Malaysia to Review Investment Rules to Bolster Growth

By Angus Whitley and Chan Tien Hin

Oct. 20 (Bloomberg) -- Malaysia's government plans to make it easier for foreigners to invest in the country and buy property as it predicts the global financial crisis will lead to slower-than-expected economic growth next year.

``We have to make Malaysia more competitive,'' Finance Minister Najib Razak said in Kuala Lumpur today. ``We have to take steps to ensure our long-term competitiveness while we manage the short-term crisis.''

Slowing growth from the U.S. to China has increased concern the world will fall into a recession, hurting prospects for Asia's export-dependent nations. Malaysia, which relies on exports as the biggest contributor to economic expansion, joins Australia, South Korea, China and the U.K. in trying to soften the economic slowdown.

Malaysia will double the size of state-run asset manager Valuecap Sdn. to 10 billion ringgit ($2.8 billion) to help support the stock market, said Najib, announcing his first series of measures since taking over the finance role from Prime Minister Abdullah Ahmad Badawi last month. There will be a package of initiatives to ``liberalize'' the services industry, he said.

``It is a good starting move, but the impact would not be translated into a positive boost to the economy very soon,'' Enrico Tanuwidjaja, an economist at Oversea-Chinese Banking Corp. in Singapore, said in an interview with Bloomberg television today. ``In the current market, which is relatively subdued, these moves will only have an implication in the next two to three years.''

Stocks Pare Drop

Malaysia's benchmark stock index pared declines of as much as 1.9 percent, falling 0.1 percent to 903.96 at the 12:30 p.m. midday break in trading in Kuala Lumpur.

Valuecap was formed in 2003 to bolster government-linked shares after the country's stock market failed to recover from the 1998 Asian financial crisis.

Malaysia will cut its 2009 economic-growth forecast on Nov. 4, from the current estimate of 5.4 percent, Najib said. Still, ``Malaysia is not in a crisis and we will not go into a recession,'' he said in Putrajaya in a separate speech today.

The country will review its foreign-investment guidelines and ease rules on some purchases of industrial land and properties, he said.

The government may have to do ``some tweaking'' of its budget-deficit targets, he said, without elaborating. The finance ministry in August forecast the budget shortfall would widen to 4.8 percent of gross domestic product this year before easing to 3.6 percent in 2009.

Southeast Asia's third-largest economy may expand as little as 4 percent in 2009, central bank Governor Zeti Akhtar Aziz forecast last week, saying Bank Negara Malaysia is ready to shift its focus to boosting growth as inflation worries ease. Economic expansion this year will probably fall below the government's official forecast of 5.7 percent, she said.

To contact the reporters on this story: Angus Whitley in Kuala Lumpur at awhitley1@bloomberg.net; Manirajan Ramasamy in Kuala Lumpur at rmanirajan@bloomberg.net