Malaysia’s 4 northern states start company to boost economy. Can it plug wealth gap?

Kedah, Kelantan, Perlis and Terengganu are aiming to tap the potential of rare earth deposits in particular under SG4 Group

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Aerial view of Kota Bharu, the state capital of Kelantan. Photo: Shutterstock

Published: 6:00pm, 4 Sep 2024Updated: 6:27pm, 4 Sep 2024

The launch of a company with an ambitious mandate by four Malaysian state governments in the underdeveloped north could shut out private investors, analysts say, as local officials seek to maximise the potential of rare earth deposits to boost economic growth and shore up their Malay political bases.

The opposition-led states of Kedah, Kelantan, Perlis and Terengganu on Monday launched their company, SG4 Group, with a target to increase revenue across multiple industries including infrastructure, logistics, trade, agriculture, education and human capital.

Former two-time prime minister Mahathir Mohamad, currently an economic adviser to the four states, was present at SG4 Group’s launch.

But setting up such an entity could curb interest among private companies - Malaysian and overseas – to invest in the four states due to the combined clout of the local authorities, analysts warn.

“By launching a government company that they said would be involved in very broad areas, the four governments are sending a message that private investors are not welcomed as the company would dominate all the key sectors,” political analyst and Malaysia expert Adib Zalkapli told This Week in Asia.

During the 1980s and 1990s, Malaysia experienced an industrial boom under Mahathir that focused on Selangor and Penang, leaving the northern and eastern states lagging behind the rest of the country. The so-called SG4 states of Kedah, Kelantan, Perlis and Terengganu have yet to bridge the gap since then.