Business as usual in Malaysia? Not any more

Business as usual in Malaysia? Not any more

Posted by Raja Petra
Thursday, 20 March 2008

For years, Malaysian companies and businessmen had competed with one another to win the affections of the ruling Barisan Nasional (BN) coalition government because of its huge role in the national economy.

By Leslie Lopez, THE STRAITS TIMES

AMONG the flood of congratulatory flowers that made their way last week to the office of Penang's new Chief Minister Lim Guan Eng, a large bouquet from businessman Patrick Lim stood out.

It came with a bright-red card, which read 'Congratulations on your historic win', and a large poster carrying the very familiar logo of Mr Lim's Democratic Action Party (DAP), a red rocket with four boosters piercing through a blue circle.

Businessman Lim, who is no relation of the new Chief Minister, is a close friend of Prime Minister Abdullah Badawi. His property company Equine Capital is behind the island's most ambitious infrastructure undertaking, called the Penang Global City Centre.

The businessman's overture to one of Datuk Seri Abdullah's most troublesome political opponents reveals just how the cosy nexus of business and politics is set to undergo a seismic shift in Malaysia after the historic March 8 general election.

The opposition's strong showing, which gave it control of five economically strategic states and a big voice in Parliament, is confronting big business in Malaysia with a new set of challenges.

For years, Malaysian companies and businessmen had competed with one another to win the affections of the ruling Barisan Nasional (BN) coalition government because of its huge role in the national economy.

Now they must walk a tightrope - building bridges with the opposition-led state governments of industrial hubs such as Penang and Selangor, without upsetting their BN patrons in the federal government.

'There is going to be a lot of uncertainty because projects that were awarded through sweetheart arrangements by the previous government may not stand scrutiny. The election results will strike at the heart of how business has been done in Malaysia,' said Mr Manu Bhaskaran of Centennial, a US-based consultancy group.

Underscoring the looming uncertainty is the sharp sell-down by foreign and local investors over the past week of stocks with strong political connections listed on the Malaysian stock exchange.

These include diversified media conglomerate Malaysian Resources Corp, Datuk Lim's Equine Capital and water company Puncak Niaga, which all have strong links to the BN.

Mr Manu and other private economists say that the recent election results pose separate challenges for the opposition and the ruling BN, which is led by Prime Minister Abdullah's United Malays National Organisation (Umno).

Malaysia's loose opposition coalition, which has long been suspicious of corporate Malaysia and critical of the BN's economic policies, must now take a more pro-business approach as economic managers.

And the BN coalition must review its own strategy of dealing with opposition-led states.

In the past, the BN had dealt with opposition governments, such as the Parti Islam SeMalaysia (PAS) in Kelantan, by starving the state of development funding from the federal government.

But this time around, it is in a severe bind.

Some analysts say that Datuk Seri Abdullah's government will have to temper its hardline approach with some carrots for the opposition-led state government.

Penang, Perak and Selangor - all controlled by the opposition now - form the backbone of peninsular Malaysia's industrial and commercial strength. These states are also home to some of the country's biggest foreign-owned enterprises.

A confrontational approach with these states could weaken foreign investment sentiment, potentially undermine the national economy, and cement rising voter hostility to the BN, private analysts say.

A senior Finance Ministry official told The Straits Times that the BN government will have to maintain 'open channels with the new state governments'. 'Funding will be there for projects, but they will have to go through much stricter scrutiny than previously,' he said.

In a recent research report, state-controlled CIMB Securities said it had turned cautious on Malaysia's construction sector because of the changing political landscape.

It cited possible delays in the implementation of RM73 billion (S$32 billion) worth of so-called mega projects and a slowdown in the implementation of infrastructure undertakings under the country's five-year development programme.

The mega projects, which could face problems, include:
# The RM3.1 billion West Coast Expressway connecting Selangor and Perak;


# The RM5 billion water treatment plant in Selangor;


# The RM1.6 billion monorail system on Penang island; and


# The roughly RM10 billion water project that called for a pipeline to transfer water supply from the central state of Pahang to Selangor.

Opposition politicians maintain that they will not stand in the way of federal government undertakings.

'I think there is a lot of scope to work together on economic issues (with the BN),' former deputy premier Anwar Ibrahim, who is the leader of the opposition alliance, told The Straits Times.

But he stressed that 'the old ways of doing things won't work any more'.

For example, the opposition has insisted that contracts will be awarded on a transparent basis. Businesses will no doubt be watching.

For now, the first big casualty could well be Datuk Lim of Equine Capital.

Last year, Datuk Seri Abdullah launched Datuk Lim's ambitious RM25 billion plan to convert a horse-racing turf club into a mixed real estate development that would dwarf Kuala Lumpur's Petronas Twin Towers.

But the plan quickly attracted public controversy because of the traffic congestion it would likely create and the BN government's alleged favouritism in awarding Datuk Lim the development rights without any open tender.

Shortly after his swearing in as Chief Minister of Penang, Mr Lim Guan Eng was asked how the new state government would treat Datuk Lim's massive Penang Global City Centre project.

'There is no need to review the Penang Global City Centre as it had not been given any official approval in the first place,' he said.