Friday, May 11, 2007

Iskandar Development Region and Real Reform

In his speech in Johor Baharu, Dap Secretary-General Lim Guan Eng outlined five challenges facing the newly launched Iskandar Development Region (IDR) in Johor. The challenges are the low investment inflow from Singapore, high crime rates and public safety, lack of emphasis on human capital development, the continuation of New Economic Policy and a differential treatment for local and foreign investors which discriminates against the former.

This article intends to examine his claims and to look at the real synergy which made the Pearl River Delta (PRD) region of Guangdong province the most dynamic region in the People’s Republic of China since the start of China’s reform initiative in 1979. Prime Minister Abdullah Badawi claimed that the IDR was modeled after the PRD. However, the success story of both the special economic zones may differ due to several inherent attributes which are peculiar to the regions.

What was clear is that the PRD was established as a testbed for reform and to serve as a model for other jurisdictions in China. Before 1979, economic development in Guangdong paled in comparison with the eastern coastal development zones. Moreover, Guangdong was chosen as a special economic zone due to its proximity to both Hong Kong and Macau.

The PRC government saw several real advantages in this move. First, the PDR will tap both Hong Kong and Macau for the much needed investment funds. Second, PDR will allow Hong Kong to play a significant role in helping to modernize the region’s economy and the rest of China. Third, the PRC government wanted to tap into Hong Kong, which has a matured jurisdiction, an efficient logistics hub and an advanced professional services sector, as an export and investment gateway of mainland China.

It is history that the decision wielded significant success to PRD. Since 1979, both Hong Kong and Macau accounted for 70 percent of the cumulative FDI in the region. Hong Kong manages almost 70 percent of both seaborne and airborne exports from the region to overseas. More than 90 percent of Hong Kong imports from the PRD were re-exported.

The integration between the two economies is significant and important. A study from the Hong Kong Centre for Economic Research showed that in 2000, the city state companies employed 11 million workers in PRD. By 2002, more than 52 percent of all manufacturing and import-export firms in Hong Kong had manufacturing operations in the mainland China. As an investment gateway to PRD, more than 82 percent of both Japanese and Taiwanese investors operated out of Hong Kong.

The success of PRD economic integration with Hong Kong is evident. From 1980 to 1999, the GDP of the PRD and Hong Kong grew by 15 times and 5 times respectively. PRD’s economic success created spillover opportunities in the property, tourism and consumer sectors. Over 90 percent of the foreign tourists to PRD were from Hong Kong and in return 41 percent of tourists to Hong Kong were from the region.

An important question would be; “What are the contributory factors to the PRD?”

The most important contributor was a flexible and non-restrictive economic policies adopted by the PRC government for the region. The special economic zone was created single-mindedly to integrate and tap into the vibrancy and dynamism of Hong Kong’s economy. Hence, a generous corporate tax of 15 percent and tax holidays of up to 5 years was given to all investors.

Apart from that other incentives included the ability to repatriate corporate profits and capital investments after a contract period, duty-free imports of raw materials and intermediate goods used for exported products, exemption of export taxes and a limited access to the domestic market were implemented.

PRD was given greater autonomy to decide on its finance and fiscal matters, FDI rules and guidelines, commerce and distribution, allocation of resources, labour system and other market decisions.

Back to Lim’s argument, his assertion of a lack of investment interest from Singapore can be analysed from a few angles.

First, the statement of purpose and intent to integrate IDR to Singapore is not as solid as the PRD and Hong Kong’s integration. Moreover, it was launched at the time when the Singapore’s investors are spoilt for choices to locate their manufacturing operations unlike the PRD. Hence, it is difficult to establish the IDR as the hinterland to Singapore’s economic development.

The republic’s economic planning, since the last two decades, did not include Johor as its key overseas platforms. For the first eight months of 2006, Singapore’s investment in the state stood at a paltry RM209 million. In 2000, the republic cumulative investment in PRD was more than USD5 billion. Unless Singapore is consulted and involved in the planning of the IDR, it will be difficult to see a quantum jump in the investment from the republic.

