Asia Times
15th September 2001

DIRE STRAITS

Mixed reactions

By Anil Netto

PENANG - All of a sudden, the world's tallest buildings, the Petronas Twin Towers, punching above the Kuala Lumpur skyline, symbols of the gung-ho Malaysia Boleh (Malaysia Can Do It) spirit, are now being looked at in a different light.

The tragedy at the World Trade Center in New York has exposed the vulnerability of skyscrapers to disasters, and raised questions about the wisdom of constructing such tall buildings, especially in places where land constraints have not yet reached critical levels.

The jitters in Kuala Lumpur were obvious. Just 12 hours after the two commercial jets smashed into the World Trade Center, a bomb scare at 8.40am local time forced 3,000 occupants of the Twin Towers in Kuala Lumpur to hurriedly evacuate the gleaming buildings. Four other buildings - the American embassy, the IBM Plaza, a hotel in Kuala Lumpur, and the Citibank office in Penang - have also received bomb threats since the attacks.

Reverberations from the attacks in the US are still being felt in Malaysia at various levels: personally, psychologically, economically and politically.

Ten Malaysians are still unaccounted for among 23 who worked at the World Trade Center, said the Foreign Ministry. Immediately after the attacks, Malaysian families with relatives in New York and Washington tried frantically to get through to them but could not.

The fallout from the tragedy could send the Malaysian economy into a tailspin. Analysts are expected to revise downwards their economic forecasts as the much-anticipated recovery in the US economy is now likely to be delayed even further.

Bank Negara had been talking about brighter fourth quarter prospects after sluggish second quarter figures were announced. Even at that time, its forecasts looked optimistic and it was generally felt that Malaysia would do well to avoid a recession for 2001. The sense of gloom now filtering through is likely to make its projections look even more unrealistic.

The United States accounts for close to 20 percent of the Malaysia's global trade. "At this point, American companies which export large volumes to the US are putting on hold their inventories for export," said Nicholas Zefferys, the president of the American Malaysia Chamber of Commerce and Industry. He said multinational electronics firms such as Motorola and Intel, which make large shipments, would likely be affected.

With the closure of airports in the US, Zefferys said that US firms in Malaysia would temporarily divert their export routes to Mexico, Canada and Europe. "We are talking about days, hopefully. We hope the rippling effect will be temporarily," he said.

Already, Prime Minister Mahathir Mohamad, noting that the local economy was closely pegged to that of the US economy, has conceded that Malaysia would feel the effects of any further weakening in the US economy. He also has not ruled out yet another round of pump-priming measures to kick-start the economy.

His remarks coincided with an announcement that the government is taking over the debt-ridden and politically-linked construction giant, United Engineers, in a controversial move to save the firm, which is tied to Malaysia's largest corporate debtor, Renong Bhd.

Malaysia's stock market, which was closed on Wednesday, proved to be the most resilient in the region, slipping only 3.8 percent. But that was attributed to the fact that local and foreign funds were already underweight in Malaysian equities. With a fixed peg to the dollar, Malaysia is also considered to be a defensive bet as investors would have less concern about currency volatility.

But other analysts say that the upside is limited and with so much uncertainty investors are likely to dispose their holdings, sparking further falls on the Kuala Lumpur Stock Exchange.

Politically, the Mahathir administration stands to gain from the renewed international drive to stamp out terrorism. In recent weeks, he had alleged that Islamic militants were forming regional networks in a bid to form a union of Islamic governments in the region.

In May and June, nine Malaysians were arrested after an alleged botched bank robbery. Those arrests led to another round of arrests under the Internal Security Act of 10 men linked to the opposition Islamic Party, PAS. PAS had made significant inroads in the 1999 general elections at the expense of Mahathir's United Malays National Organization.

Already, mainstream media commentators and government officials, trying to draw a parallel to the attacks in the US, are warning that the threats posed by these groups cannot be understated.

It is important, however, to remember that those detained under the ISA in Malaysia for alleged militant activity have not yet been brought to court for trial, nor have they been given an opportunity to defend themselves in open court. The failure to provide evidence that can be tested in a court of law reduces the credibility of the allegations hurled at them.

PAS itself was quick to unequivocally condemn the attacks in the US. While expressing its condolences to the families of the victims, party president Fadzil Noor also urged the US government to play a more just role in ensuring world peace. "PAS urges all sides not to be too hasty in accusing any group of involvement without concrete proof," he added.

For all Mahathir's anti-West rhetoric, his administration maintains military ties with the United States. When the evacuation of the Petronas Twin Towers took place, army chiefs from the US and East Asian countries, who had been meeting to map out joint strategies, were in the capital attending a reception hosted by the Malaysian defense ministry. US Army chief of staff, General Eric Shinseki, cut short his stay and flew home.

While condemning the attacks, Foreign Minister Syed Hamid Albar welcomed US assurances that retaliation would not be aimed at Muslims and reiterated condemnation of the attacks.

However, in some circles there is considerable empathy for the Palestinians' right to a homeland and for the suffering of Iraqi children feeling the effects of an embargo. Many Malaysians feel that the Palestinian tragedy and the suffering in Iraq have not received enough attention from the international community and accuse the West of double standards.