Breaking free from old ways

By Nur Jazlan (The Malaysian Insider)

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.

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