Building projects unsustainable in long run, say analysts

By Boo Su-Lyn
The Malaysian Insider
October 25, 2010

KUALA LUMPUR, Oct 25 — Putrajaya’s focus on mega construction projects instead of key reforms in its economic plans — symbolised by the 100-storey Warisan Merdeka tower — will hamper the country’s goal of becoming a high-income nation, analysts have said.

They have stressed that economic and institutional reforms to increase market efficiency and human capital development were the crucial elements to lift Malaysia out of its middle-income trap.

“It is not sustainable as we will have first-class infrastructure and facility and third-world work ethics and mentality,” RAM Holdings group chief economist Dr Yeah Kim Leng told The Malaysian Insider.

“The soft part of the development, which is the human capital, will have to take centre stage for the high-income transformation drive to be successful,” he added.

Yeah noted that Prime Minister Datuk Seri Najib Razak’s reform commitments in his New Economic Model (NEM) have been eclipsed by the mega construction projects announced in Budget 2011 and the Economic Transformation Programme (ETP).

The RM5 billion Warisan Merdeka project has been derided by the opposition and ordinary Malaysians online as a wasteful initiative, with an anti-Warisan Merdeka page on Facebook called “1M Malaysians Reject 100-storey Mega Tower” garnering 156,612 fans as at 7am today since the proposal was mooted on October 15.

Budget 2011 that features other projects such as the RM43 billion new KL MRT project and the RM26 billion KL International Financial District has also been denounced by Pakatan Rakyat (PR) as an election budget honed to win votes over resolving fundamental economic issues. Analysts have also criticised it for neglecting key reforms and ignoring plunging foreign direct investment (FDI).

Various projects in the ETP include the “River of Life” Klang River beautification project in the Greater KL region, future 1 Malaysia malls in China and Vietnam, as well as a huge oil storage facility next to Singapore to form a regional oil products trading hub.
“They have overshadowed the reform agenda, which is the more important element of transformation. Without it, we cannot achieve high-growth momentum and sustain high-growth momentum,” said Yeah, adding that the construction projects were merely supposed to jumpstart economic development by stimulating growth in other sectors like the services sector.

Investment in education was needed for long-term progress, analysts said. — Reuters pic
“Once these projects are underway… we should refocus our economic agenda on reforms, regulatory reforms, how we can enhance the business and investment climate to unleash private sector dynamism, entrepreneurship, and raise market efficiency and competitiveness.”

OSK Research head of research Chris Eng echoed Yeah’s views and noted that the government needed to shift its attention to soft infrastructure like education in the future to upgrade the economy.

“In the long run, there needs to be focus on software elements… like education, policies to encourage entrepreneurship and investment,” said Eng.

Political analyst James Chin pointed out that most of the mega projects would not spur the economy as they relied on funds from government-linked companies (GLCs) instead of actual private investors that were meant to drive most of the government’s ambitious projects.

“In all the mega projects, all the private counterparts are GLCs. They are not the real private sector,” said Chin, honing in on the Warisan Merdeka project where government-linked investment corporation Permodalan Nasional Berhad (PNB) said it had sufficient funds to complete the project.

“There is no real FDI (foreign direct investment) and no real money coming in. It is internally-generated money,” he added.

Previously, the Performance Management and Delivery Unit (Pemandu) identified investments worth RM1.38 trillion over 10 years for the ETP, of which 60 per cent would come from the private sector, 32 per cent from GLCs and eight per cent from the government.

The investment aims to double Malaysia’s per capita income and push the country into the ranks of “developed” nations by 2020, rebalancing Asia’s third-most export-driven economy towards domestic demand and the service sector.

Chin, a Monash University professor, called on the government points its attention instead on developing a services and knowledge economy in a bid to achieve Vision 2020.

“It (construction) won’t help us with a high-income economy. Refocus on the services and knowledge economy, like bringing back talented people from overseas,” he said.
Najib had announced in his Budget 2011 speech that a Talent Corporation will be set up early next year to arrest the country’s growing brain drain problem that is threatening his vision of turning Malaysia into a high-income nation by 2020.

