27 services sub-sectors set free in bid to attract more investment
By PAULINE NG
IN KUALA LUMPUR
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IN A BID to attract much-needed investments, Malaysia is scrapping its bumiputra equity requirement across 27 industries in the services sector - including health, tourism, transport and information technology.
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With this liberalisation, businesses in these industries will no longer need to be 30 per cent owned by bumiputras - mainly ethnic Malays - Prime Minister Najib Razak said. This exemption applies even if investors choose to list their companies on the Malaysian stock exchange.
Financial services, which currently caps foreign ownership to 49 per cent would be further liberalised, he said, but declined details pending an announcement next week.
Also liberalised as part of continuing efforts to develop Malaysia as a hub for international Islamic finance, is the legal profession. But this applies only in the area of Islamic finance where up to five top international law firms with expertise in the area would be allowed to practice in the country.
Mr Najib who also holds the finance portfolio, said the first wave of liberalisation was done as part of Malaysia's commitments under Asean and would put the country in line with other members. But it was also to counter the expected halving of foreign direct investments this year to around RM26 billion (S$10.7 billion) because of the global financial crisis.
Of greater significance, however, was the signal sent in relation to the country's New Economic Policy. Mr Najib had said the country's affirmative action pro-bumiputra policy which has been in place since the early 1970s, would be gradually dismantled as the bumiputra equity requirement is seen as a hindrance to investors and a reason for the many structural inefficiencies.
The liberalisation is likely to inspire confidence that he plans to push ahead despite misgivings in his own party Umno where he won the president's post unchallenged last month. By convention, the president of Umno has been made the country's prime minister.
He told a media conference yesterday the government would 'progressively' undertake liberalisation of other services sub-sectors 'on an on-going basis'. The initial list was drawn up after months of consultation and feedback from industry players and international chambers, and reflects the sub-sectors' preparedness to compete with foreign firms.
Malaysia's most recent lifting of the bumiputra equity requirement was for a handful of sectors in Iskandar Malaysia, which is being promoted as a special economic zone.
Yesterday's measures were more far reaching and are expected to have positive implications on a market and economy in the doldrums.
Indeed, Mr Najib said the drawn-out announcements - ostensibly so it can derive 'bigger bang for the buck' - would allow the market to 'digest' the latest. The news could further rally the local bourse, which has seen strong gains of more than 10 per cent over the past two to three weeks.
The 27 sub-sectors liberalised are related to computer & related services, health & social services, tourism, transport, sporting & recreational services, vessel rental/leasing, auxiliary transport, and business services such as regional distribution and international procurement centres.
By liberalising the services sector, Malaysia aims to attract investments, technology, create better employment opportunities and enhance business competitiveness, said Mr Najib of the sector which currently accounts for 57 per cent of total employment and contributes 55 per cent to Malaysia's gross domestic product.
Last year, approved investments in services amounted to RM50 billion, of which foreign investments were 11 per cent.
He assured domestic players that they would continue to get government support in capacity building and in opening new export markets, as seen in the recent establishment of a RM100 million fund.
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