Najib removes 30% bumiputera quota on new shareholding

[pywong]

This is all a show. The moment things get better, UMNO will go back to the old ways and squeeze the non-Malays. The only solution is: UMNO must go!

Najib removes 30% bumiputera quota on new shareholding

Posted by admin
Tuesday, 30 June 2009 13:07

By Wong Choon Mei, Suara Keadilan

In a bid to shore up flagging confidence in his leadership, Prime Minister Najib Razak removed a key pillar of the New Economic Policy with an announcement that firms seeking listing will no longer need to allocate 30 percent of their shares to bumiputera groups.

But while analysts cheered the move, they also said it would have muted impact given that it applied only to new listings and not existing companies.

“Overall, the message is good but the impact may be muted. It will take more than this to revive investor confidence in Malaysia,” said Azrul Azwa, economist at Bank Islam.

“It is not just about lowering protectionist barriers but also about raising the integrity of our judiciary and the independence of our institutions. How good our system is will be every bit as important. Even if foreigners return, they will insist their contracts are signed in Singapore or another country and this is a shameful indictment on our federal government.”

A highly abused NEP

Under the NEP launched in 1971 to eradicate poverty, a raft of rules were put in place to protect Malay and indigenous groups and ensure that they were not left out in the nation’s economic growth. But since then, high-level corruption by top government leaders themselves have resulted in widespread abuse of the policy’s implementation. More… (http://mt.m2day.org/2008/content/view/23749/84/)

[pywong]

Much Ado About The 30% Bumiputera Equity Participation Policy

By Matthias Chang
Thursday, 02 July 2009 20:19

Any genuine attempts by the government to mitigate the effects of the global financial tsunami and promote growth of the economy must be applauded and I do so here in this column. It is better late than never.

The policy instruments that are available to the Prime Minister who is also our Finance Minister are limited because of the nature of the problem that we have to confront.

If I may be permitted to use a simple analogy - If one has only five bullets and there are ten targets, shooting the wrong targets would be a waste of the bullets and if we end up without any bullets, we will be at the receiving end of hostile fire with no defences whatsoever.

When the government announced recently that the Foreign Investment Committee would be abolished, as its principal role of ensuring the 30% equity ownership by Bumiputeras of the Malaysian corporate cake has failed, it brought cheers from some quarters and deep anxiety and worries from bumiputeras and other stakeholders who were the primary beneficiaries of the “discarded” policy. But the first tier bumiputera elites have no complaints.

I appreciate that there is a desire to effect change and a serious attempt has been made towards that end, but the bullet fired has been wasted, because I take the view that the so-called policy change has not resulted in any fundamental shift in addressing the underlying social and economic issues.

Common sense tells us that this instrument of the NEP is an inaccurate measure of the share of the national corporate wealth and has in fact caused unnecessary friction and misunderstanding between the bumiputera and non-bumiputera communities in Malaysia. It is one of the root causes of the continuing racial tensions between the various communities in Malaysia.

The policy sounds good, looks good but its effects were far from being good for Malaysia, specifically the bumiputera community.


Let me explain this matter by applying common sense.

Step 1

Let us assume that A and B owns an island and the economy of the island rests solely on the extraction of bauxite. A had the capital to start the project while B, the expertise. By mutual agreement, the shareholding was agreed to be in the ratio of A 70% : B 30%.

Therefore, the corporate wealth was divided mutually 70:30 and B therefore achieved 30% equity participation in the corporate pie.

One day, F came along and was eager to purchase a stake in the business. A was reluctant to divest, but B was willing to sell at a premium. The deal was done between B and F.

Now F is the 30% equity owner of the bauxite mining business.

B is happy with the cash payout to spend in ways that he desired. And no one can fault him as it was a business decision. He made a profit. But he no longer owns a stake in the company.

However, it must be recognised that he did at one time acquired and achieved a 30% stake in the corporate wealth of the island economy. But, he chose to cash out. In a free market economy, this makes sense from his perspective.

There is also the probability that sometime in the future, A may cash out his entire 70% stake or part of it if the price is right and there is a willing buyer like F. In that event, F would become the majority owner.

