KUALA LUMPUR: Tun Dr Mahathir Mohamad said he is “a little worried” about the tendency of “very rich” Malaysian institutions to invest abroad by purchasing and constructing properties overseas.

The former prime minister singled out the Employees Provident Fund (EPF) as an example.

“The biggest [institution] is of course the EPF. Instead of supporting local industries, [it has] gone abroad. To a certain extent, this is desirable ... [but] if we have too much outflow, it will not be good for our economy,” he said when speaking to reporters at the 6th Malaysian Construction Summit 2014 last Friday.

The EPF is allowed to invest 23% of its funds outside Malaysia. As at end-2013, approximately 21% of its total investment assets were global ones.

But not all of its global portfolio is in real estate investments, although this has been growing over recent years.

Dr Mahathir said local institutions placing investments worth billions of dollars overseas will cause a serious outflow of funds from Malaysia.

“We [should be] very concerned about the flow of money, whether it is flowing out or ... in. If we have money flowing out, it means we will have a deficit. That may be reflected in government spending because [it] may have to borrow.

“When we go [abroad] to buy properties, [the latter] are immovable. Whatever you put into [those properties result] in an outflow of funds. We [have to] be very careful about [this],” he said.

Well-known for his Look East policy and Malaysia Boleh! slogan in the 1980s, Dr Mahathir also expressed his “regret” over the lack of confidence in Malaysian contractors.

He said this is evident in the government’s decision to overlook local construction players in favour of foreign firms for some of the country’s most ambitious projects, despite the “tremendous progress” on the local construction scene.

“There was a tender for a building which was over 100 storeys high, [but] Malaysian contractors and architects were not even invited to tender for [it]. This is very sad because it would have given us the opportunity to build, or at least design, the building,” he said.

“[For] the building next to the [Petronas] Twin Towers [Petronas Tower 3] ... the contract was given to foreigners. I am sure Malaysians would have worked with these foreigners. So, they [Malaysians] should be given a chance to build these tall buildings,” he said.

Dr Mahathir also appeared unimpressed with the idea of a 100-storey skyscraper in Kuala Lumpur in the first place.

“The problem with all buildings is that once you build a tall [one], someone wants to build [another] that is higher. [As a result], there is a race [to do so] and I think the Gulf states will win ... hands down because they have a lot of money left over after selling their oil.

“I don’t think we should compete with them, although there is already [a] competition in Malaysia. Someone wants to build a building that is higher than the Twin Towers,” he said.

On a separate issue, Dr Mahathir criticised the government-backed fund, 1Malaysia Development Bhd (1MDB), for its plans to sell some RM8.4 billion worth of Islamic bonds, calling it “borrowed money”.

“Borrowed money cannot be regarded as [a] sovereign wealth fund ... When you want to spend money to build up assets in the country or outside the country, it must not be from borrowed money. It must be from surplus. We have no surplus,” he said.

Prime Minister Datuk Seri Najib Razak chairs 1MDB’s advisory board. If 1MDB’s mega sukuk plan materialises, it will be the world’s biggest Islamic bond offering in 2014. However, it will also add to the company’s mounting debt of RM38 billion.

The comments come after Dr Mahathir voiced his unhappiness over the Najib administration.

While he admitted that his comments were “annoying” to some quarters of the government, Dr Mahathir said he felt inclined to make “nasty” remarks when government decisions do not contribute to the economy.

He argued that Malaysian leaders need to be criticised based on their performance in order for them to improve, and that he will continue to be “nasty, when necessary”.

This article first appeared in The Edge Financial Daily, on September 22, 2014.