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."