Entrepreneurial skills more important than 51% Bumiputera stake, govt told

An economist says the government should focus on building the skills of Bumiputera entrepreneurs instead of setting the condition for 51% equity ownership in logistics companies.

Yeah Kim Leng, a professor at Sunway University, said this would enable the Bumiputeras to establish their own companies and to better understand the increasing competition in the current market situation.

He also voiced concern over what might happen if the policy is implemented without emphasising the long-term implications for the companies involved.

“To be directly involved, we need to have expertise or experience in the industry to be able to contribute to the company and ensure that it continues to grow and remains competitive,” he told MalaysiaNow.

“If this policy is seen as a forced recruitment process, it could create conflict within the management of the company and disrupt the growth process.”

In 2018, Najib Razak who was prime minister at the time announced that the Bumiputera equity conditions for logistic companies would be reviewed in 2020.

“If this policy is seen as a forced recruitment process, it could create conflict within the management of the company and disrupt the growth process.”

In January, Finance Minister Tengku Zafrul Aziz said all brokerage licensees registered with customs had to comply with Bumiputera ownership conditions, but did not give specific details.

The Federation of Malaysian Freight Forwarders subsequently urged the government on Sept 18 to clarify its stance on the 51% Bumiputera equity stake for logistic companies which will reportedly take effect by the end of the year.

On Sept 28, Zafrul told the Dewan Rakyat that the finance ministry had extended the exemption period for freight forwarders to meet the requirement of 51% Bumiputera equity participation until December 2022.

He said this was to allow the Bumiputera Agenda Steering Unit or Teraju to study and review the participation of the Bumiputera community in the logistics industry in greater detail.

Ahmed Razman Abdul Latiff from Universiti Putra Malaysia said condition did not portray the ability of Bumiputeras in the industry.

While the intention of the proposed policy might appear to be in their best interest, he said, there were also fears that it would only benefit certain groups.

“First of all, we need to understand why the government wants to implement this policy – to increase the ability of Bumiputeras to own property or assets in the form of equity.

“But we also need to understand that uplifting the Bumiputeras is not just about equity percentage,” he said.

Speaking to MalaysiaNow, he said each company has its own value in the market which cannot be directly compared through the equal distribution of equity rate.

“For example, if an individual owns a 51% equity stake in a company worth RM1.1 million, that person will possess RM500,000. But if a company is worth RM1.1 billion, the individual will own RM500 million.

“So we need to look at the value of equity,” he said.

Yeah meanwhile said that in the event of a management conflict, the outcome is usually in favour of the majority shareholders as often seen in joint venture companies.

“The concern is that the owner of a company whose holdings are shrinking will give up his shareholding and start a new business using the resources from his business.

“This could cause the value of the company to plummet, and in the end the original goal of implementing that policy will not be achieved,” he said.

Both he and Razman welcomed the government’s move to extend the exemption period, saying this would allow it more space to examine the policy in depth.