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Newsweek: Southern Exposure - FEER: US Attacks Hit Penang Firms
By George Wehrfritz

23/10/2001 3:05 am Tue

[Gembar gembur (kununnya) kewujudan ancaman kumpulan militan oleh Mahathir akan menggugat ekonomi Malaysia juga akhirnya. Rencana ini menyebut syarikat DELL telah mengalihkan beberapa operasi mereka ke negara China. Memandangkan DELL merupakan salah sebuah syarikat yang terkemuka, pelabur lain tentu akan mengorak langkah mengikuti jejaknya. Sudah tentu syarikat sokongan, samada asing atau tempatan akan turut terjejas sama.

Ini semua bukan sedikit kesannya kepada ekonomi Malaysia. Yang akan kehilangan kerja itu termasuk ahli Umno juga. Lain kali jangan mengada-ngada kerana pelabur meneliti setiap yang terkata. Belanjawan baru-baru ini menunjukkan kerajaan sudahpun menggelabah dengan perubahan suasana. DELL sendiri sudah tidak yakin dengan angka-angka wawasan yang dibentang oleh menteri kewangan raja kelentong negara. - Editor]

Newsweek International,
Issue 29th October 2001

Southern Exposure

The Sept. 11 storm has reached Southeast Asia, from nervous Indonesia to stable Singapore. The trouble could even bring good news to Hong Kong and Taiwan

By George Wehrfritz

Oct. 29 issue - Singapore has long styled itself as a safe harbor for investors in Asia. But after the global-technology downturn and the terror attacks in the United States, says Trade Minister George Yeo, the city-state faces an 'almost perfect storm.' Its GDP is forecast to shrink by 3 percent this year, down from a sizzling 9.9 percent expansion in 2000. 'I would say that the challenges before us are the most severe since our independence in 1965,' warned Prime Minister Goh Chok Tong in a speech last week. Song Seng Wun, regional economist for investment firm GK Goh, blames slack export demand, a sharp decline in tourism, renewed weakness in tech-based industries and the psychology of the regional malaise. 'We get lumped in with the more problematic countries around us,' he says.

THE EVENTS OF Sept. 11 have effectively redrawn the map of Asia in the eyes of Western investors. They used to talk about the emerging economies of 'Asia Outside Japan.' Now the more apt phrase might be 'Asia Outside Islam.' The once rock-solid Singapore falls into the no-flight zone occupied by neighbors with large, potentially restive Muslim populations-namely Indonesia, Malaysia and the Philippines. Stock markets in those three countries have plunged this month amid forecasts of slower growth, declining foreign investment and rumbles of unrest. In Manila, the sometime lair of associates of Osama bin Laden, share prices sank to levels last seen in 1991. In Kuala Lumpur, officials scrambled to ease investor jitters after the leader of a large Islamic political party declared holy war against the United States. Across Indonesia, the world's most populous Islamic state, violent protests raged for a week after the United States began its assault on Afghanistan on Oct. 7. 'During the first two weeks after the terror attacks in the U.S., people weren't thinking about the Islamic factor,' says James Bryson, market analyst for Merrill Lynch securities in Jakarta. 'But that's changed.'

Islamic unrest isn't the only problem. Southeast Asian economies rely heavily on exports to the United States, which leaves them vulnerable to suddenly shaky American consumer confidence. The result: foreign capital is migrating to larger, more diverse Asian markets with stronger domestic demand-principally South Korea, China, Taiwan and Hong Kong. 'The general feeling is that Southeast Asia will lose its flavor among international investors looking at Asia,' says Chia Woon Khien, a researcher at ING Barings in Singapore. 'Apart from the Afghan troubles now, these countries also appear to have greater difficulties in restoring the pace of growth they had before 1997.'

The Sept. 11 shock came as the region was still struggling to overcome the financial crisis of 1997-98. Even Singapore, despite efficient banks and high tech that allowed it to weather 1997 relatively unscathed, is being dragged down by the neighbors it serves as a trade and travel hub. Thailand is bracing for a steep downturn in its huge tourism industry, which accounts for about 10 percent of GDP. In the Philippines, linked in headlines to bin Laden, stock prices dived 8 percent in the three days after the United States commenced bombing Afghanistan. 'Americans, especially those who have not been to the Philippines, will now have a negative impression, since all they know about our country is what they read in the paper,' frets Gregory Domingo, Philippine under secretary for Industry and Investments.