About 700,000 Malaysians are currently living abroad, with half of them in Singapore, while the rest can be found mostly in Australia, Britain and the United States.

The number of Malaysian migrants rose by more than 100-fold in a 45-year period, from 9,576 Malaysians in 1960 to 1,489,168 Malaysians in 2005, according to the World Bank.

Political analyst Lim Teck Ghee was similarly critical of Najib’s grandiose construction projects, pointing out that such projects were unsustainable and likely to rack up higher bills than initially estimated.

“Not only are they not sustainable, but so called iconic projects often turn out to be white elephant projects which have massive costs overruns and take much longer to complete,” said Lim, citing the Istana Negara project as an example.

The cost of the new palace project in Jalan Duta has ballooned to more than RM935 million from the RM400 million figure originally announced by the government in 2006.
The Centre for Policy Initiatives director also highlighted several skyscraper projects in Osaka, Japan that failed to draw investors and resulted in massive public bail-outs in 2002.

“There are plenty of examples from cities such as Osaka where three huge skyscraper projects — the Asian Trade Centre, the World Trade Centre and the Minatomachi Distribution Centre — were forced to seek protection from their creditors. The projects also failed to attract investor support and businesses shunned moving into them,” said Lim.

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31 Replies to “Building projects unsustainable in long run, say analysts”

  1. Who are they kidding – these projects got nothing to do with long term and every one knows it. The funny thing is, for something that is suppose to have short political benefit, its going the other way.

    What it is, is a way to galvanise the troops which speaks loudly of where Najib is politically. Its amazing in the short span of 18th months, the man has lost all his political capital. At least Badawi had 4 years.

    What is more important is that Najib is not noticing that they usual political expedient tools of UMNO/BN have shorter and shorter life-span. Its their achilles heel. Its because the tools will quickly expire that Najib has to go for election quickly or it will be the death of him

  2. Long run ? Who cares about the long run ? Without projects how can the BN thieves raise money ? Without projects how can there be leakages ? Without projects how can there be cost overruns even when there are no actual overruns ?

    It’s the same old, same old with UMNO. Barry Wain suggested that Mamakthir lost the country 100 billion. Najib is trying to outdo Mamakthir by “losing” even more to his BN cronies.

  3. Once upon a time our government had a vast scrap yard in the middle of a jungle in Pahang.

    The Cabinet Ministers discussed it at the weekly cabinet meeting and said, “Someone may steal from it at night.” So they created a night watchman position and hired a person for the job.

    Then Cabinet said, “How does the watchman do his job without instruction?” So they created a planning department in the Prime Minister’s Department and hired two people, one person to write the instructions, and one person to do time studies.

    Then Cabinet said, “How will we know the night watchman is doing the tasks correctly?” So they created a Quality Control department in the Prime Minister’s Department and hired three people. One to do the studies, one do the reporting and one do the auditing.

    Then Cabinet said, “How are these people going to get paid?” So They created four positions: a time keeper, a payroll officer, a clerk and a manager to ensure the department have sufficient staffs to manage them and hired four people.

    Then Cabinet said, “Who will be accountable for all of these people? So they created an administrative department and hired six people, an Administrative Officer, Assistant Administrative Officer, a clerk, an office boy, a Legal Secretary and an assistant.

    Then Congress said, “We have had this command in operation for one year and we are $100,918,000 over budget, we must cutback.” So they laid off the night watchman.

    http://maverickysm.blogspot.com/2010/10/tale-of-watchman.html

  4. Of course “soft part of the development, which is the human capital” is more important from realists’ viewpoint than first-class infrastructure and tallest monuments and “not only are they not sustainable, but so called iconic projects often turn out to be white elephant projects which have massive costs overruns and take much longer to complete”, per Lim Teck Ghee.

    However to the powers-that-be, the greater competing objective of overarching importance is political, which is to erect the 100-storey Warisan Merdeka tower as a permanent metaphor / symbol of Malay aspiration to reach the sky in terms of achievement that will stand the test of time, with which the present administration is identified, just like the Petronas Twin Tower is identified with Mahathir’s administration. It helps garner votes; and of course helps crony bumi consultants, contractors and sub contractors in the spirit of NEP to get jobs.

