Malaysia's victorious opposition in weekend polls assured foreign investors yesterday that pro-business policies would remain intact in Penang, one of Asia's biggest manufacturing hubs.
Opposition parties made major solid gains in Saturday's general elections, taking control of five out of 13 states, including Penang. The opposition also denied Malaysian Prime Minister Abdullah Ahmad Badawi's National Front coalition a two-thirds majority in parliament for the first time in four decades.
"There will be continuity. We assure foreign and local investors that Penang will remain business friendly. We will not undertake any policies that will frighten investors away," Lim Guan Eng (林冠英), Penang's chief minister-elect, said in a telephone interview.
Penang's new government will be led by Lim's Democratic Action Party, which won 19 of the 40 seats in the state assembly. It will form a coalition with the opposition People's Justice Party, known by its Malay acronym PKR, which won nine seats. Abdullah's National Front coalition got only 11 seats, losing control of the legislature for the first time since 1969.
The opposition victory had raised fears of an economic slowdown because of its criticism of large infrastructure projects and promises to cut fuel prices. The fears were felt especially strongly in Penang, which is home to major US electronics firms such as Dell, Intel, Motorola and Seagate.
The manufacturing sector contributes to almost half of Penang's economic growth, and provides more than 200,000 jobs in the island of 1.5 million people, Lim said.
He said Penang's industrial edge has been dulled by stiff competition from China and cheaper emerging markets such as Vietnam and Thailand.
"We feel Penang has lost its luster. We will pursue pro-business policies to make Penang a competitive and leading manufacturing hub in Asia," Lim said.
Economists said foreign investors may stay on the sidelines in the short-term to see how the opposition strength would influence economic policies.
"There are a lot of uncertainties, a lot of risks, but it may turn out positive. It can be a catalyst for change in the right direction," said Chua Hak Bin (蔡學敏), a Singapore-based economist with Citigroup.
"Fund managers will be concerned with the racial divide," Chua said.
"With the Chinese and Indians voting for the opposition, you raise the question if Malaysia's fundamentals are intact and whether there will be racial violence even though the Malays also voted for the opposition," he said.
Malaysia's minorities are concerned over rising "Islamization" and angry over the government's refusal to abandon positive discrimination policies that give Malays advantages in education, housing and business.
Chua said the fall of Penang, Malaysia's "Silicon Valley" which is home to many high-tech firms and the only state dominated by ethnic Chinese, could affect equity prices.
"It could also have an impact on billion-dollar projects in Penang, including the second bridge crossing," he said.
Wan Suhaimi Saidie, economist with Kenanga Investment Bank, said there could be a drop in share prices when the bourse opens today.
"Some investors may shift their position when trading opens on Monday while others may take to the sidelines. But I think it will just be temporary," he said.
Wan Suhaimi said that with a strong new opposition, the government could hopefully fine-tune its investment policies to woo overseas funds.
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