Malaysia's Theory: If You Build It, They Will Come

Malaysia is wooing the West with high-tech metropolis Cyberjaya. But has the economic crisis derailed the project?
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KUALA LUMPUR - A lonely metal switchbox, the words "network backbone" scribbled in marker ink along its side, looks out of place amid the dense grove of palm trees.

"In a couple of years this will be one of the best research-and-development areas in the world," says Malaysian government spokeswoman Rodiah Ismael as she points to the untouched land. "We will build laboratories and offices."

We are in her air-conditioned car about 40 miles from Kuala Lumpur, where workers completed most of the world's tallest buildings, the Petronas Towers, in 1997. Now, Malaysia has turned its attention to a project of even greater scope: the development of an entire city envisioned to grow into the hub of Asia's information technology industry.

Cyberjaya

, or cyber-

place

, the name of the planned high-tech metropolis, is set for completion in 2020. By that time, the government expects 500 of the world's most important and influential IT companies will place their regional headquarters in the smart city, a location central to what had been the fast-growing Asian economy. It will combine high-tech with entertainment; Malaysia is courting India's

Bollywood

elite.

CyberJaya

The multimedia city under construction. It is set for completion in 2020.

Photo: Philip Droege

Cyberjaya is the brainchild of Malaysia's controversial -- and resilient -- prime minister,

Dr. Mahathir Mohamad

, who officially opened the city earlier this month. In the early '90s, as he watched the U.S. get swept up in the beginnings of the Information Revolution, the eccentric leader unfolded plans to accelerate Malaysia's development with the ambitious goal of bringing his country into the developed world by 2020.

Malaysia's plan is by no means unusual. Neighboring countries, all eyeing with envy the booming U.S. economy, have similar goals to emulate

Silicon Valley

. India's Bangalore state has its

Silicon Plateau

development; Australia has

Billy-Can Valley

; and Singapore has

Intelligent Island

.

Malaysia's success rests on attracting investment from world-class IT companies. To attract that money, Mahathir realized he had to provide them with the entire infrastructure. Cyberjaya sits at the heart of an even bigger project, the

Multimedia Super Corridor

. Within Cyberjaya, all information lines will be fiber optic; a monorail will whisk "knowledge workers" from environmentally friendly bungalows to downtown; all inhabitants will be issued a smart card that serves as a credit card, driver's license, passport and house key.

The crown jewel of Cyberjaya is a new multimedia university that will educate the staff of the future. Full of confidence, Mahathir laid the first stone.

But when the economic crisis hit Asia, the Malaysian economy almost ground to a halt. Some companies, mostly local, postponed or canceled their plans to resettle in Cyberjaya. International supporters of the project, like

IBM

and

Microsoft

, scaled down their initial investments.

Mahathir, however, was undaunted. Even as Malaysia instituted capital controls to prevent money from fleeing the country, he announced Cyberjaya would go ahead as planned. And the pace at which Cyberjaya is being built is remarkable. The office complex of the

Multimedia Development Corporation

, or MDC, the parent company of the Corridor, was finished earlier this year. A five-star hotel, the

Cyberview Lodge

, opened this summer. The

Multimedia University

has begun classes; despite the simmering heat, students were hanging around the entrance gate in July. And perhaps the most important resident has recently moved in -- the prime minister lives and works in an impressive government complex in the new city.

The speed with which the new city is being built is intended to convince the world that Malaysia means business. A cynical article in

Business Week

-- it bore the catty title "Mahathir's high-tech folly" -- damaged the future city's image, suggesting that investors were wary of Malaysia's uncertain political future and pulling out of the project. MDC-director Othman Yeop Abdullah reacted by publishing a list of 205 companies that will open shop in Cyberjaya before the end of the year. Among them are big names like

Oracle

(ORCL) - Get Report

,

Baan

(BAANF)

,

Intel

(INTC) - Get Report

,

Siemens

,

Motorola

(MOT)

and

Lotus

.

Is the plan attracting investors? The jury is still out. One thing is for certain, it is hard to beat the optimism of the Malaysians. Though ethnic and religious lines divide them, almost everybody you talk to in Malaysia -- from Chinese cabby to Sikh journalist -- seems upbeat about the future of Cyberjaya.

Remarkably, the biggest stumbling block for the project may be its architect. As long as Mahathir holds power in Malaysia, companies may be leery of sinking cash into the project. Foreign investors still shudder when they remember the capital controls. And his casual statements that the Asian financial crisis was caused by "international Zionists" and his rants against homosexuals and "Western decadence" cause hands to be wrung in corporate boardrooms.

Fortunately, Western decision-makers may not have to worry for much longer. The grand old man of Malaysian politics -- he has been prime minister for 17 years -- has announced he will retire in a couple of years. If a more pragmatic politician succeeds him, Mahathir's brainchild might just get the push it needs.