Iskandar to Attract RM73bil

JOHOR BAHRU: Iskandar Malaysia aims to attract RM73bil new investments to the country's first economic growth corridor starting from January 2011 until December 2015.

Iskandar Regional Development Authority (Irda) chief executive officer Ismail Ibrahim said although it was getting more challenging to attract new investments, the figure was achievable.
He said that by December last year, Iskandar Malaysia had attracted RM69.48bil, surpassing the RM47bil target for 2010 from its inception on Nov 4, 2006.Ismail added that RM3.76bil new investment was recorded in the first quarter of the year, bringing the total committed investments to RM73.24bil since 2006.

Ismail Ibrahim (second from right) briefing journalists on Iskandar Malaysia’s development at Irda headquarters in Danga Bay, Johor Bahru

 

Of the total RM73.24bil, RM43.29mil or 59% are from local investors and RM29.95% or 41% are from foreign investors, of which 41% of the total committed investments have been spent to date. The manufacturing sector contributed RM28.25bil, with RM24.26bil from properties, RM6.28bil from the Government, RM2.90bil from utilities, RM1.47bil from tourism, while RM10.08bil from others. “The targets will be reviewed regularly in view of the ever-changing global economic and investment climate. There are no hard and fast rules for us,'' he said at a media briefing for journalists from Kuala Lumpur on the progress of Iskandar Malaysia on Saturday.

He said Iskandar Malaysia would be focusing on potential investors from Asean, China, India, Japan and South Korea apart from Europe and the Middle East which were the main targets during its early inception.
Ismail said Iskandar Malaysia would be entering its fifth year in November, and the latest investment figure reflected the serious commitments and efforts undertaken by all stakeholders. Ismail stressed that Iskandar Malaysia would focus on acquiring quality investments and not numbers in line with the aspiration for high-income economy. He said the investments should further enhance and complement the five existing economic clusters under its Comprehensive Development Plan (CDP) to transform Iskandar Malaysia into an international metropolis by 2025.

The five are electrical and electronics, petrochemical and olechemcial, food and agro-processing, logistics and related services, tourism, health services, educational services, financial services and ICT and creative industries. “For instance, are we going to continue manufacturing parts and components only or are we migrating into research and development activities,'' said Ismail. He said the obvious choice would be to move up the value-chain as the country's manufacturing sector could no longer remain labour-intensive. Ismail said the manufacturing sector in Iskandar Malaysia was moving into the R&D and high-technology activities with the setting up of the BioXCell biotechnology park in Nusajaya and Senai Hi-Tech Park. He said the two projects had received several capital-intensive investments from foreign investors involved in the biotechnology R&D and renewable energy sectors from India, China, France and South Korea. Ismail said with the improvement of bilateral ties between Malaysia and Singapore, many Singapore-based small and medium enterprises (SMEs) have expressed interest to relocate to Iskandar Malaysia. He said three areas in Senai, Pasir Gudang and Gelang had been identified for the setting up of the dedicated industrial parks for the local and foreign SMEs.

“We have received queries from companies operating in the Ring of Fire zone which plan to relocate their operations to Iskandar Malaysia in view of frequent earthquakes in their region,'' said Ismail. He said Irda and other stakeholders would continue to work hard in promoting Iskandar Malaysia to the world and to correct the misperception that Iskandar Malaysia was only about Nusajaya. Ismail said the 9.712.45ha Nusajaya was one of the five flagship development zones in Iskandar Malaysia the other zones were the Johor Baru City Centre, Western Gate Development Zone, Eastern Gate Development Zone and Senai-Kulai. “Located in the southernmost part of Johor, spanning over 2,217 sq km and three times bigger than Singapore, Iskandar Malaysia offers good prospects and investment opportunities for all,'' said Ismail.

Irda and the Government-backed investment holding company Iskandar Investment Bhd (IIB) are the two bodies tasked to promote and develop Iskandar Malaysia. Irda is the regulatory body mandated to plan, promote and facilitate the development of Iskandar Malaysia and IIB to drive commercial initiatives within Iskandar Malaysia via joint ventures or contribution of land.

Ringgit and a Host of Other Currencies Strengthened Against The US Dollar

KUALA LUMPUR: The ringgit and a host of other currencies strengthened against the US dollar after US Federal Reserve chairman Ben Bernanke signalled interest rates would be kept at the current super low levels as the US economy had not yet recovered from the problems caused by its credit crisis.

Stock markets in Asia, however, were mixed at the close of trade yesterday but crude oil and gold rose after the Federal Open Market Committee (FOMC) meet and a historic first post-FOMC press conference by Bernanke who indicated that inflationary pressure was on the rise in the US and economic growth would probably be slower this year than earlier predicted.

“The ringgit is already reacting,” said RAM Holdings Bhd senior economist Kristina Fong. The ringgit, which was at 2.96 against the US dollar at press time, climbed for the seventh straight day and has been the best performing currency among the major currencies in Asia over the past week.

