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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