What’s really choking investments in Malaysia?

by Edwin Yapp
The Malaysian Insider
Jul 21, 2011

JULY 21 — In my many years as a journalist, one of the most oft-asked questions I’ve put to interviewees who have business interests here in Malaysia is: “What are some of the factors that have prompted you to invest in Malaysia?”

The answers that I get, though not exactly the same every time, can be summarised into one or more of the following major points: low costs, multilingual workforce, skilled labour, and political stability. This was especially true in the heydays of the Multimedia Super Corridor (MSC) Malaysia, when multinationals began pouring their investments into Cyberjaya, building their shared services and outsourcing centres there.

Thus, I read with interest an article last week which quoted our deputy minister of international trade and industry as saying that one of the main features that attracted investors to Malaysia was political stability.

He went on to say that it was “unfortunate” his ministry will now have to rely on other “features” in its bid to promote the country, especially coming off the back of last week’s Bersih 2.0 rally.

“The main question we receive is whether this [Bersih 2.0 rally] is a common occurrence,” he was quoted last week in The Malaysian Insider as saying. “Although it was a hiccup last Saturday, we tell investors that it happens only very rarely.”

His responses got me thinking about a couple of things. Firstly, was the Bersih 2.0 rally, which admittedly doesn’t happen frequently, a real cause for concern as the deputy minister claimed? Secondly, what kind of other “features” does he think the government can use to sell Malaysia as an investment destination?

While I think it’s fair to say investors could have been marginally concerned about the one-off street rally that happened last week, I do not think that our position as an investment destination will be affected by the fear of more street rallies in the future.

In fact, I think what’s more worrying to businesses are basic issues affecting the nation’s economy as a whole. There are many fundamental ones that can be highlighted but I think two will suffice.

The first must be the application of equitable and transparent business practices at all levels of investments, especially in deals that involve taxpayers’ monies. Now, there have been many instances when the public has read and heard through the grapevine, and no doubt experienced by businessmen, of how the lowest priced and best submitted tenders aren’t the ones which would eventually get the job.

Case in point: The recent Light Rail Transit (LRT) extension project in a so-called open tender exercise, which witnessed the Finance Ministry committee ordering Syarikat Prasarana Negara Bhd to award the deal to the Hartasuma Sdn Bhd-Bombardier joint venture, whose RM890 million bid is nearly 50 per cent higher than the lowest bid.

A source told The Malaysian Insider that “all bids are technically the same” but Prasarana had recommended Ingress Corp Bhd-Balfour Beatty Rail Sdn Bhd, which put in a bid of RM610 million, the lowest, against Hartasuma-Bombardier’s bid, which was the highest.

If indeed this were proven to be true, my question would be what happened to the principle that there must be a “level playing field” in order for true competitive practices to thrive and for the owner of the project, in this case, the government, to be ensured of getting the best value for its money on the said project?

Or are these kinds of deals awarded based on the age-old feudalistic principle of, “It’s not what you know, but who you know?” instead of the “May the best man win” principle? This case is just but one of the many stories of how the best, most qualified tender submission, isn’t the one that’s going to get the job.

Now wouldn’t any businesses wanting to deal here in Malaysia be more concerned with a level playing field than street rallies?

The second factor I believe investors are likely to be antsy about is the systemic corruption and wastages that permeate all levels of tenders in the country. For this, we only need to turn to the pages of the Auditor-General’s report for the past few years to see for ourselves how bad the wastages in Malaysia are.

A sample of these occurrences (http://thestar.com.my/news/story.asp?file=/2007/9/9/nation/18832193&sec=nation) include a set of four screwdrivers costing RM224; technical books consisting 10 titles that had a price tag of RM10,700; a 3.1-megapixel digital camera that was bought for RM8,254.

These figures speak for themselves. Surely this kind of practice can’t inspire confidence in foreign investors to make Malaysia a preferred investment destination, especially with other countries in the region rising to challenge our competitiveness?

