Malaysia Will Adjust Its Racial Policies

ASIA NEWSMARCH 23, 2010, 8:47 P.M. ET
Malaysia Will Adjust Its Racial Policies
By PETER STEIN

HONG KONG—Malaysian Prime Minister Najib Razak said his government is planning to adopt new affirmative-action policies that are "more market friendly" but said the pace of reforms will depend in part on "people's buy-in to the changes."

In an interview Tuesday, Mr. Najib also addressed concerns about religious unrest in Malaysia, the trial of opposition leader Anwar Ibrahim and the use of oil revenue to subsidize domestic fuel prices.

After taking power in April last year, Mr. Najib announced a relaxation of restrictions in the country's services sector, including moves to encourage foreign investment in tourism and legal and financial services.

"The market, I must say, has not appreciated the significance of those changes," the 56-year-old Mr. Najib said in Hong Kong, where he spoke at a Credit Suisse investor conference. Also underappreciated, he said, were "the political risks we have to take to examine some of these policies and reform these policies."

Malaysia retains longstanding policies aimed at promoting the role of ethnic Malays, who make up 60% of Malaysia's 27 million population, and which leave many ethnic Chinese and Indians feeling disadvantaged.

However, his government plans to announce new overhauls in coming weeks. "And the new approach towards affirmative-action will be more market friendly, more transparent and more merit-based," Mr. Najib said, without disclosing any details.

The British-educated Mr. Najib, the son of Malaysia's second prime minister, took power last April after big losses at the polls for the governing National Front coalition precipitated the resignation of his predecessor, Abdullah Ahmad Badawi. The opposition, led by former deputy prime minister Anwar Ibrahim, has gained ground in part by drawing on support from disaffected ethnic groups.

Mr. Anwar is currently on trial for allegedly sodomizing a young male aide in 2008, the second time such charges have been brought against him in little more than a decade. Mr. Anwar, 62, says the charges are a fabrication aimed at destroying his reputation and political career. He was jailed on similar charges from 1998 to 2004, when his conviction was overturned on appeal.

Asked how he responds to criticism that Mr. Anwar is being tried for political reasons, Mr. Najib said that it "has nothing to do with the government. It's an individual matter. It just so happens the person concerned is the head of the opposition." He added: "Let us allow the process to take place and the international community can judge for itself."

This year, Malaysia has been hit by religious unrest. Tensions between Muslims and non-Muslims escalated after the country's High Court ruled on Dec. 31 that Roman Catholics could use "Allah" as a translation for "God" in a Malay-language church publication. That sparked protests among Muslims demanding that Islam be protected, and led to attacks on a number of churches and the desecration of two mosques. Mr. Najib's government has appealed the court decision, arguing that the Arabic word should be reserved for use by Muslims.

Mr. Najib blamed the violence on extremists. "In any society, there will be the whole spectrum of views," he said. "You will get the extremists on the far right and also the far left." He noted that "to change people's attitudes and values, it does take time."

Weaning Malaysia off dependence on royalties earned from its oil reserves is one of the nation's longer-term challenges, Mr. Najib acknowledged. Currently, the government uses that income to subsidize public fuel prices but "we've realized it's not sustainable." However, he noted that "there's a political cost to taking away subsidies," which will make it difficult to remove them quickly. He also stressed the need to strengthen Malaysia's social safety net to help poor people most impacted by any changes.

The prime minister confirmed that Malaysia is "quite keen" on joining an Australian-backed proposal for a trans-Pacific free trade zone. Last week, representatives of the U.S., Australia, China, Brunei, New Zealand, Peru, Singapore and Vietnam held preliminary talks on the idea of such a grouping in Melbourne.

Malaysia's policy is pro-free trade, he said, "so any kind of arrangement that helps to promote trade is something that we would be very supportive of."

Write to Peter Stein at peter.stein@wsj.com

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