism-related services.

Qualified companies will also be exempted from withholding tax on certain payments for 10 years if they commence operations before 2015. Abdullah said qualifying companies would enjoy exemptions from Foreign Investment Committee rules, freedom to source capital globally and unrestricted number of foreign employees within the approved zone.

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Friday March 23, 2007

Ghani and Shahrir back move to drop quotas

MB Ghani Othman; "At the same time, there will be capability for Bumiputras to participate despite FIC requirements being completely relaxed"

By IZATUN SHARI
KUALA LUMPUR: Bumiputra investors have the capability to participate in the Iskandar Development Region (IDR) in southern Johor despite the Government's move to exempt qualified investors from foreign investment committee (FIC) rules, Johor Mentri Besar Datuk Abdul Ghani Othman said. Abdul Ghani said he agreed with the move to exempt IDR from policies that favour the bumiputras in a bid to attract investors. "IDR is a very defined area and there is enough bumiputra strength to participate in the development despite the FIC rules being relaxed completely," he told reporters after the launch of IDR and the second Penang Bridge projects at the Invest Malaysia Conference here yesterday.

Johor Baru MP Datuk Shahrir Samad (ABOVE)said the public should not be alarmed with the move because exemptions were already given for certain industries such as the Multimedia Super Corridor-status companies. "We have to be clear and careful. We have to understand the actual situation. People have the impression that everything requires a racial quota. It's not exactly something new," he said. "There are precedents. MSC-status companies are not required to have a racial quota. Foreign investors can have 100% ownership, 100% foreign workers and it is a free trade zone concept." On the new incentives announced by Datuk Seri Abdullah Ahmad Badawi for certain zones within IDR, Abdul Ghani said the move would make the growth area very attractive for foreign investors to work and live in.

In his keynote address at the Invest Malaysia Conference 2007 here yesterday, the Prime Minister announced that qualifying companies in creative industries, educational services, financial advisory and consulting, healthcare, logistics and tourism related services, would be exempted from FIC rules, and have freedom to source capital globally.

The IDR is the largest development project announced by Abdullah to push economic growth. He is seeking foreign investors to help fund the RM383bil, two-decade-long project, which will transform Johor.

= == = = for Tun Musa Hitam's Bloomberg's Interview Go H E R E ON

MUSA & IDR ADVISORS; EXEMPT JOHOR from NEP to Move Forward; Only Hope to Attract Foreign Investors;

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