Thứ Ba, ngày 12 tháng 8 năm 2014

Malaysia Booms as Najib Beats Growth Goal With Investment

Chua Ma Yu, a Malaysian billionaire

who made his fortune in the stock market, had big ambitions in

2008, when his CMY Capital Sdn. agreed with partners to build

the 48-story St. Regis Kuala Lumpur.


The country’s first six-star hotel would feature 208 rooms

and 160 apartments with housekeepers, butler service and a chef-in-residence. Two years later, the tycoon was still struggling

with paperwork to start construction, Bloomberg Markets magazine

will report in its September issue.


Chua met with Idris Jala, the man in charge of Prime

Minister Najib Razak’s plan to lift Malaysia into the ranks of
Asia’s wealthiest nations. Jala says he saw the St. Regis as a

way to spark spending in tourism, one of 12 areas Najib, 61, was

targeting for growth with tax incentives and expedited reviews.

Jala helped streamline the paperwork, and Chua, 61, got

approvals two weeks later. The government went on to create a

one-stop center to handle development applications.


“Investment is a precursor to economic growth,” says

Jala, 55, who heads the government’s Performance Management and

Delivery Unit, or Pemandu, which oversees Najib’s economic

transformation program. “If there is no investment, there are

no new jobs and no growth.”


Growth Targets


While Najib’s government has already attained some goals

since launching the economic program in 2010, others are more

far-reaching.


In the first quarter of 2014, gross domestic product

increased 6.2 percent, surpassing the average of 6 percent

annual growth Najib wants to register through 2020. Per capita

gross national income rose to $10,060 last year, crossing the

$10,000 threshold for the first time.


That’s still a long way from $12,746, the latest World Bank

definition of high income, and the $15,000 the prime minister

wants to achieve by 2020.


Najib’s plan involves diversifying Southeast Asia’s third-largest economy beyond oil and gas. He wants to foster skilled

workers with improved education and increase investment to $444

billion in the 12 areas his economic plan focuses on to add 3.3

million jobs by his self-imposed 2020 deadline. So far, 219.3

billion ringgit ($69 billion) has poured in, 84 percent from

private companies.


‘High-Quality Economy’


“I want to see Malaysia emerge not just with a high-income

economy, but a high-quality economy,” he said at the Invest

Malaysia 2014 conference in Kuala Lumpur on June 9.


The country is heading in the right direction, says

Frederico Gil Sander, World Bank senior country economist for

Malaysia.


The nation moved to No. 6 in the organization’s “Doing

Business 2014” report on business-friendly nations, up from No.

12 in 2013 and No. 25 in 2007. The index, measuring 189

countries, covers everything from starting a company to dealing

with permits.


“With the new economic model, there is now a road map for

needed reform,” Gil Sander says.


Malaysia’s improving outlook is helping investors overcome

perceptions that the country can be a difficult place to find

talent, says Zainal Amanshah, CEO of InvestKL, a government

agency created to lure global companies.


InvestKL has induced 38 multinational firms to set up

regional headquarters around Kuala Lumpur — more than a third

of his goal of 100 by 2020. International Business Machines

Corp. (IBM)
, the world’s biggest computer services company, announced

a plan to invest 1 billion ringgit in 2011 in a technology

center outside the capital. IBM debated whether it would find

the right workers and transportation.


No Shortcomings


“The shortcomings are no longer in play,” says Paul

Moung, managing director of IBM Malaysia, who is satisfied with

the decision.


Kuala Lumpur embodies Malaysia’s new confidence.

Pedestrians stroll along refurbished walkways. Traffic zigzags

around excavation for Malaysia’s first mass-rapid-transit

system, the MRT, whose inaugural line is set to begin operations

in July 2017. Cranes dot the horizon, and crews bathed by

floodlights work until midnight. Dozens of skyscrapers are

joining the 88-story Petronas Twin Towers, the world’s tallest

buildings when they opened in 1999.


“The St. Regis will help put Kuala Lumpur on the travel

map and create a new benchmark in the international luxury

hospitality industry,” says Chua’s daughter,Carmen Chua, chief

executive officer of One IFC Sdn., the property’s developer.