Things are so bad that capital flight is no longer the main worry. Investors 'have got nothing in Indonesia, nothing in the Philippines and nothing in Malaysia,' says David Scott, a strategist at Indosuez W.I. Carr Securities. 'So there's nothing to take out.' The risk is that capital won't return. In Indonesia, foreign investors have a vital place in the blueprint for recovery, carefully negotiated with the International Monetary Fund, which includes selling off state banks and telecom monopolies. David C. L. Nellor, IMF senior rep-resentative in Jakarta, says these assets will be harder to sell amid 'signs of greater risk aversion.'

There are even intimations of a new crisis on the horizon. 'If investors are jittery, it will affect the currency,' warns Bryson. Laksamana Sukardi, Indonesia's minister of State Enterprise and Investment, is one of the architects of an IMF-sanctioned plan to privatize key state-owned assets by selling portions to investors from elsewhere in Asia. 'While we have a good plan, the Sept. 11 terror attacks have changed the whole perspective. The appetite for people to expand their businesses is just not there.' Will there be delays? 'Definitely, yes,' he says. 'But I hope it's a temporary hiccup, and when things settle down it will be business as usual.'

It's widely assumed that the United States will prop up nations crucial to its war on terror, particularly strategic allies like Turkey, which is already on IMF life support. As usual, it's not clear where Indonesian President Megawati Sukarnoputri will stand. She has voiced cautious support for the war on terror, for which she was rewarded with $657 million in U.S. financial aid plus restoration of military assistance. But she has also criticized the attacks on Afghanistan and remained mum on anti-American protests at home. Investors in Jakarta find her silence unnerving. Last week she met with President George W. Bush for the second time since Sept. 11. Indonesian economist Hadi Soesastro last week warned the government not to be 'captured' by 'misguided interests' who care more about Islamic solidarity than the threat of 'a spiraling down of the economy.'

Investors are finding a haven from unrest in the non-Muslim economies of East Asia. Hong Kong and-to a lesser extent, due to its slumping electronics industry-Taiwan look attractive for their strong links to China. South Korea, meanwhile, responded to the 1997-98 crisis by restructuring its banks and busting up several major conglomerates, or chaebol . Unlike Japan, where economists foresee a 1 percent contraction in 2001, it may even avoid recession this year. 'As Southeast Asia experiences more political uncertainty, Korean shares could look much safer in the eyes of international investors,' says Lee Keun Mo, head of research at Good Morning Securities in Seoul.

China, with its huge domestic market, is positioned to sustain rapid growth despite the global slowdown. In 1997-98, China's relative stability lured low-end manufacturing businesses out of Southeast Asia. Now, with China poised to join the World Trade Organization, the pattern is repeating higher on the technology ladder. Dell Computer, for example, recently transferred production of desktop computers destined for Japan from Penang, Malaysia, to Xiamen, China. 'It's very good for Asia to have a large, fast-growing economy in the neighborhood,' says Eric Sandlund, chief investment officer of Merrill Lynch Investment Managers (Asia Pacific). 'Japan used to play that role.' Now China is taking over the role, at a time when Asia desperately needs an economic engine to pull it through this almost perfect storm.


Issue cover-dated October 25, 2001

U.S. Attacks Hit Penang Tech Firms

The economic fallout from the September 11 terrorist attacks in the United States has added to the woes of hi-tech firms in the Malaysian state of Penang--an important regional hub for mobile telecoms and computer manufacturers including U.S. giants Motorola, Dell and Intel. Penang officials say 11,000 people in the island state have been laid off. But there's an upside too. The crisis has seen a soaring demand for two-way communications transceivers manufactured by Motorola. More intense security at airports and office buildings around the world is thought to be driving that. Meanwhile, with some 30,000 computers destroyed in the World Trade Centre and adjacent buildings in New York, Dell is stretched to capacity filling orders for the U.S. market, a senior Penang official says.