  5. Unsustainable for whom? It is a case of make hay while the sun shines, because the sun may not shine much longer.
    Man with low self confidence / self image needs iconic buildings to boost their ego.

  6. Makes me chuckle, this “River of Life”. It is a totally dead, filthy drain of miles and miles of upstream garbage, including tons and tons of chemical waste of industries.
    Makes me cry, actually.

    What about cleaning all upstream inlets, instead? Would help us, our environment and our kids, actually.
    But as long as the kampung-people say “the river will take it down to the sea” the government doesn’t dare alienating its voters. A vicious circle.
    I for one believe it, when a beach opens opposite the General Post Office. And I promise, I’ll take a swim. Once our beloved Klang fulfills the requirements set out by the WHO for water quality.

  7. Petronas Twin Towers is quite empty.

    But we need another mega tower.

    Print more banana money.

    Ng Yen Yen says we must build it because ‘we can do it’. Yes why not build a 200 storey tower then?
    In your backyard. It will be good for tourism.

  8. ///Hishammuddin said that even Shafie, whom he called “the pirate of Semporna”, had eloquently presented his speech in Malay, complete with poetry. Shafie is of Bajau descent.

    Hishammuddin took the joke further by labeling Umno vice-president Datuk Seri Ahmad Zahid Hamidi as Jawa Bagan Datuk, Malacca chief minister Datuk Seri Ali Rustam as Bengali Malay, Perak Mentri Besar Datuk Dr Zambri Abdul Kadir as mamak Malay, Datuk Seri Musa Aman as Malay-Pakistan-Dusun. To this, a delegate retorted he is a three-in-one Malay.

    Putra Umno chief Datuk Azeez Abd Rahim was not left out.

    “I have checked (with the National Registration Department) and the JPN director-general told me that Azeez’s (ethnic) status is unknown,” Hishammuddin said.

    Umno deputy president Tan Sri Muhyiddin Yassin also touched on a person’s roots.

    “People ask me what am I. My late father was a Bugis and my late mother was a Javanese. I am a Malay,” he said.

    Najib, in his winding-up speech, declared that the man of Turkish descent and the guy with “unknown status” are also Malays.

    “We are all Malays. We must be united,” he said to loud applause from the floor.///– http://thestar.com.my/news/story.asp?file=/2010/10/24/nation/7289147&sec=nation

    The leaders of UMNO are not Malays, not pure anyway.

    Najib, the President is of Turkish descent.

    Mulyiddin, the Deputy President is Bugis and Javanese, or more correctly Indonesian.

    Ahmad Zahid, Vice President is of Javanese descent

    Hishamuddin is of Turkist descent

    Shafie Apdal is Bajau, Muslim native of Sabah, but not Malay.

    Sharizat, Chief of Wanita is Mamak

    Khairy Jamaluddin, looks Mamak but may be Malay.

    So the top UMNO leaders, other than Khairy, are not Malays as would be the intended beneficiaries of Article 153. Yes, they can be called themselves Malaysians but they choose to be known as Malay first when clearly they would not qualify by the definition of Sarawak Malay which demands purity of bloodline. Why then do they give up their roots to take up the position as Malay? They do it for the opportunities accrued to Malays. So, they ought to be called racial opportunists.

    Najib declared that all those non-pure Malays are Malays. Najib can call anybody any race he pleases. But to admit someone to be a beneficiary of the provisions accorded by the constitution has Najib’s the authority to do so? Was it the intention of the constitution to protect a race provided that race could remain pure and intact? When an ethnic group cannot preserve purity in the bloodline, that race disappears. Certainly the Malay race has not disappeared and the affirmative programmes should be directed only to pure Malays, else NEWMalays would hijack them.

