‘Ibrahim’s liberalistion fears unfounded’

Economists dismiss the threat of liberalisation to Bumiputera entrepreneurs but voice concerns of their own.

PETALING JAYA: Economists have rubbished Perkasa chief, Ibrahim Ali’s, warning that liberalising the economy will sideline Bumiputera entrepreneurs and cost the government crucial Malay votes in the next general election.

Prime Minister Najib Tun Razak’s latest budget includes the opening up of 100 percent foreign ownership in 17 sub-sectors to recapture straying investments. Among these sectors are healthcare, education and legal.

Ibrahim yesterday declared liberalisation an opposition idea and accused the Performance and Management Delivery Unit (Pemandu) of habouring a “hidden agenda” by advocating it.

His stand has earned him a drubbing from an economics professor who pointed out that since liberalisation apparently threatens the inefficient and incompetent, Ibrahim was therefore discrediting his own community.

“His assertion assumes that this is what Bumiputera businesses are and that they haven’t improved even after 50 years of independence,” said the professor who requested anonymity.

The former head of the business school of University of Nottingham Malaysia, Subramaniam Pillay, meanwhile doubted that the move would make even a dent in Bumiputera entrepreneurship.

“At this stage of development, Bumiputera entrepreneurs should already be able to compete,” he said. “They even have the option of a joint venture with foreign investors.”

“But Ibrahim is talking about the elite Bumiputeras and has forgotten the poorer segment of that community. So while there are fears over the elite being sidelined, he hasn’t considered that liberalisation could create more employment opportunities for the less affluent Bumiputeras.”

‘Not the only game in town’

Political analyst Khoo Kay Peng was more blunt in suggesting that Ibrahim do his math before runing down the undisputed benefits of opening up a country’s economy.

“Why do countries encourage foreign investment?” he asked. “It’s to grow and enlarge the economic pie. This is how countries prosper. Otherwise what’s the point?”

“Without economic liberalisation the younger population will face with a shortage of jobs which will lead to severe socio-economic and political problems. This was the basis of the Middle East revolution.”

Both economists agreed that the move to liberalise Malaysia’s economy was neither wrong nor right in its entirety but emphasised that it had to be selective and sensitive to public perception.

The aforementioned professor stated that liberalisation is important only in the sense that it engenders a level playing field which must not only be level but also be seen to be level.

“The success of liberalisation depends on investors’ perception of whether it is just rhetoric or whether it will be different this time around,” he said. “And this perception hinges on a number of factors, not just a single promise.”

“We have witnessed too many contradictory statements and actions to stave off investors’ doubts. We’re not the only game in town and even if we liberalise, our neighbours may do a better job or be perceived to be doing so.”

More needs to be done

When asked about the nation’s economic future should the government backtrack from its liberalisation plan, he painted a humdrum picture in which Vision 2020 would remain exactly that.

“Actually we may not even reach Vision 2020 even if we don’t backtrack,” he mused. “To achieve it we need to do more than liberalise. We need to upgrade our technology and I don’t see any real focus in this area.”

Subramaniam has a different set of concerns with the main one being the inclusion of healthcare under the 17 sub-sectors identified for liberalisation.

“I completely oppose this because it will encourage the setting up of more private hospitals in the country,” he said.

“The attractive renumeration packages of private hospitals will attract specialists from government hospitals thus giving wealthier patients a wider choice and the rest with virtually none.”

Subramaniam also spoke out against the government’s fondness for granting liberal tax incentives to foreign investors. He referred to Lynas Corp which will enjoy a 12-year tax break.

His final caution to the government in the opening up of the economy is to stem the influx of foreign labour.

“The budget didn’t contain a single plan on how to reduce our dependency on foreign labour which is the source of our poverty levels,” Subramaniam noted.

“Again the government is listening only to people with capital. So if it decides to liberalise the economy then it had better be sure to restrict foreign permits and only hire locals.”