The discourse on bumiputera quotas and discounts, this time involving the housing and property sector, has reached a new level with politicians and the public arguing whether such a policy is in sync with the New Economic Model (NEM) espoused by Prime Minister Datuk Seri Najib Razak.
The issue is not new though. In the past, the Real Estate and Housing Developers Association (Redha) called for a review of the requirement to sell certain types of properties to bumiputeras at a discount. Since the introduction of the New Economic Policy (NEP) in 1970, besides the discount which ranges from 5% to 15%, housing developers are also required to set aside at least 30% of units for bumiputeras. However, developers can apply to the government for the release of this allocation after a certain period.

But when politicians raised this matter again — this time, it was DAP’s Tony Pua — the discussion, as could be expected, turned political. Pua proposed that the government do away with the 7% discount for houses above RM500,000 and commercial properties exceeding RM2 million.

The reaction of Umno and Malay pressure group Perkasa showed that they were clearly against such a move, even for high-end properties. Umno Youth leader Khairy Jamaluddin said statistics in 2007 showed that bumiputera ownership of properties and buildings was only 15.7%. For commercial properties, including business complexes, the community’s share was only 29.2%, and for industrial premises, it was as low as 3.5%. Such imbalances, he added, were “too obvious”.

Taking the middle path, so as not to be seen as backtracking on the NEM, Najib said the Barisan Nasional states will not do away with the discount. “It will not happen now although I must admit that this practice might not last forever. But now is not the right time [to remove the discount],” he added.

The aim of the quota and discount, just like many of the NEP’s objectives, was noble. This policy was put in place to encourage more bumiputeras to own houses and business premises and ensure the right mix of races in new housing estates, townships and commercial areas to reflect the country’s multiracial makeup.

The number of bumiputeras able to own properties has increased in the last 30 years, notably among the lower and middle income groups, thanks to attractive government loans, discounts given by developers and the involvement of state governments in housing projects. However, the aim (of the discount) is “not so noble” when rich individuals who can afford to buy houses priced at more than RM1 million still get the discount.

What’s more, speculators have abused and taken advantage of the discount system. It is a known fact that many Chinese property agents co-opt bumiputera individuals into lending their names as registered buyers, notably to purchase freehold properties in prime areas, especially corner lots, in projects undertaken by private developers. These properties are later sold on the secondary market within a year for a hefty profit.

The bumiputera buyers who are entitled to a discount but let their names be used get their “commissions” from the non-bumiputera agents.

This is what happens when a blanket discount is given to all properties. The policy is often abused as greed takes over. And if there is anyone who should be ashamed of manipulating the NEP, it is these groups.

For developers, the discount and quota system has resulted in higher holding costs and inefficiencies in the delivery system. But they are also partly to be blamed for the abuse of the discount policy as they know there are bumiputera units being taken up by agents and not sold to genuine buyers. The only concern of the developers, it seems, is to get their properties sold, no matter what.

As we move forward to a more liberalised economic environment, I believe the burden of increasing the number of properties — especially business and industrial premises — held by the community should be carried by bumiputera institutions and government-linked companies. When the NEP was launched, Mara, the Urban Development Authority (UDA) and Pernas were active in the property market, developing and buying commercial properties for the bumiputeras.

While Mara continues to build, sell and rent out small business premises, the social responsibility role of UDA and Pernas was derailed when both organisations underwent privatisation through management buyouts (MBO) in the 1990s. As the MBOs were mostly financed by borrowings, profit and bank repayment became the priority of the MBO team, leaving community needs in the dust.

While the assets of companies under Pernas are now mostly under Tan Sri Syed Mokhtar Al-Bukhary, Pernas — a government agency — still continues to function but on a smaller scale, notably in helping bumiputera entrepreneurs under the franchise system. UDA Holdings is now back with the government in Khazanah Nasional’s stable.

All the big bumiputera institutions — Permodalan Nasional Bhd, Lembaga Tabung Haji, Lembaga Tabung Angkatan Tentera and state governments — have sizeable property businesses under various companies. Together with UDA and other private bumiputera-owned developers, these companies should not only continue to provide discounts but also build more properties that are affordable to bumiputeras.

New agencies like Pelaburan Hartanah Bumiputera Bhd should not just concentrate on building big high-end commercial projects. Along with Mara and UDA, they should continue to play the role of facilitator by buying bumiputera commercial lots that are not taken up so that these can be rented out to bumiputera businesses or sold when buyers are found.

Meanwhile, non-bumiputera developers should be allowed to choose — to decide if they want to continue giving discounts to bumiputera buyers, particularly of high-end houses costing more than RM1 million. If their aim is to develop a project that will attract a mixed-raced community and reflect the nation’s multiracial aspirations, then the discount and quota system might be a good incentive to encourage bumiputeras to buy their products.

For a multiracial country like ours, it is not a healthy trend to see upper-middle class and high-end housing projects being dominated by a single race. As it is, the majority of children of different races today go to different primary schools. And if they do not mix at school and do not live in a multiracial residential area, it does not help the nation in its effort to forge better relationships among the different races.

Further, bumiputera buyers who strongly feel that they do not need the discount because they can afford it should just say no … and pay the market price.

Azam Aris is executive editor at The Edge. Comments: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

This article appeared in Forum page of The Edge Malaysia, Issue 818, Aug 9-15, 2010