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Undilah PAS : MENENTANG KEZALIMAN & MENEGAKKAN KEADILAN
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Don’t play it again, Dr M
Investors worry about Dr M’s dogma, lack of reform
By Wayne Arnold
This article appeared in the 4 Dec 1999 edition of The New York Times KUALA
LUMPUR—With all due respect to Frank Sinatra, investors here have had just
about enough of "My Way."
Prime Minister Mahathir Mohamad adopted Sinatra’s swan song as the anthem
for his election campaign last month to remind voters how he had steered
Malaysia through Asia’s financial crisis while spurning foreign succor and
remonstration. The public responded on Monday by giving his ruling National
Front a majority and a five-year reprise to his 18-year tenure as prime
minister.
Behind the election results and the stock market’s slump the day after,
analysts and investors say, is a growing impatience with Malaysia’s failure
to take the kind of financial and corporate medicine that the International
Monetary Fund has prescribed for Thailand, Indonesia and South Korea.
Mahathir appears to have won little gratitude for having spared Malaysia
whatever humiliation might have come from inviting foreign assistance.
"There are a lot of people not entirely happy with him," said Fiona Leong,
head of research at the J.M. Sassoon brokerage firm.
Instead, Mahathir’s policies and antiforeign rhetoric appear to have
alienated the foreign investment-fund managers Malaysia needs to finance its
shift from a high-technology manufacturing base to a service economy, as
companies relocate production to countries with cheaper labor such as China.
Such dissatisfaction may seem out-of-place considering Malaysia’s current
economic vigor. After slipping into recession in 1998 and imposing controls
on currency flows in and out of the country that fixed its exchange rate,
Malaysia has returned to growth that economists estimate could exceed 5
percent this year. The sidewalks of downtown Kuala Lumpur have become a
battle zone of jack hammers and faux French cafes.
Economists say this Malaysian renaissance has less to do with Mahathir’s
policies than with a cyclical rebound generated by demand for Asian exports
from the United States and Europe.
"It’s just a cyclical upswing," said William Belchere, head of Merrill
Lynch’s fixed income research in Singapore.
The electoral returns themselves provide some insight into the
disillusionment with Mahathir. The ruling coalition’s share of the votes
dropped to roughly 56 percent from more than 65 percent when elections where
last held in 1995. Thanks to a redrawing of constituencies in 1996, that was
enough to secure more than three-quarters of the seats up for grabs. But
Mahathir’s own party, the United Malays National Organization, saw more than
one-fifth of its seats taken away.
Much of this popularity was lost in more conservative Muslim northern
states, with a second state falling into the hands of the Islamic Party of
Malaysia. Though less-developed, the area is rich in natural resources and
investors worry this new opposition state will copy its predecessor and
impose Islamic law, curbing its appetite for such lucrative vices as
gambling and drinking alcohol. Analysts also worry that the opposition gains
could presage broader dissension once Mahathir, who is 73, leaves office.
Another potent source of discontent comes from the middle-class communities
and industrial enclaves in the state surrounding the capital. There, the
National Front’s share of votes fell from roughly 75 percent to 55 percent.
Foreign investors are also leery, with many still smarting from what they
regard as Mahathir’s caprice and unfounded accusations that a Jewish-led
conspiracy has sought to undermine Malaysia’s economy.
As part of an effort to repair its economy, Malaysia also outlawed trade in
Malaysian shares overseas, a move that overnight shut down a lively market
in Singapore and left 172,000 investors with roughly $4 billion in Malaysian
shares they couldn’t sell. Fund managers say the still-unresolved issue is
yet another example of discrimination against foreign shareholders.
"If they’re serious about reform, and they want to be fair, why do they lock
these guys up?" asked J. Mark Mobius, president of the Templeton Emerging
Markets Fund.
Mobius, who says he has pulled $2 billion out of Malaysia since it imposed
capital controls, is spearheading a campaign by fund managers to convince
Morgan Stanley Capital International to reconsider its August decision to
reinclude Malaysia in its influential model portfolios. Because so many
funds use Morgan Stanley’s portfolios as a benchmark to measure their own
performance, he says, Malaysia’s reinclusion would obligate many fund
managers to invest there regardless of what Mobius says are considerable
political risks.
In late October, Morgan Stanley announced that it would delay returning
Malaysia to its key indexes from Feb. 29 until May 31 to avoid any potential
problems caused to computers by the leap year.
"Thank God they listened to our advice," Mobius said.
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