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Retrenchments, shutdowns, pullouts, recession, capital controls and political uncertainties.
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Toffler Raises Furore Over MSC's Future
November 19, 1998, Kuala Lumpur -- Under intense international scrutiny and amid the worst political and financial crisis in its recent history, Malaysia now faces doubts on the viability of its much-touted Multimedia Super Corridor (MSC) project.
Author Alvin Toffler, an influential member of the MSC's international advisory panel, has shot the first salvo by castigating the Prime Minister Mahathir Mohamad for perpetuating a "climate of political repression" that he says will stifle the project.
"I do not believe that this visionary project, which is important for the future of the Malaysian people and serves, in part, as a model and challenge to other countries, can flourish in the present climate of political repression," he said in a statement issued to this reporter.
He said he believed that other members of the panel, comprising top executives of giant software, computer, and telecommunications companies, shared his view.
Toffler said contrary to earlier reports in the press he had not formally resigned from the 45-member panel although he had written a stinging letter to Dr Mahathir voicing his concerns.
In the letter, he stated: "The Internet cannot deliver its full economic and cultural benefits in climate of political fear. Can anyone imagine Silicon Valley, with its pronounced libertarian culture, generating endless innovations and whole new industries in the presence of political repression?"
Toffler told this reporter in a prepared statement he still held a hope that "even at this late date a calm and just resolution can be found to the conflict between those calling for reform in Malaysia and a once visionary Prime Minister."
Toffler was referring to a fledgling reform movement started by political rival Anwar Ibrahim who was sacked as deputy prime minister and finance minister and arrested after leading an unprecedented anti-government protest rally in the capital city on Sept 20.
Anwar was later allegedly beaten while in custody, which sparked sharp criticism from the United States, Phillippines, Indonesia and Australia and human rights groups.
Anwar is currently trial on charges of corruption and sodomy, which he repeatedly denies and blames on a plot to prematurely end his career.
Following Anwar's arrest, four people were also charged with spreading rumors via the Internet of bogus riots, and authorities claimed they were "monitoring" the many websites that had sprung up mostly in favor of the reform movement which denounced nepotism, collusion and cronyism in highest levels of government.
The moves were seen as attempts to stifle dissent which run counter to "freedom of information on the Internet" , one of the list of guarantees promised by the MSC.
Riot police also cracked down on demonstrators in the capital city and arrested several hundred people for illegal assembly over the last few weeks.
The assembly of four or more people without a permit is illegal in the country.
Prior to his removal, Anwar was also the deputy chairman of the National Information Technology Council, the main policy-making body for Malaysia's information technology agenda including the MSC.
In the face of impending recession, the first in 13 years, Anwar deferred mega-projects favored by Mahathir including parts of the MSC in what was seen as International Monetary Fund-styled austerity measures.
At issue was Putrajaya, the new administrative capital, which was to be the centerpiece for a costly experiment in electronic government, a key application of the MSC.
Anwar chose to delay its second phase as the costs for the first phase of Putrajaya, and the building of the so-called "twin intelligent city" Cyberjaya, which would host the investing MSC companies, and various accompanying infrastructure, had begun to spiral.
High priority had been given to the construction of the first phase of Putrajaya which included the Prime Minister's residence and office space.
It was revealed that the cost of the residence and its surrounding complex was about 75 million ringgit (about US$20 million). Anwar contends the cost of the premier's residence alone, which he has described as a "palace" and was privy to, was in excess of 200 million ringgit (about US$52.6 million).
Toffler, in an article widely distributed by the Los Angeles Times Syndicate, also defended his friend Dr Munawar Anees, an Islamic scholar, editor of Periodica Islamica, and Anwar's former speechwriter who was jailed for six months, for confessing to having been allegedly sodomized by Anwar.
Munawar, a father of two, has filed an appeal with supporting affivadits that he was coerced into making the confession.
"If Anwar and Anees are not released from prison unharmed as soon as possible, I will resign, as, I suspect, will other members of the panel on whose investments the project depends," said Toffler.
Toffler is the co-author, with his wife Heidi, of Future Shock, The Third Wave, Creating A New Civilisation and other works.
