Malaysia’s economic prospects have been hampered by the market-constraining aspects of a long-standing affirmative action program designed to improve the prospects of the country’s ethnic Malay majority. Now, the country’s new prime minister, Najib Razak, has made an initial bold move to unravel the policy. It’s very canny of him, given the feisty political opposition nipping at the ruling party’s heels. To be sure, the New Economic Policy isn’t being dismantled – far from it. But, as my colleagues report, Najib has “outlined a package of measures to spur foreign investment in the Malaysian economy” at a time when some experts think GDP could shrink as much as 5% this year. Najib, who is also Finance Minister, knows that if he doesn’t do the right thing to jump-start economic growth, his political future will be in jeopardy. As long as he ignores retrograde forces within the political establishment, Najib’s interests will be aligned with growth. One new proposal: Permit 100% foreign-owned fund management firms in Malaysia for the first time while allowing foreigners to own up to 70% of stock broking firms (the current is 40%.) Malaysia’s affirmative action policies, introduced in 1971 after violent race riots, were designed to help ethnic-Malays, who comprise 60% of the population, catch up economically with ethnic-Chinese Malaysians. As colleagues James Hookway and K.P. Lee report, the fundamental “target of putting 30% of the economy in Malay hands remains intact” according to the Prime Minister. “But this 30% figure is now a macro target, not a micro target,” Najib said. Here’s coverage of Najib’s announcement by the official wire service, Bernama: http://www.pmo.gov.my/?menu=newslist&news_id=203&news_cat=13&page=1731&sort_year=&sort_month=