    The mixed blood Malays who helm UMNO are too good for the pure Malays to compete with them. They made use of NEP to be fabulously wealthy. Since NEP allows them discretion not based on merits, ordinary Malays would not stand a chance in competition with other Malays. When the mixed blood harbour racist thought, only the mixed blood would be in their inner circles. If the list of all those who owned more than one percent of any listed corporation could be revealed, it should be interesting to know the quantum of equity shares held by the mixed blood who called themselves Malays.

    UMNOputras fight for Malays so they say, but they are actually fighting for themselves, in the name of pure Malays. Since NEP has been converted to nepotism mixed-blood Malay leaders have condemned Malays for harbouring parasitic mindset as a pretext to continue with NEP to plunder the nation with impunity. Malays who share the late Tun Dr. Ismail aspiration to uphold the pride of Malays are said to be opportunists pandering to non-Malay votes. Malays are not allowed to reclaim their dignity. When would true Malays be able to take over from the mixed-blood UMNO leaders? That seems impossible, and Malays are in real dilemma.

  9. R Tea is drooling n dying 2 b a Malay too
    Si toh kam wan
    Actually must thank UmnoB 4 making it so eazi 4 a person 2 b transformed 2 Malay n then start jiak, jiak, jiak, protected under NEP/NEM

  10. And they who migrate from the archipelago are Bumiputras while others like the Chinese and Indians are “pendatangs” (immigrants) or ‘penumpangs’ (passengers).

    Once an immigrant, always an immigrant.

  11. Whether building projects are sustainable in the long run or short run, that is not important to Najib. What matters to him most is to win in the next GE. The more high-flying projects he proposes, the more popular he will be, and, the bigger is the support he will get from the rakyat come GE 13.

  12. When KLIA was built…our jokers didnt know how to operate the baggage system…First world infrastructre…3rd world otak

    This is the Mamak’s work…delusions of grandeur…ala Arabian nights…

    PR must focus on education, healthcare and maintenance…if they even breath the dirty words “Mega Projects” votes will be destroyed….

  13. Mega projects mean lots n lots of $$$$$ 2 b given away 2 some lucky UmnoB/BNputras n their cronies ahead of d coming GE
    Also lots of $$$$$ promised 2 b given 2 some lucky guys after d GE – so dat they must vote for UmnoB/BN 2 remain in power 2 give out d promised $$$$$
    Wonder what happened 2 d big bucks meant 4 d north, south, east n west corridors?
    Remember just b4 308, BNputras spent all allocations meant 4 d entire 2008 within d first 2 months of 2008
    History always repeats itself, learn fr history, without fail CORRUPTION begets more blatant corruption

  14. MAS cabin crew members complained dat they r not well paid
    Well, MAS was exploited n ransacked by MMK, Daim, Tajudin
    If MAS cabin crew members want better pay, they shld know what 2 do in d next GE
    Kick out UmnoB/BN n vote 4 PR, what’s there 2 lose

  15. Those MEGA projects are only grand if viewed from a distance; the nearer one gets then the reality of cost versus work will show. All our Mega projects have been built with cost over-run of a few folds. i am just wondering as to why the double-rail tracking is not completed after all these years? Cost over-run has already be figured in long time ago, why the delay?
    The Warisan Merderka appears to be a fairwell gift? in view of the imminent GE??

  16. Even an idiot knew very well what these suckers are up to.
    Their real intention are not building the tower.
    They just wanna suck a huge amount of money out of it, that’s it!
    They’ve very big appetite as each and every one of them want a bigger share.
    That’s why they keep on looking for mega project to built every now and then.
    Sports betting failed and now warisan merdeka to back them up.
    Sports betting is haram but warisan merdeka is not.
    What will they think of next!!!

  17. THE National Higher Education Fund Corporation (PTPTN), which is projected to face a whopping cash flow deficit of RM46bil, mysteriously approved loans totalling RM23.78mil to 16,013 students who did not apply for the facility.

