KL scraps bumis equity

KUALA LUMPUR - MALAYSIA has announced major steps to liberalise its economy, including the scrapping of a rule that requires publicly listed companies to set aside 30 per cent equity for bumiputeras.

Foreigners will also find it easier to buy property under the measures announced by Prime Minister Najib Razak on Tuesday.

Datuk Seri Najib said the 30 per cent rule - long part of an affirmative action programme for the country's ethnic majority - was not helping poor Malays or the economy. Malaysia's economy is expected to shrink by up to 5 per cent this year amid a global downturn.

'It is not a time for sentiment or half measures but to renew our courage and pragmatism, to take the necessary bold measures to advance the national interests for the long-term benefit of all Malaysians,' he told an investment conference. 'The world is changing quickly and we must be ready to change with it or risk being left behind.'

The liberalisation moves unveiled on Tuesday also crimp the powers of the Foreign Investment Committee (FIC), a government body with wide discretionary powers to vet proposed investments.

One of its tasks was to ensure that the 30 per cent bumiputera equity guideline is complied with. But it has often been criticised by foreign investors for the opaque way in which it operates.

Mr Najib said that he wanted to create a more equitable system. 'We want to be fair to all communities. No one must feel marginalised. It is a tricky balancing act but it is doable.'

Listed companies will still be required to offer 25 per cent of shares to the public, and half of this must be sold to Malays. A private equity fund will also be set up to boost Malay equity, with an initial capital of RM500 million (S$206 million).

Such moves are still seen as necessary as the Malay share of corporate wealth currently stands at 19.4 per cent, a far cry from the '30 per cent by 2010' target envisaged by the government when it launched its New Economic Policy in the 1970s to give Malays a bigger stake.

Despite the expected unhappiness from the Malay ground, the measures come at a critical time as investment inflows have plunged since last year.