Revisiting the Bumiputera corporate equity issue


By Lim Teck Ghee

More than five years have passed since the Asli corporate study report revealed that Bumiputera ownership of corporate equity in the Kuala Lumpur Stock Exchange had exceeded the 30 per cent target.

The study’s findings of a 45 per cent Bumiputera share were based on a different method of measurement compared with the official one. Using market value as opposed to the par value valuation official method, and allocating the equity of GLCs according to racial share, the study noted that it was time to do away with the policy which had been implemented since the 1970s.

The study’s findings raised a hue and cry not only because it challenged the official data on the share equity attained by the Malay community but more importantly because it challenged the official orthodoxy.

Strong reactions from various Umno leaders at that time indicated their fury — and perhaps fear — that the Asli study negated a long-held belief on how the Bumiputera corporate equity strategy was necessary for Bumiputera economic advancement and synonymous with the interests of the Malays.

Lost in the firestorm were the study’s recommendations that encompassed a wide spectrum of issues. Those recommendations are reproduced below. I hope they will be read more carefully by the present crop of policymakers and politicians that are trying to find their way out of what has correctly been referred to as the “bastardisation of the NEP” — an assessment made by one of the nation’s foremost bankers, Datuk Seri Nazir Razak.

Corporate equity findings (from Centre for Public Policy Studies’ Report)

  • GLCs are leading shareholders of corporate equity. The GLCs’ pattern of operation reflects little entrepreneurial and manufacturing capacity.

  • Regulatory agencies ensure that 30 per cent of the equity of quoted firms is owned by Bumiputeras. These agencies do not, however, ensure that individual Bumiputeras allocated large volumes of publicly-listed equity, especially during IPOs, retain their ownership of this equity.

  • Publicly-listed shares distributed to Bumiputera minority shareholders during IPOs should be done in a more equitable and transparent manner. Currently, an elite benefits from such IPOs, and these shares are quickly divested for huge profits.

  • The continuous divestment by Bumiputera shareholders (partly as a means of asset diversification) has been mainly responsible for the so-called “under achievement” by the Bumiputera in relation to the NEP corporate equity targets based on the official definition.

  • Even if this divestment is not taken into account, Bumiputera share of corporate equity presently is well in excess of the target of 30 per cent, if more objective methodologies of measurement are used.

  • There is little intra-ethnic business co-operation among leading Chinese businessmen. There is growing evidence of inter-ethnic partnerships forged on a basis where the partners contribute equally to the development of an enterprise.

  • Government regulation and policies, principally in the form of NEP measures, are stymieing entrepreneurial development and hindering domestic and foreign investment.

  • Corporate equity recommendations

  • Enterprises owned by the GLCs must be managed by competent professionals with expertise in the business of the company under their charge. Senior management positions should not be determined on the basis of ethnic background but on merit and professional achievement.

  • The government should cease allocating equity to individual Bumiputera during IPOs. The allocation of shares to Bumiputera before IPOs tend to promote “Ali Baba” relationships that only serve to undermine investor confidence and foster ill-will.

  • Bumiputera trust agencies, such as the ASN and ASB, should be the primary beneficiaries of IPOs allocated to this community. At the same time, there should be equal determination by the government to increase the share participation of the Indian and East Malaysian Bumiputera communities through similar community-based trust agencies.

  • Government initiatives to promote enterprise development on the basis of affirmative action will undermine entrepreneurial endeavours, which have emerged primarily among SMEs, without state support.

  • The government should focus its attention on promoting key economic sectors and SMEs as a means to develop Malaysia’s economic potential. The government should particularly tap into the potential of the new middle class to create thriving enterprises and find means to support such endeavours.

  • Racially oriented affirmative action and the promotion of Malay-owned businesses have created serious intra-ethnic Malay cleavages while also hindering the creation of a competitive economic environment. The government should not continue with the continued promotion of such policies.

  • In calculating the respective ethnic shares of the corporate equity, there is need to apportion the share of GLCs as well as nominee companies according to the ethnic composition of the country. This will provide a fairer and more objective computation of the respective ethnic shares as compared with the current methodology.

  • Government policies to enhance Malay Bumiputera and other ethnic minority participation in commerce and industry are better achieved through capacity building efforts such as investment in human resource development and skills training rather than through forced equity restructuring.

  • Continuing “wayang” on Malay corporate equity

It is understandable why Perkasa and similar parasitic groups are raging away at the corporate equity issue. The ultra nationalist movement badly needs issues that can burnish its credentials as the protector of Malay interests and derail the structural reforms the country needs to flourish.

What is incomprehensible is why Umno continues to harp on the attainment of the racial corporate equity share target as a key goal to be pursued for the Malays and country as a whole.

It is absolutely the wrong target to focus on because it has been conclusively shown to benefit only a small minority of well-connected and already wealthy business and political leaders — numbering perhaps no more than a few tens of thousands of individuals and their families at most.