    Further checks also showed these students had not signed any agreement to return the loan advances…

    The above RM46 billion is equivalent to about 10 hundred-storey Warisan Merdeka towers. Who say we don’t live in a high-income society?

    http://thestar.com.my/news/story.asp?file=/2010/10/26/nation/7298262&sec=nation

  18. Next in line is another mega project: 2 build a bridge or tunnel between Melaka n Sumatra
    Of cos, another expensive 2-show-our-1st-world-status project is 2 send another Malay space tourist 2 space, billions needed

  19. PM Najib>>Can we turn this Mega Stone Dead Umno structures into food commodities …to fill up the hungry Poor Bumi Lazy Malay stomach bags till 2020 instead…as currently short of their daily3 basic meals to consume ..PM Najib Tun Razak please answer Rakayat Malaysian First this Fundamental Survival Conscience ????
    If your answer is NO…proceed reading below:

    : “Umno MalaySia already Doomed forever as their Ringgit strength which is a sign reflection of what UMno ruling means to this Natural Resources Bumi Malay-Pengatangs Nation… totally damaged by..1 Malaysia>> Mati Umno…sudah mati..no more hidup umno…Lets shout >>””Mati Umno! x3″”
    Malay History shown and proven that NEP had been “”Good for Nothing”” ; Only it managed in creation of @ 20 millions of Lazy Poorer Malay Malaysians( Bumi Pendatangs)and thus enriched a little bunch of Umno BN MP + their saudera2
    What about 99% Malay Lazy Civil servants…going for broke as their gaji increment was unrealistic thus providing corrupts services by cheating Rakyat soliciting $$$ kalau you mau Cepat service ,tah mau bayar dendah$$.
    Rakyat witness Umnoist tendency to cultivate lazy Self suffering Bumi Pendatangs with majority in the civil service sector all over all the Malaysia states by their Allah Gilah .
    Insallah!

    God Bless PR
    Rakyat ..Stand Together as One People Race Nation Vote PR into PutraJaya come next 13th election.

  20. The comments by “analysts” here are self serving. There are just as many who would say otherwise and proffer convincing data and evidence to support their claims to the topic of building projects being ideally what is required in government intervention in an economy during a worldwide recession (except in places like Malaysia and Singapore or Australia).

    It is easy to pontificate about these other alternatives many of which will take time to implement before being effective because of the lag for results to be evdient. By then there would be casualties the effects of which will encroach on whatever strenghts there remain in the economy.

    LKS offers no real solution other than to bag whatever the government does. Thats not being constructive. Where is the alternative and where is the empirical evidenc to support the theories of these critics? Thi is the work of a cosmetic opposition too long in the wings without the practical experience of government however unacceptable to them.

  21. The Reid Commission thought that Malays needed help. The term Malay was the creation of the British who utilized it to describe the people who came to Malaya later than the Orang Asli but these late comers, possibly the first wave of pendatang were able to create ‘native chiefs’ whom the British considered convenient to deal with. The British preferred to deal with the leaders rather than the masses, and for such convenience, they afforded support to the leaders. The British considered it their interest to divide the people into separate groups, better still for them to be in perpetual cold war but without erupting into red hot conflicts. Thus, the British demarcated Malay reserve land to endear Malay rulers who could impress upon their subjects that the British Advisers were indeed needed. The British somehow believed that Malays were more cooperatives than other races as civil servants. They realized too that the people might distrust the government if all the officers were Malays. Thus, they decided that a quota for Malays was needed. When it was time to hand over Malaya to the people as an independent state, despite the emphasis by the UMNO leaders then that in independent Malaya all citizens should have equal rights, Reid Commission considered it necessary to include in the constitution the provision to make Malays the preferred race to enjoy certain privileges which would be phased out in time. One cannot second guess the intention of the Reid Commission for the aberration introduced in the constitution. Was it the British hidden objective to bury a time bomb waiting for a comeback? The constitution of India provided an affirmative action for the ‘untouchable’ caste, the lowest in the caste system. The untouchable were not proud of their caste, but they were easily identifiable. Since the caste is known, the beneficiaries are certain, and they will not grow with time, other than the natural increase through birth.