He was invited to become a member of the panel which personally advises the Prime Minister on the strategic direction of the project in 1996.
The high-profile panel, which included a who's who among global information technology players including Microsoft Corp chairman Bill Gates, and Sun Microsystems Inc chairman Scott McNealy, had met twice, once in Stanford University, California in January 1997 and the second time in Cyberjaya, near Kuala Lumpur, in February 1998.
Toffler did not attend both meetings but praised Mahathir and the project when he visited Malaysia in August this year.
He has reversed his views following the arrests of his friends.
In his statement, Toffler also rebutted Mahathir's contention that the MSC project is "purely a business matter and has nothing to do with politics."
"The cyberlaws that he promised investors -- complete with freedom of access to information, and other Third Wave freedoms, are, in fact, clearly political. The creation of an Asian Silicon Valley is itself inherently political," he said.
Toffler's statements comes in the wake of US Vice President Gore's provocative comments on the eve of Asia Pacific Economic Co-operation (APEC) Summit on Monday (Nov 16).
Gore seemed to endorse ongoing pro-democratic demonstrations in the capital city when he told business leaders at a dinner: "… among nations suffering economic crisis, we continue to hear calls for democracy in many languages, 'people power', 'Doi Moi' and 'reformasi.' We hear them today - right here, right now - among the brave people of Malaysia."
Anti-Mahathir protesters have been chanting the word "reformasi" which means reformation in Malay.
"If governments try to suppress the creative potential of their people by denying them access to information, they will undercut their own efforts to build their economies. Any government that suppresses information, suppresses the economic potential of the Information Age," said Gore.
That Gore has chosen an economic forum to make a political statement irked Mahathir's political associates and some leaders of the 21 APEC members who slammed his speech as "rude" and "disgusting".
Some attending the summit feared talks to solve the Asian crisis would be derailed by such political posturings.
But Gore's dig is a testimony of how economic progress and political reform are inextricably linked and that one cannot be separated from the other.
The example of Indonesia instituting IMF-prescribed economic measures without being mindful of its immediate political impact and social fall out is a case in point.
Mahathir himself has repeatedly told investors the MSC's success was dependent on his government's continued power.
When he unveiled the project in August 1996, he described it as an experiment to test new roles of government, new cyberlaws and "collaboration between government and companies."
Investors to the MSC have also stated it was Mahathir's persuasive nature that was crucial in making the final decision to invest.
It is ironic that both Gore and Mahathir now find themselves at loggerheads when each has been responsible for championing the set up of national information infrastructures in their respective countries.
Gore propelled the metaphor of the "information superhighway" into the American and global public consciousness, saying the digital communications revolution will enhance the lives of everyone - rich and poor - by creating instant, low-cost access to the world's greatest information resources.
Mahathir speaks of similar goals for the Multimedia Super Corridor.
Gore is also pushing for the wiring of schools to the Internet in the US while Mahathir has plugged a similar smart school program.
Both governments, through Gore and Mahathir, have continually hyped the benefits of the new digital economy and urged their citizens to embrace information technology.
In the last two years, both Malaysia and the United States have also been hammering out parallel legislation governing digital signatures, computer crime, data privacy and multimedia convergence.
Each new techno-friendly law and pro-information technology suggestion has been applauded gleefully on the sidelines by computer vendors with vested interests who see an expansions of their ever-permeating markets.
But Malaysia's high-tech plans may be permanently soured by Mahathir's constant blame of foreign sources for his country's woes.
Mahathir, who has called the MSC the nation's "gift to the world" and welcomed advise and comment by the set of international advisory panels, now seems mindful and wary of outside interference.
Technocrats and scholars initially lauded the project and its holistic approach to put in place concurrently intellectual property laws, along with IT-friendly business incentives and world-class infrastructure.
MSC International Advisory Panel member Robert Madge, chairman of Madge Networks Ltd, said he agreed with Toffler that the success of the MSC depended on having "a climate of openness."
"Perhaps more importantly it has to have a stable legal and economic environment and avoid, for example, unexpected regulations on the flow of capital, " he said.
