Published November 17, 2008

MALAYSIA INSIGHT
Too small a move for crisis ahead?

Optimists say relaxation of bumi equity rule may be first of several measures planned

By PAULINE NG
KL CORRESPONDENT
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IT TAKES a great deal to sustain market interest these days.

Witness the short-lived euphoria over Barack Obama's landslide victory in the US presidential election before concerns over deteriorating economic data hit home. It was much the same with the United States' humongous US$700 billion economic bailout plan. Ditto for China's mammoth US$586 billion stimulus package.

Malaysia's recent attempts at shoring up its bulwark haven't exactly set pulses racing either.

Following an initial RM7 billion (S$2.94 billion) stimulus package, it was decided last week to allow potential companies seeking a listing on the local stock exchange to be deemed to have complied with listing rules should attempts to seek bumiputra buyers willing to take up 30 per cent of the entity prove unsuccessful.

Predictably, the 'relaxation' of the listing requirement to enhance the capital market elicited shrugs of indifference.

If big bumiputra funds have little interest in such companies, it's safe to say few bumiputra retailers (next in line to be offered the shares) or non-bumiputra retailers (who are then to be afforded the next bite of that unsnapped up cherry) would be sprinting to subscribe to the listings.



Even so, it's telling that in spite of the seeming insignificance of the relaxation, Deputy Prime Minister and Finance Minister Najib Razak had to reassure that the 30 per cent bumiputra requirement under the country's affirmative action New Economic Policy remains unchanged.

A second proposal before the Treasury to do away with the requirement for listed entities to ensure a top-up to 30 per cent in the bumiputra portion should there be a dilution subsequent to the listing could prove uneventful.

Never mind waiving subsequent top-ups. Getting owners to give up nearly a third of their company cheapish is already a formidable mountain to climb as evidenced by the shrinking listings. Admittedly, decreasing numbers of initial public offerings is not a problem unique to Malaysia, but with stock exchanges worldwide casting their nets outside their home turf, the challenges faced by the local bourse are obviously more formidable.

But as minor as the relaxation last week appears to be, it should not be taken in isolation because it is likely to be one of many elements ahead, the optimists propound.

In some ways, the country has been a victim of its own success, as economic growth over the past decade - whether owing to its natural resources or its economic headstart over its neighbours - has been decent to impressive.

In recent years, however, other emerging economies - each with its own unique strengths - have been quick to throw down the gauntlet, with the result that issues which have kept the country from performing to its ability have become more glaring.

Labour, human capital, subsidies, educational standards, and other prickly issues that have persistently been consigned to the backburner over the past few years as too difficult or inconvenient to tackle head on have now become more prominent because of the current economic shakeout.

Executives say they are less alone these days in the fight to increase the country's competitiveness because an increasing number of senior government officers are now on the same page.

'I think there will be an acceleration of reform as within the government there is now more emphasis on making the country more competitive,' said a corporate chieftain.

Whether the pace is fast enough is another question. When asked if there would be further relaxation to the 30 per cent bumiputra equity rule, Mr Najib, who has the daunting yet rewarding task of getting Malaysia past the impending global recession, replied, 'Wait. Slowly.'

The economic contagion from the world's biggest economy, on the other hand, has not been slow to spread, such is the inter-connectedness of the global economy.

And while every little bit helps, too scant a bit might be too little for the crisis ahead.