Reuters - Tuesday, June
30
KUALA LUMPUR, June 30 - Malaysian Prime Minister Najib Razak on
Tuesday unveiled new measures to boost investment in the country's
slumping economy which has been hit hard by a global economic
downturn that has sapped demand for its exports.
Najib told an investment conference on Tuesday that it will end
a ruling requiring that the Foreign Investment Committee , a
government authority, approves investments in non-strategic
sectors.
He also said property deals not involving companies owned by the
majority Malays, who are seen as "sons of the soil" or bumiputra,
will no longer require FIC approval.
"We have become a successful middle income economy. But we
cannot and will not be caught in the middle income country trap. We
need to make the shift to a high income economy or we risk losing
growth momentum in our economies and vibrancy in our markets,"
Najib said.
The Southeast Asian country also plans to raise foreign
ownership in investment funds and stock brokerages as well as
address the issue of increasing the liquidity in the stock market.
For a list of reforms, click [ID:nUSN008111]
Malaysia, once one of Asia's leading economic reformers, has
seen its business model of low value electronics exports and
commodities exports hit hard by the rise of China and investment
flows have dried up as other countries have liberalised faster.
At the same time, strict government controls that reserve a
certain proportion of the economy for ethnic Malays, the so-called
bumiputra policy, has hurt growth and fostered corruption, critics
charge.
"There is a sense that the liberalisation measures fail to
excite the markets but it all boils down to the need for the
government to toe the line between attracting foreign investment
inflows and keeping the pro-bumiputras part of the population
satisfied," said Joanna Tan, economist with Forecast Pte Ltd.
"Stocks which are already buoyed by today's improved sentiment
and possible window dressing should also find support on the news.
Further pressure on the USD/MYR is expected."
The Malaysian ringgit <MYR=> gained 0.6 percent to 3.517
per dollar after the announcement. The benchmark KL Composite index
<.KLSE> inched up 0.4 percent to 1,080.23 points
This is the third reform announcement since Najib took office in
April.
Earlier, he announced measures to liberalise some sectors of the
service economy as well as banks and insurers, although both of
those previous announcements were measures that had already been
promised already but not implemented.
Even though investors have recovered from jitters caused by the
global financial crisis, foreign portfolio investment is still
pulling out of Malaysia, a Southeast Asian country of 27 million
people.
In 2008 there was an outflow of 92.3 billion ringgit in
portfolio investment <MYFLO=ECI>, starting in the second
quarter of the year when shock electoral losses for the National
Front coalition that has ruled Malaysia for 51 years coincided with
the build up of the current global financial crisis.
Those flows still haven't returned and investment bank HSBC is
forecasting there will have been another outflow of portfolio
capital to the tune of 50 billion ringgit ($14.14 billion) when
first-quarter current account data is published later on
Tuesday.
(Reporting by David Chance and Soo Ai Peng; Editing by Neil
Fullick)