Shoe Closet


The 31-year-old graduate of the London School of Economics

and Political Science, who speaks English with a plummy British

accent, shows visitors a model apartment, pointing out the walk-in shoe closet and stainless steel appliances.


Looming in the St. Regis sales gallery is a massive bronze

horse by Fernando Botero. At 3.5 tons, it’s the biggest piece

the Colombian artist has ever created and it eventually will

move by crane to the St. Regis lobby. Art comes naturally to

Carmen, who is curator of her father’s collection of Andy Warhol

originals and other modern masterpieces.


Najib wants to increase tourism, health care and other

services to 65 percent of GDP by 2020 from 55.2 percent in 2013.

Melaka-based Kotra Pharma (M) Sdn. is investing 60 million

ringgit for a plant to produce infusion products. The government

predicts the project will create 99 jobs and add 35.2 million

ringgit to gross national income.


Najib wants to lessen Malaysia’s dependence on oil and gas

– even as state-owned Petroliam Nasional Bhd. is expanding amid

a five-year, 300 billion ringgit capital-spending effort.

Petronas, as the company is known, has awarded contracts to
Petrofac Ltd. (PFC) and others to develop marginal fields.


Oil Revenue


In 2013, it opened a liquefied natural gas importing and

regasification terminal in Melaka with the capacity for 3.8

million metric tons a year. And it plans to invest $27 billion

on a refinery and petrochemical development complex in the

southern state of Johor.


The government expects oil and gas to make up 28.9 percent

of total revenue this year, down from 39.7 percent in 2008 — a

sign that even as Petronas grows, Malaysia is developing other

industries.


One man who personifies Malaysia’s newfound entrepreneurial

verve is Andrew Lee. He created a massive indoor model of Kuala

Lumpur with its skyscrapers and proposed MRT system.


The 50-year-old founder of ARCH Collection Sdn. shows off

rare maps and the future cityscape in his Kuala Lumpur City

Gallery. Outside the 116-year-old brick building, tourists pose

in front of Lee’s I Love KL structure.


The capital’s new transit system will help ease travel

times that can exceed an hour by car for the 10-kilometer (6-mile) crosstown journey.


‘Game Changer’


“We’re using this project as a game changer to show to the

nation what can be done if you put your heart and mind to it,”

says Azhar Abdul Hamid, CEO of MRT Corp., which is building the

transit system.


Enticed by initial public offerings and rising corporate

earnings, investors are piling into Malaysian stocks. The FTSE

Bursa Malaysia KLCI Index (FBMKLCI), anchored by financial firms Malayan

Banking Bhd. and Public Bank Bhd., hit an all-time high in early

July.


One prominent Najib skeptic is his most-storied

predecessor, Mahathir Mohamad, who was prime minister from 1981

to 2003. During his tenure, he laid out a 30-year economic plan

known as Vision 2020.


‘So-Called Transformation’


“I find difficulty in understanding the purpose of this

so-called transformation because we have been transforming all

the while,” says Mahathir, 89, referring to Najib’s proposal in

his shrinelike office adorned with carvings and photos of him

with world leaders.


Mahathir claims credit for changing Malaysia to an

industrial country from an agricultural one. He wooed chipmaker
Intel Corp. and other electronics firms, improved roads and

started building the Petronas towers and the Kuala Lumpur

International Airport.


Then the Asian financial crisis erupted in 1997. The

ringgit plunged 53 percent, and the benchmark stock index

tumbled 52 percent that year. While South Korea raised interest

rates
and opened capital markets to overseas investments,

Mahathir imposed currency controls to keep foreign investors

from fleeing. That worked for a while. GDP rebounded to 6.1

percent in 1999 after contracting 7.4 percent in 1998. Then

growth began to slow.


Mahathir was a strong supporter of the nation’s policy of

affirmative action for the majority Malays and other indigenous

peoples, with quotas and subsidies in schooling and government

jobs.


Najib’s Rise


Singapore lured skilled workers looking for better

opportunities, South Korea embraced advanced manufacturing, and

some investors moved money abroad. Growth fell to 4.6 percent in

the decade that ended in 2010 from 7.2 percent in the 1990s.