Second, whilst PRD was created with the intent to serve as a testbed for reform, the IDR’s investment relaxation and waiver of the controversial NEP was limited and subjected to only foreign investors operating within a small area of 1,780 hectares. In addition, the decision to exclude the FIC rules from the small area is seen as shaky and unsure.

The is also a burden of history in some of the politically overcharged corporate acquisitions made by Singapore’s investors of some Malaysian firms for example the Pantai shares by Parkway Holdings Ltd. It is undoubtedly that political interference is seen as a business risk to foreign investors. The Shincorp saga will deter more Singaporean acquisitions in economies which demonstrated intense nationalism.

PRD’s success can be largely attributed to its ability to foster a relationship of dependence and mutual support with Hong Kong. Hong Kong provided investors who are interested to invest in PRD with a reliable and efficient financial services, logistics support, information gateway, legal system and management expertise and knowledge on doing business in the region.

As a result, many enterprises from other countries employed a large number of Hong Kong professionals to help manage their PRD operations. Some economists argued that the transfer and exchange of management experience is even more important than technology transfer. Given the knowledge transfer from Hong Kong, the region was able to cultivate, groom and attract better local skilled workers to work in PRD.

It means that IDR must find a complementary synergy and a win-win partnership with Singapore. It must be given the autonomy to dictate its own relationship with the republic without the unnecessary political interference which is often filled with racial nuances and blinded ethno-nationalism. It must repair its image amongst Singaporean investors and policy makers. A credible action must go beyond the usual rhetoric of cooperation and mutual dependence.

I agree with Lim’s third and fourth points on the need to balance ‘software’ (human capital development) and to exert policy consistency. Presently, we are not benefiting from the management expertise of Singaporeans but instead suffered a massive brain drain to the republic. It is estimated that there are close to 300 thousands Malaysians working in the republic in various knowledge based industries.

Malaysia must not only think of a way to stop bleeding more brains but to attract top brains to work in the IDR. Hence, the retraction of a Free Access Area originally pledged in IDR is a step backward. In PRD, a large number of people commute daily between Hong Kong and the region for work and meeting purposes. An easier access to IDR will facilitate other nationals who are based in Singapore to seek out opportunities in the region.

Given that the IDR initiative is a signature project under the present administration, the government should initiate serious policy discussions with relevant parties including foreign investment groups chiefly with the Singaporean investors and administration. A lingering uneasiness would still be the controversial NEP which is a bulwark of the 9th Malaysia Plan. Malaysia’s past habit of fiddling with its policies had caused uneasiness with many foreign investors.

To rewrite our past records of failures and half successes, the government should emulate the PRC government’s decision to use the PRD as a testbed for reform which has provided numerous lessons to other economic regions in China. A half hearted attempt at reform will ensure more failures. Moreover, the IDR is 30 years behind PRD and it should never be seen as a lesser attempt at reform compared to the latter.

On crime and safety, the threat of criminal activities is real but yet not as significant as the impact of bad policy direction and implementation to the IDR. Investors who have made forays into the PRD do have some horrible stories to relate as well. However, efforts must be taken to ensure that IDR is a safe haven for investors, workers and dwellers. What Johor need is an image clean-up and a stronger commitment to rebuild its credibility as a serious economic player in the region.

In a nutshell, the success of the IDR rested on several key decisions which may contradict the current administration’s stand. A thorn in the flesh which invites uncertainty and uneasiness amongst foreign and local investors is the NEP. The government has called for a revival of the NEP target last year before the release of the 9th Malaysia Plan.

With the economy going through a real bottleneck soon and competition for FDI getting tougher, the government must decide between its race affirmative agenda or a more inclusive socio-economic policy which is acceptable to both foreign and local investors.

It is without a doubt that the race affirmative policy is more a hindrance than a catalyst for social engineering and economic development in the country.

(My interview with Reuters here.)

22 comments:

Melayu Raya said...

This race dilemma is the creation of the British, a white neanderthal race. Of course it is a hindrance to such people and their cohorts(chinese).

Melayu Raya said...

The Malays are going into great lengths to share this great land but the immigrants want more. IWe cannot blame the Brits anymore as they were long gone and trying to preach democracy now. Btw not too long ago was the South Africa....

