Where’s the RM30 billion FDI and 1,000-point KLCI promised for Barisan Nasional sweep in 11th general election

in the debate on the Motion of Thanks for  the Royal Address
by Lim Kit Siang

(Dewan Rakyat, Wednesday & Thursday): I rise to support the motion of thanks to the Yang di Pertuan Agong for the Royal Address, representing the first policy address of the new government of the  fifth Prime Minister, Datuk Seri Abdullah Ahmad Badawi,  at the official opening of the 11th Parliament yesterday. 

I am sure the Prime Minister expected eyebrows to be raised when the second paragraph of the Royal Address adverted to the 11th general election held on March 21, 2004 as having been held  “smoothly without any untoward incidents” and expressing appreciation to all parties involved, particularly the Election Commission.  

That the recent general election was far from conducted “smoothly without any untoward incident” is testified firstly, by  the highest number of election petitions filed in any of the eleven general elections in the nation’s 46-year history; and secondly, another first, an impeachment motion in Parliament against the Election Commission Chairman and Commission members. 

The no-confidence motion against the Election Commission Chairman on the parliamentary order paper standing in my name reads: 

“That this House resolves to impeach the Chairman of the Election Commission Tan Sri Abdul Rashid Abdul Rahman and the members of the Election Commission by passing a motion of no confidence on them for conducting the most disgraceful and chaotic general election in the 46-year history of the nation, rendering the recent March 2004 general election the most unfair, unfree and unclean of all 11 general elections in the country since Merdeka in 1957”.

As the government is agreeable to allocate time for a debate on the impeachment motion against the Election Commission Chairman and other Commission members for the conduct of the most disgraceful and chaotic general election in the nation’s history, I shall reserve the many things I have to say about the 2004 general election until a final decision is made about  such a debate tomorrow.


Revamp of GLCs 

The Prime Minister  has taken  serious and concerted efforts to revamp the government linked companies (GLC). Such revamp has been  overdue and proves the serious neglect of the previous Barisan Nasional government. 

I welcome that a professional investment banker, Azman Mokhtar, was given the important  task and responsibility to head the Khazanah, hopefully  as he professed,  “not  to ‘micro-manage’” those companies controlled by Khazanah. 

The Prime Minister  has launched the National Integrity Plan (NIP), which supposedly is aimed to bring in higher degree of integrity in the administration and management of the country. Such integrity was lacking under  the previous Barisan Nasional government.  

However, the financial market, albeit, the KLSE (Bursa Malaysia), did not seem to welcome all these moves put forward by the Barisan Nasional  government. The KLCI dropped 15.6 points in anticipation of the GLC revamp and further 9.1 points after announcement, amounting to RM1.5 billion losses to all  investors, including the Khazanah.  

Let us recollect the prediction made by the Barisan Nasional  during the recent general election campaign. The Prime Minister  then boldly forecast that  once Barisan Nasional  had a decisive victory and overwhelming majority, RM30 billion worth of foreign funds will inflow into KLSE. Or in simple projection, KLCI should cross 1,000 points after the general election. This has been contradicted by the facts as the  KLCI had since dropped from the height of 918 points on March 22nd to 794 points by May 15th, about 124 points or a hefty loss of about RM7.5 billion. Yesterday (May 18), it has slipped further to 781.50 points. 

Where is the RM30 billion? Where is the CI 1000 points? Where is the  foreign funds inflow which has turned into an outflow or were they voting  with their feet away from the Barisan Nasional  victory ? 

Is the financial market, both local and foreign investors,  telling us that the BN government is doing things wrongly?

Most of the above losses happened immediately after the annual pre-budget dialogue between the private sector and the  government. The series of dialogue had the main theme of “Public Private Participation” (PPP) to enhance  competitiveness and efficiency. Are the investors telling us that such theme of PPP is wrongly focused? Maybe the  government is seeing the trees as forest. Or in short, all those measures of revamp, management, integrity and so on did not directly confront the challenges facing the economy in terms of future and further growth, restructuring and the risks that follow. 

It has been argued that the  government is putting all efforts to “micro-manage” and  still following those modes and legacies  left over by the Mahathir administration. 

This is one view that I have received: 

“Multinational companies (MNCs) and over 8000 manufacturing licenses in operations have already achieved world class productivity and global competitiveness. Try telling Intel, Motorola, Matsushita, IOI, YTL etc. to enhance competitiveness when they are already top notch market leaders. Try telling those small medium enterprises (SMEs) that have provided support and services to the MNCs what to do. Or try to tell Public Bank and the like what to do and how to run their operations. In short, what the government has attempted to improve are only those poorly run GLCs owned  by the government through Khazanah, state governments, statutory bodies such as EPF and other local government and administration. 

 “How can the  government conveniently forget larger issues and challenges facing the country immediately and in the near future? How can we take the “Trees as Forest”?

Maybe the financial market does not fully reflect the real sectors. In the macro economic settings, the country faces many  challenges that the government had thus far failed to address.  

One is the declining inflow of  Foreign Direct Investment (FDI). We have been told repeatedly that there is continual increase of FDI by the relevant authorities and the Minister in charge.  


(speech continued on Thursday, 20.5.04) 


But what is the real situation happening on the ground? What can be observable contradicts. Factory lots not taken up in Shah Alam, Penang, Johore. Worse still the closure of plants especially those in the small medium sector is not tabulated.  


Repeal Industrial Co-ordination Act to encourage domestic  private investment  

These SMEs in general were entities owned and managed by our fellow Malaysians who have  thus provided the local entrepreneurship that have played an important  role in sustaining our economy. Are they to be sacrificed in the name of globalisation?  