Good luck and best wishes for his future success. But in the latter situation, A and B would be equally contented as they chose a cash payout rather than having a share retention. Who is to judge their business decision? It was a willing buyer, willing seller transaction.

The important thing to remember is that B did achieve 30% equity stake at one point in time. If B wants back the original stake, he will have to pay for it, maybe at a premium.

Step 2

Another island economy.

For historical reasons, the natives in this island were neglected by their former rulers and were mainly confined to an agrarian economy producing food for the growing population which were imported by the former rulers to mine the mineral wealth of the island.

Over the years, a sizeable portion of the immigrant population was able to venture into various kinds of small businesses – retail, small scale construction, barter trade etc.

In 1957, the inhabitants of the island were able to oust the former rulers and began to manage the affairs of the island by themselves. It was apparent to all that unless something was done to address the disequilibrium in the share of the island’s wealth amongst the inhabitants, social unrest and chaos would ensue and the economy would plunge.

Affirmative action was agreed by all as the solution to the pressing problem. The natives should be given every opportunity to acquire a larger stake in the economic pie. And every effort must be made to enlarge the economic pie so that more can share the enlarged economy.

It was a good policy. It was aimed at eradicating poverty and fostering social justice. I was all for it.

One of the methods to promote a greater share of the corporate wealth was to ensure that should there be any new businesses, the natives were to be allocated 30% equity participation in that new venture. An agency was established to ensure its proper implementation – the Foreign Investment Committee (FIC).

The majority of the natives have no idea how this 30% equity participation is to be allocated but it can be said that they were happy and contented that a huge effort has been made to address the problem. It did not really matter to the farmer in Kedah or the Felda settler in Pahang as to who got what and how much. It felt good that efforts have been made to address poverty. As they say, some are more equal than others.

Back to business at hand.

Many businesses were started and because of the affirmative action policy, 30% equity was allocated to the “selected representatives” of the native community.

The selected bumiputeras, were in the situation as Mr. B in the first island story referred to above.

Therefore, at the point in time of the allocation of the 30% equity, the selected bumiputera (be it an individual or a corporate representative) acquired and achieved the target 30% equity stake.

Thus, in the first island story, there was only one company. But 30% equity was acquired by B. The target was achieved in the island’s free market economy.

In the second island story, after the policy was implemented, every new business was required to allocate 30% equity to Bumiputeras.

Thus, at the point in time of every new venture the target of 30% equity participation was indeed achieved. The “bumiputera (native) community” had achieved the 30% equity participation target.

It has now been revealed that RM54 billion worth of this 30% equity stake allocated and owned by the selected bumiputera representatives were in fact sold i.e. they cashed out for a cash gain. Only RM2 billion worth of this 30% equity stake remained in the hands of the selected bumiputera representatives.

These bumiputeras exercised the option to have cash instead of shares. Thus, they realised the equivalent in cash the 30% stake.

Therefore, it is scandalous and seditious to say that these bumiputeras did not achieve and acquired the 30% equity target. That 30% equity stake acquired over the years amounted to RM56 billion, of which only RM2 billion worth of equity are still held by the selected bumiputera representatives.

THEY SOLD OUT!

But can we blame them? It was a business decision. They preferred the immediate realisation of a capital gain to that of collecting interim and final dividends which may or may not be declared, depending on the vagaries of the economy, the industry and the health of the firm in question. And as they say, better to have a bird in the hand, than two in the bush.

SO WHAT WENT WRONG? NOTHING! ABSOLUTELY NOTHING!

This is because, in all societies, some are more equal than others.

Additionally, in a free market economy, cashing out is a valid option in any business. Even a majority shareholder may one day cash out for his much awaited retirement.

In the above situation, when the selected bumiputera representative cashes out, he/she has exchanged shares for the cash equivalent, often times at a premium. He/she preferred hard cash instead of an equity stake. It is his/her right within the overall scheme of things.

The majority shareholder does not cash out because it is his business, his blood, sweat and tears and unless the business continues he would end up with nothing. It is much easier to sell a minority stake than a majority stake. There is also the emotional attachment which a majority shareholder has (and usually he/she is the founder) for the company.

