KL's leaders keep investors guessing
KL's leaders keep investors guessing
By Nelson Graves
KUALA LUMPUR (Reuters): Will it be guerrilla warfare? Or the welcome mat?
On the same day last week that Malaysia's prime minister predicted a "guerrilla war" against foreign capitalists, his second in command was appealing to overseas investors for billions of dollars.
The conflicting messages from Prime Minister Mahathir Mohamad and Deputy Prime Minister Anwar Ibrahim have many scratching their heads.
"Foreign investors are concerned because there is no consistent message," a Western diplomat said.
"It is no good for Mahathir and Anwar to continue to send different and completely contradictory messages to investors and people of the world," opposition leader Lim Kit Siang told Reuters.
The contradictions are not lost on the financial markets, where the ringgit and share prices went into retreat last week amid confusion over Malaysia's economic policy.
Mahathir has been openly pressing for lower interest rates and obliquely criticized the central bank's monetary policy. Anwar has defended the central bank and cautioned that capital could rush overseas if rates were too low.
The prime minister has kept up a drumbeat of criticism aimed at foreign investors ever since Asia's financial troubles erupted last July.
"He's been consistent," said Abdul Razak Baginda, executive director of the Malaysian Strategic Research Center, a think tank in Kuala Lumpur.
But Mahathir's rhetoric reached a new pitch last week when he fulminated against foreign companies and currency traders who he said were bent on gaining control of Asian economies.
"But the people will show their resentment against those outsiders who will lord it over them once again," he said in a speech in Tokyo.
"Even if they want to avoid violence, violence must come as the new capitalists disregard the signs. There will be no war of independence of course. But there will be a kind of guerrilla war which will not be good for anyone."
Hours later, Anwar, who is also finance minister, announced that a government-backed agency would be looking to foreign investors to buy up to US$2 billion worth of bonds to fund the purchase of bad loans from banks.
The agency, the Asset Management Company, is being advised by two U.S. stalwarts, J.P. Morgan and Arthur Andersen.
Despite the contradictions, Mahathir and Anwar display no open hostility and appear comfortable in their roles of senior political statesman and heir apparent holding the financial portfolio.
Many foreign investors have grown accustomed to the discordant messages, discounting much of Mahathir's rhetoric as political boilerplate.
After all, during 17 years in power Mahathir has doggedly pursued a liberal, capitalist agenda that has propelled Malaysia's economy forward.
"But he is a very sensitive individual who feels personally hurt by the damage that last year's events have had on Malaysia's economy," said a senior Malaysian financier, seeking to explain Mahathir's acerbic tone.
Still, some are beginning to wonder how much longer the two leaders can deliver such starkly different messages.
"It's becoming more public now," the Western diplomat said.
"There is a growing rift between them, and Anwar is flexing his muscles."
"Mahathir's anti-West ideas don't go down well at all at this time," Abdul Razak Baginda said. "His rhetoric has an economic cost which we cannot bear."
But diplomats said Mahathir was right when he said foreign investors, while reluctant to take a gamble on shares or the ringgit, continue to be interested in investing in projects.
"There is a lack of transparency which, coupled with the inconsistent messages, has investors saying, 'Is this the place where I want to park billions of dollars?'" the Western diplomat said.
"But there is no sign of foreign direct investment dropping off. Companies are still coming and talking."