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by Lim Guan Eng
(Petaling Jaya, Thursday
): Former Prime Minister Tun Dr Mahathir Mohamad is correct to say that the country’s economy is bad when for the first time in history, not only is Foreign Direct Investment (FDI) for Malaysia of US$ 3.97 billion less than Indonesia’s US$ 4.62 billion in 2005 but also declined by 14.21% when FDI inflows to Southeast Asia increased by 44.7%. DAP is not surprised that Malaysian Chinese busnessmen have told Mahathir that they preferred to invest in China because there are more opportunities there and they don’t find it easy to do business in Malaysia. DAP is surprised that Mahathir has not heard similar complaints from non-Malaysian Chinese businessmen who are also suffering.
DAP believes that this sentiment is not restricted to Malaysian Chinese businessmen but all Malaysian businessmen and foreigners as can be shown by the United Nations Conference on Trade and Development's World Investment Report (WIR) 2006. The 2006 WIR showed that for 2005 due to the loss of its competitive edge, Malaysia slipped four notches to rank only sixth out of the 10 Southeast Asia countries in FDIs, from a high position of second a few years earlier.
In 2005, Malaysia’s FDI inflow contracted by 14.21% to only US$3.97 billion (RM14.63 billion) last year from US$4.62 billion (RM17.02 billion) in 2004. In contrast overall FDI inflows into Southeast Asia increased 44.7% to US$37.14 billion (RM136.83 billion). Never before as the FDI for Malaysia fallen when the total FDI for the entire region has increased.
More alarmingly, Malaysia lost out to Indonesia, whose FDI increased by five-fold to US$5.26 billion (RM19.38 billion) from US$1.89 billion (RM6.96 billion) in 2004. Prime Minister Datuk Seri Abdullah Badawi should seriously study why foreign investors are still coming into Southeast Asia but avoiding Malaysia and preferring other countries such as Indonesia.
Clearly Abdullah’s emphasis of inculcating a “first-class mentality”, value creation and improving competitiveness since he took over as Prime Minister 3 years ago is just empty rhetoric. Instead of improving competitiveness, the situation has deteriorated until Malaysia has even lost out to Indonesia. It is easy to see where Malaysia went wrong when Abdullah could not get anti-corruption campaign off the ground until councillors in Majlis Perbandaran Klang who are supposed to uphold the law deliberately violate it by building palatial homes worth nearly RM 10 million without building approvals.
Despite all his talk of improving the delivery mechanism, Abdullah failed to institutionalize the principles of transparency and accountability in the civil service and reform Government-Linked Corporations(GLCs) in line with key performance market indicators. Widespread corruption, lack of transparency and accountability had had a devastating impact on Malaysia’s competitiveness.
Even the Prime Minister’s department’s National Economic Action Council (NEAC) working group member Datuk Zainal Aznam Yusof admitted that Malaysia had lost its competitive edge. Dr Zainal claimed the loss in competitiveness was due to Malaysia’s labour sector facing a shortage of human capital and losing out to other countries with cheaper manpower. He said Malaysia must further liberalise its services and manufacturing sectors to make the country more attractive to investors.
How can Malaysia enhance human capital resources when Abdullah stubbornly clings to failed policies such as the New Economic Policy based on ethnic quotas and crony capitalism creating the worst income inequality in South East Asia? Any efforts to liberalise the economy requires a bold step to abolish the NEP, remove quotas and replace it with merit and competence.
Malaysia must seriously arrest the brain-drain that has cost Malaysia highly in highly-trained and competent professionals. Only a culture of excellence that maximizes Malaysia’s human resources can we compete with the low-cost manpower in China and India. DAP can not understand the short-sighted policies of the government in trying to out-do China and India by importing cheaper migrant workers from Indonesia, Bangladesh and Phillipines.
Foreign workers, including illegals, comprise more than 20% of Malaysia’s population. In Melaka there are 123,792 legal foreign workers and 539 expatriate workers as at 30 September 2006 or nearly 20% of Melaka’s 650,000. This has resulted in Malaysians getting artificially lower salaries and also creating social problems from higher crime and losses from usage of health and educational resources.
There is no time for Abdullah to be in denial. The time has come for Abdullah to put aside his personal animosity and political power struggle with Mahathir but admit that Mahathir is right to say that the Malaysian economy is bad. The denial syndrome shown by Deputy Prime Minister Datuk Seri Najib Tun Razak in dismissing the decline in FDIs is not only irresponsible but dangerous for a country facing the challenges of globalization.
A Prime Minister’s legacy is determined not by his predecessor but by his economic performance. No Prime Minister can be proud, when during his watch Malaysia loses out economically to Indonesia. Malaysia can not waste any more time and be obsessed in seeing whether Abdullah can survive this personal conflict with Mahathir. If Abdullah admits the truth of some of Mahathir’s attacks and take corrective measures to cure the economy, then he will not only prove Mahathir wrong but will have established his legacy as a Prime Minister.
* Lim Guan Eng, Secretary-General of DAP