(Nikkei BP Group)
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| Malaysia to Build Multimedia Corridor Despite Recession
November 4, 1998 (KUALA LUMPUR) -- The Malaysian government is pushing
ahead with its plan to build the Multimedia Super Corridor although
its economy will shrink by about 4.8 percent in 1998, for its first
recession in 13 years.
|Prime Minister Mahathir Mohamad said the project is crucial for the country
to achieve his dream of attaining developed nation status by 2020.
However, the project's lofty plans to turn a 750-sq.-km former rubber
and palm oil estate into an industrial park have come under criticism
amidst the political and financial crises.
Mahathir, who assumed the position of finance minister following the
sacking of deputy premier Anwar Ibrahim, presented a national budget
on Oct. 23 in deficit for the first time in six years.
The deficit will swell to about 16.1 billion ringgit (US$4.24 billion)
in 1999 from 9.59 billion ringgit (US$2.52 billion) in 1998.
This follows five straight yearly surpluses and marks an end to austerity
policies prescribed by former deputy premier Anwar after Asia's economic
crisis erupted in mid-1997.
Anwar had called for the slashing of government spending and the postponement
of some "mega-projects" favored by Mahathir, including parts of the
MSC project. Mahathir has come under fire from international leaders
and human rights groups after Anwar was arrested and charged with sexual
misconduct and corruption, and allegedly beaten while in custody.
The incident triggered a series of violent battles in the streets of
the capital city between demonstrators and riot police in recent weeks.
Political activists, opposition parties and disenchanted citizens have
called on the 73-year-old Mahathir to step down after 17 years in power.
And fears are growing that potential MSC investors may turn away because
Malaysia appears to be unstable in the political and economic spheres.
The government stated that as of Oct. 15, a total of 179 companies with
investment pledges exceeding 3.3 billion ringgit have received "MSC
status," which qualifies them for various incentives under the project.
But critics are questioning the validity of encouraging such investments
in light of Malaysia's turmoil.
They said that closer scrutiny of the figures reveal that many of the
investment proposals are stretched over five or more years and their
revenue-generating capabilities are uncertain.
Although unemployment is rising in Malaysia, MSC companies are allowed
unlimited imports of foreign knowledge workers.
In a further blow to the frail economy, Bank Negara, Malaysia's central
bank, issued a statement that MSC companies will be exempt from the
latest capital controls imposed by the Malaysian government.
MSC companies can continue to repatriate unlimited amounts of profits
to their home countries without restriction, the bank stated.
Also, the companies will continue to enjoy tax exemptions of five to
10 years under terms of their MSC status.
In his budget speech to parliament, Mahathir said the development of
Cyberjaya, one of the MSC's two intelligent cities, will continue despite
Cyberjaya is the centerpiece of the high-tech MSC zone designed to host
the various information technology companies and a population of 240,000.
In July, Mahathir had approved an initial allocation of 600 million
ringgit for the development of Cyberjaya.
However, signs that the economic crunch was beginning to take a toll
were seen in August. The government stepped in to rescue the Cyberjaya
project after companies that were developing it were faced with financial
The central government purchased a 55 percent stake in master developer
Cyberview Sdn Bhd for 192.5 million ringgit (US$50.6 million). The government
had earlier held a 10 percent stake in the company through the Multimedia
Development Corp. and another 5 percent through state investment house
Permodalan Nasional Bhd.
Earlier, Mahathir had said that the MSC project would be mainly driven
by the private sector.
A key player that caused the project to stall was troubled infrastructure
conglomerate Renong Bhd, which has debts estimated at about 20 billion
ringgit, or about 8 percent of all loans in Malaysia's entire banking
The developer was scheduled to have completed the primary infrastructure
and sell parcels of land in the first phase of a 2,800-hectare zone
Another Cyberjaya project subject to delays is the Multimedia University,
a high-tech academic campus that had been scheduled to be completed
this month. Instead, its completion has been pushed to 1999.
Mahathir said the government would allocate 110 million ringgit (US$29
million) in 1999 for the smart school program and three other key MSC
applications -- telemedicine, electronic government and multipurpose
But the Association of Computer Industry Malaysia (Pikom) has said the
sum is too small. "It could have been more," said Pikom chairman Shaifubahrim
He said the sum does not take into account development of the three other
MSC flagship applications: borderless marketing, worldwide manufacturing
networks and research and development clusters.
(Julian Matthews, Asia BizTech Correspondent)
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