Investors edge way back into Malaysia

Business Asia, May 31, 1999

Eight months ago, Malaysia's investment landscape could hardly have looked more scarred in the eyes of international investors.

Government capital controls, implemented to arrest a stock market slump, had trapped an estimated US$10 billion in foreign funds, while thousands of protesters were chanting "Reformasi" as they grappled with police on the streets of the capital.

That, along with news that former Deputy Prime Minister Mr Anwar Ibrahim had been sacked by Prime Minister Dr Mahathir Mohamad in a dispute over economic policy, had foreign investors staying away in droves. Now, they look set to return despite renewed commitment to currency controls by Dr Mahathir.

As Malaysia's government this month filed documents with the US Securities & Exchange Commission to sell US$2 billion in bonds, its first sovereign bond sale since 1990, analysts were forecasting strong demand.

"The book on Malaysia was closed, as far as international investors are concerned, because of the capital controls," said Mr Bernard Eschweiler, JP Morgan's head of economic research in Singapore. "Now, (economic) reforms are getting positive feedback, and people want to look at Malaysia."

The bond sale -- to be managed by Salomon Smith Barney -- is the result of months of intensive public relations aimed at persuading global investors that Malaysia has put in place strategies to recover from its worst recession in four decades.

This year, Malaysia's top financial officials -- from the central banks' deputy governor to the securities regulator -- have visited the world's financial centres to woo back foreign money.