AFAM: Set up inquiry first why 30% Bumiputera stake not achieved

Proposed implementation by end-December 2022 has put many forwarding managements in a quandary


THE Airfreight Forwarders Association of Malaysia (AFAM) wants the new requirement that mandated forwarders to have 51% Bumiputera equity be removed, saying it contradicts the spirit of Keluarga Malaysia.

Instead, the association urged the government to identify why the target to achieve 30% Bumiputera stakes in companies is not achieved.

AFAM chairman Walter Culas said such drastic requirements should be preceded by a careful study on how it would affect logistics companies, so that the growth of the industry as a whole can be protected.

Following protests, the government has pushed back the implementation date of the new requirement to Dec 31, 2022, but Culas said the problem remains and it will just prolong the uncertainty in the industry at a time when it must be streamlined to be efficient, improve productivity and maintain a low-cost base.

He said the government’s Bumiputera equity policy originated from the New Economic Policy (NEP) that was set up back in 1971 and the government has been giving incentives to the Bumiputera community since then to achieve 30% equity.

“Prime Minister (PM) (Datuk Seri) Ismail Sabri Yaakob said the government’s target to raise Bumiputera equity ownership to 30% has yet to be achieved, so there is an urgent and compelling need to find out why the desired result is not achieved.

“Since this is the government’s main agenda, we propose that a Royal Commission of Inquiry needs to be established to determine the actual truth and recommend ways to address the matter.

We feel that the policy has long outlasted its initially intended phasing out,” he told The Malaysian Reserve.

It was reported that the Finance Ministry has agreed to postpone the enforcement of Bumiputera ownership requirements for freight forwarding companies in order to review the regulations.

The Federation of Malaysian Freight Forwarders proposed that the requirement — possibly calling for a 51% Bumiputera ownership of their companies — be deferred to the end of next year.

AFAM’S Culas said if the forwarding industry is subject to 51% Bumiputera equity while all other industrial segments need only comply with 30% as stipulated within the NEP, this will be unfair towards the industry and companies therein.

He said the current changes are without any valid and justifiable commercial or economical reason whatsoever and is therefore an unfair decision, and the proposed implementation of this policy by end-December 2022 has put the management of many forwarding agents in a quandary.

“Existing forwarding agents that admit a new Bumiputera partner will face equity losses that took decades to build. No one within the industry wants to be a minority shareholder in a business their families have built up over the years. Others are finding it difficult to find a new Bumiputera partner in this poor economic environment.

“How will implementing a 51% Bumiputera equity enhance the growth of the industry? What distinguishable value does the Bumiputera equity requirement bring to the table? What is the logic and rationale for the exemption of public listed companies from the 51% Bumiputera equity? Why the double standards and distinction between the two categories of company?,” he questioned the MoF.

AFAM had sent a letter to the ministry on the matter on Sept 29.

In the letter, Culas also said the issue with integrated international logistics service (IILS) provider companies needs to be addressed as local companies that registered with IILS requirements over the years are being asked to comply with the 51% Bumiputera equity.

“Majority foreign-owned IILS companies, for example, more than 51% of their boards of directors and shareholders are foreigners, are, however, exempted from this requirement.

“This new requirement hinders locally owned IILS companies from competing effectively with majority foreign-owned IILS companies,” he added.

It is acknowledged that the local IILS companies have invested heavily into assets like warehouse, equipment and vehicles to provide a comprehensive and total logistics service.

The asset value can reach millions of dollars and the implementation of the 51% Bumiputera equity will be unfair at this time and hard to fill at the level it is today.

Furthermore, it is very hard to find Bumiputera investors with interest and financial equity on hand to invest in long-term return on investment as required within the logistic industry across the board, Culas said.