Government May Ease Investment Rules?

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Malaysia's Abdullah Says Government May Ease Investment Rules

By Angus Whitley

June 14 (Bloomberg) -- Malaysian Prime Minister Abdullah Ahmad Badawi said he may ease investment restrictions and roll back race-based policies should an experiment in the southern state of Johor be a success.

Asked at a dinner with business executives in Kuala Lumpur late today whether the redevelopment of Johor could be a model for the rest of the country, the prime minister said ``yes.''

Abdullah is seeking foreign investors to help fund a two- decade, 382 billion ringgit ($110 billion) redevelopment of Johor, bordering Singapore. Scrapping the nation's race-based program could lure investors and pave the way for the country to completely drop its 36-year-old policy in support of ethnic Malays, who comprise 60 percent of the population.

The racial program, introduced under the New Economic Policy in 1971 after clashes between ethnic Chinese and Malays, also known as Bumiputras, aimed to increase the wealth of the nation's poorest grouping through benefits ranging from cheaper housing to greater access to initial public offerings.

Concern about the policy's validity grew last year after a report by the Asian Strategy and Leadership Institute in Kuala Lumpur showed the original targets to address the wealth imbalance had been surpassed.

The government earlier this year removed a capital gains tax on property, allowed foreign investors to take out more than three mortgages from local lenders and offered tax incentives aimed at transforming Johor.

The Malaysian government expects the $147 billion economy to expand 6 percent this year after 5.9 percent growth in 2006.