Khoo Kay Peng said...

Melayu Raya,

I shall not go into in pre-history to tell you that this land belonged to others long ago. However, it is pertinent that all communities move on with changing times.

You can still blame others and insist on your birth right but the reality is you can never compete with others with this feudal mentality. To say that Chinese are the cohorts of the British, you are damned wrong. If you are still ignorant or refuse to acknowledge history..I shall remind you that similar accusations can be hurled on your race as well.

But such accusations will not be fair to all Malays because there are many enlightened ones.

As a Malaysian, I will fight racism and I will stand up against people like you.

Melayu Raya said...

The Malay Archipelago has long been known and still is. The Chinese ( immigrant)came here through and during the British colonial time. Earlier on there were the babas and nyonyas who are really a mixed race and seemmed assimilated. But the subsequent ones are a pain in the neck destroying the land ( Tanah Melyu)in the name of 'development'. So as to move with the changing time pl move on and leave the Malays here to manage our land. Remember somehow a past PM did let go singapore so that we awere to be left in peace, but you want more. Enough is enough

Khoo Kay Peng said...

I do not know if you are ignorant or blatantly racist. I am a baba. My family tree can be traced back to 400 years ago in Malaya and we are one of the most established baba-nyonya families in Penang. But I am NOT a mixed race.

My late grandma and grandpa wore sarong, munched sirih, enjoyed sambal belacan and were ardent fans of P.Ramlee. We speak good Malay. But we are not a mixed race. Culturally, we accepted the Malaysian way of life. This is not assimilation but acceptance and integration.

The past PM, coupled with the extremist pressure group in his party, had to kick Singapore out because LKY had espoused a Malaysian Malaysia which was seen as a direct ideological challenge to the Malay-centric "Ketuanan Melayu" ideology - which fortunately are not share by many of my Malay friends who see themselves as Malaysians.

I am not an ardent supporter of LKY and many of his views but I do believe in the need to create a true Bangsa Malaysia. I support the Vision 2020 which called for the creation of a just, equal and fair Bangsa Malaysia.

The Vision 2020 was a brainchild of the past UMNO president too.

Now, another Malay leader - Anwar Ibrahim - is calling for a New Malaysian Agenda to replace the racist NEP.

These propositions came from current and ex-UMNO leaders.

Where were you when these ideas were made? Did you stand up to protest? Or you did so only when another non-Malay is espousing it?

Are you a racist?

Melayu Raya said...

Baba and nyonya came about when a chcinese traders (male) married a local (malay female) I consider this as mixed marriage. Of the current ones are so diluted that you would not want to admit to the mixed race idea - and I dont really care at all.
The ouster of singapore was decided by the ex-PM in London if you know the history.
What is Bangsa malaysia? -there is no such thing as malaysian race! Malaysia is a country brought about by the fedration of Malay and some states in Borneo. So be clear about what is race and what is citizenship.
You ask whether I am a racist - no, I am a nationalist trying hard to protect my identity as a Malay in the only land that I know. Unfortunately with the vitriolic rhetorics from the chines race I have no alternative but to face to the reality that this is a dangerous game I am faced with. Ehh, the Indians seems accomodative or are they waiting to just swing like a pendulum to whichever side they deem fit? Your Malay friends are in agreement with you? I wonder...

Melayu Raya said...

OOps I miss out on your Anwar. My view is that he is a has been politician.He did not perform well when he was in govt and I dont think he'll learn now that he is in sunset. Politician talk and promise the sun and will not deliver simply because he is a political animal. I have no affiliation to any political body , So it is straight talking for me

Ko-chi Wai said...

Khoo, this guy is a troll. And when he mixes racism with stupidity there is no point in engaging with him. Perhaps he's one of those new govt cyber-officers out to "police" the blogs. If he is, the govt better find better ones.

Anonymous said...

History has shown many a times - Internal fighting has destroyed many civilisations, kingdoms and empire.

Why are we talking about race superiority internally when the fight for superiority is outside the wall of the nations ? Grow the pie or the cake and we will have enough to share amongst us. Wouldn't this be a better idea than try to fight each other internally ?

