By Lee Wei Lian
KUALA LUMPUR: Malaysians must face new global realities and accept increased competition and removal of subsidies, said Prime Minister Datuk Seri Najib Razak today.

He said today that subsidies for industries must be restructured and gradually phased out to promote private investments.

“Giving freer rein to private initiative and market forces... has important consequences,” he said in a speech at an economic conference.

“We may not be able to afford over-subsidised and under-priced energy,” Najib added.

Subsidies make up about 2 per cent of Malaysia’s gross domestic product with the country expected to spend RM21 billion this year on fuel, gas and food subsidies.

Najib noted that the China-Asean Free Trade Area (CAFTA) that took effect in January would pose challenges to the country but that the nation would just have to adjust.

“CAFTA will challenge all Asean economies to structurally adjust and adapt and Malaysia is no different,” said Najib at the opening of the 1 Malaysia Economic Conference organised by the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM).

“The private sector will need to raise its game in terms of being more efficient abd hone its ability to exploit opportunities presented. CAFTA offers Malaysians unique prospects to export and expand their business.”

ACCCIM president Tan Sri William Cheng had in his speech earlier suggested that the governments of Malaysia, Thailand and Indonesia try to convince China to limit their exports to affected Asean countries to no more than a 10 per cent increase over last year to reduce the impact of CAFTA.

“It is important to understand that complaints and demands to be shielded from competition will get industry participants nowhere,” Najib responded.

“If Malaysians do not do what is necessary to survive and thrive, and do it faster and better, we run the risk of being left out and left behind.”

He added that subsidies for industries must be restructured and gradually phased out and greater domestic competition must occur.

“Nurturing of infant industries must be done differently and based on skills, technology, access to capital and marketing support. Not on protection. The sooner we realise these new realities, the better it will be for all of us.”

Najib added that Malaysia needed to create more intangible assets such as proprietary technologies, intellectual property, brand names and institutions.

“Investment in these assets is extremely critical. Look at high income countries. Their high value industries and corporations have a high ratio of intangible investment,” he said.

The Najib administration is trying to make the country’s economy more efficient by removing subsidies such as for oil and sugar as well as embarking on various economic liberalisation measures such as lifting of ethnic quotas in selected sectors of the economy.