Controversial Malaysia airport privatisation deal stirs debate on economic fallout of Israel boycotts
KUALA LUMPUR - A controversial multibillion-dollar Malaysian airport privatisation deal involving an Israeli-linked company has ignited a debate over the economic fallout of pro-Palestine boycotts and whether they are sustainable in the long run.
Critics, as well as some ruling party and opposition lawmakers, want the government to scrap the deal involving US fund manager BlackRock because of its ties to Israel, but Prime Minister Anwar Ibrahim, who has been a vociferous critic of Israel over its war in Gaza, has said that it is “not realistic” to ban all trade with Israel-linked companies.
“Apple, Microsoft and Nvidia, they all have interests in Israel. Do we have to cancel (our trade with them)? It might sound good, people will be happy to hear it and call us fighters, but actually, this is not realistic. In my discussions with Hamas, this issue did not even arise,” he said.
The clamour to call off the deal “seems more Hamas than Hamas”, he told Parliament on June 25.
BlackRock is in talks to buy New York-based infrastructure investor Global Infrastructure Partners (GIP), which aims to take a 30 per cent stake in Malaysia Airports Holdings Berhad (MAHB), together with the Abu Dhabi Investment Authority.
GIP and the Abu Dhabi Investment Authority are in a consortium led by Malaysia’s sovereign wealth fund Khazanah Nasional and state pension fund Employees Provident Fund, which on May 15 announced its offer to take MAHB private.
Datuk Seri Anwar pointed out that BlackRock currently holds equity investments in 100 public-listed companies in Malaysia, worth approximately RM27.5 billion (S$7.9 billion).
Investment, Trade and Industry Minister Tengku Zafrul Aziz told Parliament on June 28 that BlackRock has never influenced government policy, despite pouring money into the Malaysian economy. He had also earlier warned that if BlackRock withdrew its investments from Malaysia, this would have a negative impact on the country’s investments, and potentially affect thousands of jobs.
Amid the furore, Malaysia has found itself in a difficult position.
The country has no formal diplomatic ties with Israel. Mr Anwar blocked all Israel-flagged ships from using local ports in December 2023, but the BlackRock issue underlines the difficulties faced by his administration in condemning the war in Gaza while minimising the domestic economic fallout.
Dr Oh Ei Sun from the Singapore Institute of International Affairs told The Straits Times that if Malaysia were to pull out from the deal, it would “paint a rather negative picture of Malaysia’s corporate scene, one of prioritising remote political considerations over legitimate business dealings”.
Some observers and experts have raised doubts about consumer boycotts against goods and businesses perceived to be linked to Israel, after several companies in Malaysia faced economic consequences as a result.
A persistent boycott here led to the nationwide closure in April of more than 100 KFC fast-food restaurants, owned by Johor Corporation – the Johor government’s investment arm – and the Employees Provident Fund.
The Berjaya Food restaurant group, which operates over 400 Starbucks stores across Malaysia, has also suffered losses as a result of customer boycotts linked to the Israel-Gaza conflict.
Revenues fell 48 per cent year on year for the three months ending March 31 to RM138.6 million, compared with RM265.8 million in the same period in 2023. Berjaya Food reported a RM29.8 million loss for the quarter, compared with a profit of RM15.94 million for the same period in 2023.
Footfall is still limited at many of the boycotted businesses.
Housewife Khatijah Saiful, 51, continues to steer clear of McDonald’s, Starbucks and Pizza Hut, among others. But she started buying from KFC again after pro-Palestinian group Boycott, Divestment, Sanctions Malaysia stated in May that it had never campaigned for Malaysians to boycott the fast-food joint.
“I nearly bought cookies from Marks & Spencer just now, as they were on sale, but my daughter reminded me not to buy from them,” said Mrs Saiful, referring to the British retailer perceived to have Israeli links.
Following the closure of the KFC outlets, the Malaysian Institute of Islamic Understanding (IKIM), a government agency under the Prime Minister’s Office, held a closed-door roundtable discussion on June 27 with experts in various fields. Under discussion was the impact of the boycotts on Malaysia’s economy, and their potential to affect its position as a trading country and investment destination.
“On one hand, we as Malaysians are firmly in strong support with our brothers and sisters in Palestine,” IKIM director-general Mohamed Azam Mohamed Adil told ST before the roundtable.
“On the other hand, we want to seek the best solution. What is the contribution of a boycotted company to Israel, is it 1 per cent? What are the repercussions that we will face?” he said.
“We are really worried that companies majority-owned by Muslims will collapse. My personal opinion is that the boycott will affect the economy in the long run. You can say that we can switch to local fried chicken, but the repercussions are very big. It affects the chicken producers, the companies that belong to Muslims. The majority share of the companies is held by Muslims.”
Another concern with the boycotts is the spectre of growing unemployment among Malay-Muslims, who make up the bulk of the workers employed by these companies.
“If we were to boycott, we have to do our homework to ensure that at the end of the day, it will not destroy the Muslim economy,” said Datuk Mohamed Azam.
According to the Economy Ministry, however, the boycott, which has mainly affected the food and beverage sector, has only slightly affected employment.
The ministry said on June 26 this is because the contribution of the food and beverage sub-sector to gross domestic product is small – 2.3 per cent in 2023 and 2.4 per cent in the first quarter of 2024.
Nevertheless, there has been a 23.8 per cent increase in overall unemployment, with 22,315 workers losing their jobs between January and May, compared with 18,026 in the same period in 2023.
The job losses were due to business closures and downsizing, said the ministry. Some 4.9 per cent were from the accommodation and food services sector.