Will it make you look better/superior or feel better by driving someone out from where they currently live ? What if this happens to you when someone come and drive you out ?

As long as we refused to see the Bigger Picture, we will be focusing on this is mine or owing mentality.

Underneath each of us, our blood is dark red in color irregardless of our race and we are made up of the materials. We are all Malaysians and we have a desire to live in peaceful & harmony.

Anonymous said...

We are all humans and infighting will not benefit anybody. Yes, we need to find a way to expand the economic cake and to share it so that nobody feels deprived. Let the govt agent or whatever form give their piece of mind but we'll show them we are straight talking and not unreasonable as to close our heart to other people's ideas. Wai, no need to label people as troll as this will only prove that you are a bigger troll yourself. Show that DAP members are open minded and ready to face challenge in the most fair manner. To this govt agent pl continue to speak up and also give us a solution that we can all live with - win-win solution

wye said...

I am deeply sad and concern about what melayu raya comments. His view represents most of bumi thinking now. I am a chinese and guess i will have to say i am an immigrant with no where else to go since my mother give birth to me at this 'wonderful' land. But i had all this while thinking i am a proud malaysian but now?? i am deeply puzzled. I don't see a future of my children anymore! Good luck to 'melayu raya' once they have the full(whole) cake for themselves. Wish all brother and sister of bumiputera kaya raya when the days come. Thanks.

Anonymous said...

The saying goes... Racism starts in the mind and it is this place where it should end.

If you still regard yourself as Chinese, Indian or etc, then you are no different from "Melayu Raya". We are all MALAYSIANs and we live in the true spirit of MALAYSIA.

The silver lining in the cloud is that nobody can win all or no one will loses all. For example, human are definitely unique. They performed much better when the odds are stack against them and when being given a lot of luxury, they will waste them away.

In order to change the world, we have to start with ourself and leave the people with the "owing mentality mindset" behind. They will be co-erced by the environment to change when the time comes. Remember, the only constant in life is CHANGES !!!

Let it all ends where it begins - The MIND.

Khoo Kay Peng said...

I am not sure if I do agree with you that if I regard myself as a chinese then I am a racist.

It is a cultural and biological fact that I am a chinese but MALAYSIAN FIRST.

I respect my language, culture and heritage as much as I am interested to learn the culture of my fellow Malaysians.

At the pre-Uni level, I did both Sastera Melayu and Bahasa Melayu and did very well in both subjects. I was a student of Sejarah Islam too.

Racism is not born. It is neither a mental illness. Racism is breed, cultivated and carefully institutionalised. In many instances, our politicians are the biggest culprits. They manipulate racism to hegemonize their own race.

Hence, I urge you not to run away. We are Malaysians. We must fight these racists so that they will never be elected to power.

Khoo Kay Peng said...

Melayu Raya,

You can choose to define Baba&Nyonya the way you wanted. It remained a fact that Baba&Nyonya families are not mixed race. Many of them are Buddhists or Christians. And very much Chinese but peranakan Chinese.

you are not ignorant. you are just blatantly mischevious in order to serve your own racial prejudice. You sound like a true blood Umno putra.

Melayu Raya said...

Wye is right and so is melayu raya. Don't be sad wye your kind has many billionaires in this wonderful land not to count the ownership of most of the residential houses strategy located in the prime areas. Melayu raya is not even demanding for the whole cake - just 30% now and later 70% in line with the population ratio.But anonymous is not happy, he wants more. That's kiasu. He wants malays to be like the red indians or the abos. But unlike these people they are in the minority and cannot voice out thru votes or guns. And chinese is the most global race that melayu raya can think of, always able to survive anywhere, just ask any of your rich brothers who travel abroad - there's always chinatowns in cities all over the world. And the melayu raya kind is not homogenous, for example those in kedilan will always remind melayu raya to share our home under the social contract.

Melayu Raya said...

KK Peng,
My definition of Babanyonya is based on what I have read in the past - if it is wrong it is fine with me. Any way simply because they are budhist or christian does'nt mean thay are not mixed race. I read somewhere too that the malays were also once a hindu, and there's still pockets of them in indonesia. Ok we are all not ignorant and I respect your point of view too . On the other point raised, I am NOT Umno putra - don't associate me with them.
I think this is a good debate and I thank the host here for being civil.

