KUALA LUMPUR, Jan 28 — Thanks to its “stability and resilience”, Malaysia has been listed as one of Fortune Magazine’s “lucky seven” smart bets for investors in the coming years, along with other emerging markets like India and Indonesia.
The popular business magazine observed that with China’s economy slowing, “scandal-plagued” Brazil now on the brink of recession and the cliff dive in global oil prices taking its toll on Russia’s economy, the economic powerhouses of “BRIC” — referring to Brazil, Russia, India and China — are now coming in for a dry spell.
“So where, now, should companies turn for their strategic investments? Well, that has everything to do with what they should look for: stability and resilience,” the magazine wrote in its February issue.
“And for that we found seven smart bets. In short, these are markets where it would seem good governance and sustainable growth are likely to go hand in hand.”
Apart from Malaysia, the tri-weekly magazine also listed Indonesia, Mexico, Colombia, Poland, Kenya and India — the sole BRIC nation to make it to Fortune’s “lucky seven” list, as other emerging markets that investors should park their businesses in.
The magazine cited governance, apart from sustainable economic growth, as one of its reasons for choosing Malaysia, pointing out that good governance is the one key ingredient missing from many developing countries.
In Malaysia, it observed, the ruling Barisan Nasional (BN) government in Malaysia has been trying to stay ahead of the demand for change and has been rolling out “credible” pledges for smarter economic management.
As an example, Fortune cited Putrajaya’s move last year to scrap fuel subsidies and its plan introduce the six per cent Goods and Services Tax (GST) this April as part of its bid to increase government revenue.
Prime Minister Datuk Seri Najib Razak, the magazine added, is also likely to accelerate his Economic Transformation Programme (ETP) soon by introducing further tax incentives for foreign investors.
The country’s manufacturing and financial services sectors are also expected to face further liberalisation in the years ahead, the report said.
“It’s a fair bet that as growth tapers in China (and the impact of that slowdown is felt in Malaysia), Najib’s government will feel pressure to boost public spending on infrastructure, education, and health care,” it said.
“That’s a good thing — particularly if authorities, as expected, continue to advance a broad fiscal reform agenda, with support from the middle class, to balance the nation’s budget by 2020.”
Just last week, the Najib government announced a revision to its budget for 2015 in response to plunging oil prices — global crude oil prices have dipped to less than half of the federal government’s estimated average of US$110 (RM396) per barrel for 2015.
The prime minister announced an RM5.5 billion cut in Putrajaya’s operating expenditure this year and adjusted the deficit reduction target to 3.2 per cent of the national economy instead of the original 3 per cent, while maintaining the RM48.5 billion development budget.
During the announcement, Najib also said his administration will encourage companies to register for the GST in order to collect an additional RM1 billion in taxes to increase government revenue.
In response, Dr Frederico Gil Sander, a senior World Bank economist on Malaysia, lauded the move to introduce the GST this April, even asking that fewer items be listed as GST-exempt.
The economist also said the elimination of fuel subsidies was a triple win for Malaysia’s budget, its environment and equity, but warned Putrajaya of succumbing to public pressure when global oil prices bounce back.
“The government should begin now to think about measures to take when oil prices inevitably rise again in the future in order to avoid pressures to re-introduce subsidies,” Gil Sander suggested.
In November last year, Domestic Trade, Cooperatives and Consumerism Minister Datuk Seri Hasan Malek, said the retail prices for RON95 petrol and diesel would be fixed on a managed float system from December 1, 2014, as the government will no longer subsidise both.
Deputy Finance Minister Datuk Ahmad Maslan, however, later suggested that Putrajaya may introduce some form of fuel subsidy if global oil price rises above US$80 a barrel, although not in the form of blanket subsidies.
As a crude oil exporter, Malaysia is highly dependent on petroleum income. Its oil-related revenue totalled RM63 billion in 2013, accounting for 29.5 per cent of total government income.
