Najib defends scrapping of quota

KUALA LUMPUR— Prime Minister Datuk Seri Najib Razak yesterday defended the removal of the 30 per cent Malay equity quota in several sectors, and said that Malay businesses would not lose out despite any increased competition.

Market analysts and political leaders have welcomed the scrapping of the quota in sectors such as health, tourism and transport. The decision means investors in these sectors no longer need to find Malay partners to take up 30 per cent ownership in their businesses.

The move, effective immediately, is seen as inevitable, especially in the current weak global economic climate, but there are concerns among some Malay groups.

Najib yesterday sought to assure the Malay community that Bumiputera businesses would not suffer.

“I can see Bumiputeras have the ability to compete with the rest. I am not worried they will become 'extinct' or lose out in competition because of this decision.”

It is unclear if his comments will appease Bumiputera businesses, which already complain that their share of the pie is shrinking.

Mohd Fadzli Mustafa, the secretary-general of the Malay Chamber of Commerce, said it would be a big challenge for Malays.

“We are already seeing fewer opportunities because of the economic downturn. It's going to be an uphill battle for Malays,” he told The Straits Times.

He feels the government should have waited until the 30 per cent Malay equity target had been reached. The figure is estimated at between 12 per cent and 18 per cent currently, he said.

The Associated Chinese Chambers of Commerce and Industry of Malaysia welcomed the decision, saying it would increase confidence and attract more foreign direct investment to Malaysia.

Leaders of Barisan Nasional component parties Gerakan and the MCA also hailed the move, but urged the government to liberalise other sectors as well.

They also urged the government not to rescind the rollback later.

MCA secretary-general Wong Foon Meng said he hoped that “liberalising the 27 sectors will be sustained permanently and that quota requirements will not be re-invoked in future”.

He said nine other sectors — including property, utilities supply, public transport, telecommunications, banking and media — should also be opened up.

“When there is a level playing field, it will spur further local and foreign investment... Our anxiety about investors moving their investments to other countries will be considerably lessened,” he said.

Some analysts said questions remained over whether the government would also lift equity caps placed on firms that bid for government projects. Government and government-linked companies (GLCs) are allowed to procure goods and services only from firms that meet strict Bumiputera ownership requirements.

Opposition lawmaker Tony Pua said if the rule continued to apply to government tenders, foreign investors would have no incentive to set up shop in Malaysia.

“Why would they consider setting up operations here when they have no opportunity to offer their services to the government and the GLCs, which combined represent the single largest consumer of services in Malaysia?” he said.

Ooi Siw Wan, project manager of a local creative content development company, said that because of the Malay equity rule, her company can work only as a subcontractor for successful Malay bidders. This means it has to make do with smaller profit margins.

Denis Ong, who runs a budget hotel in Kuala Lumpur, said the liberalisation could create problems for small businesses. He told The Straits Times that since foreign investors have no problems raising funds, they would be able to operate large hotels at budget prices and compete aggressively with smaller players. — The Straits Times