Malaysia’s drop in FDI: the warning 35 years ago which the government ignored
No, the problem did not start on 1st March 2020. The problem started in 1997 during the Asian Financial Crisis. The 1997 Asian Financial Crisis woke the ASEAN countries up. Singapore, Indonesia, Philippines, Thailand, Vietnam, Cambodia, Burma, Laos, Brunei and Timor-Leste knew they had to reform. They needed both political and economic reforms if they wanted to survive. Malaysia, however, continued to sleep. And that is why, today, Malaysia is in trouble.
NO HOLDS BARRED
Raja Petra Kamarudin
There appears to be a lot of discussion and debate regarding Malaysia’s drop in FDI. The discussion, however, is centred on who is to blame rather than why it happened. Of course, the perception they want to create is that Prime Minister Muhyiddin Yassin and the Perikatan Nasional government are to blame.
The truth is, more than 35 years ago back in the mid-1980s, the government had already warned businessmen that the position of Malaysia as the darling of foreign investors was not going to last. The politics of the ASEAN region was going to change — and once peace and stability comes to the other ASEAN countries such as Indonesia, Philippines, Thailand, Vietnam, Cambodia, Burma, Laos, etc., Malaysia was going to lose its darling status.
I was then a committee member of the Malay Chamber of Commerce and Industry while Rafidah Aziz was the Minister of International Trade and Industry (1987 to 2008) and Tun Daim Zainuddin was the Finance Minister (1984 to 1991).
During that period of the mid-1980s to the early 1990s, we had a series of meetings and conferences with the government on what to do post-NEP (the New Economic Policy was supposed to end in 1990) and how to ensure that Malay businessmen can continue to survive without depending on what the critics call ‘crutches’ or ‘tongkat’.
Around 35 years ago Rafidah Aziz warned Malaysians that Malaysia was going to lose out to other ASEAN countries if the country did not change direction
If you want the Malays to have a bigger share of the economic pie, then you need to enlarge that pie (or else you would need to ‘steal’ from the non-Malays to give to the Malays). And this would mean the economy needs to grow. But for that to happen, Malaysia would need more foreign investments or FDI. Hence Malaysia needed to remain attractive to the foreign investors.
But, in time, the government warned the businessmen, Malaysia would lose its attractiveness. Malaysia depended on a stable political environment and cheap source of labour to remain attractive to the foreign investors. Once Malaysia can no longer provide ample and cheap labour and the other ASEAN countries begin to see political stability, Malaysia will no longer be the darling of the foreign investors and foreigners would head to Indonesia, Philippines, Thailand, Vietnam, Cambodia, Burma, Laos, and so on.
Yes, 35 years ago, when Rafidah was the International Trade and Industry Minister and Daim was the Finance Minister, this matter was discussed. The government warned Malaysians that the country was going to lose out to its ASEAN neighbours. Singapore, Indonesia, Philippines, Thailand, Vietnam, Cambodia, Burma, Laos, Brunei and Timor-Leste were going to overtake Malaysia as the number one destination for FDI.
This was forecasted 35 years ago. It was discussed 35 years ago. Today, 15th February 2021, ASEAN’s population is 673 million and Malaysia’s population is only 4.7% of ASEAN’s population.
Tun Dr Mahathir Mohamad realised that Malaysia is too small. We do not have a big enough domestic market to support local businesses so that exports can become cheaper (meaning no economies of scale) and we do not have a sizeable enough work force (meaning we need to import our workers).
Mahathir suggested that each family have five children so that in time Malaysia’s population can grow to 70 million.
When Daim was the Finance Minister in the mid-1980s he knew Malaysia was headed for doom
People laughed at Mahathir and called him an idiot. But Mahathir saw that Malaysia’s small population is going to be a disadvantage when the other ASEAN countries stop killing and fighting and begin to open up the country to foreign investors.
Yes, that was 35 years ago. Prime Minister Mahathir, Trade-Industry Minister Rafidah, and Finance Minister Daim all saw this coming. Back in the mid-1980s they knew that by 2020 (when Mahathir’s Wawasan 2020 or Vision 2020 was supposed to be realised) Malaysia is going to be in trouble.
Malaysia, with its 4.7% population, was going to lose out to its ten other ASEAN neighbours. That was the real Wawasan 2020 or Vision 2020. But how to prevent that from happening?
Rafidah said the only way to prevent it was to stop depending on cheap labour or labour-intensive businesses and go high-tech or move into technology-based businesses (like Singapore).
Mahathir said Malaysia must go into heavy industries (which was why Hicom was set up) and he pushed Malaysia kicking and screaming into automobile manufacturing, the steel industry, ship building, and so on (at a great cost to the nation).
Daim played the stock market and tried to turn Malaysia into another Wall Street.
Anwar was warned about the problem and he had seven years to come out with a plan but he did nothing
In the meantime, Malaysia’s ten ASEAN neighbours slowly woke up, one by one, and quietly overtook Malaysia. While that happened, Malaysians continued to argue about Hudud, Islamic State, the NEP, Chinese schools and education, Malay rights and privileges, and so on.
Then, in 2020, against the backdrop of Mahathir’s Wawasan 2020 or Vision 2020, the Covid-19 coronavirus pandemic hit the world. This triggered a global economic collapse. And Malaysians woke up from sleep one morning — while enjoying the lockdown and while helplessly watching Malaysia’s economy collapse — and realised that the warning of 35 years ago had been ignored and the country was now suffering because of it.
No, this calamity of the fallen FDI is not Prime Minister Muhyiddin Yassin’s fault or Perikatan Nasional’s fault. They came to power just a year ago. More than 35 years ago we were all warned that, by 2020, Malaysia would be in trouble. And we were told the reasons why.
But no one did anything about it, neither the government nor the opposition. Malaysia, just like Nero, fiddled while Rome burned. We wasted 35 years on just playing politics even though 35 years ago we had been warned what was going go happen in 2020. And now we are looking for a scapegoat to blame.
In fact, Anwar Ibrahim also knew about the impending doom when he became Finance Minister in 1991 and Deputy Prime Minister in 1993. Anwar was warned about what was going to happen and he had seven years to come out with a plan. But he also did nothing because he was spending all his time plotting against Mahathir to try to take over as PM5.
Malaysians think that this is a problem which surfaced only over the last one year since Muhyiddin took over as PM8 and Perikatan Nasional formed the government on 1st March 2020. How shallow-minded Malaysians are.
Mahathir’s solution was to have more babies and he encouraged each family to have five children
No, the problem did not start on 1st March 2020. The problem started in 1997 during the Asian Financial Crisis. The 1997 Asian Financial Crisis woke the ASEAN countries up. Singapore, Indonesia, Philippines, Thailand, Vietnam, Cambodia, Burma, Laos, Brunei and Timor-Leste knew they had to reform. They needed both political and economic reforms if they wanted to survive. Malaysia, however, continued to sleep. And that is why, today, Malaysia is in trouble.
The 1997 Asian Financial Crisis woke ASEAN up but Malaysia continued to sleep
