KUALA LUMPUR, 27 April 2009: Though it has been only three weeks since he took office as Malaysia’s sixth prime minister, Datuk Seri Najib Razak has been busy crafting out reforms, especially in relation to the economy.
In a short spate of time, he has revised several policies and announced the liberalisation of some sectors of the economy to level the playing field of opportunities.
(Pic courtesy of theSun)
Since taking office on 3 April, Najib has announced a series of major policy changes, including the lifting of some regulations designed to benefit bumiputera but which had deterred entrepreneurship and foreign investments.
This included scrapping a 30% bumiputera ownership requirement for investment in some services sector to help boost the country’s flagging economy, with immediate effect.
It will benefit part of the services sector, including computer services and health-care sectors.
As part of his first major policy reforms, Najib also announced that five foreign law firms would be allowed to offer services in Islamic finance.
Economists and analysts have been watching closely if the government will gradually liberalise more sectors. They are especially monitoring the more sensitive ones such as retail and banking that also have certain ownership requirements. It was thought the government may try to avoid liberalising these sectors to avoid a political backlash.
However, judging from the speed the new administration has tackled reforms, it appears Najib and co. are determined to liberalise the sector turn the nation into a more attractive place for investment.
“In fact, we are very encouraged; quite a number of far-sighted decisions are now being undertaken at a very quick pace since he assumed premiership. This is very encouraging. If it is followed through, it will have a positive impact on the sentiments, more importantly the investor confidence,” said Chief Economist, RAM Consultancy Service Dr Yeah Kean Leng.
“Less than 100 days, there are breathtaking changes. If we can follow through, it can be achieved in less than 100 days,” he added.
The New Economic Policy (NEP) was introduced in the 1970s to provide for equitable distribution of the economic wealth, which required businesses to have certain percentage of bumiputera ownership or quota on the hiring of bumiputera.
Foreign investors found this policy to be restrictive, in terms of their businesses.
Political analysts said Najib was smart and bold in continuing this anti-affirmative action jag, despite its political implications. They suggest Najib knew that it was also the only way forward, particularly in the current bad global economic situation.
More importantly, Najib’s reforms are what the public at large have been expecting as the way forward for multi-racial Malaysia, a country still very much dependent on natural resources, plantation and manufacturing as the main sources of income.
NEP hampers growth
“It’s a practicality. You have no choice. Either you do something to give it a chance, or you wait till it dies naturally,” said James Wong, a former politician and political analyst, referring to Najib’s move to loosen NEP restrictions in some sectors.
Wong said, since the NEP was announced in 1971, Malaysia’s preferential treatment of bumiputera in education and business was seen as hampering growth.
“If the government can move past these, its economy will benefit most,” he added.
Today, Najib continued his reform agenda by allowing up to 70% on foreign shareholdings in insurance and investment banking, as part of measures to boost the finance industry under the economic liberalisation package.
His latest move seems to be in tandem with the promises he made during an interview with Financial Times, just before he took over the premiership, that he wanted Malaysia to move away from its dependence on electronics exports and commodities.
Although opposition lawmakers and political parties are expecting wider reforms, DAP member of parliament Tony Pua has described Najib’s announcements as a “baby’s step forward” to unwind long-standing policies which hindered investments.
In the past, Pua said state agencies and government-linked companies imposed strict guidelines on procurement of goods and services from private firms, requiring them to comply with bumiputera equity rules and staff quotas.
For instance, he said, some banks engaged only legal firms which have at least 50% Malay Malaysian equity.
Despite perceptions that the government was unwilling to scrap policies which benefited bumiputera, for fear of alienating them as they formed the main support of the ruling party, some politicians believe Najib would continue with his reforms even if he faced fiery criticisms from his own party.
As pointed out by Umno MP for Pulai Datuk Nur Jazlan Mohamed, the people should not worry too much about Najib’s reforms and should play their part in a positive way to accept his challenge.
“We should focus on prospering the economy and commit less politicking, if we love the country and love each other. His (Najib) hard work and Barisan Nasional’s efforts will be judged by the people, come the next general election.
“So, let’s give the Najib Administration time and space to do its job. As for us, let’s get on with making us Malaysians strong as one people without letting any policy divide us,” Nur Jazlan wrote in a commentary posted on a website. — Bernama