One can’t really know what the right honourable deputy minister meant when he noted that we must use other “features” to make us more attractive to investors.

But regardless of what he means, I do not think that there will be any downside to making Malaysia a preferred investment destination if the government begins first by addressing the two aforementioned points before trying to do anything else to convince investors that are already here to stay, or those who are thinking of investing.

Political stability can’t be just about the absence of perceived disturbances and nuisance as a result of one rally. It must encompass much more than just that; it should be about how the government of the day allows free market principles to breed a competitive business landscape through the execution of open and transparent business practices instead of letting a feudalistic mentality continue to reign.

It must be about the eradication of systemic corruption, the plugging of leakages and the elimination of wastages that will always end up disrupting economic progress.

If the government is truly serious about selling Malaysia, start by selling this feature — that it is committed to reform by being transparent for all to see while tackling the hubris that exists in the current system.

Do that, rather than simply making July 9, 2011 a convenient and obvious scapegoat for the flagging inflow of investment into the country.

This would be the best “feature” that will ultimately speak for itself and convince investors to part with their money and park it here in Malaysia.

* The views expressed here are the personal opinion of the columnist.

  1. #1 by yhsiew on Friday, 22 July 2011 - 12:39 am

    Tell me Edmin Yapp, which investors want to invest in a die-hard despotic state which puts up road blocks everywhere, forbids people to wear yellow and blanks out magazine pages?

  2. #2 by ablastine on Friday, 22 July 2011 - 1:43 am

    Those at the pinnacle of power in Malaysia, namely the UMNOputras and cronies had to pay a lot of money to get to the position of advantage they wanted. The top man, Prime Minister gets the key to Petronas with perogative to make it his own ATM and is simply above the law. He has all the important State institutions completely under this control and if that is not enough repressive laws like the ISA, EO, OSA etc are all at his disposal. These benefits percolates down the line and the gravy train only stops after cronies like the MCA, MIC and Gerakan running dogs lap up the last drop.

    Frankly BN politicans are there for one and one reason only and that definitely is not to concern themselves with trying to get the country conducive for foreign investment. They are out to rape the treasury and after having done that they will leave the country behind to die while they wallow in luxury in some far off land. If Pakatan cannot convince enough of rural folks to understand this fact and still have them vote BN in the coming election, it means that we will be finished as a nation fast forward.

  3. #3 by trublumsian on Friday, 22 July 2011 - 4:23 am

    umno will bribe foreign companies (the middlemen) to invest in malaysia, that’s their m.o.

    for every baginda there is 10 more lining up to line up their pockets.

  4. #4 by Joshua on Friday, 22 July 2011 - 6:35 am

    Under Najib we have to cry much more..

    Anwar means we have to war more unfortunately we are also seeing that .

    while many know Najib talks of IMalaysia, he should be known as 1teargas as the amount of teargas had been blown on the 1people for the 1performance in a peaceful demonstration of LOVE for the nation.

    So Najib has done the right thing for his namesake as Najib in Chinese is eye tears and now that tears is from the ordinary people in KL on 709 to be in history.

    Even hospital where lots of tears of mourning are aplenty was not spared as 1Najib = 1tears for all.

    this 1tears will clean up or Bersih the nation for the IGGG to be after the exorcize the ghosts of May 13. What a remedy as “no pain no gain.”

    A new beginning for Malaysia in


  5. #5 by loveandgratitude on Friday, 22 July 2011 - 8:53 am

    ‘Thus, I read with interest an article last week which quoted our deputy minister of international trade and industry as saying that one of the main features that attracted investors to Malaysia was political stability.

