Friday, January 15, 2010

2009: The Year That Wasn't

I was asked to write by The Edge weekly for their 2009 year end bumper issue on the theme of "The Year That Wasn't". Originally, I had no clue what I was going to write, I mean, was there any positive expectations in the first place? But I soon found my inspiration as the deadline approached. The article was published and juxtaposed against a pretty good write up by Khairy Jamaluddin, who at least made the effort to be critical, unlike some of the others who wrote, who were more into flattering the current administration.

The Edge "titled" my piece "Good Start, Bad Finish", which I thought was a pretty appropriate title. ;-)

So here it is, reproduced for your reading pleasure ;-).

2009 is a year where expectations were high on the economic front in Malaysia despite the global economic crisis which brought global growth to a grinding halt. We had a new Prime Minister in Datuk Seri Najib Abdul Razak, and along with any new Prime Minister, hopes are high and promises are aplenty.

In fact, being a member of the opposition coalition, initially I was seriously worried that if the new Prime Minister is able to achieve his targets, there's little we can do to challenge Barisan Nasional except to grudging concede that he has done a good job. 2009 was hence the year where a revitalised UMNO and Barisan Nasional would prove that they would be able to manage the social and political economy than in the recent past.

Datuk Seri Najib Razak launched a series of 'liberalisation' measures which won praises in the financial circles. The 30% bumiputra equity requirement which was a cornerstone of the New Economic Policy (NEP) for companies seeking a Bursa Malaysia was waived to make Malaysia more attractive to foreign companies. This was soon followed by 2 quickfire listings by Chinese shoe companies on our stock exchange.

27 services sub-sectors were also “liberalised” where no racial equity conditions will be imposed. That was followed by further liberalisation of the Foreign Investment Committee (FIC) which prompted UBS and HwangDBS to make bullish calls on the Malaysian property sector in June.

The unbridled optimism continued with the Prime Minister's open declaration that direct negotiations as a method of awarding contracts should be replaced with open or restricted tenders. He said “opting for the tender system will curb corruption and bring back the people’s confidence in the Government.” This commitment solidified his position in November 2008 before he became the Prime Minister, where he said that “the Government planned to maximise income on all its existing assets, including on parcels of land that have not been developed, via open tender.”

I was honestly happy for the country, but worried for the opposition as Najib appears adamant to focus on the transformation of our economy, as the key strategy to lead Barisan Nasional out of the political doldrums.

However, as we approach the end of 2009, after a gruelling debate on Najib's inaugural 2010 Budget in parliament, the optimism has subsided.

The stock prices of Xingquan International Sports Holdings Limited and Muti Sports Holdings Limited have been thrashed in the markets by 43.3% and 42.3% respectively, despite a healthy 7.3% increase on the KLCI over the period since their listing in early August. A more recent listing in November, XiDeLang Holdings, another shoemaker, has already had its price underwater in December. Their performance effectively put paid to any ambitions left of Malaysia becoming an attractive regional financial centre any time in the near future.

The so-called liberalisation of the 27 services sub-sectors was soon forgotten for it was 27 out of hundreds of sub-sectors and the announcement was made meaningless as the Deputy Minister of International Trade and Industry revealed that the move was “synchronise what was already happening in the service industry” and that he will continue to defend the NEP. This means that there was never any meaningful participation by bumiputeras in these 27 services sub-sectors in the first place. Without further subsequent services sector liberalisations after Najib's April announcement, the euphoria soon became hype.

Furthermore, it doesn't help that these equity 'liberalisation' measures which wasn't accompanied by any 'liberalisation' of Government procurement system is effectively telling investors that we'll allow you to set up shop on our shores, but you won't be able to sell anything to us.

The worst hit had probably been the real property sector where anyone investing in our local properties on UBS and HwangDBS's bullish calls in June would have received a rude shock when the Government announced a 5% real property gains tax (RPGT) in the 2010 Budget after having only removed it in 2007 together with the introduction of a slew of liberalisation measures to attract international investor interest in our sluggish property markets. The Government's continued Jekyll and Hyde property market policies serves only to make Malaysia the destination to avoid for property investments.

And most disappointing to all, is the failure of the Prime Minister to keep his promises to ensure open tenders and auctions for the Government's privatisation projects and sale of assets. The proud announcement by the MITI on the award of the building of Malaysia's largest convention and exhibition centre to Naza TTDI worth RM628 million via direct negotiations in mid-November was probably the straw that broke the camel's back, that everything is status quo.

What stunned even a skeptic like me was the fact that the Government will be paying for the centre with a piece of prime land located in Sri Hartamas purported valued at RM197 million by the Government, but was apparently worth as much as RM1.5 billion according to property consultants.

2009 had promised that 'Najibnomics' will stir Malaysia from its uneasy slumber, it has proven to be “same old, same old”, the year that wasn't.
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