Are plans for a new 100-storey skyscraper a sign of strength or weakness? Either way, they make little economic sense.
Even just a glimpse of Kuala Lumpur's 88-floor Petronas Towers is a reminder of Malaysia's pharaonic ambitions. The reasons for building them were partly economic, but mostly symbolic—Malaysia had arrived, the towers were supposed to say. And between 1998 and 2004 they were the world's tallest buildings.
Now, Malaysia wants to relive those glory years. It’s planning to build another tower, this one to be the world's second tallest after Dubai's Burj Khalifa. Warisan Merdeka, or Freedom's Legacy, is supposed to be a private venture managed by asset management company Permodalan Nasional. But the government's hand is clearly visible. Prime Minister Najib Razak announced it during his 2011 budget and the company's chief executive claims government backing. Razak has said the government isn’t contributing a cent, but no one really believes him. Most suspect the government will use other tools besides equity funding—like tax breaks or plain old political influence—to support the project.
The trouble is that Warisan Merdeka makes no economic sense. The developers say the project will yield between 8 percent and 10 percent a year. But there’s already a glut of office space in Kuala Lumpur—occupancies are only around 80 percent—and adding 3 million square feet of space certainly won’t help. Permodalan Nasional has also remained unhelpfully tight-lipped about where funding is actually coming from.
The opposition has relentlessly attacked the UMNO (United Malaysia National Organisation) government about the project, while tens of thousands have joined an anti-Warisan Merdeka Facebook group.
Many Malaysians are furious because the project is a complete policy non-sequitur. Aside from raw material exports, the Malaysian economy is clearly underperforming, while foreign direct investment has slowed to a trickle in the past few years. The Wall Street Journal's editorial page has pointed out that on a net basis; money is flowing out of the country—partly because there are few investment opportunities. Cheap labour can no longer drive the country's growth—Vietnam and China are more competitive here. Meanwhile, educated Malaysians, whom the country desperately needs to move up the value-chain, don’t actually want to live in the country. Instead, they’re fleeing for better pay abroad, in part due to affirmative action policies. Building a tower solves none of this. In fact, far from a symbol of economic dynamism, it suggests a lack of imagination at best, and stagnation at worst.
The other reason Malaysians are opposed to the tower is more psychological. Many resent the relentless benchmarking the government has foisted upon them. Perhaps no Asian government, not even China's, has announced more ‘economic transformation programmes’ or ‘national key result areas’ or ‘strategic reform initiatives’ than Malaysia. No other nation exhorts its citizens more to strive for ‘developed nation status’—a harsh yet self-imposed reminder that it still can’t call itself one. After a decade of hard-charging leader Prime Minister Mahathir Mohammad, the national mood is much like a mother who has delivered a baby—grateful but exhausted. In his recent budget speech, Razak told Malaysians: ‘to attain developed nation status, we cannot remain complacent. We must change our mindset.’ But what if Malaysians aren’t ready for someone to out-Mahathir Mahathir?
Photo Credit: Mike Villiger