    He went on to say that it was “unfortunate” his ministry will now have to rely on other “features” in its bid to promote the country, especially coming off the back of last week’s Bersih 2.0 rally.’…


  6. #6 by dagen on Friday, 22 July 2011 - 8:59 am

    This umno practice of blowing up costs of materials supplied to the umno gobermen is actually dumb. Very stupid. But hey it works. Dude, it works only here in malaysia. Let me tell you people why. Everyone knows the real purpose for blowing up the numbers from 2000 ringgit a laptop to 42000 ringgit in one real life example. There are many umnoputra hands waiting to dip into the excessive profit, I am sure. So it’s no wonder that the excess profit must be really excessive.

    But look at the supplier. He would have made his usual 5-8% maybe 10% profit from the sale of his 2000ringgit laptop. Lets say 10%. That means his profit is a mere 200ringgit. And in an honest situation, he would be taxed on that 200 ringgit profit (after taking away whatever deductibles the law allows). Oh no. But his invoice shows 42000 ringgit; and that means a profit of 40200 ringgit. He, going by the laws, would be taxed on that whole 40200 ringgit (less whatever deductibles).

    This is alright if he has actually got the whole 40200 ringgit profit in his pocket. But as I hv said earlier, that is not the case because dato so and so needs a cut. Datin so and so wants a kickback. Dato seri so and so needs political contribution. etc etc. In the end the supplier may end up with a much reduced profit. Maybe, say 8000 ringgit. Still, it is a big figure when compared to the 200ringgit he would have got by honest means. But dont forget this. 25% tax rate on 40200 works out to be 10000+ ringgit. What he has in his pocket would not be enough to pay the tax due on his 40200 profit.

    So any wonder why the inland revenue is working extra hard going after non-umnoputra business people? Re-play this same scenario for the foreign investors. Inflate their prices to give kickbacks to umnoputras would result in losses after tax in their home country!

  7. #7 by Godfather on Friday, 22 July 2011 - 9:13 am

    Don’t laugh at the botak deputy minister. He is part of the power sharing formula in UMNO and it’s mainly due to the “influence” of his old man.

  8. #8 by DAP man on Friday, 22 July 2011 - 10:29 am

    The Minister has to find some scapegoats and Bersih is the convenient one.

    The best feature, would be kick out UMNO and bring in Pakatan as the government.

    This is the only panacea.

  9. #9 by yhsiew on Friday, 22 July 2011 - 10:48 am

  10. #10 by Cinapek on Friday, 22 July 2011 - 11:11 am

    Somebody should go tell this poor excuse of a minister that the first stop any foreign businessman interested to invest would be the Trade Counselor of his embassy or diplomatic mission.

    The US Embassy’s opinion of Malaysia and its shennanigans as revealed by the Wikileaks cables speaks volumes of what the Embassy will advise its citizens if they do ask. And I am sure it is the same for all the other countries. So, Mr HP6 minister, all you and your HP6 Govt need to do is to get your act together on proper governance and the investment will flow in.

    I also notice that when Rafidah, for all her shortcomings, was Minister, she was very hands on to promote Malaysia as a destination for FDI. I hardly hear any efforts now being made. Is the minister and his deputy up to the task to “sell” Malaysia? Is MIDA effective?

  11. #11 by Joshua on Friday, 22 July 2011 - 11:16 am

    How much did Najib bring back from the latest official visits to EU after spending so much public fund?

    Did Bersih bersih Najip expected hopelessness?

  12. #12 by ktteokt on Friday, 22 July 2011 - 7:27 pm

    Who with sound mind would want to bring in money to a country which is racist, corrupt and badly managed?

  13. #13 by waterfrontcoolie on Monday, 25 July 2011 - 12:15 am

    I am wondering as to why the Chinese didn’t bide? Ot are they not bidding because of their experience on the Gemas-JB rail track contract?
    Notwithstanding their hi-speed kereta-Api, their average KM cost is still lower than ours at 150km/hr. Why? Maybe I should not ask. we all know! when a man is in a denial mood, normally, they say: time is up!! to roll up the mattress! that is! Time to leave with my bag full!!!

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