12MP: Bumiputera equity safety net may do more harm than good

The firms which are able to purchase the shares will counter the productivity of the exciting companies

by ANIS HAZIM & MUHAMAD AMIR AIMAN AZLAN / pic by TMR FILE

THE Bumiputera equity safety net under the 12th Malaysia Plan (12MP) is seen as a good intention but could potentially harm the Bumiputera, the Institute of Democracy and Economic Affairs said.

Its CEO Tricia Yeoh said the policy aims to increase the wellbeing of Malaysia’s Bumiputera but the reality may benefit only a small number of the group.

“One of the policies may have good intentions to increase the wellbeing of Bumiputera in Malaysia. However, the reality is that this will only benefit a few Bumiputeras,” she told The Malaysian Reserve.

The equity safety net framework was tabled in Parliament recently by Prime Minister Datuk Seri Ismail Sabri Yaakob, which stated that the sale of Bumiputera shares or companies will only be sold to fellow Bumiputera firms and individuals.

Yeoh said those who are able to purchase will counter the productivity of the exciting companies.

“This is due to insufficient take-up, so the demand is not high because there are only smaller pools of individuals and companies which are able to buy the shares. Therefore, the value of the company will actually fall,” she stated.

Yeoh said the falling market value could potentially harm the Bumiputera community.

“If the market value of the company falls, how can this be a positive thing for the Bumiputera community at large? So, the policy may have good intentions but it will eventually encounter productive and potentially harm instead of helping the community,” she added.

Besides, the proposed policy will also affect Bumiputera’s shares and companies.

“The drops in market value will also lower the demand for Bumiputera’s equities of the stock market. Meanwhile, the non-Bumiputera are unable to add to the Bumiputera’s capital as they have been excluded which will hurt the companies,” explained Yeoh.

According to her, the Bumiputera equities have fallen over the past five years period together with the non-Bumiputera and foreign investors.

“If we look at the 12MP table, the category that has grown over the last five years is only the nominees which have grown from 7% to 11%. There are a lot of nominees that are buying shares on behalf of someone else or other parties.

“This will be beneficial to the owners of the shares which are not being transparent to disclosed the equity which will not help the Bumiputera,” she further said.

Meanwhile, MARC chief economist Firdaous Rosli said the 12MP failure to review its past rationale and cost of the unmet target might complicate its execution to be effectively implemented.

He said the lack of criticism in the past growth target, however understandable, will disrupt the continuation of Malaysia’s developmental target as the nation’s environment are to show similar cases.

“The downside to policy continuation remains as the 12MP will witness another general election between now and July 2023. Given there will be around 5.6 million new voters in the 15th General Election, its outcome gets harder to anticipate than ever,” he said in a report yesterday.

Firdaos added they are cautiously optimistic about the government’s high inflation tolerance, given average inflation during the 11MP was 1.3%, compared to the predicted range of 2.5% to 3%. Given that the unemployment rate is expected to remain high over the 12MP period, we anticipate the government will keep inflation low, which will affect the overall efficacy of the plan.

“During the 12MP period, the government forecasts real GDP growth to range between 4.5% and 5% every year, up from 2.7% in the previous plan period when it was not dealing with the fallout from lockdowns.

“It also forecasts growth in gross national income per capita to RM57,882 at the end of the 12MP period, up from RM42,503 before. We think that the 12MP’s goal of raising the average family income to RM10,065 will result in a significant increase in the current minimum wage,” he said.

“More clarity in development planning is required not just to reorganise the economy in the post-pandemic age, but also to prepare the private sector for the future,” said Firdaos further.