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 26 Apr 2009

Malaysia urged to reform ethnic policy

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Malaysian opposition lawmakers and lawyers yesterday called for wider reforms of a mandatory ethnic Malay ownership rule, after the government relaxed the decades-old affirmative action programme, reported the Associated Press.

Prime Minister Najib Razak announced on Wednesday the government has scrapped a 30-per cent Malay ownership requirement for investment in some service sectors to help boost the country's flagging economy.

As part of his first major policy reforms after taking power early April, he also said five foreign law firms will be allowed to offer services in Islamic finance.

The government's move marked a dilution of the country's politically sensitive New Economic Policy, which aims to uplift Malays who are a majority in the country but lag economically.

Opposition lawmaker Tony Pua called the government's move a "baby step forward" to unwind long-standing policies that had hindered investment.

He said the liberalisation was too narrow in scope, covering only 27 sub-sectors under health and social services, tourism, transport, business and computer-related services out of hundreds.

"We certainly look forward to further liberalisation of ownership constraints, especially those imposed on Malaysians themselves," he said in a statement.

Pua said state agencies and government-linked companies impose strict guidelines on procurement of goods and services from private firms, requiring them to comply with Malay equity rules and staff quotas.

For instance, he said some banks engage only legal firms which have at least 50-percent Malay equity.

"These persisting barriers to entry will continue to discourage investments in these sectors," he warned.

The Bar Council, which represents some 10,000 lawyers, said it was unfair to open up the legal services sector to foreign firms as Malaysian practitioners are hampered by existing barriers.

"The government must address domestic market issues and ensure that such policies are also abolished if there is to be true liberalisation of the legal services market in Malaysia," it said in a statement.

"There is no point in making Malaysia welcoming to foreigners if we have not yet put our own house in order," it said.

Critics say the New Economic Policy hinders investment and has largely benefited well-connected elite Malays rather than the poor. The government has been unwilling to scrap it for fear of alienating the Malays who form the main constituency of the ruling party.

It has, however, allowed 100-per cent foreign ownership in the manufacturing sector. Najib has said the government plans to progressively liberalise other sectors, and will unveil moves to open up the financial sector next week.






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