Southeast Asian countries yesterday shrugged off a decision by the largest US pension fund to withdraw investment for political as well as financial reasons.
The California Public Employees' Retirement System (Calpers) is pulling out of Indonesia, Malaysia, the Philippines and Thailand, citing factors such as poor financial and legal transparency, labor standards and human rights.
Authorities said the decision would have little impact, and Malaysia also suggested it showed a lack of insight into the region's potential.
"Malaysia feels that being a relatively new player in the region, Calpers may not have a complete insight into the potential investment value of South-east Asian emerging markets such as Malaysia," the government's National Economic Action Council said yesterday in a statement.
Executive director Mustapa Mohamed added that the government was confident other investment funds would not be swayed by the Calpers decision.
Deputy Prime Minister Abdullah Badawi dismissed the political aspects of the decision.
"It has nothing to do with our record on human rights and democracy because our record is good," he told reporters.
"If we have a poor record, we would not have done well economically. Nobody would want to come invest in Malaysia, nobody would want to have business in Malaysia."
Thai Prime Minister Thaksin Shinawatra also dismissed suggestions that Thailand may have been ruled out over its human rights record, saying this would be "inexcusable" as Thailand was a rights advocate.
"It's merely their investment strategy that they will pull out as they can make a profit," he told reporters.
Thaksin said the pullout would have little effect because the fund accounted for only a small percentage of foreign investment, despite news of its withdrawal triggering a sharp sell-off in Bangkok shares on Thursday.
"The index plunged due to local investors who panicked," Thaksin said, adding that the fund's withdrawal was unlikely to touch off a domino effect among other overseas investment funds.
The Thai Securities and Exchange Commission noted that Calpers investments in Thailand totalled just 101 million baht (US$2.3 million).
Philippine central bank governor Rafael Buenaventura said: "I don't think other pension funds or investors will follow suit. They are independent."
Finance Secretary Jose Isidro Camacho said the Calpers decision "really doesn't affect us."
"If at all, it could be the [internationally traded] bonds that will be affected, [but] our bonds are strong."
The US fund's total investments in the Philippines stood at around US$25 million, fund managers estimated.
Calpers said its withdrawal of public investment in the four countries was linked more to financial risk than social conscience.
"Some people are referring to these as social issues, but we believe that these are closely linked to the risk for an investor so in fact our decision was linked to financial performance," Calpers spokesman Brad Pacheco said.
Malaysia and Indonesia had scored poorly mainly on the human rights and democracy fronts, while the Philippines failed mostly on financial criteria and Thailand did badly for a mixture of reasons, he said.
The decision by the fund, which manages US$151 billion dollars, will affect around US$1 billion in emerging market holdings, Calpers said.
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