Friday, April 24, 2009

Msia's Policy Makers Wake Up To Economic Realities

The IMF projects Malaysia's GDP to contract by 3.5% this year compared to the Malaysian government's forecast of -1% and +1%. Meanwhile, IMF's forecast for Sinagpore is -10%, which is in line with Senior Minister Lee Kuan Yew's comments a month ago.

Thus, PM Najb's move to remove the 30% bumiputra equity requirement in 27 sub-services sector (Computer & Related, Health & Social, Tourism, Transport, Sport & Recreational and Business Services) is commendable and marks a first step towards real economic reform for the country.

Removing the NEP policy and the political agenda behind it is essential. But what is more essential for bloggers/the media and the public to understand is that distribution of human and financial resources based on race is economically most wasteful and greatest disincentive for economic wealth-building (as opposed to wealth hoarding by the privileged few).

Allocating economic resources based on race/class(Marxism)/religion/or any other superficial feature is a guarantee for economic inefficiency and waste. There are huge opportunity costs (RM140 billions or 20% of annual GDP?) that Malaysia's affirmative action policies (as distinct from but not unrelated to cronysm) have incurred.

So Najib's move should spark a fresh wave of analysis why Malaysian policymakers need to recognise the absurdity and stupidity of economic disincentives and to allocate its resources in the market efficient way. Everyone benefits from a bigger pie.

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