Published July 13, 2009

MALAYSIA INSIGHT
Enforcers needed for KL's reforms

Najib should appoint task force to jump-start new system

By PAULINE NG
KL CORRESPONDENT
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MUCH was made of Prime Minister Najib Razak's first 100 days in office last week which he celebrated with a slew of goodies for the public. His 100 days have received mixed reviews: 65 per cent now approve of him, up from 46 per cent in mid-May according to a recent survey by independent research firm Merdeka Center.

Others remain unimpressed. Former premier Mahathir Mohamad is one who believes that Mr Najib's performance thus far has been more negative than positive.

On the economic front, however, he has broken a lot of new ground, one of which was to end the requirement that local firms seeking a listing had to offer 30 per cent of their shares to bumiputras.

In the case of foreign firms such as Xingquan International Sports Holdings - the pioneer foreign firm to list on the local bourse last week - the rules had been changed in 2006 so that they did not have to comply with the 30 per cent bumiputra quota. This was also extended to local companies that earn more than half their profits overseas.

The local stock exchange hopes that Xingquan will pave the way for many more foreign firms. There are likely to be others in the pipeline but it's worth noting that it has taken a good three years to land the first one.

The changes do not give Malaysia an edge, but brings it closer to others.



One wonders how many foreign companies that chose to list on rival bourses over the years might have opted for the local bourse if the listing criteria had been made more market-friendly.

Mr Najib's revelation last month that of the RM54 billion (S$22 billion) in shares allocated to bumiputras - mainly Malays - between 1984 and 2005, only RM2 billion remained in their hands. A D-minus performance, he said.

In truth, the leadership is equally culpable for the dismal record - after all, it insisted on the continuance of a flawed method of corporate wealth distribution even when it was patently obvious it was defective.

How are the Malays ever to attain the objective of 30 per cent of corporate wealth if they opt to cash out their shares?

Upset that the policy was being tweaked despite Malays not meeting the stated objective of 30 per cent of corporate wealth, Dr Mahathir had observed, 'the point is that the bumiputra quota has not been met', adding that liberalisation would only worsen the situation.

Government statistics maintain that the Malay share of corporate equity is some 19 per cent, although there have been independent studies that claim that it is now over 40 per cent.

Last Friday, Dr Mahathir grudgingly conceded: 'We gave AP (approved permits), they sold AP; we gave contracts, they sold the contracts; we gave licences, they sold the licences. That's the fault of the Malays.'

Fault apportionment aside, Malaysians would support an affirmative action policy so long as it is needs-based, equitable and properly implemented.

A nine-member National Economic Advisory Council has now been tasked with coming up with a new economic model that can transform Malaysia into a high-income economy.

Former banker and minister in the economic planning unit Amirsham Aziz heads the panel, which includes a number of familiar faces that used to sit on such panels, but there are also a number of 'foreign experts'.

Given that the structural problems that plague the economy and prevent its move up the value chain are long-standing and well-documented - examples include a deteriorating education system, a weak ringgit policy, and an unsustainable reliance on cheap foreign labour and hefty government subsidies - it remains to be seen whether anything novel will emerge from the council.

Sorely lacking in the past has been the political will to tackle tough issues. And when present, indifferent execution has proven to be the Achilles heel.

In the interest of ensuring that the reforms take hold, Mr Najib has talked about key performance indicators. To hasten the process, he ought to consider assembling a task force of able and respected 'enforcers' - top civil servants who can be trusted to jump-start the system so that policies are implemented as intended. And as quickly as possible.