One would have thought that the RM52 billion out of RM54 billion of equity value sold off by Bumiputera preferred investors between 1985 and 2005 would be sufficient proof that these individuals do not need more perks and special treatment.

More important, the Bumiputera corporate equity target is the wrong one as it will only distract from the more important challenges that the nation and especially the Malays and other Bumiputera communities need to face up to.

  1. #1 by boh-liao on Sunday, 5 September 2010 - 11:07 am

    Obvious lah, any fool would know dat Bumi ownership of corporate equity in d KLSE had exceeded d 30% target long ago
    Follow d on going legal dispute between former Realmild director Khalid Ahmad n former MRCB chairman Abdul Rahman Maidin in KL n we will hv a glimpse of where Bumi $$$ had gone in2
    Eventually, through devious routes, Bumi $$$ invariably went into great dictotor n racist MMK, under d pretence of Umno’s guardian
    Ask MMK how he n his family members (wife, children, n in-laws) r so filthy rich n directors of so many public listed companies
    Eg, Google “Saleha bte Mohd Ali”
    Dis is d amazing wealth of just 1 Bumi family (unless it was classified under “Indian”)
    Of cos, there r many many more Bumi families dat r equally as rich or more rich
    Hence, no way Bumi ownership of corporate equity in d KLSE is less than d 30% target

  2. #2 by k1980 on Sunday, 5 September 2010 - 12:41 pm

    They are using the binary system to count— 0,1,0,1,0,1…..

    After 0, comes 1 and then back to 0 again. Can never ever reach 2……so how to reach 30?

  3. #3 by Bigjoe on Sunday, 5 September 2010 - 1:12 pm

    Well, what may be wrong for the country may not necessarily be wrong for UMNOputras. After all the Malay monarchies did one thing wrong after another from the 15th century to the 20th century that ultimately the educated class had to rescue the country from them.

  4. #4 by yhsiew on Sunday, 5 September 2010 - 3:17 pm

    ///Even if this divestment is not taken into account, Bumiputera share of corporate equity presently is well in excess of the target of 30 per cent, if more objective methodologies of measurement are used.///

    But a greedy Mahadir will always say Bumiputera ownership of corporate equity is still fallen short of the 30% target – nobody would want to spit out the fat piece of meat in his mouth.

  5. #5 by haneasme on Sunday, 5 September 2010 - 6:01 pm

    Bro,

    Awak sepatutnya memastikan moderators blog lebih bertanggungjawap, bukan setakat memastikan komen2 yang disiarkan untuk PRO anda tetapi MEMASTIKAN KOMEN PARA PENYOKONG ANDA TIDAK MELEPASI BATAS.

    Pengkritik ## 3 ‘BigJoe’ adakah perlu beliau mengheret institusi diraja dan menghina instiusi tersebut. Hanya Dokumentari Discovery “Emergency In Malaya” disebabkan adanya Institusi DiRaja lah yang meluluskan cadangan agar Pendatang dari Cina dan India diberi taraf Warganegara Malaya.

    Bro,

    Jangan pandai cakap tapi tak serupa bikin. Besar kemungkinan kritik ini tidak akan melepasi lembaga penapis LKS.

  6. #6 by Loh on Monday, 6 September 2010 - 5:30 pm

    Khairy jamaluddin said back in 2006 that the target of 30% should be revised to 60%. Ibrahim Ali of Perkasa notoriety said that including the natives of Sabah and Sarawak, bumiputras’ share of equity should be 67%. These two statements show that when UMNO can continue to claim that the 30% objective has not been met, that was good enough for them to declare the continuation of NEP for its original objective. When EPU has to concede that the 30% target had indeed been achieved, then a new target would be established. UMNO has not intention to end NEP. Period.

    What good is the collective 30% ownership of equity share capital to Malays or bumiputras if they do not own any shares? Have we heard of Mahathir and his sons donating their equity shares or money to charities or more importantly to Malays? If the rich Malays keep their wealth to themselves rather than donating them to the Malay community, what good is it to compute the collective ownership of equity or even wealth? If the 30% only meant to make the community proud, that is promoting racism. Should national policy be promoting racism, even if peacefully? Should racism be the right price to pay for being a low income nation, for non-performing government institutions, for biased civil services and racial polarization so that a few thousands super rich Malays could compete with about the same number of Arabs in Saudi Arabia? It has been reported that the wealth of Saudi Arabia was controlled by about 6,000 families. That might be the reason why Malays is practicing the look-Arab policies.

  7. #7 by dagen on Monday, 6 September 2010 - 6:21 pm

    Is there a new umno idiot here?

    Wot horrible expressions he makes.

    Nope. Cant make head or tail of what he wrote.

    Hey u.

    U tau tulis bahasa malaysia.

    Kalau tak tahu, balik saja ke tempat asal.

    Paham!

    Oh boy.

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