Melayu Raya said...

One more KKP don't fall into the dap trap. I can see your approach is more enlightened as compared to the kochi wai who only speak ill of others and only wants to listen what he wants to hear. See I am not the mischievious type but just laying down facts to give you the big picture and rethink your idea

Khoo Kay Peng said...

Melayu Raya,

The big picture is you must see the world as a competitive landscape.

No one is taking anything away from you here. For your information, your community still own 75% of the land in this country.

90% of the civil sector, 85% of the GLCs board members, more than 75% of the cabinet members and more...

However, the Malay community must learn to compete and acquire knowledge. If you make them believe that 70% of the wealth in this country is their birth right but failed to address the intra-community wealth gap, then you will find 80% of your community still living in poverty.

In this era, we should not look at race-affirmative action anymore. We must address class difference.

What you read, I am afraid, are propaganda or ill-conceived facts.

You tend to equate religion to race. Yeah...baba&nyonyas are chinese. but some of them may be either buddhists, muslim or christians.

by race, we are chinese.

mind you, not all chinese are billionaires and capable of surviving anywhere. have you seen poor chinese? if you havent, i can show you.

just as I am angry of wastages and corruption..i am also sad to see the poor bumiputeras who are neglected.

i only ask you to sympathize the same for the poor chinese, indian, orang asli etc.

if you are ignorant, i hope you will learn. if you are a racist, you can be sure that i will fight you.

Melayu Raya said...

I am am shocked that a person with such educational background can be so manipulative in the quotation of statistics simply to justify the ends - 75% land are owned by malays, so what ? Whats the valuaation like? Lets take Kedah, the padi lands are probably owned by Malays but the rice mills and sundry shops are mainly by the non Malays and the value is disproportionately higher. Likewise the massive houses in Puchong has muuch higher valuation thnn the kampung lands in Ulu Langat. Likewise the civil service sector staffings are mainly the clericals. But then even the graduate level officers are paid much lower than in the private sectors. Just ask around.
On the race religion issue pl read again what I have said. The chinese babas can be budhist or christian, and it is a non issue to me. He remains a chinese. No, I am not a racist here, but merely stating facts.
By way of logic you seem to agree with the 70% share but due to administrative issue it could be 80%. So the contention here is implementation so that 70@ does not overrun to 80% due to inefficiency.
Now to solve the poor chinses sector will be the distribution of the 20% cake. The indian will share the other 10%. Aah, the orang asli, the champion say? The Malays will share the 70% with them.
So we know have worked out broadky or in principle the distribution of wealth amongst the diverse races. There is no need to create the Malaysian race pretext now, because it 's just a political ruse by some has been politicians and those with real racist intent.
Therefor I cannot be a racist because I have actually suggested a proportinate sharing of wealth amonsgt all races. No need to create another race malaysian of malaysia which is just a political recognition of citizenship.
This is of course very conditional as it is a total package deal. You can't just take away something from any one race and not compensate it with another - a sort of new social contract. If we can convince our respective race on this it looks like we don't have a fight after all.... peace be upon you

Anonymous said...

Melayu Raya deserves the contempt that he gets in this blog.

Typical of racist trolls who shout pendatangs to every non-Malay he spots in cyberspace.

Wonder if he has the guts to do it in person.

Anonymous said...

Whilst racism should be punished as a criminal act since it incites violence in some cases, maybe we should ask "Who are the true bumis in Malaysia?" They are not Malays, Indians, Arabs, Chinese, Baba Nonya, etc. but orang asli. Why not go back all the way rather than just chosing points in history to suit each of you. I am Malaysian, but belong to none of the above ethnic groups, and your racism is deplorable. Stop this time wasting talk and get on with creating a stable base and foundation for racial harmony in a country where we are all stuck with each other, like it or not.

Anonymous said...

is it true that orang asli are the real bumis?? i don't think so.. speak with facts.. find and show the facts that they are the real bumis.. don't just speak with your emotional..