Transcript Corporate Equity Distribution: Facts and Fallacies

Corporate Equity Distribution:
Facts and Fallacies
At
ASLI-SEDAR Roundtable
January 14, 2006
Dato Dahan / Hj Abd Khalid
YKSM Research & Consulting Centre
Genesis of NEP
• Must trace to the time of achieving Merdeka in
1957: “social contract”, the balance of malaysnon malays including special privileges for the
malays, upholding of the position of the Sultans
(just to name 2) in return for citizenship rights &
participation in national politics for non malays.
Embedded in Federal Constitution
• A different social contract among component
political parties forming first the “Alliance”, later
“Barisan Nasional”-power sharing; UMNO
became “first among equals” in the legitimate
power sharing.
Dato Dahan / Hj Abd Khalid
YKSM Research & Consulting Centre
Genesis of NEP
• Watershed events:
– the 1969 Riots. The malays’ “near loss of
political power”at the ballot box.
– the other momentous pre-Merdeka event,
upheaval & subsequent challenge by the
malays against the British’s “Malayan Union.”
In a nutshell: History gives meaning &
relevance to nation building
Dato Dahan / Hj Abd Khalid
YKSM Research & Consulting Centre
Seven Facts
• 1.1970: malays’ equity share 2.4%.
2004: 19%. Short of the 30 % target.
• 2.Demographics: Bumi 2/3 (malays 60%)
• 3.Employment: public : private - 1 mil Vs 9
mil. Malays largely in former. In latter
malays face discrimination
• 4.9/10 shops/biz premises owned &
operated by chinese; similar for shopping
malls
Dato Dahan / Hj Abd Khalid
YKSM Research & Consulting Centre
Seven Facts (cont’d)
• 5.Overall banking & financial sector,
malays are represented (simple majority)
but within the key merchant banking &
capital market mgt services,
underrepresented
• 6.Household income ratio - malays : non
malays, 1:1.65. Crucial significant disparity
• 7. Public: private expenditures: RM120 bil
: RM430 bil. GDP 2005 RM 550 bil. (est)
Dato Dahan / Hj Abd Khalid
YKSM Research & Consulting Centre
Facts
• NEP: push for national unity founded upon two prong
strategies of poverty eradication & restructuring of
society (equity distribution is just one part), in an
economy expanding on average at 7% p.a
• Malaysia experienced unprecedented growth propelled
by high FDIs, and it coincided with a period of strong
Affirmative Action during the period 1970 -1990.
• Malaysia is not alone; some elements of Affirmative &
economic intervention policies exist in USA, UK &
Australia; even S’pore!
• What do you understand from the Seven Facts??
Dato Dahan / Hj Abd Khalid
YKSM Research & Consulting Centre
Seven Fallacies
• 1. Affirmative Action Agenda/”NEP” should not continue because It
goes against the grain of globalisation & seamless flow of trade &
funds, even though the distribution of ownership and the
management of the economy of 42 % by the chinese (only 20 % by
the malays; 38 % foreigners), the almost total control over supply
chain in any economic sector.
• 2..Bumiputera commercial & industrial community (BCIC) policy
need not be pursued since it hampers Malaysia’s competitiveness,
even though wealth creation is made through incorporated
companies and enterprises. There are 300,000 active
companies/enterprises of which less than 50,000 are owned by
Bumiputera. Ratio 1:6 as against population ratio of 66: 34. Not to
mention the regional & intern’l networks these companies have
established over the years.
Dato Dahan / Hj Abd Khalid
YKSM Research & Consulting Centre
Seven Fallacies
• 3. Take care of the strong and competitive few,
and the rest will be taken of, whereas it has
been said: “In the devt of human resources we
cannot afford to neglect half of the
population…no nation can achieve full progress
with only half its human resources harnessed”
Tun Dr Mahathir Mohammed, past PM, 1995
• 4.The malays are ready for open competition,
there should not be any more intervention, let
market forces decide. The liberals also cite weak
implementation and poor follow through (of NEP
& NDP), as further reasons.
Dato Dahan / Hj Abd Khalid
YKSM Research & Consulting Centre
Seven Fallacies
• 5. Malaysian society is united and prosperous, whereas on the part
of the malays, there is a sense of marginalisation. Among the non
malays, a sense of alienation, a deprived opportunity. Indeed ethnic
polarisation and ‘living in silos syndrome’ are indeed real.
• 6. The bumiputeras are getting all the contracts and opportunities. In
reality, the non Bumiputeras benefit more from them as a result of
leakages. The fact is that the supply chain operators, are largely
non malays and foreign.
• 7 Bumiputeras have exceeded the 30 % equity target because a
number of the big cap companies on Bursa Malaysia are owned by
Bumiputeras, even though government owned and trust companies.
But within the top/middle management, there are more non
Bumiputeras.
Dato Dahan / Hj Abd Khalid
YKSM Research & Consulting Centre
Where Do We Go From Here?
• 1. Stress on knowledge. In a knowledge based era,
characterised by rapid technological & innovation
advances, a rapidly changing market demand & aging
population (just to name 3), in unison, all communities
focus on making Malaysia ready for a highly competitive
& hostile world stage.
• 2. Prepare young Malaysians for the new world. Let
the young, educated and qualified from both sides build
bridges, make meaningful partnerships & JVs. 1000 (or
is it 100,000) young who are going to take over the baton
come 2020 ( they are 10 years or younger in 2006) be
identified, imbued with the right spirits, nurtured &
allowed to flourish in a million different ventures.
Dato Dahan / Hj Abd Khalid
YKSM Research & Consulting Centre
Where Do We Go From Here?
• 3.History is the best teacher. Let us learn from
success stories, domestic, regional and international.
Great nations, multi-whatever, have one thing in
common: they are bonded by a common sense of
purpose and guided by shared values.
• 4. Share wealth equitably. Let us focus on creating
wealth, entrepreneurship, devoid of unbridled greed &
self gratification as well as corruption. Concept of rizq
(God’s bounty for every man) and accountability to
oneself/family, above all, to the Almighty. A simple
formula to translate the above must be sought, for
example, focus on narrowing income disparity and
improving Total Factor Productivity (TFP), instead of
obsession on corporate equity.
Dato Dahan / Hj Abd Khalid
YKSM Research & Consulting Centre
Q&A
• Thank You and we look to hearing from
you:
– E-mail:
– [email protected]
– [email protected]
Dato Dahan / Hj Abd Khalid
YKSM Research & Consulting Centre