By Jeremy Grant in Singapore. Published by Financial Times on 16 August 2012.
Using the soaring rhetoric of nation-building on a grand scale, Najib Razak, the Malaysian prime minister, recently snipped a ribbon to inaugurate construction of a 28-hectare site in Kuala Lumpur destined to be a new financial centre.
Never mind that the capital already has a thriving business district, home to Bursa Malaysia and dozens of domestic and foreign banks.
The new Tun Razak Exchange – named after Mr Najib’s father, a former Malaysian prime minister – is to be even bigger, representing “the future of Malaysia as the catalyst for economic and financial growth” and positioning the country as “a nucleus of global talent”. Its developer, a state-owned investment agency called 1Malaysia Development is overseeing the $8bn project, set to rise within walking distance of the Petronas Twin Towers.
With much of the world economy experiencing anaemic growth at best, it is hard to believe that any country would contemplate a project on this scale. Yet Malaysia’s economy is enjoying a gravity-defying boom that is confounding sceptics. Second-quarter gross domestic product figures out this week showed the economy grew by 5.4 per cent, way above consensus expectations of 4.6 per cent, and the 4.9 per cent recorded – after an upward revision – for the previous quarter.
That was due to big-ticket government spending, lending to business by well-capitalised banks, and robust consumer demand, fuelled by pay rises for civil servants and cash handouts that have even seen taxi drivers receive vouchers for free replacement tyres...
Malaysia’s healthy economy – and the resulting “feel-good” factor – stands in contrast to growing anxiety among Malaysia’s neighbours in south-east Asia as the global downturn has tarnished their economies. Analysts point out one nagging concern for Malaysia: rising household debt, caused by rapid growth in credit card usage.
Growth could yet be tripped up by domestic politics too. Mr Najib has been playing a cat-and-mouse game with the opposition, led by veteran leader Anwar Ibrahim, over when to call an election, which must occur by April. When that comes, it is expected to be the closest for decades, raising the spectre of political uncertainty for investors...
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