Malaysian Govt defends incentives for Johor growth zone

The Straits Times, March 24, 2007
By Carolyn Hong, Malaysia Bureau Chief



Deputy PM says new approach needed to attract foreign investors

KUALA LUMPUR - DEPUTY Prime Minister Najib Razak yesterday defended the politically-sensitive move to exempt investors in south Johor from economic policies favouring the Malays.

He said the state's Iskandar Development Region (IDR) needed a new approach to attract foreign investors.

'This area needs an approach that can draw foreign investors because our intention is to develop the area on a large scale.

'This cannot be achieved if we don't adopt a new policy and approach to open the area and give as much flexibility as possible to foreign investors,' he was quoted as saying by Bernama news agency.

Datuk Seri Najib also said bumiputeras had the capability to compete.

The Deputy Premier was addressing the political unease over the new incentives to woo investors to the IDR, even as the plan excited the business community.

Prime Minister Abdullah Badawi on Thursday unveiled the incentives for the 2,217 sq km IDR. They include tax holidays and exemptions from the pro-bumiputera policies.

Investors in six sectors would not be bound by restrictions on property ownership, the need to have 30 per cent bumiputera equity ownership and a quota for Malay employees.

This is not the first time that the government has exempted investors from pro-

Malay policies, but the IDR incentives extend to more sectors than earlier incentives.

Analysts hailed the steps as meeting investor demands. A European Union diplomat based in Kuala Lumpur told The Straits Times that the incentives could reverse Malaysia's declining attractiveness as an investment destination.

'This decision is, to me, a clear acknowledgement that policies like bumiputera quotas in equity ownership are something that deter foreign investment,' he said.

But officials point out that the incentives will apply to a limited geographical area.

The Iskandar Regional Development Authority, tasked with overseeing the masterplan, will decide where these companies have to be sited to benefit from the incentives.

This could mitigate any political unhappiness.

Political rumblings have already begun although Johor's top leaders including Menteri Besar Datuk Ghani Othman have insisted that there would be no backlash.

There had earlier been much negative reaction to the proposed Free Access Zones which were to allow passport-free entry to foreigners. The plans have been quietly shelved.

To calm the ground, former deputy premier Tun Musa Hitam, who champions ending Malay privileges in the IDR, has called for a special Umno briefing to explain matters. He said the Malays were now ready to stand on their own.

At one time, he said on Thursday in Johor, Malaysia had an 'Ali Baba' way of doing business. Ali, the Malay, would lend his name, while Baba, the non-Malay, would do all the work, he said.

'As time went on, Ali and Baba became equal, and Ali was able to deliver as much as Baba. Now, there are even Alis who are using the Babas not as sleeping partners but as equals,' Tun Musa was quoted as saying in The Star.

But his explanation has not been well accepted.

Postings on popular political website Umno Cyber Club slammed Tun Musa's views, and Umno Johor's information chief Puad Zarkashi criticised them as confusing and dismissive of the Malays.