* Malaysia PM says to re-examine affirmative action
* Announces stock sales to boost market liquidity
* Doubts remain over implementation
* Seen needing new electoral mandate to push change
(Recasts throughout, adds analysts, market reaction)
By Razak Ahmad and David Chance
KUALA LUMPUR, March 30 Malaysia's prime
minister unveiled long-promised economic reforms on Tuesday,
with plans to reduce race-based programmes, in what he
described as a "bold transformation" but the lack of detail
Najib Razak told a business conference his "New Economic
Model" would reform a race-based economic system that has
favoured the majority Malay population for four decades but
which critics say has hurt investment and fostered graft.
The 56-year-old British-trained economist did not spell out
details on the measures, designed to transform Malaysia into a
developed nation by 2020. The plan could hit his voter base,
the 55 percent of the population that is Malay, but he insisted
he was brave enough to make changes.
"In the short term, there will be entrenched opposition,"
Najib told the conference.
"But for the long-term strength of our nation, we cannot
afford to duck these issues any longer," he said.
For a Q+A on the New Economic Model, click on
For key Asian political risk themes, click on
Najib took care to praise the the existing race-based
policies meant to improve the lot of Malays against the richer
ethnic Chinese. They were implemented by his father, Abdul
Razak Hussein, in the wake of race riots in 1969.
The new plans will be sent for public consultation, a
process that has already derailed fuel price rises and a goods
and services tax, casting doubts on Najib's ability to force
political and economic change in this Southeast Asian country
that is facing increasing competition for investment.
The full list of plans will be announced formally in June.
A plan to sell a 32 percent stake held by a state
investment fund in the country's postal service, POS Malaysia
(PSHL.KL), worth around $107 million based on its current
market value, boosted the company's stock by 10 percent.
However, the ringgit currency MYR= and 5-year government
bonds MY5YT=RR were little changed after Najib's
Najib also said two subsidiaries of state oil giant
Petronas [PETR.UL] would be listed and that the Employees
Pension Fund, a second state fund, would sell down some of its
holdings to boost liquidity on the stock market.
"It is encouraging that the government is moving along in
the divestment process, but we were disappointed that there was
no concrete timeframe for some of the reforms," said Standard
Chartered economist Alvin Liew.
ECONOMIC GROWTH AND NEW POLLS
As well as boosting economic growth so that Malaysia
achieves the income levels of a "rich" nation by 2020, more
than double the $7,000 per capita income of today, Najib has to
hold together a fractious coalition that was hammered out in
elections in 2008.
Some political analysts doubt Najib, backed by an ailing
coalition that has ruled Malaysia for 52 years, will be able to
carry out his inclusive social policies at a time when the
country has become polarised over race and religious issues.
Muslims recently protested over Christians using the word
"Allah" for god and more than a dozen places of worship were
attacked. The issue became a catalyst for the formation of
Malay rights group Perkasa, which met at the weekend with the
blessing of influential former premier Mahathir Mohamad.
The caning of three women for adultery under Islamic law
has also unsettled ethnic Chinese and Indian minorities, who
account for around 35 percent of the population, as well as
indigenous people from Borneo Island, many of whom are
Najib may in any case need to seek early polls, even though
the next elections do not have to be held until 2013.
"He will have to do it with the mandate of an election,"
said David Kiu, a political analyst at risk consultancy Eurasia
Political uncertainty in Malaysia since the 2008 elections
has hit net portfolio and direct investment outflows
MYFLO=ECI to the tune of $61 billion in 2008 and 2009,
according to official data. Malaysia's economy shrank 1.7
percent in 2009.
The country once accounted for half of total capital
inflows into Southeast Asia's emerging economies that included
Thailand, Malaysia and Indonesia. Increasing competition means
it now accounts for about a third.
A strong export-led rebound this year will likely see the
economy grow by 4.5-5.5 percent, according to Malaysia's
central bank. Najib's new economic model is targeting 6.5
percent annual economic growth.
"I would have thought that generally people would continue
to take a wait-and-see approach before deciding whether to
expand their investments in the country," said Robert
Prior-Wandesforde, an economist at HSBC.
(Additional reporting by Royce Cheah, Loh Li Lian, Julie
Goh and Soo Ai Peng; Editing by Paul Tait)