Tony Fernandes, AirAsia’s group chief executive, confirmed the decision in Tokyo Thursday, saying the move is an effort to upgrade his company’s image as a regional Southeast Asian airline rather than just a Malaysian carrier.
“I don't know whether Najib has been told or not,” said a business associate of Fernandes in Kuala Lumpur. “But why should Tony care? There are solid business reasons for moving to Jakarta.”
Najib has been on a whirlwind trip to foreign capitals to try and mend the country’s image in the wake of a violent police crackdown on peaceful marchers seeking to present a petition to the country’s king on July 9, asking for election reform. In a throwback to the 1980s, Malaysian censors blacked out details of a report about the march carried in The Economist.
That was followed on July 23 with the results of a royal commission of inquiry that concluded that a young aide to an opposition politician had been hounded so badly during a marathon interrogation over office spending that he threw himself out of a window and killed himself.
Then on Friday, immigration officials took William Bourdon, the leader of a team seeking to ferret out the details of a massive scandal involving defense procurement, off a plane in Kuala Lumpur, held him for several hours and ordered him deported via a flight back to Paris.
Fernandes characterized the move of the headquarters as a simple business decision to take advantage of Indonesia’s vastly larger economy and population, which is nearly 10 times that of Malaysia’s, although Malaysian annual per-capita gross domestic product of US$14,700 by purchasing power parity is much higher currently than Indonesia’s at US$4,200. The size of the country, however, meant that the Indonesian economy was estimated by the CIA Factbook for 2010 at SS$1.03 trillion against Malaysia’s US$414.4 billion.
AirAsia’s decision to move the headquarters is a serious negative propaganda blow for Najib’s 1Malaysia Plan, an intensive effort to lure foreign direct investment to Malaysia. In September 2010, the Malaysian government announced ambitious plans to mobilize hundreds of billions of dollars in private investment in an effort to move the country out of the so-called middle income trap, and double per capita income to push Malaysia into the ranks of developed nations by 2020.
AirAsia may well be the only Malaysian company besides the state-owned energy giant Petronas to have made an international impact – and Petronas does it by advertising intensively during Formula 1 races and by sponsoring a car – which Fernandes does as well. Launched in 2002 as a regional no-frills carrier with just two planes, AirAsia now flies 93 planes all over Asia. In addition, a long-haul service, AirAsia X, flies to Europe, Japan and Korea. The company earlier ordered 300 Airbus A320neos.to expand its routes across Asia and beyond.
It isn’t just the publicity damage. In the past 10 years, according to report by the news agency Reuters, private companies invested just RM535 billion (US$172.4 billion), according to official data. Malaysia’s private investment rate of about 10 percent of GDP is among the lowest in Asia and a third of what it was before the 1998 Asian financial crisis. The government, according to Reuters, contributes around half the investment in Malaysia.
In addition, Malaysia has long been plagued by capital flight, which has been generally regarded as an indication of lack of faith in the country on the part of its businessmen, although in Malaysia’s case the bulk may well be from stolen timber leaving the country from Sarawak and Sabah. Nonetheless, the US-based financial watchdog Global Financial Integrity estimated in a 2010 report that as much as RM888 billion (US$298.3 billion at current exchange rates) had left the country between 2000 and 2008. Illicit financial flows generally involve the transfer of money earned through illegal activities such as corruption, transactions involving contraband goods, criminal activities and efforts to shelter wealth from tax authorities.
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