KUALA LUMPUR, Malaysia - Malaysia’s leader on Tuesday unveiled an ambitious economic reform program to double income levels in the country and overhaul an entrenched affirmative action program for the majority Malays.

Prime Minister Najib Razak set out a road map to achieve what he called his “New Economic Model," which if implemented would be his boldest policy move since taking office last year to make Malaysia a developed country by 2020.

The plan also proposes reducing subsidies and making great strides in raising education levels.
But to achieve all this, Najib, 56, will face enormous political challenges from power brokers within his party, who would be loath to antagonize Malays, especially with elections due in 2013.

Malays form 60 percent of the country's 28 million people and have long been used to a host of privileges in jobs, government contracts, businesses, education and housing among others.

But critics say the affirmative action program has become a tool for political patronage and has mostly benefited rich and well-connected Malays.

Because of its political connotations, the program is also seen as discriminatory by the minority Chinese and Indians.

The affirmative action program's original objectives are still relevant, “but it is time to review its implementation," Najib said in a speech at an investment conference.

He said it will now be need- and merit-based, rather than race-based.

"Our first priority must be to eradicate poverty, irrespective of race," he said, adding that the program would target those who form the bottom 40 percent of the income strata.

"So there will be a renewed affirmative action policy ... It will focus on the needs of all our people," he said. Also, the government will no longer tolerate practices that support "the behavior of rent-seeking and patronage," he said.

Najib's plan to reform the economy comes at a time when Malaysia is losing its attraction as a low-cost investment destination to other countries in the region such as Vietnam and Indonesia.

Malaysia also suffers from cumbersome bureaucratic procedures in doing business. Productivity is falling and there has been little effort to innovate and create high-skill industries.

"We want to see a Malaysia that makes a quantum leap from the current $7,000 per capita annual income to $15,000 in 10 years," said Najib, who took power in April 2009. This can be achieved by raising skill and education levels, he said.

He said some of the other goals of the reforms are:

·       re-energizing the private sector to lead growth

·       develop a quality work force and reducing dependency on foreign labor;

·       create a competitive domestic economy;

·       strengthen the public sector;

Details on how the goals will be implemented will be announced in the next few months once the government has obtained public feedback, Najib said.

The government's plan to cut fuel subsidies and implement a goods and services tax have already been put on hold due to public protests.

But Najib said a strong political will and the support of all Malaysians is needed to pull the country out of its "middle-income trap" and make it a developed nation by 2020. - AP