Were there studies done  to assess the number of jobs loss and more crucial to anticipate which particular product sector would next be affected? Are such  entrepreneurs who have helped to generate employment left in the lurch?  

Will the demise of this entrepreneurial class eventually create a large vacuum of our nation’s enterprising spirit? Another important area gpt consideration would be the multiplier effects of such unchecked situation. 

FDI had played a crucial and pivotal role in the growth and development of our country. The 1990s robustness and the spirit of  “Malaysia Boleh” was built upon the strong inflows of FDI. 

Malaysia had been suffering from “FDI deficiency” since China’s accession to the WTO  just like other South East Asian countries. It was earlier predicted that

China, after WTO accession will become the “Black Hole for FDI”  sucking up all foreign investments. This has proven  true as China took about 80% of global FDI  into East Asia while  20% was shared among other East Asian countries which include Malaysia, Thailand, Singapore, Indonesia, the Philippines and Vietnam. This trend and reality has not been seriously addressed by the government.  

Malaysians have been continuously told that  the figures are good, the future rosy!   We were so happy when Intel announced reinvestment of RM100 million in Penang in October 2003. However, at the same time Asian Wall Street Journal reported Intel’s new investment of RM1.2 billion in Chengdu, China. Of course Intel did not shift out, it merely invests much more elsewhere! 

Malaysia’s future and further growth depend very much on continuous arrival of FDI. Without this and viable alternatives, it   will mean declining growth, less jobs generated especially for our local graduates. The government is currently toying with various possibilities to assist the graduates in getting jobs, namely extend three-year course to four  years and to enable graduates to experience industry attachment. At best these are only temporary stop gap measures. Ultimately, we need strong growth to generate employment. 

The reality is that FDI  and local investment are undergoing an extremely dynamic shift. Is the  government aware and prepared to face such  dynamic changes or they prefer to camouflage statistics and still view the situation in rosy hues. At one time a key Minister even mentioned that all the major FDI companies are already having operations in Malaysia – how then  to attract more investments?  

Malaysia should have policies which are pro-active.  For  instance, we now have a group of former SMEs entrepreneurs who have folded their operations mostly due to the imports of cheaper products. This is an enterprising force which can be harnessed to better use. Given the right policies, incentives and support I am sure their entrepreneurial spirit can definitely be revitalised. 

The government is certainly aware of the above changes yet they keep extending post-pioneer status to MNCs and keep relaxing the conditions under the Investment Incentives Act for foreign companies while refusing to relax the Industrial Coordination Act or to repeal it completely. We even are generous enough to allow foreign companies to produce for the local market and we are not just talking about import substitution here. When we feel hemmed in by competition, we open more. This in itself is good for business and  seen to be a pro-business government.  But for our local business another picture emerges. Local companies must still have to  abide by the Industrial Coordination Act, an outdated legislation which has served the New Economic Policy 30 years ago and certainly has outlived its usefulness. 

If  we continue to allow this state of affairs, are we not positioning our own local businesses as second class entities compared to foreign ones? The FMM is asking the ceiling of ICA to be upgraded. In these more challenging times for businesses, it  makes sense to liberalise and provide a more conducive investment  policy infrastructure – such as the repeal of the Industrial Co-ordination Act. 

The  PM appointed a senior UMNO Vice President to head the Agriculture Ministry purportedly to initiate changes for higher GDP growth and going back to basics (B to B) or in India, they called it “Back to Bangalore”. 

Malaysia has signed many bilateral and multilateral trade agreements. Some conditions of these agreements have already doomed many agri sectors and products. How then can the BN achieve the objectives of growth and diversification? How can the Agriculture Minister turn the tide started by the October 8 2003 “Early Harvest” agreement with China? 

One stunning example for illustration is the poultry sector. Before the signing of the October 8th Agreement, MITI had agreed to allow “free importation” of poultry and parts into Malaysia. The only control was by the Health Certificate issued by the Department of Veterinary Services (DVS). It all started in February 2002, when NAFAS began importation from China. By April 2003, a mere 14 months or an equivalent of about RM200 million worth of imports was enough to nearly collapse the whole poultry industry-an industry worth RM6 billion (at ex-farm price) with RM4 billion inputs of feeds, vet pharmaceuticals etc “literally came to a halt”. Both the then Agriculture and Health Minister took urgent and immediate measures to stop import and thus manage to ensure the survival of an industry which places over  ½ RM billion to the government tax coffers. 

The point is, some BN leaders just failed to realise the impact of signing trade agreement, while others try hard to fight after the damage done. Apart from the boo-boo committed, what is the cause for such shocking failure in co-ordination by different departments in the government?.

Forgetting the above debacle, the October 8, 2003 agreement was signed in Bali. Under the conditions, poultry from China will gain free access from Jan 1 2004 onwards. By January 2006 up to 500 agricultural items from China will gain free access into Malaysia, meaning those involved will be driven out of business, jobs and income. This will mean over 20 listed companies, 100 thousand skilled workers, and the hope of the “Bio-Valley” especially in the realm of veterinary pharmaceuticals, are at grave risk. 

Increasing importation of China’s vegetables and other products such as broccoli, cabbage, ginger etc. will ultimately be inimical to the objective of promoting  growth through agriculture. There should be proper co-ordination between MITI and the Agriculture Ministry, as we cannot continue to have the split personality of the Agriculture Minister encouraging farmers to “tanam jagung” and “cucuk tanah”, while the country continues to import food  substitutes of  over RM8 billion – especially as there are further agreements to be signed between AFTA and China.

(19 - 20/5/2004)

* Lim Kit Siang, Parliamentary Opposition Leader, Member of Parliament for Ipoh Timor & DAP National Chairman