Investors not scared off by politicians’ pledges to cancel projects, say observers
KUALA LUMPUR, Jan 5 — Investors will continue to invest in Malaysia despite politicians in the past year promising voters that they will cancel projects that have sparked public opposition due to health and safety concerns, observers have said.
Ahead of Election 2013, Barisan Nasional (BN) promised to cancel the 29-storey Dolomite Park Avenue condominium project in Batu Caves if the ruling coalition wins Selangor, while political rival Pakatan Rakyat (PR) made an electoral pledge to scrap Lynas Corp’s RM2.5 billion rare earth plant in Kuantan, Pahang.
Johor PKR chief Datuk Chua Jui Meng had last September similarly promised to stop the RM60 billion Petronas Refinery and Petrochemical Integrated Development (RAPID) project at Pengerang, Johor, but Opposition Leader Datuk Seri Anwar Ibrahim a month later reportedly said that PR only wants to delay the project for public feedback and an environmental study.
Wan Saiful Wan Jan, chief executive of think-tank Institute for Democracy and Economic Affairs (IDEAS), said that these pledges would be unhealthy if they were made simply to get political mileage.
“I think it shows that politicians respond to public demands. In a sense that is good, but when it gets to a level where they’ve entered an agreement and promised to simply reverse an agreement to gain political popularity, I think it’s not healthy.”
“I do think it should be made difficult for governments to cancel agreements simply at will,” Wan Saiful said.
“For the economy to progress we need a situation where investors can be confident that the money they put in is not going to be wasted.”
Despite these promises, he said investors will continue to invest but will be “more cautious”, saying: “I don’t think it will affect our development that significantly.”
He said investors would be prepared and know that this uncertain period is merely “temporary” as the elections are coming up, and would instead be more concerned about the level of trustworthiness of public institutions.
He said that all the “promises and counter-promises” by both BN and PR has been creating uncertainty, and it is better for the polls to be held as soon as possible.
Dr Lim Teck Ghee, the director of the Centre of Policy Initiatives (CPI), said politicians should only cancel projects after looking carefully at disputed projects.
“Politicians want to be seen to respond to public issues but they should not rush to judgment. They need to be more responsible and to come to this decision only after a close scrutiny of all points of view,” Lim told The Malaysian Insider.
He viewed these as isolated cases, saying that it will only affect the companies that have invested in these projects.
“I do not think it will change investor perception of the country and business climate.
He said that investors will be looking at the potential returns from their investments when deciding to invest in Malaysia.
“Investors will be more concerned about the cost and efficiency of the labour force, the level of corruption (affecting their investment), the infrastructure, the overall political stability and other macro factors rather than individual and isolated cancellations.”
Although Lim agreed that it was “unhealthy” for politicians to promise to cancel projects that face public protest as “national interests” should be placed above the interests of political parties, he said “the solution is not in repressing these protests”.
Lim suggested that the problem’s root cause may be what is seen as the authorities’ rushed approval of “sensitive and potentially hazardous projects” without allowing the public and stakeholders “ample opportunity” to “express their concerns”.
“We have an authoritarian decision-making system and process that needs to be democratised and for proper checks and balances to be in place.
“Until we get them (checks and balances) in place, we will see more of such protests which have some legitimacy given the lack of transparency and accountability in the current project approval system,” Lim said.
Dr Yeah Kim Leng, chief economist of RAM Holdings Bhd, said that if these promises are “followed through”, they could be a “detriment to the business climate because there is no certainty”.
He said that investors may in turn “demand even tighter conditions to invest” such as asking for longer tax breaks which will then “increase the cost of doing business” for both the government and investors.
He pointed out that the projects would have gone through the necessary evaluations and checklists, and there is usually “strong opposition” to projects when these processes are “bypassed”.
Yeah said if projects are “well-planned” and “well-conceived”, then public protests could indicate “a breakdown of communication”, going on to suggest that there should be more investment in communication to ensure that there was “no undue backlash” at the advanced stage of projects.
He said the current scenario suggests there is a “greater need for good governance and quality institutions” which was becoming an important aspect of Malaysia’s corporate scene.
He said the people will want to know “whether the projects in the first place meet the test of transparency and good governance”.
“If we suspect poor governance, then there are good grounds for review by politicians... if managed on sound basis, (they) should not fear intervention by politicians.”