Obviously, when the selected bumiputera representative sells his 30% equity stake and if he fails to invest wisely the hard-earned cash, there will be no future income. The selected bumiputera representative’s share of the economic cake in the future is thereby reduced, but he/she has enjoyed the benefit of the 30% stake allocated to him/her. So what is there to complain?

Step 3

Don’t blame the existing majority shareholder and or the acquirer of the disposed 30% equity stake. The latter was willing together with the majority shareholder to realise a gain (or loss, which is a risk of business and investment) in the future rather than having the hard-earned cash for immediate gratification.

And, as the business grew, so the profits and the proportionate share thereof between the shareholders A and F. Wealth is thereby created and enhanced. Future income is assured.

Production and the expansion of production of goods and services (and hence wealth) is a direct result of savings, the postponement of immediate gratification for future gains and risks of potential loss!

A simple business decision which everyone has to make!

Common sense tells us that the selected bumiputera representatives had the 30% stake but they literally sold out the community for a cash gain and immediate gratification.

Who tolerated and condoned this state of affairs?

Surely, not the majority shareholder or the acquirer of the 30% stake! They had no choice. They had costed this gigantic tax into their business plans and had to work doubly hard to recover this additional burden.

Who should bear this responsibility? It is the entire bumiputera community who had the wool pulled over their eyes and unquestioningly allowed this policy to be implemented in a manner that benefited the chosen few – the elite bumiputera class.

THIS ASPECT OF THE NEP WAS AN UTTER FAILURE.

BUT THERE WERE SUCCESSES IN OTHER AREAS – OPPORTUNITIES FOR HIGHER EDUCATION, BETTER JOB OPPORTUNITIES, A SUSTAINABLE LIVELIHOOD IN AGRICULTURE etc.

Step 4

If bumiputeras are the majority shareholders, and having parted with the first tranche of 30% equity in the performance of national duty, were to be asked again to allocate another 30% equity to another group of selected bumiputera representatives when a new venture is initiated, you can bet your bottom dollar, there will be political and social eruptions greater and more devastating than that of Mount Vesuvius.

We should all pause and think objectively and not let emotions rule our minds!

From an economic point of view, this compulsory 30% equity stake is in fact a tax on all taxpayers, regardless of race, creed and culture. The only people who benefited from this gigantic social and economic tax are the selected bumiputera representatives, the elites.

What has happened over the years is that one generation of selected bumiputera representatives reaped the harvest of this policy, squandered much of the gains, some moved on to greater things while many lost a fortune.

From a gain of 30% equity stake, matters returned to ground zero followed by clamours for social justice, a bigger share of the economic pie and more affirmative actions. The second generation of selected representatives took advantage of the situation and made another grand harvest. Now, the third generation is demanding their dues. But the cake has shrunk as a result of the global financial tsunami.

I would like to pose the following questions to all those disenfranchised bumiputeras who for the last 30 years never had a chance to dream about, what more to have the opportunity to personally acquire and hold a portion of the 30% equity stake allocated to selected bumiputera representatives:

What are you going to do about this injustice done in your name?

When are you going to demand a proper accounting for the “disappearance” of RM54 billion allocated to your selected representatives when they sold out?

Why are you asked to pick a fight with the majority shareholders and the acquirers, when you should be questioning your selected representatives who have been allocated the 30% equity stake?

Is this really a racial issue or an issue of injustice and exploitation within your community?

Why is it that they can drive BMW 7 series, the Mercs, the Jaguars, the Ferraris etc., have multi-million dollar homes while you can only afford to drive a Kancil and live in a rented or low cost flat?

Are we supposed to accept that some are more equal than others?

I am for the NEP to eradicate poverty and social injustice.

But I am not for this social and economic tax borne by us all. Yes, by Malays and non-Malays, except the filthy rich.

The policy has not been abolished as such, but curtailed. The devil is in the details. Those of you who are driving Kancils, you should be happy as this huge tax have been reduced to 12.5% from the previous 30%. The second and third tier elites have been sacrificed so that the first tier elites can survive the coming financial fiasco.

Let us not debate or fight on racial lines, but rather we should collectively turn the spotlight on all those who have been selected to live off this gigantic tax fraud!

