Foreign Direct Investment in Malaysia 6 July 2009 James Freckleton

2 New Economic Policy Perceived power imbalance: dominance of business sector by Chinese community Perceived power imbalance: dominance of business sector by Chinese community New Economic Policy implemented in 1971: New Economic Policy implemented in 1971: –Companies must allocate 30% of their holdings to Bumiputras (Malays and indigenous communities) –Regulatory approval for foreign property purchases –Approval required for mergers and acquisitions Target: 30% Malay share of corporate wealth Target: 30% Malay share of corporate wealth

3 However… Target not met: figure stands at 19.4% Target not met: figure stands at 19.4% FDI stagnating since the Asian financial crisis FDI stagnating since the Asian financial crisis Economy may contract by 5% this year Economy may contract by 5% this year NEP criticized by all communities, even by many of the Malay majority NEP criticized by all communities, even by many of the Malay majority –Unfair ethno-centric policies –Growing gulf between the entrepreneurs and the poor

4 ‘New’ New Economic Policy Malaysian Prime Minister Najib Razak recently relaxed many NEP regulations Malaysian Prime Minister Najib Razak recently relaxed many NEP regulations –No approval necessary for foreign property purchases –Corporations no longer need to reserve 30% of stock for Malays Politically fraught with danger: Politically fraught with danger: –Malays make up 60% of Malaysia’s 28 mil population –Diluting privileges in business, education, jobs and property ownership Stated aim is to increase FDI Stated aim is to increase FDI

5 Sources AFP: AFP: –Malaysia liberalises economy as recession looms (30 June 2009) – M5gHvboZbpFLqQgupyYUbq69iNY8dg M5gHvboZbpFLqQgupyYUbq69iNY8dghttp:// M5gHvboZbpFLqQgupyYUbq69iNY8dg SMH: SMH: –For all Malaysians: new PM abandons ethnic capitalism (1 July 2009) – new-pm-abandons-ethnic-capitalism d3tq.html new-pm-abandons-ethnic-capitalism d3tq.htmlhttp:// new-pm-abandons-ethnic-capitalism d3tq.html