Freight forwarders raise concern over 'bumi equity' rule
An association that claims to represent over 1,500 freight forwarding companies has cautioned about the future of their industry amid plans to expand the bumiputera equity rule to include those in the International Integrated Logistics Services (IILS).
Speaking to Malaysiakini, Federation of Malaysian Freight Forwarders (FMFF) president Alvin Chua voiced concern on how such a requirement would impact the future of the companies.
This is especially when it comes to competing with international companies which he said are...
An association that claims to represent over 1,500 freight forwarding companies has cautioned about the future of their industry amid plans to expand the bumiputera equity rule to include those in the International Integrated Logistics Services (IILS).
Speaking to Malaysiakini, Federation of Malaysian Freight Forwarders (FMFF) president Alvin Chua voiced concern on how such a requirement would impact the future of the companies.
This is especially when it comes to competing with international companies which he said are not required to have bumiputera and Malaysian shareholders.
"We are not happy in this case because for foreign companies that apply for the customs licences, they do not need 51 percent (bumiputera equity). They do not even need Malaysian participation.
"However, for Malaysian companies that want to go into IILS, they need to show they have 51 percent bumiputera equity to get a customs licence," Chua said when contacted today.
IILS is a status granted by the Malaysian Investment Development Authority (Mida) to logistics companies that provide logistics services along the value chain as a single entity on a regional or global scale.
FMFF also learned that the government is planning to reimpose the "51 percent requirement" on all logistics companies to renew their customs licences, regardless of how long they have been registered.
Previously, the federal government under the Najib Razak administration in 2018 approved that no bumiputera equity is required for the renewal of customs licences for those registered before 1976.
Meanwhile, for those registered between 1976 and 1990, the companies have to have at least 30 percent bumiputera shareholding. Licences registered after 1990 will have to comply to the 51 percent requirement.
Those with IILS customs licences, however, do not have any bumiputera requirement.
However, the Finance Ministry this year said the bumiputera equity requirement will now be applied to all licence holders, including those in IILS.
The freight forwarders association said they are not against having bumiputera companies holding shares in their businesses.
Their main concern, Chua stressed, was actually finding bumiputera companies that were willing to buy their shares, especially during the current economic climate.
According to him, when the federal government reviewed the equity percentage rule in 2018, many companies had bumiputera shares reduced according to what was required of them.
"We are not against the policy, but how can we get this participation from bumiputera companies to come and invest in our companies? That is the issue.
"We don't mind bumiputera investors. But can we get these investors to come in? That's our question.
"We want the bumiputera to participate, (but) how can they invest? Is the government going to give them money or grants for them to invest?" he asked.
Chua said if the 51 percent bumiputera equity is reimposed across the board, it would affect some 100 companies that would have to find bumiputera investors.
They also must do it in time before the end of this year, which is the deadline to renew their licences under the new equity requirements.
For IILS customs licences, he said it would affect about another 100 companies that will have to do the same.
'Giving up control'
Another issue would be that company owners may opt to sell off their businesses if they have to relinquish control.
"For example, if I am going to sell... I won't sell 51 percent, I will sell 100 percent. If I have to give up control (of my company), why should I keep my company?"
According to Chua, the logistics companies that are members of FMFF have worth ranging between RM5 million and RM500 million.
He said selling prices are usually calculated five times a company's current worth, taking into consideration five years' worth of profit, which makes a company worth RM5 million today hold a price tag of RM25 million.
Chua said they are hoping that the Finance Ministry would consider lowering the requirement, instead of increasing it.
"That is the difficult thing here. I feel the government should reduce it to, for example, 30 percent," he said.
He said this was why he wrote a letter to Finance Minister Tengku Zafrul Abdul Aziz and International Trade and Investment Senior Minister Azmin Ali last week.
In the letter, sighted by Malaysiakini, FMFF called for the government to clarify the requirement for companies to renew their customs licences, given that they have to comply before Dec 31 or risk their licences being cancelled.
For now, Chua said, the freight forwarders cannot do anything pending a decision by the Finance Ministry.
Meanwhile, The Vibes quoted unnamed sources claiming that the enforcement of the bumiputera equity requirement has been postponed until the end of 2022.
“The matter has been resolved for now, and the Finance Ministry has agreed to postpone (the deadline for enforcement) until 2022 to review the regulations,” the source reportedly said.
