Call on UMNO and PAS to stop their competition to out-Islam and out-Islamic State each other, which is undermining Malaysia’s international competitiveness and worsening the national investment climate in an already bleak global economic scenario

Media Conference Statement 
by Lim Kit Siang

(Ipoh, Sunday): The record-breaking 2003 Budget presentation by the Prime Minister, Datuk Seri Dr. Mahathir Mohamad on Friday for being the longest budget speech ever made in Parliament in the nation’s history and for two years instead of one, is also significant for its omissions – in particular the reasons for the erosion of Malaysia’s international competitiveness and the  worsening of the national investment climate in an already bleak global economic scenario. 

When in the budget speech  Mahathir called on Malaysians “not to be complacent with our current level of competitiveness as other countries are also striving to strengthen their position”, he was stretching the truth as he  should be sounding the alarm about Malaysia’s worsening competitiveness in recent years. 

Malaysia’s international competitiveness slipped from 18th position in 1994 to 29th position in 2001 in the World Competitiveness Report.  In contrast, Finland rose from 19th place during the same period to 3rd since 1999, while Ireland rose from 21st to 7th because of their ability to transform themselves into K-based economies.           

While other countries put in solid work to transform themselves into K-based economies, Malaysia spends years talking about its K-economy Master Plan, dubbed the  “Strategic Initiative One of the 21st Century”, which has taken longer than any other country to complete and even now remains largely a mystery to the Malaysian public.  Although completed last year, it was only launched two weeks ago and yet up to now, nobody has been able to get a copy of the K-Economy Master Plan.  My office was told the copies of the K-Economy Master Plan are available only at the end of the month and I have just received confirmation that MPs have not received any copy of the K-Economy Master Plan although Parliament has been in session for two weeks. 

Malaysia also fared very poorly in another recent report on international competitiveness, the FDI Confidence Index September 2002 released by the Global Business Policy Council just before the 2003 budget presentation. 

The FDI Confidence Index tracks the top 25 countries for foreign direct investments (FDI).  Malaysia, which occupied the 22nd position in last year’s ranking of the FDI Confidence Index, has fallen out of the top 25 destinations for FDIs in the FDI Confidence Index September 2002 and received the following comments in the report:   

“Malaysia experienced a significant drop in this year's country rankings, falling from 22nd position out of the top 25 destinations. Estimated to reach a 4% GDP growth rate this year, Malaysia is making progress in banking reform, corporate governance, and is improving its infrastructure. However, uncertainty about its leadership transition, fears of terrorism and the complex relationship between politics and business have taken a toll on Malaysia's investment attractiveness.           

“Malaysia's attractiveness dropped dramatically in the heavy and light manufacturing sectors, which falls in line with the recent shift of production bases from Malaysia to China by such multinationals as NEC and Dell Computer. Despite efforts by the government to stimulate investments in the electronics, chemical and petroleum industries, investors within these sectors indicated they are less likely to invest in Malaysia. 

“A shortage of high-skilled labor and increasing labor costs also put Malaysia at  a competitive disadvantage vis-a-vis other regional locations. Competing with Singapore and South Korea in know-how-driven manufacturing is difficult, and Malaysia also loses out to lower cost Asian countries such as Indonesia and Vietnam. Indonesia and Vietnam enter light manufacturing's top-25 list and register substantial increases in the likelihood of investment from light manufacturing executives. American and Japanese investors -- two of its principal past sources of FDI -- expressed significant diminished interest in the Malaysian market this year.”

Mahathir has studiously avoided facing up to the country’s eroding global competitiveness as the  cause for the sharp drop in FDIs, which have plunged  from RM9.4 billion in 1999 to the region of RM3 billion for 2002 – with neither Mahathir nor the Economic Report prepared to forecast the size of the FDI for the coming year.

Mahathir’s explanation that the reason for the sharp drop of FDIs is because Malaysia is now selective in preferring capital-intensive to labour-intensive industries does not stand up to examination, especially as figures released by the United Nations Conference on Trade and Development (UNCTAD) in its World Investment Report 2002 a few days ago  showed that Singapore ranked fifth in the world’s top ten economies last year for attracting foreign direct investments.

FDI in Singapore last year  climbed by 59 per cent to US$9 billion, the first increase since 1998, although this was still below the US$11 billion peak of 1997.

The UNCTAD reports states that  “Faced with the erosion of its competitiveness in electronics vis-à-vis other countries in the region, Singapore has focused on biomedical sciences as the next pillar of its manufacturing growth, and has been improving and targeting high-potential companies in that industry through various investment funds that include venture capital”. 

The top ten best economies for attracting FDI flows last year were Mexico, France, China, South Africa, Singapore, Morocco, Turkey, Saudi Arabia, Chile and Italy. 

Malaysia should not continue to be in denial and must grapple with the major factors for declining FDI confidence in the country.  It is significant that in the 2003 Budget speech, Mahathir made no mention whatsoever of  the fight against corruption and corporate fraud, demonstrating minimal commitment to good governance whether in public or corporate sector.

In this connection, DAP calls on UMNO and PAS to stop their competition to out-Islam and out-Islamic State each other, which is worsening the national investment climate in an already bleak global economic scenario.

The seriousness of this UMNO-PAS rivalry to out-Islam and out-Islamic State each other to the detriment of Malaysia’s international competitiveness was highlighted by two events which preceded Friday’s 2003 Budget presentation, viz: 

If such UMNO-PAS competition and rivalry to out-Islam and out-Islamic State each intensifies, then the biggest casualty will be Malaysia’s international competiveness and the national economy.  The Parliament debate on the 2003 Budget starting tomorrow should call an immediate halt to such competition and rivalry which can only undermine Malaysia’s economic prospects.


*Lim Kit Siang - DAP National Chairman