Analysts have said the ringgit's attraction is not only the interest rate differential it enjoys with the US but also the much lower inflation rate compared with other countries in this region. Gold rose US$4.75 an ounce to US$1,532.1 and Brent crude oil retraced gains earlier and was trading at US$125 a barrel for June delivery.
At the FOMC meet on Wednesday in the US, the Fed decided to leave interest rate unchanged at between 0% and 0.25% and will continue with its US$600bil quantitative easing programme that will end in June.
With Asian countries, including Malaysia, having the bias to raise rates, the widening interest rate differential and the quantitative easing the US is committed to would mean increased focus on emerging markets.
“There is a possible widening of interest rate differentials and that will indicate more capital inflows into the regional economies,” Fong said.

Stock markets reacted differently as analysts said investors were happy to note pro-growth policies would continue in the US but were wary over the sluggish growth forecast for this year. The FTSE Bursa Malaysia Kuala Lumpur Composite Index closed up 5.39 points at 1,535.3, The Fed in its meeting and the subsequent media briefing by Bernanke indicated it would initially not grow its balance sheet and re-invest proceeds from maturing securities once its ongoing quantitative easing concluded, which economists said was a clear hint monetary easing would eventually come to an end.

In a report yesterday, CIMB Research said the Fed had noted the upside risks to inflation given the headwinds from higher energy and food prices. “It will monitor inflation and expectations for future prices closely but said so far, so good',” it said. With the Fed saying “long term inflation expectations have remained stable and measures of underlying inflation have been subdued,” CIMB said that could suggest the Fed was in no rush to raise overnight interest rates from their existing near-zero levels. “That said, the Fed upped its inflation estimate this year from 1.3% to 1.7% to 2.1% to 2.8%. Core inflation forecasts were tweaked up from 1.0% to 1.3% to 1.6%,” said CIMB Research.

On the direction of interest rates in the US, CIMB thinks the Fed is is no hurry to raise interest rates given its downbeat tone on the economic recovery. “Even though inflation pressures have started to build up due to rising commodity prices and energy costs, it is not yet at a tipping point',” it said. “The FOMC reaffirmed its current monetary policy stance of keeping the Fed funds rate exceptionally low for an extended period. As such, we now expect the Fed to keep the rates at 0.0% to 0.25% till year-end, a revision from 0.75% by end-2011.”

World Bank to Present Findings Next Month

THE World Bank, which has been accredited by the Government to conduct a study on minimum wage in Malaysia, will present its findings on May 9 and 10.

Deputy Human Resources Min-ister Datuk Maznah Mazlan (pic) said a special committee would then analyse the findings, including the impact on production costs, inflation and the country’s competitiveness in the international market. She was replying to a question by Khoo Soo Seang, who had asked about the impact of fixing minimum wages on the country’s economy.

Maznah said that an advisory council on minimum wage would be established to gather feedback and that it would be followed by implementing laws on minimum wage.“Initial research was done in December last year, followed by a special minimum wage lab conducted from Feb 14 to 17,” she added.

Big Jump in FDI Growth

PUTRAJAYA: Foreign direct investment (FDI) into Malaysia jumped to RM9bil in 2010 from RM1.4bil in 2009, said Prime Minister Datuk Seri Najib Tun Razak.

"I am confident we will be able to ensure a very healthy growth in FDI. But don't forget, it's not only about FDI, it's also about domestic investment. "Our development plans involves 73% domestic investments," he told a press conference here after chairing the 11th National Small and Medium Enterprise Development Council Meeting Friday.

Najib, who is also Finance Minister, admitted however that brain drain remained one of the major obstacles to Malaysia achieving high income developed status by 2020. "We have identified (brain drain) as one of the problems that we need to find solutions to. That's why we set up Talent Corp," he said.

He said one of the measures taken by the Government was announcing a flat five-year 15% income tax rate for professionals returning to work in Malaysia. "It (brain-drain) is not something that is happening now. It is a problem that has been happening for some time. But we are taking very concrete measures to address this," he added.

Najib was responding to the World Bank's report that "accelerating brain drain" posed the greatest threat to Malaysia's plans to achieve developed status in 2020, including attracting foreign investments.
The Prime Minister refuted the World Bank report's chief author and senior economist Philip Schellekens' claim that a lack of investments and brain-drain were due also to race-based policies in favour of Malays.

Malaysia and China boost Ties With Slew of Agreements

KUALA LUMPUR: Malaysia and China have taken a major step forward in bilateral relations with a slew of agreements signed and a pledge to break barriers.Prime Minister Datuk Seri Najib Tun Razak and Chinese Premier Wen Jiabao expressed their desire to outdo achievements in the bilateral sphere for the good of both nations.

A total of eight agreements and MoUs were signed in the presence of both leaders yesterday. Among others, Malaysia and China have agreed that bilateral trade be settled in local currencies. A student exchange programme is also to be introduced next year. A traditional Chinese medicine centre of excellence will be set up in Malaysia, while Bank Negara will establish a representative office in Beijing.

