Before June 30, 2009, discussion of the 30 percent bumiputera equity rule was taboo in Malaysia or at least considered a ‘sensitive’ issue not to be questioned in any quarter. Anyone pressing for its abolition would have been branded as anti-Malay or as a traitor.

najib and finance But Prime Minister Najib Abdul Razak changed all this when he announced that the equity rule would be repealed immediately because the guideline of the Foreign Investment Committee (FIC) has outlived its usefulness.

In fact, it has failed to achieve the goal of restructuring society with the aim of enabling 30 percent bumiputera equity ownership in companies across the board. In 1990 bumiputera equity was 19.3 percent - in 2006, it was 19.4 percent and since then, has not moved.

Up to 2006, the FIC had assigned RM54 billion in equity to bumiputeras, but only RM2 billion (less than 5 percent) remained in their hands - the balance had been sold for profit, said Najib.

The FIC guidelines were also regarded as an obstacle to investment and economic growth, resulting in the need to for restructuring towards being investor- friendly. This is especially since the country faces the following major challenges:

  • Diminishing petroleum reserves (Malaysia is estimated to become a net importer in 2014)

  • Dependence on decreasing FDI from 1998

  • Low level of productivity growth

  • Reliance on unskilled foreign workers

The New Economic Model (NEM) has been formulated to meet these challenges through the following strategies:

  • Create a conducive and investor-friendly environment

  • Focus on effective bumiputera involvement in the economy, based on meritocracy

  • Encourage bumiputera entrepreneurs’ sustained involvement by controlling ownership and management of corporations in sectors with potential high growth

  • Increase the labour force of bumiputera especially in managerial and professional categories in the corporate sector

  • Increase the number of middle-class bumiputeras

The FIC will also stop processing share deals, except those involving liquidity of bumiputera or government interests.

Foreigners are now allowed to purchase property worth up to RM500,000. Ownership in the wholesale segment of the fund management industry will be fully liberalised, for qualified and leading fund management companies to establish operations in Malaysia.

In the retail segment, foreign shareholding limits for unit trust management companies will be raised to 70 percent from its current 49 percent. Foreign ownership shareholding limits in existing stockbroking companies will be similarly increased.

I think precautions are required against over-liberalising strategic economic sectors, to ensure that our economy will not again be controlled and manipulated by the superpowers. This is keeping in mind that our economy is suffering a downturn due to the financial crisis in the US.

Embodiment of NEP spirit

The new instrument to implement the NEM strategies is the formation of Ekuiti Nasional Bhd with RM500 million in initial capital, to be expanded to RM10 billion in private equity funds. Its investments will focus on potential high-growth private sectors such as tourism, ICT, pharmaceuticals, oil, gas and biotechnology.

nor mohamed yakcop and malaysia stock exchange Minister in the Prime Minister’s Department Nor Mohamed Yakcop had stressed (Wawancara, Mingguan Malaysia , July 5, 2009) that: “The government of course holds on to the concept of growth with equity, and will continue to consider this holistically in order to introduce new instruments, besides renewing the old ones.

“It is important to ensure that no bumiputera group is marginalised. They should be given assistance as much as possible so that they are able to progress and achieve the stipulated target of the NEP. The ‘spirit’ of NEP and the bumiputera agenda still exists. Nevertheless, now we have to implement it via new instruments regarded as market friendly.

“The bumiputera quota at micro level in strategic sectors will not be repealed. It applies only at macro level. In fact, it’s our objective to achieve a greater proportion, say more than 30 percent in certain sectors if possible, not only through FIC, through equity but also through licences.

“If we observe those billionaires in Malaysia, among the 10 richest there is one or two who rank at the uppermost. But how could they become so rich? (You’ll discover that) they get big contracts and licences from government.

“So we realise that we have to make use of the licences to cultivate and groom our bumiputera businessmen to become great and successful entrepreneurs. Although we give licences and so forth to some of them, we must verify that they are able to sustain (their performance) and even enhance (it) as expected.”

It appears that Umno and Barisan Nasional have not yet learnt their lesson from those who have exploited the 30 percent bumiputera equity rule, to obtain shares without any effort and to make a quick profit by selling these after a short while.

Now, the authorities are ready to bestow various valuable licences, big concessions and contracts in potential high-growth and strategic sectors to bumiputera entrepreneurs of their choice (their cronies?) - or, in Nor Mohamed’s words, to bestow this on one or two who rank at the uppermost of the 10 richest entrepreneurs in Malaysia.

If the high proportion quota at micro level is not abolished in potential high-growth and strategic sectors, then the so-called strategy to select and cultivate bumiputera businessmen to become true entrepreneurs through meritocracy and fair competition is just mere rhetoric.

new economic policy nep Why are the enlargement of the number of middle-class bumiputeras and making of super-rich bumiputera entrepreneurs stressed, rather than the eradication of poverty and enhancement of the livelihood of the majority bumiputeras who are struggling for food and jobs in the lower classes?

Obviously, the so-called bumiputera agenda is essentially to enrich a small group of Umno cronies in the upper class, in conflict with the people’s agenda which is meant to help the poor and the deprived of all races without favour or prejudice.

LEE BAN CHEN is a Malaysiakini columnist with the Bahasa Malaysia section.