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Political instability nudging investors away

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While it looks like a synergistic move, Telenor’s move to reduce its interests in the telco business in Malaysia may well be a reflection of the lack of confidence among foreign investors.

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Free Malaysia Today
The political instability in Malaysia is nudging investors to neighbouring Indonesia, according to analysts.

PETALING JAYA:
The planned merger of mobile service providers Celcom Axiata Bhd and Digi.com Bhd has raised several questions.

Following an announcement that the Malaysian Communications and Multimedia Commission has given its blessings for the marriage, stakeholders have voiced concerns about matters such as the potential drop in competitiveness in the telco space in the country.

There are fears that with fewer service providers, consumers will end up paying more for what is already an essential service.

However, another factor that is still under the radar but more disconcerting is that the merger may well be another sign that foreign investors are now questioning the viability of putting their money in Malaysia.

The decision of Norwegian telecommunications company Telenor Mobile Communications to have its 49% stake in Digi reduced to 33.1% in the newly merged company is telling.

Just a year ago, Telenor CEO Arve Johansen affirmed his company’s commitment to remain in the telco market in Malaysia.

In a June 2021 statement Johansen, in his own words, stated that “we are very pleased to announce our intentions of increasing our investment in Digi”.

He spoke about “an exciting growth potential” in the Malaysia telecommunications market and that Digi would “continue to create value for its shareholders”.

Twelve months on, it has signed away 15.9% of that stake, almost a third of its shareholding. That is hardly an affirmation of Johansen’s sentiment about exciting growth potential or value creation.

One could cite the mixed, inconsistent and counter-intuitive messaging over the 5G rollout as a reason, but the political instability factor looms large.

The internal problems in Umno has had investors unnerved.

On one side party president Ahmad Zahid Hamidi and former prime minister Najib Razak are gunning for early polls.

But Prime Minister Ismail Sabri Yaakob, who still holds the trump card in the matter of dissolving parliament and calling for elections, is resisting.

In the interim, ambassador-designate Tajuddin Rahman, most likely peeved over his removal from the party supreme council, is dishing out a lot of dirt on the party leaders.

Malaysia, once the darling of foreign investors, seems to have lost its lead in the chase for foreign direct investments (FDIs).

In a report early this year, news site This Week In Asia stated that Malaysia’s political instability could be nudging foreign investors, particularly tech giants, towards neighbouring Indonesia.

Citing analysts, the report said that clear regulations and a thriving start-up ecosystem have been named as factors that are now giving the archipelago the necessary edge to take it ahead of the race to dominate Southeast Asia’s burgeoning digital economy.

More than that, there is political stability there.

Internal squabbles within a small party would not have mattered much to investors given their inconsequential status.

However, Umno is by and large the biggest party in the country, and to some analysts, still the most viable to take power in the next elections.

With a ruling party is in disarray, the prospect of more FDIs coming into Malaysia remains dim.

Perhaps the fact that Telenor has only reduced its stake in the country’s telco landscape, rather than exit altogether, is reason for hope.

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