KUALA LUMPUR, July 20 — The stark reality is that our economy is in need of a major overhaul.
We can no longer afford to continue with inward-looking and protectionist policies. We can no longer, akin to the proverbial ostrich, poke our heads into the sand whenever the issues at hand are either too politically sensitive or can be procrastinated or can be subsidised. Nor can we continue to persistently blame our economic slippages purely on external factors such as the general effects of a global downturn.
We have been in denial for too long and our past inaction is coming back to haunt us, both on the economic and social fronts.
We need to holistically re-engineer our economic framework. Firstly, to address the current deficiencies of our internal economy, particularly with respect to income and wealth distribution policies. Secondly to get our economy better prepared to face and participate in the unforgivingly competitive global arena.
We stand to be left on the sidelines so long as we do not accept the need to unbundle legacies which are no longer relevant or indeed restraining a greater economic potential.
In this regard, Prime Minister Datuk Seri Najib Razak’s announcements over the past few months of various economic measures have been refreshing, and a sound start.
Let’s give credit where it’s due. Recognising the need for change is a brave first step and I hope it’s a taste of a newer, more pragmatic economic governance.
However, these recent announcements need to be put into context.
The public and political focus seem to be on the more headline grabbing announcement of the removal of the 30 per cent Bumiputera quota for public offerings on the stock exchange.( More accurately it’s a reduction of the quota to 12.5 per cent, presuming sufficient Bumiputera uptake.)
This step on its own is not a wholesale dismantling of the NEP or its successors. Moreover only 27 sub- sectors of the services sector were liberalised to no longer require a 30 per cent Bumiputera element. Again, hardly a full-scale assault against the NEP.
Yet, there is the danger that the arrogance of politics coupled with the disparate objectives between politics and economic reality may require the painting of a completely different picture which may cause a derailment of these initial attempts at economic reform.
The other possible derailment may likely occur in the implementation phase. Already the defence mechanisms have been put in place as clearly stated by Najib:
“Notwithstanding this deregulation, the national interest in terms of strategic sectors will continue to be safeguarded through sector regulators. Companies in such sectors will continue to be subject to equity conditions as imposed by their respective sector regulator, such as the Energy Commission, Commercial Vehicles Licensing Board, National Water Services Commission, Malaysian Communications and Multimedia Commission. Even for such regulated companies, the repeal of the FIC guideline enhances the regulatory environment, given that the oversight will only be by the sector regulators, who are best placed to tailor regulation according to the needs of their respective sectors.”
Sensible policy but screwy implementation is not new to Malaysia — we have already had experience on this with the NEP. Najib and his entire team need to ensure that his reform announcements are carried out in the form and spirit they are intended rather than to continue as mere statements.
The average businessman and/or company in Malaysia is more likely on a day-to-day basis to be dealing with issues of licences, approvals and permits for applying for a taxi permit, a trade or business , getting onto an approved vendor list for government agencies or GLCs, etc. It is in these areas that Najib’s grand plans can get unstuck by the little Napoleons who continue to lurk in the system and who will justify their decisions on the basis of “safeguarding national interests”.
Opponents of the economic reforms need to come to terms with reality, that as a nation we have no choice but to realign our economic model and that these early steps are but just that — the start.
Even though the first steps have been made, it’s the journey of reform that will be the real test.
The journey will be the implementation of the new policies and if this goes wrong, it’s not only Najib who fails. We all fail — as a country.
Ravi Navaratnam is a former investment banker and is now a corporate finance head of a major engineering consultancy.
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