Prime MinisterAbdullah Ahmad Badawi, who spoke of easing

the preferential policy, resigned in 2009 after his ruling

coalition won 2008 elections by the slimmest majority since

Malaysia’s independence from Britain in 1957.


Najib, then deputy prime minister, took over and went on to

win a second term in May 2013. When he came to power in 2009, he

began considering how to boost competitiveness, Pemandu’s Jala

says.


Cabinet ministers held five retreats that year. They locked

themselves in a conference room, switched off phones and

debated. They agreed to tackle Malaysia’s fiscal deficit, which

had widened to 6.6 percent in 2009 from a surplus following the

Asian financial crisis.


Improving Education


“We didn’t like where Malaysia stood,” Jala says.


Malaysia narrowed the deficit to 3.9 percent of GDP in

2013, in part by cutting fuel and sugar subsidies. It wants to

further trim the gap to 3.5 percent this year and 3 percent in

2015, heading toward a balanced budget by 2020.


To attain Najib’s agenda, Malaysia must improve the quality

of education, Gil Sander says.


Among 65 countries in the 2012 Program for International

Student Assessment, Malaysia ranked 52 in math, 53 in science

and 59 in reading.


In 2012, Najib’s government started phasing in the teaching

of math and science in Bahasa Malaysia, the language of the

ethnic majority. Mahathir calls the move a mistake.


“Science is renewed every day almost, and you can’t get

that in Bahasa,” he says.


The country has been more successful at revamping the oil

industry and infrastructure, Gil Sander says.


‘Low-Hanging Fruits’


“In education, there are no low-hanging fruits; it’s tough

reform,” he says. “The biggest challenge to sustainability of

Malaysia’s economy beyond 2020 is raising the quality of

education to developed-country levels.”


Perceptions about the government’s confusion in handling

the March disappearance of Malaysian Airline System Bhd. (MAS) Flight

370 have added to the need for change.


In mid-July, the airline faced a second tragedy, the loss

of Flight 17. The jet was carrying 283 passengers and 15 crew

when it was downed over Ukraine, killing all on board.


With two disasters in four months, the airline needs to

take tough steps to overhaul its business, Najib said in a

statement on Aug. 8. Malaysia’s sovereign wealth fund, Khazanah

Nasional Bhd., which owns 69.4 percent of the airline company,

offered 1.38 billion ringgit to take the carrier private. It

plans to delist the stock in an attempt to restore confidence in

the debt-ridden airline. Details of the plan will be announced

by the end of August, Najib said.


‘Complete Overhaul’


“We believe our national carrier must be renewed,” Najib

said. “Only through a complete overhaul of the company can we

deliver a genuinely strong and sustainable national carrier.”


Jala was one of the few non-Malay, non-Muslim heads of a

government-linked company when he served as Malaysia Airlines’

CEO from December 2005 to August 2009. He devised a way to track

profits and losses for each of the carrier’s 110,000 flights

during his tenure, Jala says.


Today, he keeps tabs on dozens of Najib’s economy-transforming initiatives in his Pemandu office with a traffic-light system of green, yellow and red markers to show progress.

In 2013, retail revenue exceeded the target, while solid-waste

management was mired in red.


Jala says his job is to define the steps and keep the

overhaul on track.


“A lot of people told me directly, ‘You guys are never

going to do this,’” he says, using the MRT project as an

example of an initiative that has overcome skepticism. “It’s

now really happening.”


CMY Capital’s Chua, who’s known by his honorific title Tan

Sri Chua, says he’s seen progress, too. Since he got his Jala-expedited approvals, Chua’s St. Regis is adding its silvery

profile to Kuala Lumpur’s skyline and will open in November

2015.


“A lot of bottlenecks have been removed,” Chua says.

“People find it easier to invest.”


To contact the reporters on this story:

Yoolim Lee in Singapore at

yoolim@bloomberg.net;

Shamim Adam in Kuala Lumpur at

sadam2@bloomberg.net


To contact the editors responsible for this story:

Stryker McGuire at

smcguire12@bloomberg.net;

Lars Klemming at

lklemming@bloomberg.net

Gail Roche, Jonathan Neumann



Malaysia Booms as Najib Beats Growth Goal With Investment

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