UPDATE: Mar 23 2007
Johor investor perks unlikely to create Malay backlash
Firms' exemption from affirmative action is balanced with setting up of fund for residents
By Carolyn Hong; The Straits Times
WHEN former deputy premier Tun Musa Hitam suggested that Malaysia should exempt South Johor from policies that favour the Malay majority to woo foreign investors, his comments made waves. Some thought he was merely testing the waters with his suggestion two days ago to see how it would go down in the Umno stronghold state of Johor. But he had already spoken to Prime Minister Abdullah Badawi, and the Premier had agreed with him. Yesterday, Datuk Seri Abdullah announced a list of incentives which allow investors in some sectors to employ all the foreign workers they want, source their funds from anywhere, own their companies fully, and get corporate tax exemption for 10 years. To be sure, this is not the first time the government has given such incentives. It has done so for the manufacturing sector and the high-technology zone Multimedia Super Corridor.
But this is on a far larger scale. It includes many more sectors in the service industry. Analysts say the bold incentives showed that the government is serious about attracting investments in a project that Datuk Seri Abdullah has personally identified as his brainchild. But there is concern about possible political backlash. Some observers have interpreted the incentives as a move to pave the way for eventual scrapping of Malaysia's 36-year-old affirmative action policy. The New Economic Policy (NEP) was introduced in 1970 following race riots in 1969 to help the Malay community catch up in economic terms with the other races.
'It would be an exit route, politically,' Mr Manu Bhaskaran, a Singapore-based partner at economic research firm Centennial Group, was quoted as saying yesterday. But rolling back the NEP in Umno's stronghold state may not go down well amid angst over foreigners taking over the state's economy. Johor Menteri Besar Abdul Ghani Othman, however, insists that there will not be political fallout. 'It is a very defined area, and at the same time there is also scope for bumiputera participation,' he told reporters after the incentives were announced yesterday. An aide to PM Abdullah told The Straits Times that there was a conscious effort to balance the incentives with the setting up of the Social Projects Fund for investors to contribute to.
The fund could be used to build low-cost houses, or for small bumiputera vendor development. It is understood that the government's investment arm Khazanah Nasional, which is driving the Iskandar Development Region (IDR) initiative, has received investor feedback that they would prefer to contribute to a fund than have restrictions on ownership and employment. Khazanah also believed Malaysians would take up the majority of the 817,500 jobs expected to be created within 20 years. The Straits Times understands that Tun Musa has agreed to go to the ground to speak to grassroots Umno leaders, if necessary, to explain the decision. Johor Baru MP Datuk Shahrir Samad said there would not be a backlash if Malays and local investors were not crowded out. 'Would existing companies also benefit from the tax holiday and other incentives? It should, otherwise it will raise charges of unfair competition,' he said.
He added that there was no problem even if the IDR incentives heralded the phasing out of the NEP nationwide. 'The PM has said it would end by 2020, that's nothing new,' he said.
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Musa: Brief Umno on why it has to give up NEP ; By MEERA VIJAYAN; STAR; Mar 23 2007
JOHOR BARU: Umno should have a special briefing to explain to its members why it was time to give up the New Economic Policy (NEP) for the success of the Iskandar Development Region (IDR). Iskandar Development Region Authority (IRDA) advisory council member Tun Musa Hitam who proposed this also volunteered to be one of the speakers at the briefing. He said that there were already hundreds of Malays who had the capability to do business and on merit. As someone who had been active in Umno for several decades, Musa said, he realised that there was a need to have a change in mindset to draw investors to the country.
"The briefing should explain what the IDR is, its implications to the country and to the Malays," he said during a press conference at Danga Bay after the book launch of The Reluctant Politician: Tun Dr Ismail and His Time. In the last few decades of the NEP, the country used to have an Ali Baba way of doing business where Ali would give his name and Baba would do all the work. "As time went on, Ali and Baba became equal and Ali was able to deliver as much as Baba. Now, there are even Alis who are using the Babas not as sleeping partners but as equals," he quipped.
Musa also said that foreign investors who came to the country were not interested in the NEP, cronyism or nepotism as their primary focus was on making money. He suggested that instead of imposing conditional approvals, a more palatable method would be to provide potential foreign and local investors with a list of Malay entrepreneurs who were capable of doing business and leaving it the investors to decide. Musa said that he had already asked for a computerised master list of all Malay entrepreneurs to be drawn up and the list would include their current grades as well as their past performance and track record which would be made available to any investor. "The IDR is an opportunity to demonstrate that we have arrived and we are able to do this," he said.
