Pardon me for raining on Najib’s sweeping economic “liberalisation” parade.
For one thing, I don’t think the government fully understands the ramifications of its gung-ho approach to liberalisation in the services sector, especially the financial services sub-sector. Still beholden to the FDI-driven model of economic growth, the government is obviously hoping that its “liberalisation” will result in hordes of foreign investors stampeding into the local market. Sure, more big investors might come in – but at what price to the local economy and small-timers?
The Chinese Malaysian business sector might welcome the removal of bumi quotas. Fed up with paying high prices for “protected items” such as locally made cars, many ordinary Malaysians too might actually welcome “liberalisation” – and I can understand where they are coming from.
But have we considered all the implications? The Bar Council is already worried about the move to allow foreign legal services firms to enter Malaysia to advise on Islamic finance. This is just the beginning.
What happens when the big boys – the MNCs, with their huge resources – muscle into the local services sector? They will be prepared to make a few years of losses to kill off local competition in all sorts of areas – ranging from financial and banking services, tour agencies, and even the management of homes for senior citizens – which we haven’t even thought of.
Okay, they will create some jobs, but what about accessibility in critical areas such as health care and education. Will they cater only for the rich? What will happen to local businesses in the long-run as the MNCs flex their muscles and exert their power?
But the area which we should be most concerned about is financial services liberalisation. First, there has been a disconnect between this sector and the real economy, fuelled by the drive to seek ever-higher returns for surplus capital when the real economy itself has been stagnating due to overproduction (at a time when those who need such goods can’t afford them because of low wages). This has led to periodic bubbles in the services sector – booms and bust due to speculation. Some of the financial giants that could seize the opportunity to expand into Malaysia or acquire stakes in local banks and insurance companies could be the very ones that have received public bailout money in their home countries.
It was precisely financial deregulation and liberalisation in the developed economies that got the world into this mess in the first place.
At a time when many countries are now questioning this financial deregulation and liberalisation model and trying to make their domestic economies more resilient and independent, here we are opening the floodgates to something we don’t fully understand. This is precisely the route that MNCs want developing countries to take: they want to prise open developing countries’ markets through the WTO, Gats and now FTAs such as the EU-Asean FTA.
The Najib administration should not hand over our local market to these MNCs on a silver platter without realising the long-term implications for local businesses and the domestic economy.