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Malaysia shows that it is back in business

For a long time Malaysia was one of those nations considered to be a land of plenty and, being blessed with substantial resources, was always going to be successful.

Then came the Asian crisis in 1997 and the nation went into steep decline, producing a growth rate of –8%. The IMF attempted to bail out the country only to receive a snub from the Prime Minister, Dr Mahatir.

Soon afterwards, Deputy Prime Minister and Finance Minister, Anwar Ibrahim was jailed.

The Reformasi movement was starting to flex its muscles and dissidence was the order of the day. The world press wrote off the prospects of recovery for the country.

Having visited the country over the last few days, I took the opportunity to interview some prominent Malaysians with a view to finding out the current state of the nation.

Tan Sri Clifford Herbert is the Chairman of the Kuala Lumpur International Airport and formerly the head of Treasury in Malaysia.

He was able therefore to be frank and forthright in expressing his views about the nation.

Tan Sri Herbert stated: “Malaysia is open for business and ready to take on the investment dollars that fund managers and investors are looking to place.”

Malaysia is a nation that exhibits the following characteristics – an inflation rate of 2%, an unemployment rate of 4%, a current account that is in surplus and a growth rate this year of around 1%.

In itself, this growth rate would be considered unremarkable. However, it must be remembered that they are coming off a –8% growth rate from the previous year. So how has this been achieved?

At the time of the crisis that beset Asia, the IMF wanted governments in the region to cut back on their expenditure. Malaysia was not prepared to do this.

Tan Sri Herbert is of the view that the IMF misread the situation and if the Malaysian government had cut back on their expenditure the nation would have plunged into a recession of considerable magnitude.

The Malaysian government therefore increased their expenditure and introduced policies that were far more pro-business than had been the case in the past.

This led to the stabilisation and now possible recovery in the market to the extent that there are murmurs that the growth forecasts for this year could well be exceeded.

Malaysia has turned the corner in economic terms. The general feeling in the community is that there is a strength in the economy that has not been seen for some time.

It would seem, however, that the tourism sector is not displaying the strength of some of the other sectors.

Hotel occupancy rates are still fairly low and this is attributed to the ‘foreign press’ reporting of those problems that did visit the economy.

The Reformasi movement appears to be all but dead. The general anecdotal feeling I was able to glean is that the younger Malay national does feel strongly that Anwar may have been unjustly dealt with.

However, Chinese born Malays and Malays involved in business are enamoured by the pro-business policies of the Malaysian government. This has meant that the overwhelming support does seem to be resting with the Prime Minister, Dr Mahatir.

Datok Dr Shan, a member of the advisory panel to the Malaysian Institute of Economic Research, provided a host of economic data that had, literally, come hot off the presses.

These statistics confirm that the Malaysian economy is in a very strong and healthy position. There seems little doubt that the decision that the Malaysian government took to pump prime their economy against the wishes of the IMF was a wise one.

It would seem, as both Tan Sri Herbert and Dr Shan indicate, that the IMF got it wrong in the case of the Malaysian economy.

The scaling back of government investment at a time when the Mal-aysian economy had just seen the repatriation of over US $100 million would have plunged the economy into an insurmountable recession.

The pump priming that was undertaken, which rescued the economy from certain recession, prevented this.

Overall, when you observe the state of the economy, it is apparent that Tan Sri Clifford Herbert’s claim that Malaysia is open for business is true. It is time to reconsider the destination of some of your foreign investment capital.

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