October 8, 2013
30% Equity Target: How did this Magic Figure come about?
By Ranjit Singh
How did the 30% equity target for Bumiputeras come about? The answer is nobody knows.
The answer given by Tan Sri Ramon Navaratnam, who was a senior civil officer at time just after the 1969 riots, was that the economic consultative body which set up to study Bumiputera economic share just tossed around numbers which they thought was reasonable given that Bumiputera equity share at time stood at around 2%.
The body headed by the late Tan Sri (later Tun) Ghazalie Shafie first proposed a 50% share for the Bumiputera but then this was later brought down to 30% as a consensus figure by Tun Dr Ismail Abdul Rahman.
But several people scoffed at an answer given during the recent tabling of Tengku Razaleigh Hamzah’s ‘Amanah Plan’, which involved a group of eminent economists and technocrats headed by Tan Sri Dr Kamal Salih.
Yet, the 30% equity target is the basis of another Bumiputera economic plan that was recently announced by Datuk Seri Najib Razak. But the figure bandied about of RM31 billion for the new plan does not add up.
What he announced was the RM700 million for business loans under the TEKUN (Tabung Ekonomi Kumpulan Usaha Niaga) and 10 billion additional units under the Amanah Saham Bumiputera (ASB).
The point here is that Putrajaya has put out those figures because it continues to maintain the current Bumiputera equity is at 23%, a contentious figure among economists.
After all, Bumiputeras make up 67% of the population of the country and if GLC companies’ equity was monetized, the entire equity held by Bumiputera’s should exceed the 30% threshold.
However, the truth of the matter is 80% of Bumiputera households in the country earn less than RM3,000 per month and the reason for this is the policies that have favored the Bumiputeras have not trickled down to a wider portion of the population.
Under the policy, wealth had been accumulated in the hands of a small population of the Bumiputeras’ and herein lays the problem.
The New Economic Plan (NEP) had somewhat met its objectives but affirmative action effectiveness continues to mired in weak implementation.
Now it is evident that setting equity targets is erroneous as the real equity level has surpassed the 30% threshold but many Bumiputera households are in the poorest category in the country.
The way forward is to study ways and means of enhancing Bumiputera skills sets and to be fair to Najib, he had announced measures in his Bumiputera Economic Empowerment Plan.
The issue of funds being channeled to a select few who were in the inner circle or to put it bluntly ‘cronies’ under the NEP must be addressed or the new measures would not resolve the issue of lifting the majority of the Bumiputeras who form the bulk of the lower income group in the country to better economic status.
In the same vein, the fixation on the 30% equity is definitely myopic and really does not make sense and makes one wonder how economic planning is carried out in this country without knowing the basis of a target. – October 8, 2013.
* Ranjit Singh reads The Malaysian Insider.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.