Malaysia aims to more than double the size of its capital market to 4.5 trillion ringgit ($1.5 trillion) by 2020 under a new 10-year blueprint unveiled Tuesday to boost competitiveness.
Najib said the Capital Market Masterplan, spanning through to 2020, would slash red tape for business approvals, accelerate financing for businesses, allocate more funds for venture capital and private equity industries as well as widen access to bond markets to boost large-scale projects.
Najib, who is also finance minister, said private retirement schemes would be set up by the end of the year to promote diversity in the management of long-term savings. Malaysia currently has two public pension funds, which leaves out an estimated 2 million workers, including those who are self-employed.
"On current forecasts, our capital market size will more than double to 4.5 trillion ringgit by 2020 and with greater internationalization, this figure could increase to as much as 5.8 trillion ringgit ($1.9 trillion) over the same period," Najib told an economic investment forum.
Private pension funds are seen as a vehicle to boost retirement savings and add liquidity to the capital market, which was worth 2 trillion ringgit ($662 billion) last year.
The Securities Commission, which will regulate the industry, projected that assets under management in private retirement schemes could grow to nearly $31 billion ringgit ($10.3 billion) by 2020.
The plan however, didn't outline measures on how it would achieve the capital market expansion. Officials said a vibrant capital market could fuel Malaysia's economic growth, which is expected to slow to 5-6 percent this year from 7.2 percent in 2010.
To build an expert work force, Najib offered a flat rate of 15 percent income tax to lure professional Malaysians working abroad to return home. This will begin 2012 and eligible only for the first five years upon their return, he said.
"We are paving the way not only for a more equitable society but for a Malaysia that is more stable, more transparent and more market-friendly," Najib added.
Malaysia's lack of human capital has often been cited as a key stumbling block to economic growth, partly due to a brain drain as its controversial affirmative action program for ethnic Malays has led many citizens to study and work abroad.
Officials have said 140,000 Malaysian left the country in 2007. Between March 2008 and August 2009, the figure more than doubled to 305,000.