Features | Economy | Southeast Asia

Towering Ambition in Malaysia

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.

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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?

Perhaps the ambition itself is misplaced. Growing anywhere near 16 percent a year—as Singapore did earlier this year—isn’t only unsustainable but perhaps unnecessary. Raghuram Rajan, the former chief economist of the International Monetary Fund, has noted the vast gap between average growth rates among the early developers—Australia and the United States in the late 19th century—and the late ones like the East Asian tigers in the post-war period. Australia and the US grew at 1.8 percent and 1.3 percent respectively for half a century—a breathtaking pace at the time but which, from our vantage point, looks like a slow consolidation. By contrast, East Asian countries have often grown at multiples of that rate—Japan grew at 8 percent per year between 1950 and 1973.

But although it’s still early days, the grappling over the legacy of Asia's economic machine has already begun. Some, especially in the more developed Asian economies, are questioning their rapid expansion. This is especially true of many in Japan who believe their country destroyed too much, too quickly. Some there now look to the days of pre-Meiji Japan, a time before the industrial revolution and before the US presence—a time, says Eisuke Sakakibara, an influential former vice finance minister, when Japan was ‘peaceful, orderly, unspoiled and friendly.’

Nostalgia isn’t big in Kuala Lumpur, where shiny things are revered and old things are embarrassments. But small doses of it have blossomed recently, with multiple channels running month-long retrospectives of old P. Ramlee films, and traditional night markets being objects of chic excitement. On his blog, Mahathir suddenly reminisced about his time in medical school, saying, apropos nothing, that he was ‘not ashamed to admit that I can’t compete with the Chinese and Indian students when studying medicine. They had much better results than me and the other six Malay students for entry into the Medical College…On pure merit I would not be a doctor today, not because I was not qualified, but my qualification was lower than others.’

This is an astonishing statement for a man with Mahathir's ego, and cuts to the heart of the paradox of Malaysian nationalism. It’s schizophrenic, with constant reminders of Malay inferiority and failure imposed against the chest-beating desire to project Malay superiority. This colonial mentality is probably the major reason Malaysian projects—under Mahathir and even now—have always been somewhat vast and monolithic. The behemoth international airport, the Petronas towers, an enduring national subsidy for Proton, the ailing national carmaker—these plans all announce themselves loudly, if not always intelligibly.

‘Vision 2020’—the government's current economic blueprint—will probably require a more sensible and less defensive form of nationalism. The government says that a major reason for the 100-storey tower is to raise the confidence of Malaysians in themselves.

The truth is, though, that only when future buildings are shorter will it have succeeded.

Sahil Mahtani is a Jakarta-based writer whose work has appeared in the Wal Street Journal, The New Republic, and City Journal.