MAY 16 â€” The concept of liberalisation has long been “The L Word” for some: a dirty word; a battering ram fashioned by foreigners bent on enforcing economic imperialism; an euphemism crafted by elements intent on promoting their own selfish interests to the detriment of social justice.
The issue of liberalisation again became a public talking point when Prime Minister Datuk Seri Najib Razak announced the liberalisation of the services sector, which involved the removal of the 30 per cent Bumiputera equity ownership requirement for firms in 27 service sub-sectors. His announcement was made in line with the Government’s stated intent of raising the contribution of the services sector to the overall Malaysian economy.
Interestingly, the Bar Council, which has long fashioned for itself an image as the defender of public interest, voiced opposition to the government’s move, particularly on the decision to invite foreign legal firms to provide services relating to Islamic finance.
In response to Najib’s announcement, Bar Council president Ragunath Kesavan said that allowing five top international law firms with expertise in international Islamic finance to practise in the country is not the best solution towards liberalisation of the services sector. Instead, he insisted that foreign law firms should be required to enter into joint ventures with Malaysian law firms, so that foreign law firms were able to tap into the Malaysian law firmâ€™s knowledge of domestic laws, regulations and business environment, while Malaysian law firms would be able to access knowledge of new legal and finance products.
The Bar Council’s protest is understandable and, more importantly, serves to highlight a crucial truth: liberalisation is a painful thing, for those who must face greater competition as a result. It also highlights the fact that the pace of liberalisation must be carefully calibrated, for the legitimate fear of drowning out local players when the floodgates of competition are opened.
The response from Bumiputera groups to the decision to do away with the 30 per cent Bumiputera equity requirement for firms in certain service industries was surprisingly moderated, given the sensitivity of the issue of affirmative action in Malaysia’s political scene.
Perhaps this is tacit admission that the policy of setting aside quotas has not really succeeded in achieving the desired outcomes for increased Bumiputera participation in the economy. Najib was certainly right when he pointed out that 30 per cent ownership in a firm did not accord any control, and hence allows only limited capacity for the Bumiputera partner to be participate in a meaningful way.
Over the years, various arguments have been levelled against the 30 per cent ownership quota requirement: that it was inefficient; that it did not address the core problem of developing sustainable Bumiputera economic competitiveness; that it led to leakages and corruption; and that it fostered ill will among the racial groups in Malaysia without much success to show for.
But certainly, as Malaysia continues on the path of liberalisation, opposition will grow louder. For opponents of liberalisation, they will attempt to equate the pace of liberalisation with the dismantling of safeguards for social justice. They will claim that liberalisation will open the floodgates for greater competition that will eventually drown out those who are not prepared for change.
For policymakers, this state of affairs means that the nature and pace of liberalisation must be carefully thought out. Like Najib said: “The era of ‘government knows best’ is over.” What this should mean is that the government and its various ministries and agencies cannot decide in a vacuum. Consultations must be made, and all affected stakeholders need to part of those consultations.
This is especially true for those policies which are part of the implementation of affirmative action in Malaysia. Such policies, for example, the Foreign Investment Committee (FIC) rules, or government procurement guidelines, have become politically contentious over the years, and any effort towards the dismantling of these policies cannot be done piecemeal, nor can they be done without due consultations.
Some say that liberalisation is inevitable. This is probably largely true, given the many multilateral commitments which Malaysia has signed on to, both at the global as well as regional level. But we have a choice in the way and the sequencing with which liberalisation takes place.
There are many Malaysians out there who will have their own unique reasons for fearing the lash of big, bad liberalisation. Only with transparent consultations, careful deliberation, and a strong zeal to prioritise the public interest, can policymakers ensure public acceptance and commitment to our efforts to liberalise the economy, towards making Malaysia more competitive and dynamic.
Source : The Malaysian Insider