    In Malaysia, the situation is entirely different. The Malays knew who they were. But the definition of Malays imbedded in article 160 of the constitution makes Muslims around the world potential Malays who are entitled to preferential treatment. The Reid Commission clearly erred in that regards. Indeed, affirmative actions are meant to right the wrongs, and only those who suffered in the past should be compensated. That compensation might be extended to their children for a while until situation is rectified.

    Article 160 shoves in a large number of persons who qualify as Malay purely because of the religious faith they profess. The recent UMNO General Assembly shew the world the so-called Malays were proud to say that they have mixed blood in their veins. Since Mamakthir said that Malays were born of lesser quality to other races, mixed blood Malays with the enlarged gene pool naturally are smarter than pure Malays. Being smarter and given the special treatment meant for Malays, ordinary pure Malays have no match for them. In fact, by accepting mixed bloods within the Malay community, the true Malays whom the Constitution intended to help, so it seems, are relegated in receiving aids for the government. The UMNO top leaders who are mixed bloods harp on the 30% target. True Malays should find out who owned the bulk of those shares offered at a discount. The share of mix blood in UMNO leadership reflects the distribution of owners of Malays’ equity capital in the corporate sector, if such statistics are available.

  22. D annual horrow/national-shame rpt Auditor-General’s REPORT is out
    Year in year out, we read abt blatant corrupt practices in our gomen depts
    Yet, hardly any punitive action is taken against ppl who cheated n committed d crime
    Based on cases documented in dis report, we can expect d mega projects 2 b abused by UmnoBputras n their cronies, n d cost of each project will double or triple

  23. You cannot take cash out directly from Government coffers, so you have to do it through indirect ways by implementing projects, lots of projects. You see, a RM400 million contract can balloon to well over RM900 million and there are thousands of contracts big and small around the country. So, there is plenty of money to be made by having big projects. boh-liao, if you are a corrupted person, would you bother to take action against your corrupted subordinate? Maybe you don’t dare to take any action.

  24. Its clear to everyone online that this is about doling out contracts and galvanising the troops to go into the GE. The issue is not that. The issue is can it work?

    The strategy is predicated on two fact
    1) they believe that their rural heartland will not desert them because of their control of media and extensive machinery. PR simply cannot match them.
    2) they spending will keep the machinery loyal and will not be betrayed.

    The truth is PR cannot match BN in terms of reach into the heartland, not even PAS especially where it really matters Sarawak and Sabah. Increasing salaries and payout to key villagers should match most things that PR can throw at them especially if Anwar is thrown in jail.

    The real weakness is how the project is doled out. These projects really benefit only a few people and the issue is will it be enough to keep the machinery happy or whether there is other sources of funding for the rest that will not get any. Its possible to fix the problem of the machinery if Najib is willing to blow the budget or if Petronas can get more money. Raising taxes negate any use because the machinery can’t deal with it.

    Najib is walking a fine line and a very tight window. What is likely to happen is that for everything that gets done right with this direction, new problems will come out. The machinery will realise that that is precisely Najib and he cannot be counted on for leadership they need. They will come to realise he is basically a screw-up. The longer Najib delay his GE, the more the machinery will get tired of the constant step forward and step backward administration of Najib. He really don’t have much of window to work with and GE is imminent.

  25. grkumar on Tuesday, 26 October 2010 – 3:31 pm wrote

    The comments by “analysts” here are self serving.

    .. snip ..

    ———–

    Really? In what way are they self serving? What do the analysts gain by stating their opinion on the subject matter?

    On the other hand, there is alleged widespread kickbacks on these mega projects. If that is true, would you call the proponents of these mega projects self serving?

  26. Bill Gates launched windows vista several yrs ago with this catch line : “The Wow Starts Now.!”

    Recently the whole nation went into “whoa” “whoooa” “Whooa” when jib announced the jibby-tower. Somehow the “wow” factor he was gunning for got lost and morphed into a “whoa” phenomenon.

    The days of mamak glorification is gone bro. Jib’s trick is this. Should his stunts fail to materialise and we all remained low-income in 2020, at least there is still a jibby-tower for us to wooow over. One critical assumption he relied on. That he, jib, and umno will still be around in 2020.

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