Malaysia's new PM starts fair ownership plans

Shortly before handing over to Abdulla Badawi, Malaysia's reforming prime minister Mahathir said that he believed that it was time to unravel at least some of the pro-Bumiputra (sons of the land) measures that had been implemented - without sunset provisions - to aid the "Bumis" to move from their largely rural and agricultural lives - many of them poor - to other industries and to develop wealth.

Many of the policies were excellent although some smacked of cronyism as those close to Mahathir were awarded contracts and favours that made them rich, whilst the bulk of the Bumis did not.

Other criticisms were of, for example, the requirement that a percentage of all limited companies must be owned by Bumis. This led to considerable disenchantment by those, particularly in long-standing family companies. And it has led to criticisms that positive discrimination amounted to racism. A class of Indian Muslim was created - the Mamak - which enabled them to qualify as Bumi, and therefore to keep family businesses within a mixed religion but same-race, and therefore same family, structure. The Chinese either formed legal relationships amounting to trusts in which the shareholding was held in trust for the family and a nominal Bumi was paid a stipend as nominee shareholder. But the policy nevertheless wrankled, leaving many businesses to operate as partnerships.

And the policy had a detrimental effect both on Malaysia's reputation abroad and on inward investment.

Abdullah Badawi is a quiet man, accused by his detractors of failing to achieve anything much despite huge strides in public freedoms, freedom of the press and a reduction in corruption and cronyism. In a country where planning is usually done after adverse consequences develop, Abdullah set about a quiety revolution. That he did not appear in every news bulletin making strong, and sometimes outrageous, statements was seized on by those opposed to him - including his former mentor Mahathir.

Last month, after a sustained attack lasting more than a year, Abdullah handed over to Datuk Seri Najib Tun Razak, part of Malaysia's political dynasty. Najib has been seen as Mahathir's proxy and as soon as Najib was installed, Mahathir reappeared stage centre, calling for the restoration of so-called "mega-projects" - and rejoining the UMNO political coalition in a flurry of publicity, then appearing alongside Najib and other cabinet ministers in a series of events. But yesterday, Mahathir - one of the most media-savvy politicians in the world - told reporters "I am not Najib's adviser or consultant."

Najib will have to fight long and hard to establish his credibility and override the allegations that he is going to return Malaysia to "Mahathirism."

And so it is significant that one of his first major policy announcements is that the much derided Bumi-ownership rules are to be relaxed - at least in some service sectors.

The move is needed: many Indian and Chinese Malaysians travel abroad to be educated - and then stay away. The fact that they must surrender 30% of th equity in any business they may start when they come home has been a huge disincentive.

Najib says that the service sector is already a massive proportion of the Malaysian economy already contributing 55% to GDP in 2008 and providing 57% of the country's employment. Najib says that is expected to rise.

The 27 business sectors are in health, tourism, transport, "business," and computer and related services.

But the work towards this, and the planned expansion of the de-restrictions, is based on work undertaken over recent years under Abdullah's tenure as prime minister. Widespread consultation has taken place. He, however, will get none of the credit.

Next week, Najib says, he will be revealing de-restrictions in the financial sector.

And after that, other sectors will follow, he promised.