Bloomberg editorial column about Malaysia

From Bloomberg:

Malaysia is in the global financial pages, and for a change it has little to do with sodomy.

Normally, when Asia’s No. 10 economy makes the front page overseas, it’s about Anwar Ibrahim’s legal woes. And the former deputy prime minister and opposition leader will soon be back in court facing charges he had illegal sex with a man. The steamy case has been distracting policy makers since the late 1990s.

Now, Malaysia finds itself in the international press for the right reasons: changes that may leave the nation more competitive and prosperous in the years ahead.

In his first 100 days in office, Prime Minister Najib Razak eased rules governing overseas investors, initial public offerings and property purchases, peeling back decades of benefits to ethnic Malays as the nation faces its first economic contraction in a decade.

If you are a foreign company in Malaysia or a locally listed business, you no longer need to set aside 30 percent of equity to indigenous, or Bumiputera, investors. Overseas ownership thresholds in the fund-management industry and at local stockbrokers also were raised.

While much more needs to be done, these steps send an important signal. It’s that the nation of 27 million is open for business again after five years of drift and indecision under Prime Minister Abdullah Ahmad Badawi.

Window of Opportunity

Had Abdullah had the courage and foresight to implement these changes five years ago or even two years ago, Malaysia might be a very different place today. He didn’t and one of Asia’s most resource-rich nations lost a rare window of opportunity to compete with China, India or even Indonesia. Last week’s deadly hotel bombings in Jakarta didn’t send panic through Asian markets the way they did in the past -- a reminder of how far Indonesia has come.

Better late than never, though. The good news is that Malaysia is working to buttress its stature with investors, many of whom avoided the place after the 1997 Asian crisis.

“We are at a critical juncture,” Najib, 55, said in Kuala Lumpur last month as he began dismantling policies his prime- minister father established 38 years ago. “Failure or hesitation to act now will have long-term ramifications for the nation.”

Hesitation still reigns, of course. Najib, for example, is sticking with a broader goal. It increases ethnic Malays’ share of Malaysian corporate equity to 30 percent from a 2004 estimate of 19 percent. Also, investments will still be overseen by regulators in certain industries, such as water, to safeguard “the national interest,” Najib said.

Awkward Capitalism

It’s an awkward brand of capitalism. Affirmative action is normally aimed at minority groups. In Malaysia, it benefits the majority at the expense of minorities. Those of Indian and Chinese descent pay more for homes and compete for some jobs, university admissions and contracts, only after Malay slots have been filled.

If Malaysia wants to know why it’s not a bigger blip on investors’ radar screens it need only look at these policies. They aren’t around because of good economics, but in spite of it. Najib should be more aggressive in creating fair conditions for non-Malays and foreign investors.

The world won’t wait for Malaysia. Economies as diverse as China, India, Indonesia, Thailand and Vietnam are evolving in ways that enable them to leapfrog peers in a short span of a few years. Developing economies need to watch their backs.

And then there’s Singapore, the beneficiary of many of Malaysia’s best and brightest seeking a more merit-based economy. Najib’s decision to order that math and sciences again be taught in Malay, rather than English, is a step backward.

Step Backward

Like it or not, English is the global business language, and Malaysian students should be honing their skills whenever possible. Politicians such as former Prime Minister Mahathir Mohamad said the reversal will be a disadvantage to Malaysia.

This is a time for smart policy making. Malaysia’s gross domestic product may shrink more than previously thought as the global crisis reduces exports and household spending, the Malaysian Institute of Economic Research said last week.

The economy will probably contract 4.2 percent in 2009, almost double the 2.2 percent decline that the institute predicted in April. It lowered the 2010 growth forecast to 2.8 percent from 3.3 percent. It’s a sign that the ripple effects of global turmoil are still flowing this way.

Malaysia’s $187 billion economy shrank 6.2 percent in the first quarter. Najib has unveiled 67 billion ringgit ($19 billion) of stimulus measures. More will be needed with the research institute predicting a 22 percent plunge in exports of goods and services this year.

Anwar’s sodomy trial will soon resume and grab some of the global spotlight. Sordid news tends to do that. It would be a mistake to let it eclipse Najib’s plans to fight crime, cut corruption and improve public transport. He also is pledging to raise education standards and the quality of life for the poor.

The real concern is follow-through. Malaysian politicians are big on glossy, headline-grabbing plans to revitalize the economy. They are less successful at implementing those visions. It’s time for Malaysia to stop talking and start doing.

I'm a little late to the huge long term issue of English medium of science and mathematics being reverted to Malay. I mainly keep up with the more immediate affecting issues, but nevertheless I was shocked when this ruling came out. Clearly Najib has to play to the more Malay ultra-nationalist side, but instead of that, allocate more money and incentives towards the rural schools for English. Politics are a problem here especially when there is no strong party in power.

A lot of solutions can be made in place of the change, but our politicians lack the implementation foresight, the long term foresight, and the accountability foresight. For instance, why is the education minister who is failing horribly at implementing English given a second chance? Why is he around? He has no idea how to do this right.

Obviously if you give the job of implementing a new education program to a person who never has done it before, how could you expect results? And much less from a government official who probably has never needed to change in his whole entire career. The educational system in Malaysia has probably never changed since former PM Tun Mahathir Mohamad made the ruling to switch from English to Malay some 30 years ago.

You need real educational consultants to come in and do it right. You don't keep the same official who doesn't have the chops to do it right in the first place. In my opinion, if no progress has been made after a few years, give him the axe. Drastic change involves drastic actions to see it through.

I come from a strong English background. When executives in the United States that invest in Malaysia do not see well written, constructed emails, I know what they are thinking: Thank goodness we are only trusting them with the lowest of jobs. That's where we stay, while the number of compeititors will keep increasing and continue to leapfrog us.