Mar 30, 2010

PM Najib's "New Economic Model"

The Prime Minister Najib Razak is set to unveil his New Economic Model later today.

In the Credit Suisse Asian Investment Conference of Hong Kong last week, Najib in his keynote dialoque has indicated that there would be radical reforms, transformation and liberalization of the economy.

Najib has indicated that the New Economic Model will transport Malaysia to a high income economy by 2020 and calls for the dismantling of affirmative actions that favours the so called "bumiputras" although not so clearly stated by Najib but was widely reported by the international media.

This new economic model seems to be in part mooted by his brother Nasir Razak of the CIMB banking group, Nasir is of the belief that affirmative actions are hampering businesses and that reforms are a prerequisite towards economic progress which is a theory shared and accepted by most economist.

However there are doubts that Najib can be steadfast and resolute towards the dismantling of privileges to the bumiputras which forms the malay and mamak political party of umno, the main party of the governing Barisan National which had benefitted from the discriminate policies of the past.

Ooi Kee Beng an expert from the Institute of South East Asian Studies has this to say: “Looking back over the year that Najib has been prime minister his administration has been blowing hot and cold where reforms are concerned, especially where they concern race-based affirmative action.”

Najib's New Economic Policy will have to contend with his own party "Warlords", Mahathir and the newly formed party of "Perkasa" lead by another umno warlord of Ibrahim Ali and has the full support of Mahathir (Former Prime Minister).

This new model will also incorporate proposals to end public subsidy and the imposition of Goods and Service Tax which was recently defered. This new economic model is seen as a gamble for Najib and it just can't be seen as to how these reforms can win votes and support from the people and that is to say that if winning the next election is in his mind. Withdrawal of subsidy and imposition of GST will cause economic sufferings to the general populace of low wage earners and should be detered until when there are greater economic stability in place.

Najib bears not the strength and will to bull doze his way and the view is that we will see yet another weak approach where there are a lot of fanfare and PR promotion in trying to garner support and with the expected opposition to his plans,  this so called economic reform will than be defered citing greater feedback, study and public participation. There is still much flip flop with this new administration.

This new economic model will not get far and even if this government is able to put in place some form of change, it will still not be enough or an attraction for the foreign investors, there are much competition today and investors had plentiful choices and Malaysia is stuck in a quandary and not in the sight of investors.

If the Najib administration is serious about bringing progress, they will have to first bring radical change to the democratic process which is widely seen as being seriously flawed and eroding and this will have to be the first step. That is to first put in place the political infrastructure of just, equality, efficeiency and independence of the process of governance.

Sometime it is just mind boggling as to all the wasteful effort that is expanded which will come to naught, we need structural political reform before any economic reform is able to be brought forward.

Sending teams of people all over the world trying to sell a product which is not in place or intact is a waste of time, the funds managers are paying no heed to what we have to offfer and in the first place we had nothing to offer except for making gestures of the future, telling investors that we will be doing this and that sometime in the future.

Just imagine a salesman that comes to your door without a product but promises of a product that is vaque and in the future, what will you think of the salesperson? You must be joking! Stop wasting my time and you might tell him to scoot off!

These umno people will never get it, it is too many years of complacency that has given them a silo mentality.

Just look at some of the pertinent questions that was lightly put forward during the Asian Investment Conference, which i suspect that the Conference was hurriedly slot in by their PR guys as Malaysia was only given a slot on the second day and even that was just a one hour Luncheon Keynote Dialoque with no specific topic or paper being presented. Whatsoever, lets look at some pertinent questions by the participants which is a good reflection of their views and concerns.

  • Stephen Hagger of Credit Suisse: Malaysia is famous for the intertwined of Politics and Business and Cronyism and is Cronyism still alive today? This question was presented to the Malaysian Panel consisting of Tony Fernandez, Azman Mokhtar of Khazanah, Nasir Najib of CIMB and Yeoh Seok Hong of YTL.


  • Question by fund managers to Najib: How important is the independence of the Judiciary in Malaysia?


  • Question by fund manager to Najib: When will Malaysia free up the Ringgit and make it convertible?
All these three questions were not adequately addressed or answered.

These are a general concensus and reflection on the problem Malaysia is facing and are structural in nature and need political reform, without which any economic plan or model can not be delivered and will not interest the investors. And the reverse  applies today where even locally listed companies have moved out and many more planning to move out to be listed in other more vibrant economies.


Watch BBC video report of Malaysia New Economic Model HERE
Credit Suisse Asian Investment Conference 2010 website HERE

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