Published April 30, 2009

Malaysian defaults poised to rise

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(KUALA LUMPUR) Malaysia's corporate debt default rate may rise to 4.8 per cent this year in a 'worst case scenario', which may be the country's worst showing since the Asian financial crisis in 1998, RAM Rating Services Bhd said here yesterday.

Gloomy outlook: With deteriorating credit quality, RAM Rating Services says Malaysia's corporate debt default rate may rise to 4.8% this year, which may be the country's worst showing since the Asian financial crisis in 1998

'Because of deteriorating credit quality, defaults are expected to rise,' Liza Mohd Noor, CEO of the Malaysian ratings company, told reporters. Companies 'with significant dependence on export earnings will be the most vulnerable as the global demand slump results in weaker internal cashflow'.

Malaysia's economy may shrink one per cent this year, which would be its first contraction in a decade, or expand by that amount at best, as exports slump, the government has said. About 8.8 per cent of corporate issuers in Malaysia defaulted on their debts in 1998 at the height of the Asian crisis, RAM said in a statement.

'In times of economic slowdown, refinancing from banks and debt markets, as well as access to equity markets and sales of assets, may not be easily accomplished,' said Ms Liza. RAM's forecast for the default rate, under its base case scenario, is 1.8 per cent this year, she said.

Many issuers have indicated increased difficulty in refinancing, with more companies considering asset sales to meet debt payments, Siew Suet Ming, RAM's head of structured finance ratings, added.

Still, the default rate won't be as bad as in 1998 because Malaysian banks are better capitalised and there's enough liquidity in the market, she said.

About 15 per cent of issuers had their debts placed on a negative outlook or put on 'rating watch' with negative implications, RAM said. There will be more downgrades than upgrades in 2009 as the global economic slowdown worsens during the year, it said. Companies in the industrial and manufacturing industry will be more vulnerable to rating adjustments, it said.

Two companies, including Transmile Group Bhd, defaulted on debts of about RM300 million (S$124 million) last year, or 1.05 per cent of the total number of issuers covered by RAM, it said in a statement. That compares with 1.04 per cent in 2007. -- Bloomberg

Published April 30, 2009

Malacca building 2 cities to draw Arab tourists

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(KUALA LUMPUR) Arab investors will spend US$303 million on building two 'Arab Cities' to lure Middle Eastern tourists to the historic Malaysian town of Malacca, a report said on Wednesday.

The RM1.1 billion (S$456 million) project includes an Arabian bazaar, Middle Eastern restaurants, shopping complex, five-star hotel, water theme park, and a unisex Arabic health and beauty spa, The Star daily said Wednesday.

One of the 'Arab Cities' will be built on a small island lying south of Malacca town, while the other will be located at a beachside resort just west of the historic port, it said.

Malacca chief minister Mohamad Ali Rustam reportedly said that the project, due for completion by 2012, will attract more Middle Eastern tourists and give locals a chance to experience Arabic culture.

Malaysia's tourism industry has seen a sharp rise in the number of big-spending tourists from the Middle East in recent years, attracted by the tropical country's Islamic image.

Some 264,338 visitors from the region made their way to Malaysia last year, almost double the figure recorded in 2005.

The capital Kuala Lumpur has already seen the introduction of an 'Arab Street' to make tourists from the Middle East feel at home.

Tourism was Malaysia's second highest foreign exchange earner in 2007, raking in US$14 billion in revenue from 21 million tourists arrivals.

The government, however, expects tourist numbers to fall 9.3 per cent to 20 million this year as the global economic slowdown hits. -- AFP

Published April 30, 2009

Report soon on fiascos at Port Klang Free Zone

Transport official has permission to declassify govt documents

By S JAYASANKARAN
IN KUALA LUMPUR

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TRANSPORT Minister Ong Tee Kiat pledged yesterday to make public an investigative report prepared by an international accounting firm on the scandal-ridden Port Klang Free Zone (PKFZ) as early as next week.

In 2007, BT first reported that the PKFZ project would require a government bailout as its development costs had soared well over its budget - to RM4.6 billion (S$1.9 billion) from less than RM2.5 billion amid several questionable decisions. It suffered a further blow when Jebel Ali Free Zone International, the Dubai-based company contracted to manage the project, walked out in 2007.

The scandal became so widely reported that it grew to represent a metaphor for all the excess and hubris of the Barisan Nasional government and played some part in its dismal electoral showing last year. More immediately, its ramifications include the fact that former transport minister Chan Kong Choy was not picked as a Barisan Nasional candidate for last March's general election and, thus, lost his job.

His successor, Mr Ong, had promised to get the whole project scrutinised by international accounting firm PriceWaterhouseCoopers (PwC) and the report subsequently made public.

It never happened, for various reasons including the need to declassify several government documents related to the project. Things came to a head over the weekend, however, after business weekly The Edge published a report alleging that the total costs at PKFZ had ballooned to RM8 billion.

An indignant Mr Ong denied it. Government officials said that he then went to the Cabinet meeting yesterday where he asked, and received, permission to declassify the documents and make public the report.

'I am made to understand that the PwC report is ready and in keeping with my promise earlier, it should be made public in its entirety,' Mr Ong said yesterday via his blog. 'I have pledged to maintain transparency on this issue and I intend to keep to my word.'

Mr Ong is also contemplating whether he should submit the findings to the Malaysian Anti-Corruption Commission and the Public Accounts Committee.

Meanwhile, Lee Hwa Beng, the chairman of the development, confirmed the news to the media yesterday. 'I have received strict orders from Ong to push for nothing less than a full accounting of PKFZ for the public,' said Mr Lee. 'My mission is clear. I will facilitate the process and ensure the matter is properly resolved.' Mr Lee is also new to the job, having been made chairman after Mr Ong took over as transport minister.