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Press Statement

by Lim Guan Eng

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(Petaling Jaya, Sunday): DAP regrets that Deputy Prime Minister Datuk Seri Najib Razak has refused to say where the head of the EC delegation to Malaysia, Thierry Rommel, was wrong in saying that the NEP must be abolished. Najib should directly address the basis of EC’s criticism of the NEP and not try to distract attention with facile nationalist sentiments of EC’s unwarranted interference in Malaysia’s internal affairs.

Najib should demonstrate his maturity in arguing with reason rather than emotion by refuting Rommel’s call for the abolition of the NEP with facts. Rommel had cited the NEP as the principal reason why Malaysia has been overlooked by foreign investors.

“Rommel attributed Malaysia’s slowdown in drawing Foreign Direct Investment (FDI) to a lack of a level playing field for foreign companies “even when they are in a partnership with bumis”.

Together with an inefficient public service, corruption and the questionable and unchecked practices of Malay preferential treatment, it had also dampened the business environment and economy of the country, he added.

While the public service delivery system lacks efficiency, responsiveness, transparency and accountability, corruption as well as the questionable and unchecked practices of Malay preferential treatment also plague the business environment and economy of the country, he added.

In urging Malaysia to re-look its pro-Bumiputera policies to attract European investors, Rommel warned that opening up a public debate on the NEP would incur short-term political risks. However, Rommel said such risks can be managed through transparency, dialogue and education.”

What Rommel said is nothing new and public knowledge. Some of the criticisms against the civil service were recognized even by Prime Minister Datuk Seri Abdullah Ahmad Badawi who labeled them as ‘little Napoleons” with small titles but wide powers to delay and even derail projects beneficial to the people.

As a diplomat, Rommel would not clearly break with diplomatic convention, unless he felt it that Malaysia was refusing to face reality in private meetings and he had no choice but to go public to get his message across. For his frankness, Malaysians should thank Rommel for reminding us of the critical challenges and dangers facing the country if the government continues to pursue outdated economic policies of quotas that abandons efficiency, relies on cronyism more than on accountability and prefers mediocrity to merit.

If the government close our eyes and cover our ears to such constructive criticism, BN is slowly turning our economy into a neo-autarky or closed economy. The time has come for Malaysia to discard the NEP or risk being abandoned by the globalised world of open competition, free trade and optimal efficiency.

The NEP and Malaysia’s declining oil reserves that will make Malaysia a net oil importer in 5 years will damage future economic growth and prosperity

The NEP and Malaysia’s declining oil reserves, that will turn Malaysia from an oil exporter to a net oil importer in 5 years, will damage future economic growth and prosperity. The twin impediments of the anti-competition, anti-growth and anti-trade NEP as well as declining oil reserves are huge challenges that the Malaysian government has not even begun to address.

Oil revenues make up 40% of our yearly national income. According to the 2007 Budgetary estimates by the Ministry of Finance, Malaysia revenue’s this year is estimated to be RM 134,815 million in 2007. Of this, oil and gas amounts to RM 53,730 million comprising: -

• Petroleum income tax of RM 24,693 million

• Crude oil export duties of RM 2,642 million

• Petroleum and Gas Royalty of RM 4,395 million

• Petronas Dividend of RM 22,000 million.

This does not include the taxes paid by oil related companies or companies in the oil industry, which can be quite substantial.

This oil revenue has allowed Malaysia to cushion the negative impact from mismanagement, wastage of public funds and corruption scandals that have plagued Malaysian society and would otherwise have crippled Malaysia’s economy. Without oil revenues in 5 years time, one wonders where Malaysia is going to find the RM 54 billion or fill in the 40% gap in the nation’s finances.

Without oil resources, a country’s economic growth would depend on comparative and competitive advantages. As comparative advantage has been fully utilized in all countries, economic growth is now fuelled by competitive advantages especially in producing goods and services which are of good quality and reasonable prices. As indicated by the EU Ambassador to Malayisa, the NEP has harmed instead of helped Malaysia to improve our competitive advantages.

With the advent of Malaysia being an oil importer, it is more crucial and critical that anti-competitive economic practices and policies such as the NEP must be dumped. The BN government has to put aside the political, racial and historical burdens and stop being stubborn in continuing with outdated policies if Malaysia is to progress in the market economy and globalised world of the 21st century.