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March 13, 2009

Malaysia: No reforms expected on race-based system
Malaysia's next prime minister has signalled he will not embrace radical reforms to the country's race-based economic system that critics charge has stunted development and fostered corruption.

Deputy Prime Minister Najib Razak, who is slated to become premier on March 31, told the Financial Times that Malaysia could embrace some reforms such as liberalising the services sector but was not able to dismantle policies favouring ethnic Malays.

"We cannot have too drastic a move until people are ready for it," Najib said in an interview published on Thursday.

Najib has been painted by the coalition that has ruled Malaysia for 51 years as a reformer who is keen to modernise the economy, although his first budget delivered this week was heavily criticised by economists for being too timid and lacking transparency.

Malaysia's system of economic preferences for the 60 percent of the population that is ethnic Malay gives them preferential company ownership rights, cheap loans, superior access to university places and greater access to civil service jobs.

The policies were introduced by Najib's father in the early 1970s after race riots and were designed to help Malays catch up with the more prosperous ethnic Chinese.

Calls for the policies to be dismantled have grown and the opposition, led by former deputy prime minister Anwar Ibrahim, has made ending the system a central plank of its policy.

Other critics of the policy include Najib's brother, who heads the country's second-largest bank, CIMB.

The government suppressed a report issued in 2006 by a respected think tank that estimated Malays already owned 45 percent of the economy.

Malaysia's government is a 13-party coalition built along ethnic lines and Najib will become the leader of the United Malays National Organisation, the main party that represents Malay voters.




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