Madge referred to Mahathir's insulation of the economy from "rogue currency traders" by introducing indefinite currency controls on Sept 1, a day before Anwar's sacking, that rendered the ringgit non-convertible outside Malaysia, and barring short-term capital inflows.
He said the good reasons for the MSC stand despite the current economic and political conditions in Malaysia.
"The official government strategy to accelerate its move into the information age is absolutely the right course for the country, since its future wealth will depend on the speed by which it adopts information technology and becomes a leader in this area, " he said.
He said the MSC can be a galvanising force towards a movement into the information age.
"As a friend of Malaysia, I am very keen to see it succeed and do not think the bad press should undermine Mahathir's good work (in conceiving and promoting it)," he said.
Other panel members IBM Corp chairman Lou Gerstner and Intel Corp CEO Craig Barrett both indicated that their companies were in the project for the long haul regardless of current political events.
Both companies have operations in Malaysia for over 25 years and pledged fresh investments for the MSC project.
Madge said it would be a mistake, and unnecessarily damaging to Malaysia, to take the extreme view and halt all projects receiving foreign investment or other foreign involvement until the current political situation is resolved.
But skeptics continue to question how a country with chronic shortage of skilled labor, little software expertise, and an overly sensitive government that constantly berates the foreign media and censors magazines and films prior to distribution, could pull of such an audacious project.
"Having invited the world to embrace the project, the government must also accept opposing views by those who fear it has veered off its course," said one investor who has received MSC status, which guarantees his company tax-breaks and unlimited import of foreign workers.
The investor spoke on agreement his company would not be identified for fear of reprisal.
The investor pointed to the fact the current investment policy for the MSC is skewered towards attracting large multinational companies who may have the financial clout to set up shop in the MSC, but are not going to risk developing world-changing intellectual property "in the middle of a palm oil estate."
"The companies may get MSC status but their objectives were merely to set up training-oriented investments that would complement existing low-wage, high volume manufacturing operations in the country," he said
He said the nature of their commitment to MSC was also dependent on winning bids for the four flagship applications entirely funded by the government to kick start the project.
The four applications are telemedicine, smart schools, multi-purpose smartcards and electronic government.
The investor said an example of this was Microsoft Corp chairman Bill Gates' attempt to "sell" the company's "generic office environment" prototype as a component of the electronic government flagship to Mahathir during his last visit to the country.
"On not being successful in winning over Mahathir, Microsoft committed a 10 million ringgit (US$2.63 million) investment spread over a five year period for the MSC to set up a generic resource centre, a paltry sum compared to pledges he has made to Singapore, India, South Africa and China, " the investor pointed out.
The investor said the cost of land in Cyberjaya, which is being developed to host MSC status companies, has also become price-prohibitive for smaller investors who may want to develop innovative ideas within the 750 sq km zone.
"It is the risk-taking entrepreneurs which have the willingness and energy to take an idea to its fruition that the project should attempt to attract first," he said.
He points to the fact all the major companies in the Silicon Valley today grew from small groups of people with big ideas who were later backed by venture capitalists.
He said foreign venture capitalists who may have been interested in the MSC before may have all been spooked by the country's current capital controls.
"Although, the government has given the assurance that MSC companies will be exempt from the controls and will be allowed to repatriate profits, the central bank says investors of MSC companies have to abide by a one-year ruling preventing them from doing so," he said.
"Local venture capitalists do not even want to invest in companies without at least five year track records, and there is no culture here of long term financial support for technology and research," he added.
He added the government-centric nature of the MSC may prove its own undoing.
The investor agreed with media marketing expert Jim Mann who in a recently released book on "Tomorrow's Global Community" has stated that the new knowledge-based economy must "promote the free exchange of ideas and encourage cooperation, openness and trust rather than secrecy and suspicion."
Mann predicts that both in private and public sectors, top-heavy, centralized bureaucracies will end in favor of global communities and consensus decision-making.
His words may be indicative of how far removed Malaysia is from achieving its dream for a knowledge-based economy.
Alas for the 73-year-old Mahathir there is still time. The MSC's ultimate objective is to make Malaysia a developed nation by the year 2020. By then, Mahathir would have already been credited for having fathered the vision.(Published in AsiaBizTech, Nov 23,1998)