Emerging Markets, May 2010 (with Liz Chong)

Malaysian Prime minister Najib Razak has defended his ability to push through transformative reforms despite concerns locally that they could lose him office.

“I strongly feel that my government has the necessary support to push our reform initiatives forward,” he told Emerging Markets in an exclusive interview. He added that Malaysians would demand reform. “They desire a massive transformation,” he said.

In March Mr Najib launched an ambitious program called the New Economic Model, which seeks to make Malaysia a high-income economy with developed nation status by 2020 with a more than doubling of national per capita income to US$15,000. Significantly, Mr Najib has sought to end many affirmative action policies – originally implemented by his father, Tun Abdul Razak, when Prime Minister in 1971 – such as a requirement that 30% of equity in new share offerings must be allocated to Bumiputras, or ethnic Malays.

The reforms – which many feel have been prompted by Malaysia’s opposition coalition, led by Anwar Ibrahim, winning an unprecedented one third of the seats in parliament in the 2008 general election – have been widely welcomed by international analysts. But some feel that established interests in Malaysia will try to push Najib out of office rather than allow such change. “People who have had their snouts in the trough for such a long while are not going to take it lying down,” said an analyst in Kuala Lumpur.

“I agree this is no easy task,” Mr Najib said. But “Malaysia’s future prosperity depends on our ability to create an environment conducive to innovation and investment. The NEM… depends on our ability to provide equitable treatment for all businesses, ethnic communities and groups.” He said the NEP will “be based on needs and merit, and not simply race.”

 Mr Najib is attempting to effect change without losing the vital support of the Malay majority, and stressed: “We are not dismantling any type of support for the Bumiputera, who are often those who need it the most.” But he offered an unusually stark admission that policies have previously enriched a few and not served the majority, saying he must “make sure that government support will not get wasted in rent-seeking and patronage behaviours by a few privileged individuals.”

Specific measures include the launch of a Government Transformation Programme which will involve “improving government efficiency, an immediate crackdown on street crime, tackling corruption and a complete eradication of hardcover poverty by the end of 2010.” Other measures include childhood literacy improvements, welfare reform, and smaller government with greater partnership with the private sector. A new taskforce, PEMUDAH, has been launched to cut red tape and make it easier to do business in Malaysia. “We know that the era of ‘government knows best’ is over,” Mr Najib said.

 In one measure sure to divide opinion, the NEM will reduce subsidies, including oil. “Malaysia is one of the most subsidized nations. We know that this is not a responsible course.”

Malaysian society has been uncommonly tense this year, with attacks on Hindu temples and international concern about a second sodomy trial for Mr Anwar, who was imprisoned for six years on a similar charge that was subsequently overturned in 2004. Mr Najib said Mr Anwar “deserves to have a fair and impartial trial” independent of the government and added: “The government views this trial as a distraction from its important work of modernization and reform.”

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