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Malaysia PM Sets Big Reforms to Boost Investment

Jumat, 10 Juli 2009

Malaysia PM Sets Big Reforms to Boost Investment

KUALA LUMPUR - Malaysia's prime minister unveiled a raft of measures on Tuesday to boost investment in the slumping economy, coming close to ending an affirmative action programme for ethnic Malays that critics say has stymied growth.

Najib Razak told a conference in Kuala Lumpur that his government would end rules on foreign investment in most sectors of the economy and would open up the investment management and brokerage industry, as well as property, ending requirements for 30 percent ownership by ethnic Malays.

He also promised reforms of Malaysia's huge government companies such as plantations and property giant Sime Darby, and said they would be forced to sell non-core assets to boost domestic competition in the Southeast Asian nation.

"We have become a successful middle income economy, but we cannot and will not be caught in the middle income country trap," Najib told the conference.

"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."

The reforms gave the ringgit a small boost and it traded at 3.521 to the dollar at 0500 GMT, up from 3.54 at the open, although data released later showed foreign investors had continued to pull money out of Malaysia this year.

Malaysia is Asia's third most export-dependent nation, seeing shipment slump 26 percent from a year ago as demand for electronics and commodities has been hit by the global downturn. The economy has shrunk 5 percent this year.

Investment flows have dried up and the country has been overtaken by neighbouring Thailand in terms of direct investment since 2001 and portfolio flows turned negative to the tune of 92.3 billion Malaysian ringgit ($26.10 billion) in 2008.

In the first quarter of 2009 they remained negative to the tune of 12.2 billion ringgit, even as investment in other emerging Asian economies has recovered. Malaysia's stock market has risen 20 percent this year, underperforming a 30 percent rise in Asian markets excluding Japan.

"This move will definitely encourage investors to rethink or reconsider Malaysia amid the many choices (in the region) such as Thailand, Vietnam, and Indonesia," said Wan Suhaimie Wan Saidie, economist at Malaysia's Kenanga investment bank.

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