Malaysia: Is The New PM a Market Reformer?

Are we expecting a gradual political revolution with new leadership in Malaysia? Najib does not only embrace social media technology to improve citizen engagement, he ventures a step further where none of his predecessors had attempted before to introduce selective liberalization on financial and service sectors recently. That includes removal of 30% Bumiputra (ethnic Malay) equity requirement in those sectors in order to promote greater competition. Now is the crucial time where critics will scrutinize this unprecedented move and people will be eager to know the level of impact and transformation expected on overall economy.

Tony Fernandes acknowledges that it is a start that should lead to greater transformation:

The removal of NEP¹ requirements for 27 service sub-sectors represents a great start. […] But I hope more importantly, that the entire domestic economy is reformed. […] My wish is that Datuk Seri Najib does a Margaret Thatcher. At present, there is too much vested interest, conflict and red tape that kill creativity, discourage innovation and provide little incentive for entrepreneurs to start and grow businesses.

M. Bakri Musa offers similar conclusion that it is merely a beginning but not a total solution, he reasons that:

For Najib to have an excellent and comprehensive solution would require him to address the more difficult underlying issue of what prompted the instituting of quotas in the first place […] Ameliorate it and Najib would be able to liberalize not only the whole service sector but also the entire economy, if not every facet of Malaysian life. That would bring his “1Malaysia” aspiration that much closer.

Chua Soi Lek also acknowledges this is a positive move and ethnic Malays should not think their rights have been compromised:

I am sure this will attract more investment and also attract more professionals and technology into the country and hopefully it will be a boost to the service sector. […] The Bumiputra special rights are entrenched in the constitution. Nobody can take that away. So, a review of the NEP should not be construed by some Bumiputra as a challenge to their special rights as this is enshrined in the constitution.

Malaysia-Finance says the move is highly commendable and will attract more foreign direct investment (FDI) to the service sector:

While the country may not see an immediate benefit, the cumulative goodwill will ensure a more competitive landscape for Malaysia in attracting foreign investments.[…] The move is very crucial in moving our reliance on services to at least 60 percent, and which would then lessen our reliance on electronics exports and commodities.

However, not all are in the consensus that this move will lead to greater changes on the existing policies. Tony Pua thinks it is nothing more than official announcement for policies that are already in place and questions its supposedly impact:

Deputy Minister for International Trade and Industry (MITI), Datuk Mukhriz Mahathir has officially confirmed that it's all just hot air, no more, no less. […] Mukhriz not only stated his intent to “defend and promote” the New Economic Policy, he said that the recent liberalization measures announced by Najib was a move to synchronize what was already happening in the service industry. […] So it was all pretty much a public relations sham. These sectors were in reality already unimpeded by ownership restriction constraints. Hence what Najib announced will have very, very little real impact on the industry, if any at all.

Straight Talk confirms this view with this assessment:

I said that some of the initial reactions are too emotional and knee-jerk. Some of these sectors are already quite open even before the liberalization. Take computer and related services as an example, this sub-sector is already quite liberalized since the implementation of MSC² status. […] But as usual, a number of parties, analysts and stakeholders are trumpeting compliments of the PM's move.

So given the level of skepticism and general acknowledgement that more need to be done, Najib will need more time to prove that he is indeed a market reformer.

Notes: NEP¹ refers to New Economic Policy introduced to eradicate poverty irrespective of race and to abolish identification of economic function by race; MSC² refers to Multimedia Super Corridor initiative to promote ICT as the engine of growth toward developed country status


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