Malaysia Plans Nuclear Power, Mass Rail Projects to Boost Economic Growth
Malaysia plans to develop a nuclear energy industry, build a mass rail network and create a shopping district to rival Singapore’s Orchard Road as part of efforts to boost investment and spur growth.
These are among $444 billion worth of potential private- sector-led projects by companies including Dialog Group Bhd. and IOI Corp. that may turn around an investment slump and help the country achieve developed nation status by 2020, according to Idris Jala, chief executive officer of the government’s Performance Management and Delivery Unit, or Pemandu.
“We can do this,” Jala, who is also a minister in the Prime Minister’s department, said in an embargoed briefing on Sept. 15. “Look at what’s happened in South Korea, Taiwan and Singapore. The growth in those countries is phenomenal in the last 10 years.”
Foreign investment in Southeast Asia’s third-largest economy has fallen over the past three years amid growing competition from neighbors including India and China, tumbling 81 percent last year. The government aims to boost gross national income from $188 billion to close to $523 billion in 2020 and raise per capita income to at least $15,000, meeting the World Bank’s definition of a high-income nation, Jala said.
“It’s all about execution, execution and execution,” said Stephen Hagger, head of Malaysian equities for Credit Suisse Group AG in Kuala Lumpur. “It’s achievable. Whether it will be achieved is another matter.”
Malaysia’s benchmark stock index has risen 0.4 percent since Sept. 17, when parts of the government’s investment plans were released.
The country has had similarly ambitious plans to transform its economy before. In the 1990s, then Prime Minister Mahathir Mohamad built highways, a new administrative capital and the world’s tallest twin towers. He also promoted the Multimedia Super Corridor, a special zone including parts of Kuala Lumpur and a township called Cyberjaya to attract high-technology investment and create Malaysia’s own Silicon Valley.
Companies operating in the corridor to benefit from tax breaks and other incentives include DHL Asia Pacific Shared Services Sdn., Shell Information Technology International Sdn. and Dell Global Business Center Sdn.
Foreign direct investment into Malaysia slumped to $1.4 billion in 2009 from $7.3 billion the previous year, according to the United Nations 2010 World Investment Report. That’s less than the $4.9 billion Indonesia attracted and the $16.8 billion received by Singapore.
To help get things back on track, Prime Minister Najib Razak, who took office in April 2009, has proposed a so-called New Economic Model, which advocates further liberalizing the country’s services industry and rolling back some affirmative- action policies favoring the country’s ethnic-Malay majority and indigenous people.
While many details of Najib’s plans have yet to be announced, Malaysia’s key stock index has surged 15.7 percent this year and its currency touched a 13-year high last week.
The economic transformation strategy will depend on “the will power of the government to push this through,” Hagger said. “It’s very popular with the people, but may not be popular with certain politicians or civil service” members, who would benefit from the status quo, he said.
Still, the infrastructure plans are easier to achieve, and the mass rail and shopping belt will likely materialize, he said.
Foreign investment rebounded this year, helping Malaysia lure the equivalent of $1.6 billion in the first quarter, International Trade & Industry Minister Mustapa Mohamed said on July 26.
To achieve high-income nation status by the end of the coming decade, Malaysia’s economy will need to grow by an average 6 percent annually over the next five years, according to a government report on June 10.
Gross domestic product expanded 10.1 percent in the first quarter from a year earlier and rose 8.9 percent in the second quarter. Growth may exceed 6 percent this year, central bank Governor Zeti Akhtar Aziz said last month. In comparison, Singapore’s economy grew at a record 17.9 percent pace in the first half, while Indonesia expanded 6.2 percent last quarter and Thailand grew 9.1 percent.
Representatives of 200 private- and public-sector companies spent two months in June and July brainstorming with Jala’s Pemandu think-tank. They identified 131 investment projects spanning 11 key economic areas ranging from electronics to agriculture.
They also discussed initiatives to enhance the country’s capital city, including a 141-kilometer subway, improved tourist attractions and a 7-kilometer shopping strip with covered walkways stretching from Berjaya Times Square to the Kuala Lumpur City Centre.
Kuala Lumpur’s population is forecast to swell to 10 million from 6 million by 2020, Jala said.
Malaysia’s cabinet will consider a study on a mass rail project for Kuala Lumpur by the end of this year, according to an exhibition in the capital today. The plan could cost a total 45 billion ringgit ($15 billion), comprising 36 billion ringgit of infrastructure and 9 billion ringgit of operating assets including trains, the display shows.
The government is also studying the viability of a high- speed rail system to connect greater Kuala Lumpur to Singapore with a traveling time of two hours, according to the exhibition.
Oil and Gas
The capital’s rivers will also be cleaned up and beautified to attract high-end property development, Jala said.
In the oil and gas industry, state-owned Petroliam Nasional Bhd., or Petronas, will build a terminal so that by 2013 Peninsular Malaysia can start importing liquefied natural gas, he said.
Malaysia will start identifying sites for the country’s first nuclear power plant, though no decision has been made on whether to proceed, Najib said in May.
By 2015, Malaysia aims to have regional oil storage capacity of 10 million tons in Pengarang, Johor, with a hub similar to those in Houston, Aberdeen and Norway’s Stavanger, Jala said. Malaysia’s Dialog Group and Rotterdam-based Royal Vopak NV are in talks with Johor’s state government on the project, he said.
In the palm oil sector, local planters will expand downstream into higher-yielding byproducts like soaps, he said. Sime Darby Bhd., IOI, Kuala Lumpur Kepong Bhd. and Felda Holdings Bhd. will lead the investment and specialist foreign partners will be sought, Jala said last week.
To contact the editor responsible for this story: Chris Anstey in Tokyo at email@example.com