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March 22, 2007 17:49 PM
ABOVE:Tun Dr Ismail, extract from LensaPress Photo
Musa Told Aspiring Leaders To Emulate Tun Dr Ismail
JOHOR BAHARU, March 22 (Bernama) -- Malaysia's current and aspiring leaders should emulate former deputy prime minister Tun Dr Ismail Abdul Rahman who put the interest of serving the public above everything else. In making the call, former deputy prime minister Tun Musa Hitam said he admired the leadership style of Dr Ismail, noting that the latter never took advantage of his position to satisfy personal interests. The late Dr Ismail served under the country's second prime minister Tun Abdul Razak. "Emulate the man (Tun Dr Ismail) and the principles he stood for.
ABOVE; Tun Musa Hitam at the book Launch, extract from LensaPress Photo
This goes to all aspiring and current leaders. When you want to serve as a political leader or be in the public sector, it should be service before self," he said. Earlier, Musa launched a book by author Ooi Kee Beng, titled "The Reluctant Politician: Tun Dr Ismail And His Time", at Danga Bay, here Thursday. He said that despite his powerful job, Dr Ismail never misused it to enrich himself and this was illustrated by his modest house in Kuala Lumpur and the simple lifestyle of his children. Musa also advised future leaders to use elements in books on Dr Ismail to emerge as "Towering Malays" or "Glokal Malays" as inspired respectively by Prime Minister Datuk Seri Abdullah Ahmad Badawi and his deputy Datuk Seri Najib Tun Razak.
When launching the 311-page book, he said that Dr Ismail was a modern and progressive leader and did not fit into the "Melayu Lama" category although he lived in that era. Musa said that Dr Ismail contributed greatly in shaping up his political career, admitting that he never stopped from being overawed by the man.
He further said that Dr Ismail never suffered from the "Singapore Syndrome" and was an admirer of Singapore's approach towards development as he foresaw how Johor certainly could benefit from it. "His ideas were happily shared by his Singapore counterpart, Goh Keng Swee, who, like Dr Ismail, did not suffer from `Malaysia Syndrome'," said Musa.
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Many of your own beliefs work for you for a certain period of your life. Many children at one time or another believe that their parents are omnipotent giving them a sense of security. Then in later adolescent years the same offspring are shocked to discover their parents to be quite human and fallible; the inadequacy and inferiority the older generations and the callousness of those in control of them. And this is the same with the NEP, they are holding these believes way beyond its advantages state for them. But if this concept is held on FAR too long as the nation grows older it becomes highly restrictive and eventually structured and stifled the nation’s progress. There is an added twist here: that in the process of becoming a nation, we must also learn when to let go the NEP ; for change, growth and evolution - the elements of the process of becoming -are impossible without this.
This bold and pragmatic suggestion by the Advisory team to IDR is the true power in the imagination which dares to speculate upon the exemption of the NEP - that which is not yet. This suggestion backed by great expectations, can bring about almost any reality within the range of probabilities for the success of IDR.
The future is a probability. In terms of ordinary experience, nothing exists there yet. It is virgin territory, planted by your feelings and thoughts in the present. Therefore if we will plant accomplishments and successes, and we will do this by remembering that nothing can exist in the future that we do not want to be there. But will the un-awakened and unenlightened see the light at the end of the tunnel for such important core believes to be abandoned after receiving such support for almost 36 years? As the cabinet is prepared to scuttle and delay the FTA with US in “the interest of the people and the country” in the negotiations then there is little hope for IDR to take off if some of the rules are not relaxed. Precedents had been set when the MSC companies were also exempted from the NEP restrictions.
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Malaysia Must End Race Policy in Johor, Adviser Says (Update1)
By Angus Whitley and Haslinda Amin
March 21 (Bloomberg) -- Malaysia should exempt the southern state of Johor from policies that favor the ethnic Malay majority to help attract foreign investors to the area, former Deputy Prime Minister Musa Hitam said. Policies that give the racial grouping privileged access to government contracts and guarantee a minimum presence in the workplace may deter foreign companies from coming to Johor, said Musa, who is advising the government on the state's development. Contract awards ``will have to be on merit,'' Musa, the country's deputy leader from 1981 to 1986, said in a March 19 interview. ``The Malays will have to face competition.'' Prime Minister Abdullah Ahmad Badawi is seeking foreign investors to help fund a two-decade, 382 billion ringgit ($109 billion) redevelopment of Johor, bordering Singapore. Scrapping the race-based program could lure investors and pave the way for the country to completely drop its 36-year-old policy in support of ethnic Malays, who comprise 60 percent of the population.
