JULY 6 — Like most short-sighted politicians, Tun Dr Mahathir Mohamad has described Datuk Seri Najib Razak's capital market liberalisation as a move to be popular.
PAS president Datuk Seri Abdul Hadi Awang too has opposed it, saying the Malays are still weak and need the 30 per cent equity quota.
I guess it is easier to change laws and policies than Dr Mahathir's mind, or Hadi's, which is ironic as the country's fourth prime minister has put in similar market-friendly policies in the past.
And Hadi is working on the political capital that was and is still Umno's province. Perhaps he truly does believe in Malay unity unlike his Islamist colleagues.
But the prime minister's broad measures to liberalise and remove the unnecessary obstacles to the Malaysian capital market must be lauded for what it is — a "better late than never" move to remove the politically sensitive Bumiputera quotas on new share issues or IPOs to improve investor sentiments in the local bourse.
The measures include cutting the powers of the Foreign Investment Committee and repealing the guidelines concerning acquisition equity stakes, mergers and takeovers are designed to attract new foreign capital to come into the country and prevent domestic capital from leaving the country.
Let's face facts; the local stock market has not been an attractive destination for investment capital even for Malaysians for the last decade.
Foreign funds have preferred our more politically unstable and less democratic neighbours like Indonesia and Vietnam, willing to accept greater risks to earn a better return and avoid our relatively safe markets.
Bursa Malaysia has been struggling for 15 years since 1994 to make our stock market attractive. So far its efforts have fallen flat as the Bursa has failed to surpass its historical high of 1,400 points.
Bursa Malaysia has even taken the drastic step of merging its once famous casino, the Second Board, into the Main Board.
This desperate action has failed to rejuvenate and the stock market as it continues to trade listlessly and sideways since.
There is a very good reason why those measures failed to work. The fundamentals of the capital market in Malaysia need to be addressed and changed to adapt to the new climate of globalisation.
We should learn from the actions of our neighbours and make our capital markets attractive as they did.
Foreign capital has been spoiled for choice as it bypasses Malaysia to park funds in neighbouring countries, with Singapore a recognised safe haven for investment as the favourite destination.
The inflow of foreign funds has enabled the Singapore Stock Exchange to defy gravity and grow even though it has a small domestic economy.
Singapore should not be a worry to us from its domestic perspective.
But what should concern us more is its effective role of becoming a conduit for funds globally to channel its investments into our serious competitors in the region.
I wouldn't be surprised if Singapore isn't already benefiting from Malaysian funds that have left the country over the years.
Again, both Vietnam and Indonesia have become the new darlings for the world's investment community despite their extreme poverty, lower standard of education and poorer command of English.
Singapore plays a big part in sourcing foreign funds to finance its development.
Malaysia has to find out why we continue to remain unattractive despite our good level of education, better English skills and low level of poverty, and take action quickly.
As for the loud rumblings among Malay leaders from both the Barisan Nasional and Pakatan Rakyat on the impact of the removal of the current rules that protect Bumiputera interests, I believe the previous rules no longer matter.
The usefulness of the rules has been overtaken by global fundamentals.
The mandatory 30 percent share allocation for new listings is not attractive to Bumiputeras anymore.
The shares are not valuable now because new listings on the Bursa Malaysia have not been highly profitable since the last decade.
It’s no surprise that individual Bumiputera shareholders have decided to sell down their shareholding as quickly as they obtain their shares.
Najib was reported as saying that only RM2 billion out the RM54 billion Bumiputera shares issued remain in the intended hands.
He is correct to remove the Bumiputera quotas as they are no longer useful but remain as part of a source of contention and an impediment to the 1 Malaysia concept although the chauvinists will probably sing The Communards' "Don't leave me this way" to force him back to their mindset.
I find it equally appalling that Bumiputera trust agencies like Permodalan Nasional Berhad (PNB) are guilty of dumping these shares. They were also allocated a sizable proportion of the new issues.
PNB had been filling that role but it resorted to selling the Bumiputera issues to cover the losses on its other investments.
What we have, apart from short-sighted politicians, are civil servants and those entrusted with running these funds fumbling on perfectly fine policies. The end result is Umno gets the blame due to an oversight of oversight.
Having said that, the proposed new equity fund Ekuinas appears to be a good idea but it must avoid falling into the trap that PNB did before.
Therefore, the government should pay close attention to the management of Ekuinas as with other funds now in the capital market.
Overall, I hope the new measures will be positive and make Malaysia an attractive investment destination again.
The economy should start to grow at a faster rate again and allow the creation of more business opportunities which should allow more Bumiputeras to participate and give foreigners the confidence that they can run their businesses unimpeded by outdated affirmative action policies.
Maybe the 30 percent Bumiputera equity objective will finally be achieved by freeing the market and getting more of them to invest.
We Malaysians need to break free, to paraphrase Queen, from the old ways and old politicians.
Datuk Nur Jazlan has been away travelling and is now back to 1 Malaysia, many opinions — as a democracy should be.
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