Malaysian Prime Minister Najib Razak recently announced an allocation of RM31 billion to empower Bumiputeras – the country’s indigenous citizens, mainly ethnic Malays – and enhance their status in equity and asset ownership.
His generous provision of more funds to expand the Bumiputera share of the Malaysian economy was warmly welcomed by most Bumiputeras, especially those who would directly benefit from this largesse. He said, in an interview on CNBC on Sept 19, that his party, Umno had given him “full support ahead of the party elections” to do this.
However, the response from most non-Bumiputeras – the Malaysian Chinese and Indians and others – is negative. They feel excluded from the Umno-dominated government. Najib said he was concerned that the Bumiputeras, who make up about 67 per cent of the population feel marginalised because they perceive that they do not have a fair share of the country’s wealth.
After 56 years of independence, this is admittedly not a satisfactory situation.
Bumiputera equity ownership
About RM52 billion had been given out previously to enable the Bumiputeras to own at least 30 per cent equity under the New Economic Policy. What has happened? Much of this allocation was used up for consumption and not for savings and investment. That is a pity.
The 30 percent Bumiputera equity ownership could have been easily achieved much earlier if the funds had been saved and kept as investment, instead of being spent so easily against the very purpose for which these large funds were intended and allocated to Bumiputera interests.
The latest government statistics claim that only 23.4 percent Bumiputera equity ownership has been attained so far. Many question the accuracy of this figure.
Actually, there are many serious doubts about the government’s estimate of the present Bumiputera equity ownership. The estimates are based on nominal prices and not on current market prices. Furthermore, government-linked companies (GLCs) are apparently not included in the calculations. Hence, it is not clear that the 30 percent Bumiputera equity ownership has not in fact been achieved as yet.
Additionally the GLCs now control the commanding sites of the economy in all the vital fields of economic dominance. So most non-Bumiputeras ask why it is necessary to continue to insist on 30 percent Bumiputera equity ownership when it has most probably been achieved?
One way to clear the air would be to appoint an independent international agency, like the World Bank, to study this major issue. A great deal of doubt and distress can be removed if the study were to finally clear all these uncertainties and scepticism that keep clouding this sensitive issue about the real size of Bumiputera equity ownership.
I hope the government will rise to the challenge to fully respond to this matter of great public and national interest.
New dimension to wealth ownership
Prime Minister Najib’s interview over CNBC on Sept 19 has raised new public anxiety. Now, the 30 percent Bumiputera equity ownership is regarded as insufficient. There is a new dimension to economic policies, planning and implementation in Malaysia. Najib made it very clear in his television interview that the new definition of wealth is all encompassing and that it will have to include ownership of landed properties, savings in the bank and other assets.
This statement has raised many anxious questions, especially from non-Bumiputeras and foreign investors:
1. Does it now mean that the government will examine and seek to divide every aspect of the economy on the basis of racial proportions, especially for the benefit of the Bumiputeras?
2. Isn’t it necessary to spell out the extent to which the government intends to implement this critical new policy? Otherwise there will be considerable uncertainty for both domestic and foreign investors as to how far the government will pursue this new policy.
3. Will this new policy lead to more non-Bumiputeras being pushed to find new ways and means of going round the protective system through even more corrupt practices?
4. Will non-Bumiputeras, especially, and foreign investors, be more formally “deprived” of equal opportunities of doing business and investing in Malaysia?
5. Where will the new funding come from to implement this policy of distribution of “asset ownership”?
6. Could these new restrictive policies constrain growth and employment, and inhibit income distribution among all Malaysians?
7. Would not this new “policy of exclusion” cause more marginalisation and polarisation?
8. Won’t this new policy cause even more brain drain and capital flight?
9. Is this kind of race-based economics (Raceconomics) necessary to achieve the noble goals of more balanced economic growth, better income distribution and overall progress?
10. Can the New Economic Model be used to achieve harmonious and more balanced growth without adopting more race-based economics? Can we have better alternative strategies based on equal opportunities for progress through greater investment in quality education?
I hope that these and other questions will be raised and openly discussed and carefully analysed before this new Bumiputera empowerment policy is fully implemented .
Proposals for the new way forward
1. Macro policies
On the macro front, race-based economics may be welcomed by some in the short term but it is not sustainable in the longer term.
There is no country I know of where race-based economics has been successfully sustained in the long term. We all want to bring about more racial balance in economic growth and income distribution and asset ownership but the best solution is to devise policies that are income-based and not raced-based.
Therefore, we can be inclusive and embrace all the low-income groups of all races. They can all be given priority for government assistance and not just one race. Most of the beneficiaries of government assistance will then be the Bumiputeras themselves as they form the bulk of the poor. In adopting this inclusive way forward, we can avoid or reduce the persistent feelings of denial, deprivation and exclusion amongst all Malaysians regardless of race.
In fact this was the concept of the NEP introduced by our second Prime Minister Abdul Razak Hussein. Alas, it got so distorted during implementation that it has caused racial polarisation.
There is now a challenge and an opportunity for the present prime minister to draw inspiration from his late father and put the situation right.
2. Micro approach
On the micro front, at the corporate and company level, I have one concrete inclusive proposal to counter “raceconomics” in the corporate and business sector: encourage the formal adoption of genuine “Malaysian National Companies”. These could be made up of Bumiputera, Malaysian Chinese, Indian and other groups who could be joint shareholders in Malaysian companies. Their human and financial capital participation can be based on some acceptable balanced formula. These government-approved Malaysian national companies could then be given special tax status whereby they pay reduced taxes.
Thus the tax concessions could encourage more corporations and companies, including SMEs, to work more closely together. This will result in more joint enterprises with private companies and the GLCs.
Conclusion
The new Bumiputera Empowerment Plan is welcome as it will contribute to the further advancement of the Bumiputera community. However, it should be adopted and introduced in a more inclusive manner, to avoid raceconomics.
It should be implemented on a needs-based strategy rather than a race-based strategy. This will promote greater national unity and better economic progress. My proposals will enable the new Bumiputera policy to enjoy wider support, ensuring a much higher chance of its success on a sustainable basis in the longer term.
* Ramon Navaratnam is the chairman of the Asli Center of Public Policy Studies (CPPS), Kuala Lumpur. He has served as deputy secretary-general of the Finance Ministry, and was one of the key economists who drafted the New Economic Policy. The Harvard alumnus is also a former chairman of the Malaysian chapter of Transparency International.
