It
has been nearly a year since Mahathir Mohamad passed the
torch to Abdullah Badawi, officially making him the
fifth prime minister of Malaysia. At 64, Abdullah is the
oldest person ever to hold the post and critics often
wondered if he would be able to match the pulsating
performance of his predecessor. Going by the numbers
alone, Abdullah has done pretty well.
While
Malaysia's ranking in Transparency International's
Corruption Perception Index has dropped by two places,
to number 39 among the 133 countries surveyed, there has
been no impact on the country's economic growth. The
Malaysian economy is expected to achieve the forecast 7%
growth by the end of this year, despite high crude oil
prices. If anything, Malaysia, a net crude oil exporter,
stands to gain from the price hike, just as it seeks to
reduce its national petroleum subsidy to lighten the
government's load.
So far, Abdullah's economic
performance has been more than credible. Institutional
investors have begun to stream into bourses, with the
Kuala Lumpur Stock Exchange poised to breach the 900
index barrier over the next two months. Of the 18
sovereigns rated by Standard & Poor's (S&P) in
the region, Malaysia's were among the five upgraded in
2003. In May 2004, S&P affirmed Malaysia's foreign
currency rating of A-/A-2 and local currency rating of
A+/A-1 with a stable outlook.
A solid sovereign
rating means both the Malaysia government and its
private sector can borrow from foreign banks, especially
European banks in London, at relatively low interest
rates - this, in spite of a recent interest hike by the
US Federal Reserve. While this does not mean Malaysia
necessarily has to exercise this option, the easy and
open access to international financial market in London
allows Malaysia the extra financial leash to strengthen
its economy. In this sense, Abdullah's administration
has gained the leeway to manage Malaysia more
effectively in the event of any cyclical turbulence.
On a year-to-year basis, the government's
estimated deficit of 4.5% of gross domestic product
(GDP) and the 2005 target of 3.8% are also in line with
S&P expectations of moderate yet steady fiscal
consolidation. Such modest spending, as opposed to the
routine 8% deficit for the last six years since the
Asian financial crisis, marks a return to economic
prudence that Abdullah, time and again, has promised to
deliver. Abdullah's fiscal targets are more realistic
and are in keeping with the benchmark of good economic
deficit spending set by the Organization for Economic
Cooperation and Development (OECD). In OECD countries,
despite the need for more spending, fiscal outlays have
rarely gone above 4.5% each year. Abdullah's economic
philosophy has been a balanced one. Indeed, the
government has already committed itself to spending
another US$2.5 billion on its eighth Malaysian Economic
Plan.
More important yet, in line with
Abdullah's call to 40 government-linked companies (GLCs)
to improve performance, there has been a discernible
movement in this direction, especially after the
appointment of Azman Mokhtar as the head of Khazanah
Nasional Berhad, which is partly owned by the Ministry
of Finance. With the exception of Malaysian Airlines,
other GLCs have improved their performance. Petroliam
Nasional, Malaysia International Shipping Corp, Port of
Tanjung Pelepas, Celcom, Commerce International Merchant
Bankers Bhd, Tenaga Nasional Berhad, Maybank, Mutiara
Damansara and PLUS Expressways have done exceedingly
well.
Consistent with Abdullah's strategy to
groom GLCs for regional expansion in Southeast Asia,
especially Indonesia, the country's top three local
banks partly owned by Khazanah - Malayan Banking Bhd
(Maybank), Commerce Asset-Holding Bhd (CAHB) and RHB
Capital Bhd - are financially strong enough to acquire
overseas banks and appear poised to do so. As it is,
Maybank is currently bidding for PT Bank Permata in
Indonesia while CAHB bought a controlling stake in PT
Bank Niaga in 2002. To date, only RHB Bank Bhd, the
unlisted banking unit of RHB Capital, has yet to make a
significant overseas purchase.
According to Yeah
Kim Leng, chief economist of Rating Agency Malaysia
(RAM) Consulting Services, "If Malaysia is able to post
a GDP of over 7%, which is very likely in 2004, our
sovereign rating outlook is likely to see an upward
revision in the latter half of 2005." RAM's positive
ratings will create a virtuous cycle where other rating
agencies like Fitch, for instance, will likewise offer a
positive upgrade.
Abdullah also shows signs of a
mature statesman with his eagerness to bring all
sections of society into his economic plan. Speaking to
2,000 delegates of the Malaysian Chinese Association
earlier this month, he proposed the setting up of a
consortium of companies headed by various races in the
country to seize business opportunities in China, India,
West Asia and Africa. "I believe we can initiate
appropriate measures to set up a big company like a
consortium comprising Malay, Chinese and Indian
companies to establish trade ties with China for
instance. The same with India ... we can have a joint
venture, or in West Asia and Africa." To give added
trajectory to his plan, Abdullah affirmed that GLCs
should spearhead this proposed consortium.
From
the way he has handled the job so far, it is evident
that Abdullah will prove his critics wrong.
Phar Kim Beng is a regular contributor
to Asia Times Online. He is currently on a Sumitomo
Foundation fellowship, where he is studying the state of
Japanese social sciences. He was trained in
international relations and strategic studies, first at
Cambridge University, later the Fletcher School and
Harvard University.
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