|ASEAN: War shakes fragile
By Arun Bhattacharjee
KUALA LUMPUR - Globe Silk Store, a landmark
retail outlet on Jalan Tunku, is pulling down its
shutters. For more than 40 years it has been known for
top-quality service and reasonable prices. In the
Malaysian capital's sprawling malls, business has
slackened as much as 30 percent since last August. "Even
our neighbors from Singapore are selling their
investment in this country for liquidity," says Ng Lee
Chon, a real-estate manager in Kuala Lumpur. He says he
sold three of his uncles' flats at 40 percent less than
the purchase price of five years ago.
of a backlash by Islamic militants against the US-led
invasion of Iraq has increased the economic
uncertainties. Says a local leader of the fundamentalist
Islamic party PAS, "We know Saddam Hussein is not a good
leader but he is a Muslim, and we see this attack as a
crusade against our religion." Many moderate people feel
the same way, confirms Dr Chandra Muzaffar, a professor
at Universiti Malaya and president of the International
Movement for a Just World (Malaysia). Governments are
worried about a swing toward the right, he explains.
This fear has led to large-scale preventive
arrests in Southeast Asia. Malaysia arrested 61 people
on Tuesday, and the next day 15 people suspected of
being connected to the Malaysian militant group KPM were
arrested in the north near the Thai border. A cache of
arms including automatic M-16 rifles and machine-pistols
were recovered. More arrests are likely. Singapore,
Indonesia, Thailand and the Philippines made arrests
earlier. The news of preventive arrests in Malaysia was
broadcast only once before the government clampdown.
None of the daily English-language newspapers carried
the story. According to source in the Association of
Southeast Asian Nations (ASEAN) liaison office, the
number of arrests of suspected militants in the region
has exceeded 20,000.
Most of these countries,
especially Malaysia and Singapore, want to avoid
militant violence for fear of the impact on their
economies. Singapore imposed tight security regulations
prior to the attack against Iraq. In spite of their
differences and recent rhetoric, Malaysia and Singapore
are working very closely in this regard, especially to
protect their seaports.
All the ASEAN countries
are braced for bad days ahead and losing hope of
increased foreign direct investment (FDI) and bilateral
aid. Senior ministers of Malaysia, Singapore, Thailand
and Indonesia met on Malaysia's east coast early this
month to discuss the security environment and economic
fallout of the Iraq war.
The new members of
ASEAN - Myanmar, Laos, Cambodia and Vietnam - are making
a desperate effort to keep their economies afloat.
Malaysia, which has fared better than others, announced
on Monday the issue of new Islamic bonds worth US$3.27
billion to build the new capital Putrajaya and provide
jobs. This is in addition to $2.4 billion raised a year
More than 40,000 people lost their jobs in
2001-02 in the electronics industry in Penang. Nearly 50
others lost their jobs when a leading newspaper closed
its office there. Restructuring of industries in Shah
Alam and other belts released another 100,000 people
between November 2001 and last month.
foreign investment is hurting the Multimedia Super
Corridor (MSC), Malaysia's flagship technology center.
Investment is no better in other areas. The Economic
Advisory Group to the government revised twice
Malaysia's growth projection for 2003 from 5 percent to
4.2 percent. The most recent projection, this month, is
Prices of almost all items have
increased by an average 2 percent as of Thursday, which
is not considered bad, but the maximum increase was in
communication, transportation and in industrial
products. To arrest price increases in export-oriented
products, Malaysia announced a cut in natural-gas prices
by 50 percent on Wednesday, which followed a recent 2
percent increase in petroleum prices.
kick-start the economy Malaysia slashed interest rates
and encouraged people to buy locally made cars to save
the ailing automotive industry. This followed a similar
attempt to provide very low-interest housing loans.
Government bureaucrats were given interest-free housing
and car loans from banks to keep the economy afloat.
There is a growing fear that loans to a large number of
non-government people may create non-performing assets
for the banks.
Government economists here assure
that the government is ready to provide the needed
support to the banks. With national savings at 34.1
percent of gross national product (GNP), foreign
reserves at $35.5 billion, and $13.78 billion in foreign
trade surplus, the support may provide a temporary
respite. However, the impact of a slipping dollar is
The economic uncertainties are
further overshadowed by the possibility of a backlash
within the country by the militant Muslim factions.
Malaysian government is waving a white flag to the
fundamentalist opposition party PAS, saying that the
country should have common stand on Iraq.
the Causeway, Singapore is in a far worse condition,
with unemployment figures at an all-time high and the
fear of Islamic retaliation because of its pro-US
stance. Unlike Malaysia, the island's economy lacks both
oil and agricultural resources. The frosty relationship
with Malaysia over the supply of water from Johor Baru
has been put on hold. Singapore has also alleged that
some of the militants planning to blow up targets on the
island came from Malaysia.
has tightened security along its border with Malaysia,
fearing incursion from Malaysia's PAS-dominated north
and northeast to boost the brewing militancy in
Thailand's Muslim-majority southern district. Since
Malaysia crushed an attempted army revolt two years ago
and made it clear that militancy within the country
would not be tolerated, most Taliban- and
Pakistan-trained extremists sought sanctuary among the
sympathetic Islamic population in Thailand, the
Philippines and Indonesia.
The Philippines has
been fighting a separatist movement for the past 30
years, aggravated by Islamic militants from outside. The
prompt expulsion of two Iraqi diplomats this week on
charges of spying, after a call by the United States,
did not go well with some of the Philippines' neighbors.
The Philippines is banking on its electronic
industry and China for survival. The Philippines' export
of electronic goods last year accounted for 64 percent.
To maintain that level it increased imports of
electronic components this year by 45 percent, worth
$2.92 billion. Exports to the US and Japan hitting
bottom, an increase in insurgency, and a $3.5 billion
budget deficit are not encouraging. Economists feel that
the economy in the Philippines is sliding out of control
with unregulated imports of consumer goods and oil.
Import of consumer goods import increased by 19 percent
over last year and the oil bill increased 71 percent in
2001-02. On top of this, the peso is down and feared to
slide further along with the US dollar.
Indonesia is faring no better in spite of its
oil. A discernible fall in FDI, a deteriorating
law-and-order situation and the image of sheltering
terrorists are not helping. Its earlier image as a
liberal Islamic country took a serious knock after the
bombing of a nightclub in Bali.
"If the Iraq war
continues for a month," says a Malaysian bureaucrat,
"some of us will be in the deep sea and others [ASEAN
countries] on rocking boats."
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