Malaysia PM vows to speed reform after poll setback

By Clarence Fernandez and Naveen Thukral

KUALA LUMPUR (Reuters) - Malaysia's prime minister vowed on Tuesday to speed up economic reform after voters gave his government a wake-up call at elections this month.

But Prime Minister Abdullah Ahmad Badawi, speaking to investors, stopped short of a detailed plan or timeframe, promising only a bold new agenda for the nation's needy.

The government, troubled by fresh economic uncertainty, trimmed its economic growth outlook for this year to 6 percent or slightly lower, from an earlier forecast of 6-6.5 percent.

"The result of the election was a strong message that I have not moved fast enough in pushing through with the reforms that I promised to undertake," Abdullah said in opening Invest Malaysia, the country's main annual investor conference, in Kuala Lumpur.

"In this second term as prime minister, I intend to implement a bold agenda for addressing the concerns of the people as expressed through the ballot box," he added.

Abdullah promised to do more to help the poor, to overhaul Malaysia's extensive subsidy system to eliminate waste and to push through further liberalization of bond and stock markets.

The ruling coalition suffered its worst-ever election setback on March 8. It retained a simple majority in federal parliament but lost control of five states to opposition parties who campaigned on issues of corruption and racial inequality.

The election result prompted sweeping changes to Abdullah's cabinet, unveiled last week, and some major policy changes have already been signaled, including reforms to the judiciary and a review of Malaysia's murky system of subsidies.

Malaysia subsidizes items ranging from sugar to cement under a system that gives some firms a monopoly or oligopoly over the supply of price-controlled items. Billed as poverty alleviation, the system benefits favored companies.

In an interview with Reuters on Monday, the domestic trade minister said subsidy reform would focus on supply arrangements.

Kaladher Govindan, head of research at broker TA Securities, welcomed the comments but said investors wanted details on how the government would reduce income disparity and contain prices.

"These are very vague statements. Combating inflation by trying to keep subsidies is going to be difficult because crude oil prices cannot be controlled," he said.

FUEL PRICES ON HOLD, FOR NOW

The prime minister said the government would hold fuel prices for now at current levels, which are among the lowest in Asia, but warned that the government could not do this indefinitely.

Petrol and diesel subsidies make up the bulk of the total subsidy bill, which is officially estimated at about $3.2 billion this year. Fuel is the hottest subsidy issue because it affects the entire energy supply chain, including gas and electricity.