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How far will Najib’s reforms go?

Posted in Uncategorized by malaysiasms on April 23, 2009
The Malaysian Insider
By Lee Wei Lian

KUALA LUMPUR, April 23 — The partial opening up of Malaysia’s services sector to unrestricted foreign investment has been well received by market analysts and political leaders but they remain concerned with the pace of reforms.

The liberalisation is ultimately a move foisted upon the country because of its commitments to international trade agreements, and analysts say the government will have to spell out how far it intends to go with reforms.

An overriding question that remains is whether yesterday’s announcement heralds further changes, particularly in the opening up of more sectors or even dropping the Bumiputera policy altogether.

The lifting of equity restrictions in selected services sub-sectors will impact the Bumiputera business community but is expected to be felt mostly among bigger players.

On the other side of the nation’s lingering ethnic divide however, the non-Bumiputera business community, while generally welcoming the announcement, will also be questioning whether the government will also lift the equity restrictions placed on companies that tender for government projects.

Prime Minister Datuk Seri Najib Razak announced yesterday the lifting of equity restrictions on 27 services sub-sectors in order to attract investments and technology, create higher value employment opportunities and enhance the level of competitiveness of the sector.

James Chin, a political analyst with Monash University Malaysia, says the liberalisation is a good step, but that there are still a lot of restrictions.

“The question of who can bid for government tenders is a bigger deal,” he told The Malaysian Insider.

The DAP’s Tony Pua concurs, saying that while he welcomes “the selective liberalisation”, it was important to note that the demand side is still controlled.

“So you can set up a company, but will the government buy from you?” asks Pua.

Ibrahim Suffian, chief of opinion research firm Merdeka Centre, believes the net effect of capital inflows will benefit everyone and help win back support from non-Malays who want the New Economic Policy, the race-based affirmative action policy, to be reformed.

The independent pollster does not expect a major backlash from the wider Bumiputera business community as he thinks it will impact more the medium and larger Bumiputera companies.

“Najib has to explain how the liberalisation will benefit Malaysian businesses and the economy as supposed to just narrow communal interests,” says Ibrahim.

He pointed out that when Britain wanted to liberalise its financial services sector about a decade ago, there was a “hue and cry”.

As a result, however, London has today positioned itself as a global financial capital.

Professor Datuk Shamsul Amri Baharuddin, the director of Universiti Kebangsaan Malaysia’s Institute of Ethnic Studies, believes, however, that some outcry must be expected, saying that there will be cynics from either the more right-wing Malay groups or from the opposition who will be dissatisfied with the government.

He also sees the liberalisation as Najib’s effort to keep the announcements of reforms coming as he is under pressure to win back popular support before the next general election.

He thinks that the services sector was chosen for liberalisation as, according to the statement to the media, it employs 57 per cent of Malaysians.

He also sees liberalisation as inevitable with globalisation. “It doesn’t mean we lose, but it is something necessary if Malaysian companies want to go into to business,” he says.

Chris Eng, head of research at OSK Research, says the liberalisation “should be good if it can be truly implemented.”

He has picked the healthcare and logistics sub-sectors as the ones which could see greater foreign investments but says that progress is likely to be slow initially.

Eng adds that he expects similar resistance to the announcement as to that of the dissolution of the Entrepreneur and Cooperative Development Ministry after Najib reshuffled the Cabinet earlier this month.

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