Stone cold,
You're correct in that these protectionist policies do exist all over the world; that doesn't make them right or beneficial.
Australia has allowed pilots to come in on 457 visas in recent years and taken jobs from qualified locals. It doesn't happen constantly but it has happened in the past. But even if Australia had the exact same policy, it wouldn't make it right.
So maybe the DCA is complying with Immigration instructions not to provide licenses to non citizens for low experience level openings.
This may be the case, but the wording that was written before was that they won't approve any non Malaysian FOs.
Now, considering some FOs have 10,000 hours and the job in question that this thread was started over is a FO position on a 747, would you call that a "low experience level opening"?