Malaysia scraps bumi policy to attract foreign investment ?

Malaysia scraps bumi policy to attract foreign investment

In its biggest and boldest move to attract more foreign investment, Malaysia is scrapping, in Johor's new economic zone at least, policies that have favoured bumiputeras — the ethnic Malay majority — since the 1970s.

While the details have yet to be spelt out, foreign investors in Johor's Iskandar Development Region (IDR) will not be encumbered with providing 30 per cent equity to a bumiputera partner. The move is aimed at creating a new engine of growth in Johor's southern part so that over the next five to 20 years, it will grow into a major regional financial and manufacturing hub, providing jobs for 800,000 workers. Separately, the Government is abolishing property gains tax in Malaysia to boost the flagging property market and lure foreign investment.

While lauded in the early years, the pro-bumiputera policies — which seek to raise the Malay share of the economic pie to 30 per cent — have since been criticised for having been abused. Hence, analysts say their abolition in the IDR is a crucial step forward towards attracting foreign investment.

Development of the vast 2,200 sq km IDR, more than three times the size of Singapore — and packed with infrastructure, homes, offices, theme parks, hotels, factories and hospitals — will require a massive injection of funds. Estimates are 50 billion ringgit ($20 billion) over the next five years, rising to $160 billion over 20 years.

Luring investment over, when it is being sucked into countries like China and Vietnam, is not going to be easy. "Competition for global investment will become increasingly intense," said Prime Minister Abdullah Ahmad Badawi at an investment conference in Kuala Lumpur yesterday.

Malaysia, South-east Asia's third largest economy, saw foreign direct investment in 2005 falling to 15 billion ringgit from 17.6 billion ringgit in 2004. Figures for 2006 are not available yet but Mr Abdullah is not waiting for them to confirm the falling trend. He announced tax incentives — exemptions from corporate income tax and the withholding of tax on certain payments for 10 years — to draw investors to the IDR.

Will there be rumblings within the bumiputera ranks since the group has long enjoyed privileged access to government contracts? Johor's Chief Minister, Mr Abdul Ghani Othman, speaking on the sidelines of the conference, insisted he did not fear any political fallout, saying that foreign investment rules favouring bumiputeras will be relaxed in the IDR "in defined areas of certain kind of activities". Mr Abdullah said fiscal incentives would cover six key sectors — creative industries, educational services, financial advisory, healthcare, logistics and tourism.

"It shows that at the top ranks of the system, there are people thinking well," said Singapore economic analyst Manu Bhaskaran, according to Bloomberg. The bumiputera policies and all the related problems, he said, do turn off foreign investors.

Hints that Malaysia would scrap its policies favouring bumiputeras surfaced early in the week when IDR adviser, former Deputy Prime Minister Musa Hitam, said such a move was necessary to attract foreign investors to the project. Contract awards "will have to be on merit," Mr Musa, the deputy leader from 1981 to 1986, told Bloomberg on Monday. "The Malays will have to face competition."

But the modern bumiputera businessmen were no longer inept, he told Today. To help foreign investors pick the right bumiputera companies to be their partners or subcontractors, the Government was in the process of preparing a register of companies, detailing their past projects, and grading them according to the level of proficiency with which they handled the projects, he said.

Six companies from Singapore — two of them major ones — are also interested in Johor, Malaysia's High Commissioner to Singapore N Parameswaran told Today.

(Today via CNA)


Ghani and Shahrir back move to drop quotas

Bumiputra investors have the capability to participate in the Iskandar Development Region (IDR) in southern Johor despite the Government’s move to exempt qualified investors from foreign investment committee (FIC) rules, Johor Mentri Besar Datuk Abdul Ghani Othman said.

Abdul Ghani said he agreed with the move to exempt IDR from policies that favour the bumiputras in a bid to attract investors.

“IDR is a very defined area and there is enough bumiputra strength to participate in the development despite the FIC rules being relaxed completely,” he told reporters after the launch of IDR and the second Penang Bridge projects at the Invest Malaysia Conference here yesterday.

Johor Baru MP Datuk Shahrir Samad said the public should not be alarmed with the move because exemptions were already given for certain industries such as the Multimedia Super Corridor-status companies.

“We have to be clear and careful. We have to understand the actual situation. People have the impression that everything requires a racial quota. It’s not exactly something new,” he said.

“There are precedents. MSC-status companies are not required to have a racial quota. Foreign investors can have 100% ownership, 100% foreign workers and it is a free trade zone concept.”

(The Star)


Musa: Brief Umno on why it has to give up NEP

Umno should have a special briefing to explain to its members why it was time to give up the New Economic Policy (NEP) for the success of the Iskandar Development Region (IDR).

Iskandar Development Region Authority (IRDA) advisory council member Tun Musa Hitam who proposed this also volunteered to be one of the speakers at the briefing.

He said that there were already hundreds of Malays who had the capability to do business and on merit.

As someone who had been active in Umno for several decades, Musa said, he realised that there was a need to have a change in mindset to draw investors to the country.

“The briefing should explain what the IDR is, its implications to the country and to the Malays,” he said during a press conference at Danga Bay after the book launch of The Reluctant Politician: Tun Dr Ismail and His Time.

In the last few decades of the NEP, the country used to have an Ali Baba way of doing business where Ali would give his name and Baba would do all the work.

“As time went on, Ali and Baba became equal and Ali was able to deliver as much as Baba. Now, there are even Alis who are using the Babas not as sleeping partners but as equals,” he quipped.

Musa also said that foreign investors who came to the country were not interested in the NEP, cronyism or nepotism as their primary focus was on making money.

He suggested that instead of imposing conditional approvals, a more palatable method would be to provide potential foreign and local investors with a list of Malay entrepreneurs who were capable of doing business and leaving it the investors to decide.

Musa said that he had already asked for a computerised master list of all Malay entrepreneurs to be drawn up and the list would include their current grades as well as their past performance and track record which would be made available to any investor.

“The IDR is an opportunity to demonstrate that we have arrived and we are able to do this,” he said.

(The Star)


PM Datuk Seri Abdullah Ahmad Badawi said :

"THE 30 per cent Bumiputra equity target will not be abolished." !!

the equity target was still needed to create an even distribution of wealth among the ethnic groups.

"The minimum 30 per cent equity for the Bumiputera by 2010 is an agenda which will ensure that development will be equally-distributed between the ethnicities and regions in the country.

"At present, income and ownership of wealth among the ethnic groups is still unevenly distributed.

"The goal must be pushed until it is achieved," said Abdullah .

(NST)