Recent Investors Concerned About Reliability of Contracts Signed with Governments

June 8, 2018

The dramatic political winds of change that swept across Malaysia last month were a reminder of the inherent political risk for any investments. Such risk may be amplified when the new government does not uphold the decisions of the previous one – newly elected Prime Minister Mahathir Mohamad has announced that his administration is cancelling various contracts on national infrastructure projects agreed and signed by his predecessor. Similar incidents have been seen locally when new regimes took over the reins of government.

For both domestic and international investors, questions of late have revolved around the reliability of any contract signed with the Government today; will these be cancelled or voided if there is a change of government?

This issue bears considerable weight, particularly for NYDC. We are heavily reliant upon investors committing vast sums of long-term equity to build our basic infrastructure, therefore we have devoted considerable time to contemplate and address this issue.

In our opinion, the matter rests on one fundamental factor – if the project was conceived and negotiated on a fair and equitable basis and conducted in the appropriately transparent manner. The acid test will always be whether any deal concluded with any party is clear of any special interests (corruption and graft); whether the terms are prejudiced against the interests of the country (unfair terms and conditions); and whether it will be economically sustainable (not becoming a white elephant). If these three principles are satisfactorily addressed and able to stand up to scrutiny, then the chances of it being cancelled or voided by a succeeding administration can be mitigated.

With that in mind, NYDC’s mission is to ensure that every major and minor project in the New City can claim to pass these tests and stand up to scrutiny at any time in the future. We are cognizant of the needs of investors to have a fair and equitable deal; otherwise they would not invest. But we are even more conscious of the need to conclude deals that are not prejudicial to the interests of the State and our People. This is not such a delicate balance to strike as some may believe. We are of the view that the interests of the investors and the People are not necessarily in conflict; instead, they are aligned most of the time. The notion that one party must lose for the other to win is an outdated concept, as well as a short-sighted and narrow minded one at best.

Where bad cases are cited in the past, one could invariably find that Corruption is the main culprit which skews any alignment of common interests. NYDC is thus highly conscious of the need to combat corruption and adhere to good practices on every front. I look forward to receiving support from all quarters, especially our strategic partners, our contractors and all our stakeholders.

Regards,

Serge Pun

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