July 5 2004

Malaysia's new leader rebuilds
regional trade ties

By John Burton

Malaysia's economic ties with two of its biggest regional trading partners - Singapore and Australia - are improving as Kuala Lumpur has shifted towards a more conciliatory policy under the new government of Abdullah Badawi.
Malaysia and Singapore are planning to set up a bilateral business council and a M$10m (US$2.6m, 2.1m, 1.4m) fund to finance joint investment missions abroad. Meanwhile, Australia hopes to start free trade talks with Malaysia this month.
The warmer ties are in contrast to the testy relations that Malaysia maintained with Singapore and Australia under Mahathir Mohamad before his departure as prime minister eight months ago.
Dr Mahathir, who favoured a policy of assertive nationalism, often accused Singapore and Australia of promoting the economic interests of the west in Asia. In addition, bitter memories from the breakdown of a brief union between Malaysia and Singapore in 1965 bedevilled bilateral ties.
Comparing their rocky relationship to a divorced couple, Rafidah Aziz, Malaysia's minister for international trade and industry, told a business conference in Singapore on Friday it was necessary to "rediscover" each other.
Although Malaysia was Singapore's top trading partner last year with total trade valued at S$77.2bn (US$45bn, 36.6bn, 24.6bn), it was reluctant to permit investments from the city-state during Dr Mahathir's rule.
Mr Abdullah, however, has encouraged Singapore to invest in Malaysia in a move linked to efforts to restructure the country's big state-owned corporate sector.
Ms Rafidah said Malaysia would be "open" to investments in its state- owned companies from Singapore's powerful government investment agencies, Temasek Holdings and the Government of Singapore Investment Corp (GIC), which manage the city-state's $100bn in foreign reserves.
Improved ties have already increased Singapore's investments in Malaysia over the past year, with the city-state ranked as one of the top five foreign investors in 2003 with M$1.2bn.
Temasek bought a 5 per cent stake in state-controlled Telekom Malaysia in March and is seeking up to 30 per cent interest in Alliance Bank, the first time that Singapore would acquire a stake in a Malaysian bank. GIC has been buying property in Malaysia and last week acquired 5 per cent of Gamuda, Malaysia's second-largest builder.

Parent site: "Focus on Malaysia"