Shocking News!!!

Singapore Prime Minister Najib Razak will reach a major milestone in his one-year premiership today, when he unveils a much-hyped New Economic Model (NEM) aimed at hauling Malaysia out of economic stagnation.

Public expectations have been stoked sky-high as the decades-old controversial pro-Malay economic policy is expected to give way to more open and merit-based competition.

'The New Economic Model will also emphasise more equitable opportunities so that each and every Malaysian will be able to realise his or her maximum potential,' Datuk Seri Najib said in a video posted on his blog over the weekend.

The NEM will be unveiled in two stages. A framework will be announced today followed by public consultations.

The details will then be released in the 10th Malaysia Plan in June.

If expectations are high, it is partly because the Prime Minister himself has raised them.

He told an investment forum in Hong Kong last week that the reforms should result in a 'marked improvement' in foreign direct investment.

He also said that the new affirmative action policies would be 'more market friendly, more transparent and more merit-based'.

An official who has seen an early draft of the NEM said it included radical proposals such as reducing government involvement in business, and liberalisation of key sectors such as telecommunications and finance.

But it is not certain that the more drastic elements will be retained.

Malaysia is recovering from last year's global crisis but economists warn that serious structural problems remain.

These include an over-dependence on a low-cost structure and subsidies, a labour policy that encourages low-skilled workers and discourages professional expatriates, and a general lack of investor attractiveness.

Foreign direct investment has slowed while capital continues to flow out of the country, resulting in a net capital outflow of RM50 billion (S$21 billion) over the past three years.

Economic reforms are crucial as the government aims to raise the per annum capita income from US$8,000 (S$11,200) to US$15,000 in 10 years, putting Malaysia in the league of high-income nations by World Bank standards.

But the political resistance is intense. There have been increasingly strident calls in recent months from Malay groups and politicians who want the pro-Malay affirmative action policies to be retained.

The politicians include Deputy Minister of International Trade and Industry Mukhriz Mahathir, who rejects claims that pro-Malay policies have deterred investment.

He told The Straits Times in a recent interview that it was just an 'excuse'.

His father, former premier Mahathir Mohamad, has also joined in the Malay chorus, now led by a newly established non-governmental group called Perkasa.

Monday, the Malay Chamber of Commerce became the latest to say that it wants the NEM to be based on the previous pro-Malay economic policies.

The Prime Minister has been sensitive to such criticisms, and has back-tracked on several major initiatives following protests. These included removing fuel subsidies and the introduction of a goods and services tax.

And analysts say Mr Najib is not expected to abolish all forms of affirmative action, as that would be political suicide at a time when the Barisan Nasional's strength is largely confined to the Malay ground.

But expectations have already been set high, perhaps too high to be realistic.

'The NEM has to be new and bold. If the PM misses this chance to do it, people will no longer trust him when it comes to reforms,' said a young Umno leader.