A rich nation successfully lured a potential US$200 million investment away from Malaysia. Many Malaysians, including Prime Minister Dr Mohathir Mohamad, are angry and shocked, calling this a form of economic terrorism.

To me the greater surprise is that Malaysians are shocked by this revelation. Welcome to the real world of investments!

While Malaysia gripes about losing a major investor, the rest of the world continues to aggressively pursue foreign investments. Recently the giant aerospace company Boeing announced relocating its headquarters from Seattle to Chicago. Why? Because Chicago offered greater incentives, enough to recoup the costs of moving as well as compensating the workers for the loss of their balmy Northwest weather for the harsh Midwestern winter. No, Chicago is not terrorising (economic or otherwise) Seattle, rather this is the reality of the investment world.

Retreating investors are not economic terrorists; Nazis printing fake British pounds and hackers of banks' computer systems, are.

Investments flow to where the returns are highest, consistent with the risks. Investors, foreign or domestic, invest in Malaysia not for the love of the country but for the opportunities to make a profit. Absent that, or if the returns are more attractive elsewhere, they will leave. There is little room for such nebulous and emotional issues as patriotism, nationalism or even philanthropy.

Today there is fierce competition for investment funds for two reasons. One, with the collapse of communism, more countries are discovering the wonders of free enterprise and foreign investments. Two, dozens of new nations spawned by the disintegration of the Soviet empire are also aggressively pursuing capitalism. Significantly, two giant nations previously enamored with central planning China and India are also discovering the marvels of free enterprise; they are now wooing foreign investments with a vengeance. Their huge domestic market makes them irresistible; both are Malaysia's formidable competitors.

Influencing factors

Many factors influence investors' decisions, apart from the anticipated returns and associated risks. These include the availability of skilled workers, reliable and efficient infrastructures, stable and predictable regulatory environment, and an independent and impartial judiciary. Recent changes in senior personnel of the judiciary have enhanced Malaysia's image to investors. Likewise the teaching of science and mathematics in English would go a long way in producing a skillful workforce.

Low labour cost is only one factor; were it to be pivotal, Haiti would be swamped with foreign manufacturers and investors. Australia and Singapore attract more foreign investments than Malaysia despite their high labour and other costs.

Instead of continually whining, Malaysia would do well to study and emulate others who are successful in attracting investments. In this era of globalization, Third World countries can expect no special treatment. Mahathir is correct in noting that Malaysia now has to compete with not only China and India, but also the developed countries.

Alabama spent millions on infrastructures to attract Mercedes Benz. Additionally the state geared its colleges to produce the necessary skilled workers. Not to be outdone, Tennessee poured millions more to entice Honda and General Motors. A few years ago my California town offered generous tax incentives, developed sites, and other attractions to the mega retailer Walmart, despite intense opposition from local merchants who would be adversely impacted. The city did this hoping that Walmart would attract others. The city was right. The city went beyond; it collaborated to improve local schools and hospitals as employers now look at the quality of education and medical care.

When investors leave, it is because the profits are no longer there or the risks are unacceptable. There is no need to concoct sinister motives. I find the current reinterpretation of the recent crisis as a form of economic terrorism perpetrated by the West as amusing at best, and silly and counterproductive at worse. Investors currently desert the American stock market because they perceive (rightly) that it is not transparent enough. They are not sabotaging America.

Schizophrenic attitude

Malaysia has a schizophrenic attitude towards foreign investors. It welcomes long-term investors but disparages short-term ones as speculators. Investors are investors. Given favorable circumstances short-term investors go long term. When conditions head south, even the most patient investors would flee.

Similarly, Malaysia welcomes investors in sectors like manufacturing and IT, but jealously guards what it considers to be "strategic sectors" and "commanding heights" of the economy, believing that they should be under local or even state control. Consequently Malaysia Inc. is a major player in the economy, from manufacturing to banking.

I see no redeeming value for such government involvement. Instead of spending billions to own airline and steel companies, it is more important for the government to use those resources instead to train Malaysians to become skillful engineers and competent executives to run those corporations. I could not care less who owns Malaysia Airlines and Bank Bumiputra as long they provide efficient services at affordable prices. Little purpose is served for them to be state owned when they provide lousy services and continually bleed the public purse through incompetent management.

Malaysia would do well to ponder Ibn Khaldun's observation, "Commercial activity on the part of the ruler is harmful to his subjects and ruinous to the tax revenue." Substitute ruling party for ruler, and we have the current mess in Malaysia.

One does not have to be a resourceful journalist to identify the company or country alluded to by the prime minister. However, such an exercise would be useful only if it leads to Malaysia learning how to improve its investment climate, but not if it results in vilifying a particular company or country.

Mahathir's suggestion that there be an international body to allocate global investments "fairly" is nothing more than the reflection of the destructive Malay mentality of expecting preferential treatment. Even if there were to be such a body, there is no guarantee that its deliberations would be any fairer. For someone who distrusts the International Monetary Fund, it is disingenuous for Mahathir to suggest yet another global authority to direct global investments.

To attract foreign investments Malaysia must do more than sell itself as a place where profits can be made with the minimum of risks. It must remove barriers and enhance the attractions. Most importantly, it must demonstrate that it genuinely values the contributions of these investors. Labeling foreign investors as neo-colonisers is no way to endear the nation to them.

Writers Club recently released the writer's second book, Malaysia in the Era of Globalization . He can be contacted at: bakrimusa@juno.com

M BAKRI MUSA is a surgeon in Silicon Valley, California and the author of The Malay Dilemma Revisited: Race Dynamics in Modern Malaysia. His views on Malaysia can be stated thus: Ours is a diverse nation; we can accept and celebrate this reality or by default, it becomes a liability.