``It would be an exit route, politically,'' said Manu Bhaskaran, a Singapore-based partner at economic research company Centennial Group. Johor ``is an extremely important project. The affirmative action program and all the related problems do turn off foreign investors.'' Foreign direct investment in Malaysia in 2005 dropped to 15 billion ringgit from 17.6 billion ringgit in 2004, according to the government's department of statistics. Last year's figures haven't been released.Wealth Imbalance The racial program, introduced under the New Economic Policy in 1971 after clashes between ethnic Chinese and Malays, also known as Bumiputras, aimed to increase the wealth of the nation's poorest grouping through benefits ranging from cheaper housing to greater access to initial public offerings. Concern about the policy's validity grew last year after a report by the Asian Strategy and Leadership Institute in Kuala Lumpur showed the original targets to address the wealth imbalance had been surpassed.
The February report by the Centre for Public Policy Studies, controlled by ASLI, said ethnic Malays may own as much as 45 percent of Malaysia's corporate equity. That was higher than the government's estimate of 19 percent in 2004 and surpassed the New Economic Policy's goal of 30 percent. ALSI on Oct. 10 last year said there were ``shortcomings'' in its report. Lim Teck Ghee, director of the Centre for Public Policy Studies, quit a day later to protest the retraction. Policy Revision A five-member council including Musa and Malaysian billionaire Robert Kuok that's advising the Johor project agrees the ethnic program should be dropped, Musa said. ``I am confident that this Bumiputra thing, if I may put it this way, need not be the negative factor, and I am stressing this in this particular exercise,'' Musa said.
``There needs to be a revision, updating, of the way we approach it.'' Incentives to take part in the Southern Johor Economic Region are being finalized, Musa said. Middle Eastern and Japanese investors are among those that have agreed to plow funds into Johor, he said. The 2,216-square-kilometer development will include roads, offices, homes, theme parks, hotels, factories and hospitals and is Malaysia's biggest real-estate project. Development of the region will require 382 billion ringgit of investment from 2006 to 2025, according to Khazanah Nasional Bhd., Malaysia's state investment unit, which is leading the project.
The site will generate more than 800,000 jobs in 20 years, Prime Minister Abdullah said in November. It may boost growth in Johor to an average of 7 percent from 2005 to 2025, compared with 5.5 percent without the revamp, Khazanah said. Reaching the project's targets, without the affirmative action program, would allow the government to remove the policy in other areas, said Bhaskaran at Centennial Group. ``This is a very clever way,'' he said. ``It shows that at the top ranks of the system there are people who are thinking well.''
To contact the reporter on this story: Angus Whitley in Kuala Lumpur at awhitley1@bloomberg.net ; Haslinda Amin in Singapore at hamin1@bloomberg.net
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Musa: Drop race quota to help woo foreign investors to South Johor
KUALA LUMPUR (March 21, 2007): Former deputy prime minister Tun Musa Hitam says the government should exempt the Iskandar Development Region (IDR) in South Johor from policies that favour the bumiputras to help attract foreign investors to the huge growth area. Musa, who sits in an advisory panel for the project, said policies that gave the bumiputras privileged access to government contracts and guarantee a minimum presence in the workplace may deter foreign companies interested in investing in the IDR. According to a Bloomberg report based on an interview with the former DPM, Musa said contract awards "will have to be on merit". "The Malays will have to face competition," he said. The IDR is the largest development project announced by Prime Minister Datuk Seri Abdullah Ahmad Badawi to push economic growth. He is seeking foreign investors to help fund the RM383 billion two-decade-long project that will transform Johor.
Musa sits on the advisory council for the Iskandar Regional Development Authority (IRDA) that drives the mega project. The other members are Tan Sri Samsudin Osman, Malaysian sugar king Robert Kuok Hock Nien, Tan Sri Kishu Tirathai and Datuk Panglima Andrew Sheng. Musa said the council agreed that the bumiputra programme should be dropped for the project. "I am confident that this bumiputra thing, if I may put it this way, need not be the negative factor, and I am stressing this in this particular exercise. "There needs to be a revision, updating, of the way we approach it," he told Bloomberg. He said incentives to take part in the IDR were being finalised, and Middle Eastern and Japanese investors were among those who had agreed to come in. Bloomberg also interviewed Manu Bhaskaran, a Singapore-based partner at economic research company Centennial Group, who said: "It would be an exit route, politically. Johor (the IDR) is an extremely important project. The affirmative action programme and all the related problems do turn off foreign investors."
