DATUK Seri Najib Abdul Razak’s economic liberalisation is real, profound and courageous; one wishes such zeal was seen in other areas in need of reform as well. Nonetheless with two swift strokes of the axe he has decapitated within his first 100 days as prime minister some of the most odious economic policies that his predecessors failed to repeal.

He is, it must be said, aided by two important factors. First is perceived necessity: it is now universally accepted that foreign investors will simply go elsewhere unless we make Malaysia more attractive. Second is the acceptance – or grudging tolerance – for such reform measures among the economic nationalists within his party. As a trump card to out-reform the Pakatan, it may just work, especially if the Opposition then bicker internally about whether to oppose these measures on socialist or ethno-nationalist grounds, or conversely to criticise the government for not being liberal enough.

Justifying the measures in his keynote address at Invest Malaysia 2009 on Tuesday, the prime minister acknowledged that “the economic environment regionally and globally has changed drastically since the inception of the NEP” and that “the FIC as an instrument has not produced the desired results over the last 19 years”. Minister in the Prime Minister’s Department in charge of the Economic Planning Unit Tan Sri Nor Mohamed Yakcop added that the “FIC was a hindrance to growth”.

While the 30% bumiputra equity requirement remains – maintaining the principle that a certain group of citizens defined by government ought to own a certain share of the nation’s wealth – it does so as a macro objective to be arrived at by the respective sectors themselves. It is an important indication that Najib is prepared to trust the market instead of wielding regulatory powers to obey government diktat.

If this trust is secured and built upon it will open up avenues to further encourage the growing of the economic pie, and furthermore, transfer control over our money from the government to individual citizens.

For instance, efforts to bring our numerous Free Trade Agreements still under negotiation to fruition could be stepped up, though these inevitably take time. Securing multilateral agreements is an even slower prospect, as the Doha Round experience indicates. Fortunately there is much we can do unilaterally to liberalise trade, as we did successfully in the eighties and nineties by reducing a slew of tariffs (other distortions to the economy such as faux “privatisation” notwithstanding). While many of the tariffs in force today are on essential goods, tariff elimination is viable especially if done gradually: rises in inflation met with commensurate reduction in tariffs.

Subsequent drops in prices would mean government having to spend less on subsidies in order for consumers to pay current prices. This may help to alleviate the government’s fiscal burden, with savings ultimately passed to the taxpayer.

Furthermore, our tax system could be decentralised, so that rather than us paying taxes to federal government, which then disburses to state government, which then disburses to local authorities – a process laden with leakage and inefficiency – Parliament could cut federal taxes and enable a more locally-accountable process of tax collection for things like rubbish collection and street lighting. This would create unprecedented competition and choice, harking back to the days when people moved freely from state to state seeking the opportunities that best suited them and their families.

While liberalisation in certain sectors pertaining to our natural resources and matters under the jurisdiction of the states need to be looked at carefully, the car industry is one that the federal government could easily reform. For example, greater competition and a concurrent abolition of the Approved Permit system – that hideous tool of patronage – would enable more ordinary Malaysians to buy the cars they actually want to buy.

Then there is the battle against corruption. According to the latest World Bank Worldwide Governance Indicators, Malaysia’s performance in controlling corruption has not improved since 2003. The application of open tenders, simplified approval processes and a more robust dispute resolution procedure – whether in or outside the court system – would do much to combat ways in which corruption wastes taxpayers’ money.

There is no social, moral or economic reason to deny ordinary Malaysians the fruit of investment – foreign or domestic – and higher quality goods – foreign or domestic – at lower prices. The liberalisation announced this week is a crucial step in ensuring Malaysia does not vanish from the global economy. More please.

Tunku ’Abidin Muhriz is director of the Malaysia Think Tank (waubebas.org), a member of the Freedom to Trade Coalition (freedomtotrade.org) of 73 think tanks in 48 countries. Comments: letters@thesundaily.com.