Wednesday, September 29, 2021
The elusive 30% Bumi equity is a statistical charade
The elusive 30% Bumi equity is a statistical charade
From Kua Kia Soong
The prime minister’s statement that “the government’s target to raise Bumiputera equity ownership to 30% has yet to be achieved” sounds like a broken record from the 1980s. And after 50 years of the New Economic Policy (NEP), the never-ending policy, he has come out with a new measure to plug leakages:
“To ensure sustainable equity holdings by Bumiputeras, an equity safety net will be introduced to ensure that sales of shares or Bumiputera firms will only be sold to Bumiputera companies, consortiums or individuals.”
He also announced more Bumiputeras-only funds, namely, the Bumiputera Prosperity Fund (Dana Kemakmuran Bumiputera) and the Express Contract Financing Scheme (Skim Pembiayaan Kontrak Ekspres) under Mara to assist companies and contractors.
There will be more financial assistance. Guidance and mentoring by financial institutions would also be expanded to support Bumiputera entrepreneurs, including Bumiputera home-ownership quotas. There wll be wakaf (Islamic endowment) to diversify financial resources to finance businesses and increase Bumiputera equity.
The Bumiputera elite and their statistical charade
Supposedly introduced to eradicate poverty regardless of ethnicity and to correct the “racial imbalance” relating to wealth-holding in the country in 1971, all the NEP statistics relating to ethnic proportions ever since have been consistently obfuscating.
During the 1980s, it was pointed out that by lumping the holdings of Bumiputera and government agencies in nominee and locally-controlled companies under “Other Malaysian residents”, it was not surprising that the “Bumiputera” stake would be understated.
It was estimated then that the Bumiputera stake under “Other Malaysian residents” accounted for at least another 12 percentage points. Hence, there would have been no further justification to prolong the NEP beyond 1990.
Nevertheless, the perversion of statistics on ownership of capital according to ethnicity in Malaysia was again highlighted when Lim Teck Ghee resigned as the research director of the Asian Strategy and Leadership Institute’s (ASLI) Centre for Public Policy Studies in 2006 over the report which concluded that Bumiputera corporate equity ownership was much higher than the figures presented in government statistics.
Lim maintained that Bumiputera corporate equity ownership could be as high as 45%, or RM325.08 billion, out of the market capitalisation of RM715 billion. (The Sun, 11.10.2006)
His research indicated that if the Bumiputeras had not sold off their shares, their equity stake would easily have been higher than the 45%. An estimated 40% of the preferential shares given to Bumis were sold by them for quick profits.
The ASLI report had concluded that the NEP target of 30% Bumiputera equity ownership had already been exceeded, and said the official methodology inherited from the 1970s to measure corporate equity distribution was too narrowly based.
Lim’s resignation followed after Mirzan Mahathir, Mahathir’s son and president of ASLI, issued a statement saying that the report was flawed in its methodology and assumptions, and its conclusions could not be “vigorously justified”. Lim happened to be a former United Nations regional adviser and World Bank senior political scientist, and the recipient of many international academic awards.
The controversy over how government-linked companies (GLCs) should be categorised seems elementary to any economics student. It does not take a genius to see that Petronas, to name but one example, is certainly not a “non-Bumiputera” corporate entity.
Equity share by race
This whole notion of equity share by race is ridiculed by the very people for whom it is purportedly meant to benefit as Bumiputeras can sell their shares for cash as soon as they have received their allocation and restore the status quo ante ad nauseum!
With the latest “Bumiputera equity safety net”, Bumiputeras could resort to nominee accounts to transact their shares in the open market at higher prices instead of having to sell to other Bumiputeras. Bumiputera investors themselves would complain that it is not fair to the Bumiputera individuals who have invested earlier in hopes of getting a better return on their investment.
Now, while earlier Malaysia Plans used to provide statistics with ethnic breakdown (how else can we correct the “racial imbalance”?), the later Plans no longer did so.
The authorities justified this practice by quoting Standing Orders 23(2) of the Malaysian Parliament, that is that they were “likely to promote feelings of ill-will or hostility between the different communities”.
When I was in Parliament during the 1990ss, my questions relating to proportion of scholarships and loans that were given to the Bumiputera poor; the numbers and proportion of Malay, Chinese and Indian waged labour and their respective earnings and others were similarly disqualified under Standing Orders 23(2).
Yet without such figures, we are meant to take on trust that there is a need for further steps to correct racial imbalance? The need for a Freedom of Information Act has never been more urgent.
Without such a racially discriminatory policy, the Malay ruling elite would not only lose their unfair privilege, but they would also lose their “Malay-centric” ideology designed to win Malay votes and sustain the fruits of political power. Therefore, the NEP has had to be prolonged under a different guise – the “National Development Policy” and the newest “Shared Prosperity Vision”.
As a local academic has already pointed out: “The measure, together with others highlighted in the 12th Malaysia Plan, is meant to ensure the Malays and Bumiputeras continue to support BN, especially Umno, in the upcoming general election.”
The NEP of 1971 has led to a carte blanche for the Umno ruling class to control the commanding heights of the Malaysian economy, including banks, plantations, oil & gas, properties, and other sectors. Furthermore, several of these Bumiputera-controlled sectors are monopolies. This itself makes the elusive 30% Bumiputera equity secondary.
A stated goal of the NEP was a 30% Bumiputera equity share target by 1990. Even though that has clearly been reached, there seems to be no end to a policy that allows the Malay elite to continue reaping the benefits of the policy. Besides being on to a good thing, such a discriminatory policy has a populist appeal to win over the Malay vote by portraying the non-Malays as “immigrants” who cannot enjoy these “special privileges”.
Clearly, affirmative action on an ethnic basis can only be justified for groups that are essentially marginalised and undifferentiated by class. The Orang Asli is such a group par excellence, but they enjoy no such privilege.
Just as all Malaysians deserve transparency and accuracy regarding the statistics around the Covid-19 pandemic, such transparency is crucially needed to enable accurate strategies to raise the Malaysian “keluarga” to the aspiration of high-income status.
Truth must be identified from fairy tales. Future writers of Malaysian fairy tales will no doubt deride the NEP very much like we lampoon the emperor’s new clothes.