KUALA LUMPUR: An economist today warned that race-based policies would only worry investors instead of inspiring confidence in them.
Edmund Terence Gomez said history had shown that such policies do not encourage investments, and urged the government not to implement them.
He referred to the financial crisis in 2008, when there was a change in government and Najib Razak came to power.
He said one of the first things Najib had done after looking at the economy was to do away with affirmative action. However, this led to a backlash, including from Umno members.
“Najib subsequently changed it to market-friendly affirmative action, and while there was discussion on this in the 10th Malaysia Plan, there was none in the 11th.
“Instead, in 2013 Najib introduced his own Bumiputera Economic Empowerment policy. Look at the viability of the policy. How successful has it been in creating Bumiputera enterprises?
“Look at the top 50 companies, see how many Bumiputera-owned companies there are. You may find one or two. Azman Hashim and Syed Mokhtar Al-Bukhary. That’s about it.”
Noting that the policy had been in place since 1970, he asked what it showed if there were only two Bumiputera entrepreneurs among the top 20.
“So am I concerned about race-based policies? Yes,” he told reporters on the sidelines of the China Conference organised by the South China Morning Post.
On the government’s announcement that it would revisit the Bumiputera policy, he asked whether a historical assessment had been made of the policy since 1970.
“The only thing we have heard so far is (former finance minister) Daim Zainuddin saying this time they will get it right. How is he going to make sure they will get it right this time?
“Should we implement it without a proper assessment or show the people ‘this is where we went wrong’ and how we are going to get it right?”
When asked whether a better race-based policy was needed, Gomez said: “If you want to have it, we need to have a debate on it.
“My own argument is that it has not been successful. Don’t do it. That is my argument.”
He urged people to consider how many domestic investments there had been since Najib introduced the policy.
“Do they (investors) feel they can invest without fear? Do they feel their property rights are protected?
“These are important issues to convince investors of today: look, you can invest without fear. Your property rights will be protected. Those are the issues the government must answer.”
He warned that failure to do so before implementing such a policy would not inspire investor confidence.
“We are trying to get the economy back on track. The first thing the government must do is inspire investor confidence. Get everyone to invest.
“There is euphoria over the new Malaysia, a sense that things will be done differently by the government in an open and accountable manner.
“Investors will want to invest. Why then bring back this policy?” he said, adding that this would only “scare investors again”.
He agreed that measures needed to be taken to develop Bumiputera enterprises.
“But is this the way? Let’s sit down and talk about a proper policy, nurturing Bumiputera entrepreneurs properly.”
He also noted the emergence of a new Bumiputera middle class which was independent, articulate and entrepreneurial.
“Why not tap into that market?”
He spoke of the role of the state in welcoming Chinese investments, adding however that this had “killed off” domestic investments in the process.
Although there had been a surge of investments from China, he said, this had also allowed the entry of a particular kind of investment based on funding from China.
“It created very controversial projects such as the East Coast Rail Link,” he said.
“But at the same time, other investments also began flowing in. Very dynamic investments from mainland China.
“Both were happening simultaneously. Malaysia benefitted from private investments by China, but not enough attention has been given to this. Focus has been on the controversial projects.”
Abdul Majid Ahmad Khan from the Malaysia-China Friendship Association, who was one of the panellists at the conference, said Malaysia would continue to be a friendly and profitable destination.
He said there had been a degree of uncertainty and anxiety following the general election, but that Prime Minister Dr Mahathir Mohamad’s visit to China in August had yielded a positive outcome.
“He assured that Chinese investors are welcome, and stressed the importance of China to Malaysia.
“Despite the differences we have on one or two projects, overall relations between both countries are healthy and strong.”