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Categories
| Significant changes to 30% bumiputera rule |
| Business & Market 2009 | |||
| Written by Yong Min Wei & M Shanmugam | |||
| Tuesday, 30 June 2009 10:15 | |||
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A source said the prime minister was likely to replace the 30% requirement with a policy to enhance bumiputera manpower development, adding that the move would create more opportunities for bumiputeras to participate in the workforce at all levels as well as strengthen their human resource development. Sources said that while the move could reduce the equity participation of bumiputera individuals in public entities, it would nevertheless be compensated by spreading the resources to a larger group of bumiputeras and help some of them excel in certain sectors. “The move will enable non-bumiputeras and foreigners to have full control of a public entity. However, the government is expected to boost certain sectors to encourage bumiputera participation,” a source said. According to him, the FIC was also expected to be completely revamped and replaced with a committee more suited to current needs, stressing that the new committee would likely play the role of facilitator rather than regulator. The 30% bumiputera equity requirement was part of the restructuring of the economy and introduction of the New Economic Policy in the early 1970s. This requirement was incorporated into the FIC guidelines when the committee was established in 1974. For the past decade especially, the ruling has been viewed generally as restrictive to foreign investor participation in capital formation of the country and seen as benefiting only a portion of the bumiputeras. What’s more appalling is that despite seeing strong economic growth in the years pre- and post-Asian financial crisis in 1997-98, bumiputera ownership of corporate equity is still only about 19%, very much lower than the 30% target. Over the years, the policy came under fire particularly when public companies that allocated the shares to bumiputera partners to meet the quota see them merely as sleeping partners and in most cases disposing of their stake. Another challenge of the 30% bumiputera equity ruling is the emergence of “Ali Baba companies” that were commonly used to bid for government-tendered projects whereby non-bumiputeras team up with bumiputeras to satisfy the requirement in exchange for a certain sum. In reality there was no enhancement of manpower development. Talk that Najib would announce during Invest Malaysia 2009 measures to boost foreign investments by reducing the powers of the FIC has been around for weeks but the possible scrapping of the 30% requirement is relatively new. Concerns on whether bumiputeras would slowly be losing their slice of the cake picked up steam over the weekend and it is learned that the prime minister had diffused such concerns via a closed-door meeting with senior editors of Malay media organisations, including the influential Utusan Malaysia, in parliament yesterday. In a strong message in its editorial page yesterday entitled Bumiputera Equity Power, Utusan Malaysia highlighted that there were many shortcomings and constraints to the 30% bumiputera equity policy as there is a lack of true bumiputera entrepreneurs as well as financial restraints among the entrepreneurs to fulfil the target. It also stated that the bumiputera community has to accept that the policy previously did not take into account the focus on human capital development but was targeted at producing immediate results. It said the government could no longer solely depend on the New Economic Policy to ensure bumiputeras achieve the 30% participation in the economy without considering other factors. In April, the prime minister announced that the 30% bumiputera equity requirement will be abolished for 27 service sub-sectors, including health, tourism, transport and computer-related services. Najib also further opened up the financial sector. This article appeared in The Edge Financial Daily, June 30, 2009.
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