This is common sense.

Use common sense when addressing this issue. Link here… (http://www.futurefastforward.com/component/content/article/2031)

[pywong]

More reforms must follow


DATUK Seri Najib Abdul Razak’s economic liberalisation is real, profound and courageous; one wishes such zeal was seen in other areas in need of reform as well. Nonetheless with two swift strokes of the axe he has decapitated within his first 100 days as prime minister some of the most odious economic policies that his predecessors failed to repeal.

He is, it must be said, aided by two important factors. First is perceived necessity: it is now universally accepted that foreign investors will simply go elsewhere unless we make Malaysia more attractive. Second is the acceptance – or grudging tolerance – for such reform measures among the economic nationalists within his party. As a trump card to out-reform the Pakatan, it may just work, especially if the Opposition then bicker internally about whether to oppose these measures on socialist or ethno-nationalist grounds, or conversely to criticise the government for not being liberal enough. More… (http://)

The only reforms that matter are those that tackle UMNO's abuse of power through the following agencies which are not seen to carry out their duties professionally and in a neutral manner:

SPR
Judiciary
MACC
Military Intelligence
National Registration Department
Police
Attorney General's Office
Special Branch.

Once that is done, the rest will fall into place. They are part of The UMNO War Machine. (http://tindakmalaysia.com/tm_forums2008/index.php/topic,907.0.html)

[pywong]

The dismantling of the 30% rule

Posted by admin
Tuesday, 07 July 2009 14:40

After PM Dato Sri Najib spoke about dismantling the 30% quota, the reception was mixed. Generally speaking, it is said that the Malays feel naked.

There are no longer protection and special privileges that come along with being a Bumiputera. Hence, some feel that Dato Najib by doing so is only attempting in ingratiate himself with non Malays. Perhaps, PM Najib recognised the validity of Lee Kuan Yew's observation, that Malaysia can be better if she treats her non Malay citizens better. Maybe.

The 30% quota was the backbone to the economic policies under the NEP and its successors. It has allowed for the enrichment of selected BUMIPUTERAS namely the well connected and privileged minority. The general improvement for the Malays was secured not through the operation of this 30% rule, but by specific policy initiatives targeted at education, in land distribution or land consolidation (FELDA), through improvements in agriculture which is the main economic preoccupation of the majority of Malays, job mobility and so forth.

There seemed to be two different set of policy initiatives. One which worked through the 30% quota enabled gratuitous transfer or inexpensively financed equity stakes in on-going business firms. The Malay input is required by law to enable the company secure licence, contracts or go for listing. They got the benefits of being who they are NOT because of what they can do. Malaysiatoday.... (http://mt.m2day.org/2008/content/view/24035/84/) or Sakmongkol AK 47.... (http://sakmongkol.blogspot.com/2009/07/dismantling-of-30-rule.html)

[pywong]

This is the monster who created this mess and totally marginalised the Chinese in Malaysia and to rub salt into their wounds, he blames the Chinese for the mess he created. When we see the end of this evil man?

Not as simple as Mahathir paints it
By Barry Wain

JULY 24 — Malaysia is long overdue for a national debate on the costs and benefits of the wide-ranging affirmative action programme it adopted 38 years ago.

But judging by the provocative comments earlier this week by former Prime Minister Tun Dr Mahathir Mohamad, the country will have to wait a little longer for an informed discussion.

Apart from offering some debatable statistics and observations on Bumiputera corporate ownership, property holdings and poverty, Dr Mahathir presented his opinions as a case of Malays versus Chinese. What little the Malays have today is being taken away from them, he wrote in his popular blog, saying “the non-Malays have become the real masters” of the country. Analysts interpreted the posting as veiled criticism of Prime Minister Datuk Seri Najib Razak, who has liberalised several aspects of the NEP since taking office in April. But the sniping aside, Dr Mahathir's assessment fails to acknowledge the main reasons the NEP has become so divisive. Some of the NEP's harshest critics now are in fact Malays. TheMalaysiaInsider.... (http://www.themalaysianinsider.com/index.php/malaysia/33234-not-as-simple-as-mahathir-paints-it)