Malaysia Breaks Down Economic Barriers To Entice Foreign Investors

Kuala Lumpur, Malaysia - Malaysia is to reduce the preferential treatment in business that the country`s ethnic Malay majority receive as part of sweeping economic liberalisation measures announced yesterday to attract foreign investments.

The relaxation of controls on foreign investment would also curb the powers of the Foreign Investment Committee, which has been blamed for discouraging foreign investments with its lengthy approval process.

“The world is changing quickly and we must be ready to change with it or risk being left behind,” said Najib Razak, the prime minister, as he unveiled the reforms at an investment conference in Kuala Lumpur.

The most significant move was to change a requirement that ethnic Malay investors must hold a combined 30 per cent stake in listed companies.

For newly-listed companies, the quota would be cut to 12.5 per cent and could be reduced further if companies later issue more shares. Foreign companies seeking a listing on the Kuala Lumpur stock exchange are not subject to the quota system.

Since coming to power in April, Mr Najib has sought to ease the pro-Malay economic policy introduced by his father as prime minister in the early 1970s.

The approach is seen as a move to win back the support of the country`s disaffected ethnic Chinese and Indian minorities who view the policy as discriminatory and voted for a resurgent opposition in elections last year that drastically cut the government`s parliamentary majority.

Among other measures introduced yesterday, Malaysia will allow foreign investors to own 70 per cent of local stock brokerages, up from a current limit of 49 per cent. This follows an easing of foreign ownership limits for insurance companies.

But foreign investors will still be limited to minority stakes in banks, telecoms and energy companies, which are regarded as “strategic industries”.

The measures could provoke a backlash among the ethnic Malay population, which have benefited from the so-called “bumiputra”, or sons of the soil, policy.

The policy, introduced after post-election race riots in 1969, saw Chinese and Indian Malaysians give up the right to equal treatment in business, education and civil service jobs.

Malays made up 52 per cent of the population last year, while ethnic Chinese comprised about 25 per cent; Indians 8 per cent and indigenous people 10 per cent. John Burton

Source: http://www.ft.com (1 July 2009)
Photo: http://chapayam.blogspot.com

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