Gerakan president and Minister Primary Industries Dr Lim Keng Yaik today warned Malaysians to prepare for possible repercussions which could arise from the country's refusal to join the United States-led 'Coalition of the Willing' in waging war o­n Iraq.

The minister said although the impact of Malaysia's stand has not yet been accounted for, Malaysians should take preliminary caution by diversifying and reducing export dependence o­n the United States.

"Spiking oil prices, increasing freight insurance premiums, a decrease in tourism activities, the disruption of supply chains, decreased public and private investment due to uncertainty will all contribute to a slowdown in worldwide economic activity.

Malaysia, with its dependence o­n exports and international trade as well as tourism, will be greatly affected by a long drawn out war," he said.

Lim was speaking at a forum o­n the Iraq war organised by the Gerakan Wanita's International Relations Bureau. Speakers at the forum included International Movement for a Just World president Dr Chandra Muzaffar and lawyer Karim Raslan.

Quality tourists

Another speaker at the forum, Gerakan deputy president and Deputy Minister of International Trade and Industry (MITI) Kerk Choo Ting presented a more detailed picture of the challenges that Malaysia could face due to the impact o­n various economic sectors.

Kerk said although the longer term effects are not clear at the moment, Malaysia is likely to suffer some repercussions because of the economy's dependence o­n earnings generated from the service and manufacturing sectors.

According to Kerk, the tourism industry, which saw the arrival of some 13 million tourists last year, is among the first to be hit.

"About 10 million arrivals were from Singapore, Thailand and Indonesia. Another 500,000 to 600,000 came from China.

"We had about 100,000 quality tourists from the Middle East. They stay for o­ne or two weeks in the city and spend their money there but because of the war, they may not come. Another group of quality tourists are those from Europe and the US. Because of the war, arrivals have also fallen," he said.

The deputy minister noted that fewer tourists translated into emptier hotels, as an early survey of at least o­ne hotel has shown.

"The Mandarin Oriental Hotel, a popular five-star hotel in Kuala Lumpur, had reported cancellation of rooms as an immediate affect."

MAS doing ok

The transportation and logistics industries have also been affected because of higher costs as a direct result of the war, said the deputy minister.

"Shipping to the Middle Eastern trans-shipment ports such as in Dubai and Bahrain have been affected because of higher insurance premiums for war coverage. Palm oil shipments to the region may also decline because ships do not want to go to the Middle East," he said, adding that Malaysia exported 1.2 million tonnes of palm oil to countries in the region last year.

In part consolation, Kerk said Malaysia Airlines (MAS) has been less affected by the outbreak of war because Malaysia is considered a friendly country to both Iraq and the invading countries.

"MAS is considered a safe airline so there has not been much cancellations. However, this also depends if the price of oil remains at around US$20 to US$30 per barrel. If prices increase, then the airlines may be forced to raise air fares,"he said.

On the manufacturing sector, Kerk revealed that Malaysia exports some 82 percent of her total manufacturing output.

"Some 56 percent of total exports are made up of electronic and electrical goods which are shipped mainly to the US, Europe and East Asian countries. There has been sluggish demand.

"In 2001, demand fell by 30 percent. It rose slightly during the first quarter last year but flattened towards the end of the year. Demand also flattened over the first quarter this year," he said.

As for foreign direct investments, Kerk noted a worrying drop from a peak inflow of US$5 bil in 2001 to o­nly US$2.9 bil in 2002.

Domestic investments, o­n the other hand, suffered a major decline from US$3.6 bn in 2000 to US$1.8 bil. Last year, domestic investments totalled US$1.4 bil.

Double standards

Moving o­n to the effects o­n the world economy, Kerk said he had found worrying research suggesting that the war was not o­nly a part of an economic war for the control of oil supplies from the Middle East but also an "inventory war" for the benefit of the weapons industry.

Explaining the "inventory war" concept, the deputy minister said part of the reason that research companies in the US have been successful was because of endowment funds provided by the country's military industrial complex.

"Funds from there go to top research facilities in (universities) such as the Massachusetts Institute of Technology, research and development centres and Silicon Valley companies. With these funds, the (recipients) have to conduct R & D for certain strategic products to make more sophisticated weapons," he said.

Because of this, the minister continued, weapons become obsolete more and more quickly, prompting an urgent drive for firms and countries to dispose of their weapons inventory.

"How can (weapons) get consumed? The biggest market is o­n the battlefield. That's how they get rid of (obsolete weapons)," he added.

Kerk said another reason for the US' insistence o­n war was to engage in domestic spending to stimulate the sluggish economy and to secure the "spoils of war" in the form of reconstruction contracts.

"Contracts for reconstruction...which are offered to companies related to (some members of the US government) without public tender.

The US is an advocate of the World Trade Organisation (WTO) but while they want Malaysia and other countries to have transparency in government procurement services, they blatantly contravene basic WTO principles," he asserted.

Post-war stimulus

Meanwhile, DAP chairperson Lim Kit Siang also expressed concern over the impact of the war o­n the Malaysian economy.

Lim said Acting Prime Minister Abdullah Ahmad Badawi should personally present the fourth 2002 supplementary estimates totalling RM22.1 bil in parliament tomorrow.

"The huge allocation of RM22.1 bil in the fourth 2002 supplementary estimates represents 22 percent of the original 2002 budget, making it probably the biggest allocation ever sought in the nation's history," he said in a statement today.

The DAP leader also urged Abdullah to present the government's proposed post Iraq-war economic stimulus package in parliament before the close of the current session, scheduled for the end of the following week.