For Prime Minister Abdullah Badawi, who took office last October, the timing could not have been any better. Malaysia’s resurgent economy roared its way into 2004, posting annual growth of 5.2% and putting the country in the top bracket of regional performers.
Low interest rates and high employment helped provide feel-good factors for Malaysia’s general elections held March 21 that were expected to give Mr Badawi the mandate he needs to press on with his programme. Judging by the early signs, many bankers are quietly confident that Malaysia’s economy is on the right track.
Economic upturn
Having relied on consumer spending and government pump-priming to lift the economy during a downturn in crucial export markets, Malaysia isnow reaping the rewards of bullish commodity prices and higher capital inflows.
Businesses are beginning to assess the need for capital expenditure as exports regain a firm footing, both in Malaysia’s long-established electronics industry and in its services sector.
“So far the export-led recovery has given us a much bigger bounce than people expected,” says Piyush Gupta, country officer at Citigroup. “The economy will surprise on the upside, and consumer demand will stay. The key question is whether private capital formation picks up the baton in the second half of the year.”
As well as the numbers, bankers in Malaysia are also taking note of the political changes at the top. In contrast to his ebullient predecessor, Mahathir Mohamad, whose posturing helped raised Malaysia’s international profile during his 22 years in power, Mr Badawi, cultivates a much more low-key style of management. But his stamp on decision-making has been quickly felt in Kuala Lumpur.
One of his first moves was to shelve a grandiose $3.8bn project to upgrade railway lines to Singapore and Thailand. This was followed by a get-tough policy on corruption that has so far snared a government minister and the head of a national steel company.
Government tenders are now going out to competitive bidding as a way of cutting down on political patronage. What makes it more compelling is the hint that more cases were in the pipeline and that it is not business as usual for the ruling party.
Some critics griped that Mr Badawi was only going after the ikan bilis or small fish, and leaving untouched the ikan jerung (big fish) at the top of the pile. But that is not a view held in Kuala Lumpur’s financial community, which is quietly cheering the crackdown and also hoping that Mr Badawi can deliver on a promise to reform the country’s bloated civil service.
“If he’s able to push this through it will help the cost of doing business. It won’t happen overnight but it’s important,” says Tah Ah Lek, managing director of Public Bank.
Privatisation has also moved up the agenda in Malaysia as state holding companies have begun offloading assets acquired during the Asian crisis refinancing. Six years of deficit spending have made it crucial for Malaysia to realise some of its outlay by putting assets back in private hands.
Being neighbourly
But perhaps more significant than the stakes sold, say investors, is the buyer: Singapore. The city-state’s Temasek Holdings, a potent symbol of a richer neighbour, snapped up 5% of Telekom Malaysia for $420m.
In the past, such a deal would have kicked up political traction as relations between the two countries have often proven prickly since they parted ways in 1965. But Mr Badawi has been quick to improve ties with Singapore and downplay competition between the two erstwhile allies.
The Telekom deal was quickly followed by a friendly bid from Temasek to acquire a minority stake in privately owned Alliance Bank. “These deals are a symbol of potentially closer cooperation between Singapore and Malaysia,” says Melvyn Boey, head of research at JPMorgan.