Reaching the project’s targets, without the programme, would allow the government to remove the policy in other areas, he added. "It shows that at the top ranks of the system, there are people who are thinking well." Foreign direct investment in Malaysia in 2005 dropped to RM15 billion from RM17.6 billion in 2004, according to the government’s Statistics Department. Last year’s figures have yet to be released.
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from theedgedaily.com
21-03-2007: Singapore and Johor -- so near, yet so far; By Clarence Fernandez
Like rival sisters embittered because one has good looks and money while the other lost out, wealthy Singapore and Malaysia's underdeveloped state of Johor jostle in an uneasy relationship. Separated by just a thin ribbon of water, state capital Johor Bahru seems a world away from spick-and-span Singapore. Despite its somewhat seedy appearance and a reputation for crime, Johor is a popular day trip destination for Singaporeans who flee across the border on weekends looking for cheaper shopping and golf. Investors have been less eager to come, pointing to projects that have fallen victim to past political sparring. But Malaysia hopes to change that with a US$105 billion (RM364.9 billion) development plan that will offer Singapore and its investors something the island city-state doesn't have -- space. Malaysia sees the 2,200 sq km zone in Johor -- which will contain a marina, exclusive gated communities and theme parks -- as a hinterland for Singapore, duplicating the ties between Hong Kong and China's southern city of Shenzhen. "When Hong Kong burst at the seams, they needed somewhere to go, and Shenzhen was the most logical progression. So we see that happening here as well," said Wan Abdullah Wan Ibrahim, managing director of UEM Land Bhd, which owns almost 9,700ha of vacant and developed land in the planned zone.
Under the plan to transform Jahor over the next 20 years, an industrial precinct, schools and hospitals will also be built. The government is also studying a proposal to create free access zones in certain areas in Johor where visitors from Singapore can live and work. If it works out, there will be no immigration and customs check for entry into these zones, which will be guarded by surveillance systems and barriers. "It's not just Johor that benefits, but Singaporeans also benefit," said Wan Abdullah.
In 2006, Johor received about 23,500 visitors from Singapore every day, who spent a total of about RM5.3 million a day, the state government has estimated. Malaysia and Singapore, which separated in 1965 after a brief union in the years following independence from Britain, have deep economic ties, but relations have sometimes been prickly. They have quarrelled over the building of bridges across the Johor Strait, land reclamation, water supply and race. Singapore has a majority ethnic Chinese population and minority Malay population, while the racial-makeup in Malaysia is the opposite. The countries occasionally spar over accusations about discrimination against their Chinese or Malay minorities. Relations have warmed since Tun Dr Mahathir Mohamad, Malaysia's outspoken former premier, handed power to Datuk Seri Abdullah Ahmad Badawi in 2003. Now officials of both countries are working closely to see how strategies for Johor's development might fit with Singapore's plans, said Datuk Azman Mokhtar, chief of Malaysian state investment arm Khazanah Nasional Bhd,
which is spearheading the plan. Singaporean businessmen, burnt in the past by grandiose ideas for Johor, are cautious over concerns about rampant crime, corruption and lack of government transparency. Malaysian officials have made few details public on fund-raising plans. But they are trying to woo international investors to the massive project, and say French, German and Singapore firms are keen on locating in the industrial park. The Johor development plans offer the biggest fillip for the region's
property industry since the Asian financial crisis of 1997-1998, from which the sector has not yet recovered, said real estate agent Samuel Tan, who has worked there for 23 years. "There is a symbiotic relationship. Whatever the political situation may be, ordinary businessmen are very pragmatic, we learn to live with it."
Already 50,000 Johor residents travel to jobs in the city state each day, and Singapore-based firms are among Johor's largest employers. But suspicions remain. "Sometimes I wonder if the reason we share this unexplained hostility towards each other is because we're actually quite similar," Malaysian columnist Gavin Yap wrote in the New Sunday Times recently. "Malaysia is the big party and Singapore is the tight-fisted landlord below us, who keeps hitting her broomstick against her ceiling, screaming at us to shut up and get a job." - Reuters
ABOVE & BELOW: Models of the Johor Iskandar Development Region (IDR)
