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Malaysia’s New Economic Model:
Risks and Rewards
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AseanAffairs Magazine May - June 2010

Prime Minister Najib Razak vows to take Malaysia forward and transform it into a high income nation through economic and social reforms. Initial responses to this ambitious drive are mixed, details are scarce and investors play wait-and-see.Yet, Najib insists he’s got support to push ahead.

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(L-R) Panelists in the first session of the 7th Asean Leadership Forum, Mr. P.K. Basu, Managing Director & Chief, Economist Asia ex-Japan, Daiwa, Capital Markets, Singapore, Dr. Mahani Zainal Abidin, Chief Executive, Institute of Strategic & International Studies Malaysia, H.E. Ong Keng Yong, Ambassador at Large Singapore & Former ASEAN Secretary-General / Director, Institute of Policy Studies Singapore, Moderator:Tan Sri Ramon Navaratnam, Group Adviser, Sunway Group / Chairman, ASLI’s CPPS, Dr. Nungsari Ahmad Radhi, Executive Director, Khazanah Nasional Berhad, Ms. Annie Cheung, Vice President, Smarter Planet, Initiative, ASEAN, Mr. Rajiv Biswas, Director, Southeast Asia, Corporate Network, Economist Intelligence Unit, The Economist,Singapore

NEP and the Sceptics

Rajiv Biswas

Investors will wait until the full details are released in June 2010, to see the fine print and how much reform is actually going to be delivered. I am optimistic that the Malaysian government under the leadership of PM Najib is very serious about making reforms. Of course, Rome was not built in a day, and a realistic timetable of implementation is fair enough. However, investors need to be convinced that reforms announced will be delivered, and that there will not be delay after delay in implementation – this will erode the credibility of the package of reforms.

Ramon Navaratnam

I don’t blame either domestic or foreign investors for being skeptical. After all, the NEP itself, which was good at the early stages, went awry later. This is why we are caught in the “middle income trap” whereas some other Asean countries are forging ahead.

They are adopting “a wait and see policy” as they don’t want to be frustrated again. Malaysia used to do very well after Merdeka (Malaysia’s independence from Britain) and until 10 years after the NEP was introduced in 1970. We even excelled over most Asean countries.

Michael Yeoh

The key to the success of the new economic model is successful execution. A Plan is only as good as its implementation. Constant monitoring is essential.

Jamaludin Ibrahim

In 1988 Malaysia’s weighting in the MSCI Emerging Markets Index was 29.5 percent, today it is 2.7 percent. Interest in Malaysia as an investment destination has dropped. Skeptical or not, recognition has to be given to the government for recognizing this and taking bold steps to address it. The model is transformational, and involves many risks, so some are obviously cautious. However, given the Government’s concerted focus, over time, the skeptics can be proven wrong.

Mohamed Iqbal Rawther

Gone are the days when a policy measure is announced, the flood gate is opened, and investors pour in. Today, investors are more careful and more calculative. The payback criteria is shorter. There are choices, on a global basis, on a regional basis, and in today’s Malaysia, there are even choices within Malaysia due to a political divide “Wait and See” – yes, it is part of an evaluation process. But too long a wait may be too late. The saying, “The early bird catches the worm” may be true in a changing economic scenario. Investors need to be mindful to exploit an opportunity when one is seen and made available.

Jeffrey Cheah

I believe investors should have confidence in the commitment of Prime Minister Najib and the Malaysian Government to the reforms. I believe now is the right time to invest in Malaysia, particularly in the property and services sector.


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