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Tuesday, May 26, 2015

Bumi equity 50% now if policies carried out, says economist

In the 11th Malaysia Plan, Bumiputera investors may withdraw savings from EPF to buy unit trust in the Amanah Saham Bumiputera Two (ASB2) to increase their equity. – The Malaysian Insider file pic, May 26, 2015.In the 11th Malaysia Plan, Bumiputera investors may withdraw savings from EPF to buy unit trust in the Amanah Saham Bumiputera Two (ASB2) to increase their equity. – The Malaysian Insider file pic, May 26, 2015.
Bumiputeras would be controlling 50% of all corporate stock in Malaysia had the previous Barisan Nasional (BN) administrations carried out pro-Bumi business policies, said a prominent economist who helped in drafting them for the government.
Universiti Malaya's (UM) Tan Sri Kamal Salih said this as Putrajaya pushed its Bumiputera business agenda in the 11th Malaysia Plan (11MP) launched on May 21.
Kamal said 11MP’s target of achieving 30% Bumiputera corporate equity would likely fail without structural reforms to the agencies and departments tasked with carrying out the agenda.
“They were good ideas but the execution was poor,” said Kamal referring to why the Abdullah-era policies which he helped crafted, failed to achieve the Bumiputera equity target.
The policies forged during Abdullah's administration were supposed to continue where his predecessor, Tun Dr Mahathir Mohamad, had left off.
According to economists Edmund Terence Gomez and Johan Saravanamuttu, Bumiputera equity or ownership of corporate stocks stood at 18.9% in 2004, when Abdullah took over from Dr Mahathir.
That figure went up to 21.9% in 2008, according to Gomez and Saavanamutt's book, "New Economic Policy in Malaysia, Affirmative Action, Ethnic Inequalities and Social justice". This was a year before Abdullah passed the mantle to Datuk Seri Najib Razak, who is now prime minister.
Cluster approach
Abdullah’s administration had used a cluster approach to developing more Bumiputera enterprises by tapping into the value and supply chain of certain industries, said Kamal, who is now an adjunct professor at UM.
A key feature was the open tender system, through which 60% of government contracts to Bumiputera companies were issued, Kamal said.
Negotiated tenders would only be given sparingly, he added.
Another important thrust was the parcelling out of contracts to Bumiputera small and medium enterprises (SMEs) through government-linked companies (GLCs) when these obtained big contracts from the government.
“The philosophy was to cooperate and compete at the same time so that the best Bumi companies can grow.”
Architect of the pro-Bumiputera equity policies, Tan Sri Kamal Salih, says their failure lies in implementation. – The Malaysian Insider file pic, May 26, 2015.Architect of the pro-Bumiputera equity policies, Tan Sri Kamal Salih, says their failure lies in implementation. – The Malaysian Insider file pic, May 26, 2015.These strategies, however, were not implemented adequately and Abdullah's administration came up short on its aims.
When it came to government procurement, the majority of contracts were still given out through closed, negotiated tenders, which made collusion and corruption easier, Kamal said.
“When GLCs received big contracts, they formed subsidiaries which competed against the Bumiputera SMEs that they were supposed to help.
“In the end, a combination of institutional failure, incompetence, lack of integrity, leadership and collusion scuttled its implementation.”
If Abdullah’s and Dr Mahathir’s policies had been properly implemented for the past 30 years, Malaysia would have surpassed its 30% Bumiputera equity target and hit 50% by now, he said.
It only reached 23.5% in 2011. In his 11MP speech, Najib said the aim was to reach 30% by 2020 – the year Malaysia is supposed to be a developed country.
This would be done through his Bumiputera Economy Empowerment Agenda launched in 2013. It allocates RM47.95 billion worth of programmes towards growing Bumiputera SMEs, to be implemented by the government’s Bumiputera Agenda Steering Unit (Teraju).
Teraju’s website states that this will be done by providing business opportunities and funding, private sector investment and the vendor development programme involving GLCs.
In 11MP, Najib also announced that a part of the savings from the Employees Provident Fund (EPF) could be taken out and used to buy unit trust in the Amanah Saham Bumiputera Two (ASB2) scheme.
Kamal, however, said Najib’s own Bumiputera policies and the 11MP itself were doomed to fail like those of his predecessors if he did not reform implementation.
He had praised the 11MP for its focus on improving the livelihood of the bottom 40% of households who earned an average monthly income of RM2,500.
“From an economic justice point of view, the 11MP is the best set of policies since the NEP (New Economic Policy). But I fear its targets will not be achieved without deep institutional reform.”
- TMI

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