US Slow Growth Raises Protectionist Threat

WASHINGTON: Persistently high unemployment and a weak economic recovery could persuade US policymakers to slap protectionist duties on imports from China and around the world, an economist said.
“Trade protection is far from an ideal policy, and indeed it carries serious dangers, but in current circumstances it may offer America the only way out of its difficulties,” Paul Ashworth, chief US economist for Capital Economics in Toronto, said in an analytical note.

Having largely exhausted fiscal and monetary tools to boost US economic growth, Congress and President Barack Obama might realistically look at trade measures aimed at negating China's currency-derived trade advantage, Ashworth said. Possible Republican presidential candidate Donald Trump has already called for the United States to slap a 25% tariff on Chinese goods, a move that would violate US commitments made to the World Trade Organisation.

Senate Majority Leader Harry Reid and other lawmakers just returned from Beijing said on Tuesday they pressed China to allow its currency to rise more rapidly in value to help bring trade between the two countries into balance. “China's currency policy has resulted in an unbalanced exchange rate that keeps the cost of Chinese products artificially low and the cost of US exports to China unfairly high, making it difficult for US businesses to compete with China in the global also marketplace,” the lawmakers said in a statement that noted Beijing had confirmed plans to continue a “managed appreciation” of its currency. Reuters
Ashworth noted that even with the current weak US recovery, the US trade deficit has already widened again to more than 3% of gross domestic product and could once again reach its previous peak of 6% of GDP.

That could lead lawmakers to consider tariffs as a way to narrow the deficit, most likely starting with legislation that would clear the way for the United States to use countervailing duties against China's undervalued exchange rate, he said.

“As it stands now, we could see such a bill being passed some time in 2012 when the (presidential and congressional) election campaign is in full swing,” Ashworth said. “When such limited measures do little to stem the rise in the overall trade deficit, or possibly even the bilateral deficit with China, we would expect Congress to agree to a wider set of sanctions targeting either China alone or possibly a wider range of low-cost Asian producers,” he said.

Since that would most likely run afoul of WTO rules, the logical next step would be a US debate on whether to withdraw from that organisation, he said. The preferred solution would be for China to take steps to boost its domestic demand, such as allowing its currency “to appreciate more substantially against the dollar,” he said. The second-best solution would be for the United States to offset China's currency advantage by slapping tariffs on its goods, Ashworth said in a phone interview. Reuters

Malaysia towards 2.97 per US dollar

PUTRAJAYA: The ringgit is expected to continue its rally to greater heights in the near term, and towards 2.97 per US dollar in a month, before hitting 2.93 against the dollar in three to six months.
“The estimation is based on our recent exercise on the econometric modelling of the local currency,” AmResearch senior economist Manokaran Mottain told Bernama when asked on ringgit's performance yesterday.
Overall however, he said any rally might be subjected to some profit-taking activities in the long term, and this would see the unit weakening to around 2.97 by the end of this year.

Manokaran Mottain ... ‘We think this (inflation rate) is tolerable level for the authorities.’

Apart from an anticipated weakening of the dollar on expectations of continued monetary easing, speculations of a potential increase in the overnight policy rates (OPR) domestically pushed the unit to a 13-year high of 2.99 against the greenback yesterday, he said. Manokaran said Monday's performance of the ringgit was its highest for the year, having strengthened by 0.45% and with gains of nearly 2.4% against the greenback.

The economist said the stronger ringgit was also mainly due to the increased speculation that the recent rise in inflation would pressure policy makers to raise interest rates or tolerate further currency appreciation.
Malaysia's inflation rate accelerated to a 23-month high of 3% in March compared with March last year. It was at 2.9% in February. “We think this is tolerable level for the authorities,” he, however said.
He added that month-on-month prices rose only 0.1% in March versus 0.5% in February and 0.6% in January.

Manokaran also highlighted that “speculators think that the three equal 25 basis points (bps) hikes in interest rates by Bank Negara since March last year has grouped Malaysia among countries that were the first to tighten monetary policy.” Malaysia's OPR stands at 2.75% currently, while the US Federal Reserve has kept interest rates in a range of between zero and 0.25% since December 2008. “This has led to a widening interest rate differential in favour of Malaysia, thus making the latter even more attractive to excess dollars,” Manokaran said. “The interest rate spread between the two countries which currently stands at a high of 250 bps seems another pull factor for speculative buying of the ringgit in recent weeks,” he said.

Ironically, short-term capitals or “hot money”, which has been driving up the ringgit over the past few months, may not remain in the country for a longer period of time, he added.
On Bank Negara's intervention, Manokaran said it might allow gradual appreciation of the ringgit to tackle inflation. “Like in the rest of Asia, we believe a certain degree of intervention may have been taking place to support the currency at current levels, in order to manage the increasing capital flows.”
However, on the back of the recent rise in inflation rate, “we reckon the central bank would allow a certain degree of appreciation in the short term, with the aim to reduce imported inflation.” - Bernama