Washington DC.
IMF advises Malaysia: Take Decisive Action on Reforms under NEM
The IMF has asked Malaysia to take “decisive” action on reforms under a model program aimed at revamping a controversial four-decade-old affirmative action policy.
Prime Minister Najib Tun Razak announced in March his New Economic Model or NEM, aimed at reforming elements of the policy favouring the country’s majority ethnic Malays in a bid to boost economic competitiveness.
Perkasa issues Najib an Ultimatum
by Hazlan Zakaria @www.malaysiakini.com
Malay rights NGO Perkasa today told PM Najib Abdul Razak that he must do all he can to address the economic woes of Malays, or risk losing their support in the next general election.
“If nothing is done, Malays will react. They might be silent now, but they will show their displeasure at the next general election. The Malays will reject UMNO outright,” PERKASA president Ibrahim Ali told a press conference in Kuala Lumpur.
He warned that UMNO and the PM would lose the votes of the Malays should the government continue to kowtow to non-Malays and allow the erosion of Malay economic privileges, which he said are enshrined in the federal constitution.
“The Malays are worried by the government’s approach to spurring the economy. And the minister in charge seems to be keen in taking away what remains of Malay and bumiputera wealth,” claimed Ibrahim.
He was responding to the 12 resolutions which the MCA congress came up with yesterday, one of which demanded the reduction of the 30 percent bumiputera equity.
In addressing the Chinese Economic Congress, Najib – who is also finance minister – had given his
assurances to the congress that the Foreign Investments Committee (FIC), which monitors the application of the 30 percent bumiputera equity policy, will soon be dismantled. Najib also said he would welcome more Chinese involvement in Malaysia’s economic development.
Striking a raw nerve
Both statements struck a raw nerve with Perkasa, which has been championing for Malays to be given a greater economic stake.
“I condemn and censure the demands by the congress to reduce the bumiputera 30 percent equity and for more non-Malays to be appointed into government-linked companies.”
The Pasir Mas parliamentarian argued that not many Malays are directors or are employed by the non-Malay cartels which have been given special considerations by the government, such as Robert Kuok’s sugar empire or independent power producer YTL.
As such, Ibrahim said he believes the 30 percent equity and positions reserved for Malays in GLCs are vital to ensure they have their share of the nation’s wealth.
“The Malays and bumiputeras do not want to be given only table scraps. We also want the main course of the economic stake,” said the veteran politician.
Malays, Ibrahim stressed, are no longer satisfied by mere pittance such as the occasional “duit raya”, welfare assistance doled out by the government and even the targeted RM1,500 minimum income for bumiputeras. These, he said are only “bread and butter” to Malays, who want their lion’s share.
Nazir the ‘Chinese’ hero’
Ibrahim also hit out at the PM’s brother and CIMB head Nazir Abdul Razak for claiming that the New Economic Policy (NEP) had been ‘bastardized‘ to enrich the few.
“Nazir is talking nonsense,” snapped Ibrahim. He added that Nazir is far from qualified to make such an assessment on this or on other economic matters.
“Even if he is a banker, he is new. And we have to ask how he got to where he is today. CIMB did not become successful because of him,” Ibrahim sniped.
He added that CIMB was previously Bank Bumiputera, and was helped by state petroleum firm PETRONAS several times before it was able to stand on its own. “Let him be the Chinese hero, but I am fighting for my own race,” said Ibrahim.
Details of the reform program, including its timing, have not been announced yet. The Washington-based International Monetary Fund said on Friday (August 13, 2010) it was looking forward to the NEM’s rollout.
In a report after annual consultations between the IMF executive board and the Malaysian government, the Fund acknowledged the “ambitious vision” of Najib’s administration for a far-reaching economic transformation over the longer term.
The Board Directors “agreed that the comprehensive structural reform agenda, at the heart of the New Economic Model, holds out promise of faster and inclusive growth,” the report said. “Directors looked forward to a decisive effort and sustained momentum in implementing this agenda,” it said.
They also called for an “effective communication strategy” to forge “broad public support” for these efforts.
“Further gradual liberalization of product and labor markets will help exploit policy complementarities, encourage private investment and harness the benefits of reform,” the report said.
Najib, who came to office last year, said the New Economic Model was designed to boost growth, create a
People Expect Decisive Action on NEM and No Pandering to PERKASA
high-quality workforce, and attract badly needed foreign investment.
The model also aims to stem Malaysia’s “brain drain” with measures to retain skilled professionals, and make markets more competitive by phasing out price controls and subsidies.
Favourable growth prospects
The affirmative action policy which hands Malays privileges in housing, education and business has been criticised as uncompetitive and improperly benefiting the elites. Under the planned changes to the policy, the government will seek to raise the income levels of all disadvantaged groups, rather than focusing solely on ethnic Malays, the dominant ethnic group in the Southeast Asian nation.
Najib’s reforms face opposition from conservative Malay rights groups. The country has sizeable ethnic Indian and Chinese minorities, who mostly deserted Najib’s ruling coalition in 2008 elections.
The IMF also said that Malaysia’s near-term growth prospects were favourable. The economy was projected to expand by 6.7 percent in 2010 but growth is expected to moderate to 5.3 percent in 2011, the IMF report said.
It also said that IMF staff felt Malaysia’s ringgit currency appeared to be “weaker than its equilibrium level in real effective terms.” The IMF Executive Board, according to the report, agreed with the Malaysian authorities’ view that a stronger ringgit could boost over time the role of domestic demand as a growth driver and promote a shift toward higher-value added industries.
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