Published April 27, 2009

MALAYSIA INSIGHT
Threat to bumiputras was never from within

Govt's move to liberalise is long overdue as trade and investment have all but collapsed

By S JAYASANKARAN
KL CORRESPONDENT
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THE government's move to liberalise 27 service sub-sectors by doing away with the 30 per cent bumiputra equity requirement in those sectors is significant and a bold step forward.

It is also long overdue. Trade and investment have all but collapsed and Malaysia cannot afford to lag behind when it comes to competitiveness. And the country can no longer depend on its old manufacturing model. Services is the key going forward.

Its contribution to gross domestic product has risen to 55 per cent from 49 per cent in 2000 and Kuala Lumpur wants it to rise to 60 per cent by 2012. It's not impossible if Prime Minister Najib Razak keeps displaying the kind of pragmatism he showed last Wednesday.

Some of the measures he announced are those that foreign investors have been asking for years. Take the issuance of Class C licenses for haulage. Manufactures in places like, say, Johor have been asking to have their own means of hauling their cargo to the ports rather than having to depend on licensed bumiputra operators who have not always been dependable. The measure will undoubtedly help them become more efficient.

Likewise, the move to open up theme parks, convention centres and four and five star hotels to all comers is welcome. We have also been told that those firms that invest in such ventures who then want to list their investments in the future will not have to submit to bumiputra equity requirements when they go to the stock market.



But the government has not answered some questions. Can these businesses that have been given these new rights apply for government contracts, for example? Are they eligible for government procurement? Given that they have invested money in the country, they should be entitled to it. But that has not been addressed and the government has kept mum over the issue although the question has been raised notably by the opposition and the Malaysian Chinese Association, among others.

Still, it is a start. And today Mr Najib is expected to detail more liberalisation measures in the financial services industry.

These moves are expected to be in line with the Financial Services Masterplan which was announced by the central bank in 2001. The plan expects the sector to be almost completely opened up by 2011 which means we can expect to see more new players entering the market.

One does not expect the local banks to be threatened by the prospect. Indeed, after the consolidation and merger of the banks more than eight years ago, local banks are far stronger than many of their foreign counterparts. In fact, the example of the banking mess in Europe and the United States make the Malaysian banks look like shining examples of thrift and prudence.

The good news so far is the lack of criticism of the liberalisations by any significant bumiputra association or any of the Malay dailies which have been swift to assail anything they perceive to be a threat to the special rights of the Malays. Indeed, the Bumiputra Chamber of Commerce even welcomed the measures calling it good for competition.

Perhaps it is finally beginning to sink in that the threat was never from within. It was always external.