Malaysian Prime Minister Najb Razak has warned the private sector not to rely on subsidies, as they won’t be around forever and create a false sense of competitiveness. Speaking to CNBC Asia on the weekend, Najib hinted the government’s eventual goal was subsidy reduction and eventual elimination. The private industry needs to be more competitive and it can be because it’s more innovative and productive by nature, with the right kind of investment and talent development.

He admitted there had been some misallocation of subsudies and repeated a commitment to help not only Malaysia’s abject poor, but also the lower 40% who have incomes but still struggle to make ends meet. Fewer subsidies will increase the competitiveness Malaysia needs to compete globally, he said.

Najib’s words come as Malaysia slipped in Global Competitiveness rankings in the World Economic Forum’s annual report. Continuing a downward trend in the past three years, the country fell from 21st in 2008-09 to 26th position. Though it scored highly in legal rights (equal to Hong Kong and Singapore) and investor protection, its performance in the higher education, labor market efficiency and institutions indexes was less stellar.

Minister of International Trade and Industry Mustapa Mohamed noted that Malaysia ranked comparatively well on more complex issues facing advanced economies, like business sophistication and innovation. Once initiatives of the New Economic Model, Government Transformation Programme and 10th Malaysia Plan began to take effect, he said, there would be an increase in overall competitiveness.
the World Economic Forum’s full 2010-11 report is available here: (PDF download)