Foreign Direct Foreign Direct Investment in Investment in

MalaysiaMalaysia

6 July 20096 July 2009

James FreckletonJames Freckleton

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New Economic PolicyNew Economic Policy

Perceived power imbalance: dominance of Perceived power imbalance: dominance of business sector by Chinese communitybusiness sector by Chinese community

New Economic Policy implemented in 1971:New Economic Policy implemented in 1971:– Companies must allocate 30% of their holdings to Companies must allocate 30% of their holdings to

Bumiputras (Malays and indigenous communities)Bumiputras (Malays and indigenous communities)– Regulatory approval for foreign property purchasesRegulatory approval for foreign property purchases– Approval required for mergers and acquisitionsApproval required for mergers and acquisitions

Target: 30% Malay share of corporate wealthTarget: 30% Malay share of corporate wealth

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However…However…

Target not met: figure stands at 19.4%Target not met: figure stands at 19.4% FDI stagnating since the 1997-1998 FDI stagnating since the 1997-1998

Asian financial crisisAsian financial crisis Economy may contract by 5% this Economy may contract by 5% this

yearyear NEP criticized by all communities, NEP criticized by all communities,

even by many of the Malay majorityeven by many of the Malay majority– Unfair ethno-centric policiesUnfair ethno-centric policies– Growing gulf between the entrepreneurs Growing gulf between the entrepreneurs

and the poorand the poor

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‘‘New’ New Economic PolicyNew’ New Economic Policy

Malaysian Prime Minister Najib Razak recently Malaysian Prime Minister Najib Razak recently relaxed many NEP regulationsrelaxed many NEP regulations– No approval necessary for foreign property No approval necessary for foreign property

purchasespurchases– Corporations no longer need to reserve 30% of stock Corporations no longer need to reserve 30% of stock

for Malaysfor Malays Politically fraught with danger:Politically fraught with danger:

– Malays make up 60% of Malaysia’s 28 mil populationMalays make up 60% of Malaysia’s 28 mil population– Diluting privileges in business, education, jobs and Diluting privileges in business, education, jobs and

property ownershipproperty ownership Stated aim is to increase FDIStated aim is to increase FDI

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SourcesSources AFP:AFP:

– Malaysia liberalises economy as recession Malaysia liberalises economy as recession looms (30 June 2009)looms (30 June 2009)

– http://www.google.com/hostednews/afp/article/http://www.google.com/hostednews/afp/article/ALeqM5gHvboZbpFLqQgupyYUbq69iNY8dgALeqM5gHvboZbpFLqQgupyYUbq69iNY8dg

SMH:SMH:– For all Malaysians: new PM abandons ethnic For all Malaysians: new PM abandons ethnic

capitalism (1 July 2009)capitalism (1 July 2009)– http://www.smh.com.au/world/for-all-malaysianhttp://www.smh.com.au/world/for-all-malaysian

s-new-pm-abandons-ethnic-capitalism-2009063s-new-pm-abandons-ethnic-capitalism-20090630-d3tq.html0-d3tq.html