Nationwide reforms better than special economic zones, says economist

 

Malaysia and Singapore signed a memorandum of understanding last month to set up a special economic zone in Johor. (Bernama pic)

PETALING JAYA: An economist has called for the implementation of economic reforms nationwide instead of the setting up of special economic zones (SEZs) in different parts of the country.

Geoffrey Williams of the Malaysia University of Science and Technology said creating SEZs would be less effective than handing out incentives for businesses across the country.

“It would be much better for a whole-of-nation approach to economic reform and recovery through the liberalisation of business and markets everywhere,” he told FMT.

“Why confine efforts to (attract investments to) SEZs, which could potentially draw investment away from other regions of the country?

“Concentrating (investments) in zones around Selangor or Johor is less effective than making the whole of Malaysia an SEZ with countrywide incentives to do business in a low-tax, low-regulation environment.”

Williams also called for less government intervention, at both the federal and state level, even if such measures are focused on “key growth areas”.

He said the government should only intervene to liberate markets and do away with restrictions on doing business, for both Malaysians and foreigners.

He also proposed that the government implement modern tax policies like an e-payments tax rather than conventional consumption and income taxes, to create a competitive investment environment throughout Malaysia.

The proposed e-payments tax is a small charge imposed on payments at all e-transaction points, including for goods, services and fees.

Its proponents have said the tax would allow the government to generate significant revenue on the back of the ever-increasing use of the internet for business.

On Monday, Selangor menteri besar Amirudin Shari proposed turning the Greater Klang Valley into an SEZ to increase its economic potential, particularly in Petaling Jaya, Subang Jaya, Shah Alam and Klang.

He expressed confidence that this would boost investment and see the Greater Klang Valley emerge as a leading economic zone in Southeast Asia.

A Johor-Singapore SEZ is already in the works, following a memorandum of understanding inked between Malaysia and Singapore last month, with a full-fledged agreement set to be signed soon.

Both nations have also agreed to explore the establishment of a one-stop centre aimed at handling business and investment applications by Singaporean firms and allowing passport-free travel between the two countries at land checkpoints.

Bank Muamalat chief economist Afzanizam Rashid voiced support for the Selangor SEZ idea, saying it would push other states into a healthy competition to attract investment.

He said every state should create a unique value proposition beyond tax incentives to enhance investor experience.

“This would mean addressing red tape and bureaucracy as a means to increase their appeal to investors. In a nutshell, it’s a positive move,” said Afzanizam. - FMT