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Sakmongkol ak 47

ariff.sabri@gmail.com

Tuesday, 7 July 2009

The dismantling of the 30% rule


After PM Dato Sri Najib spoke about dismantling the 30% quota, the reception was mixed. Generally speaking, it is said that the Malays feel naked. There are no longer protection and special privileges that come along with being a Bumiputera. Hence, some feel that Dato Najib by doing so is only attempting to ingratiate himself with non Malays. Perhaps, PM Najib recognised the validity of Lee Kuan Yew's observation, that Malaysia can be better if she treats her non Malay citizens better. Maybe.

The 30% quota was the backbone to the economic policies under the NEP and its successors. It has allowed for the enrichment of selected BUMIPUTERAS namely the well connected and privileged minority. The general improvement for the Malays was secured not through the operation of this 30% rule, but by specific policy initiatives targeted at education, in land distribution or land consolidation (FELDA), through improvements in agriculture which is the main economic preoccupation of the majority of Malays, job mobility and so forth.

There seemed to be two different set of policy initiatives. One which worked through the 30% quota enabled gratuitous transfer or inexpensively financed equity stakes in on-going business firms. The Malay input is required by law to enable the company secure licence, contracts or go for listing. They got the benefits of being who they are NOT because of what they can do.

The other approach was meant for the majority unknowable masses. The policy initiatives outlined above were targeted at capability enhancing. These took the form of raising educational standards, expanding technical knowledge, widening job prospects or transferring productive assets into the hands of those who qualify being given by actually working the land.

The NEP created 2 groups of Malays. The 30% faction turned out to be largely rent seekers. The second group, which took the slower route of progress, were actually the people who actually worked to gain benefits.

The NEP then created two dichotomous groups. One secured benefits by being who and what they are. The other group secured benefits by offering what they can achieve.

The numerically larger capability enhanced group has been outside the 30% game thus far. They lose nothing that which they have not gained. Thus dismantling the 30% quota does not cast a doomed shadow over them. In fact, they stand to benefit from the opening up of the economy since they have been capability enhanced. The ones suffering will be those who have benefited by taking a joy and free ride enjoying the status of Bumiputera.

My own personal view is, the NEP (especially the 30% equity rule) is essentially a giant, legalised PONZI scheme. Consider this. Since the NEP was carried out, in the name of the NEP, in the name of Melayu tak akan hilang di dunia, RM54 billion worth of equity ownership has been given to BUMIPUTERAS. Who were these BUMIPUTERAS? The refined term used presently- the first tier BUMIPUTERAS.

It has created a super rich section of the Malay community. I salute the PM for dismantling this 30% myth of Malay ownership of Malaysia's wealth. If it has not worked, cut our political losses and abandon them. Clearly, the policies have not been functioning well.

Inter ethnic wealth differences are widening. Intra ethnic income differences are worse among the Malays. We can infer many things from the outcome of various economic policies. By and large, the Malay administrative elite have not helped out the majority Malays. The political elite have been feathering their own nests. Just look at the GINI coefficients. The facts speak for themselves. Res ipsa loquitur.

What has happened to the 54B? Our PM has been forthcoming in this- out of that figure only 2B remained. Those BUMIPUTERAS once holding the RM52 billion have left the building. They sold or the softer term- cashed out. This behaviour, as some contend, is perfectly rational. The NEP was designed to help Bumis acquire 30% equity- but the policy, these people claimed, never demanded they retain it. They had it and cashed out. The problems start when the very same people want the opportunities again- for themselves, for their successors.

The NEP failed to produce the two elements essential for sustained wealth creation. These are actual ownership of the businesses and a willingness to defer present gratification. You don't have ownership, when you don't have title to something and the responsibility, your attachment is ephemeral. It's like bloggers who chose to remain anonymous while delivering their vitriolic and personal attacks. They refuse to confer ownership on their writings and therefore attach no conscientious responsibility over them. So they babi here and babi there.

95% of those who received government largesse wanted to exercise immediate gratification- more cars, houses and more wives. They want to drive in Ferraris, Jags, Mercs and Aston Martins.

Who are these selected few? Various euphemistic terms have been given to them- first tier, top tier, perhaps later, maal hijrah
business stars. We know them simply as rent seekers and rent collectors. It was easy for them to jettison their shares because they got it gratis. Easy come, easy go. That is also perfectly rational behaviour.

We have another plain term for them. The bumiputera means just that- putera di depan, bumi dibelakang. These puteras in front- PUTERA BANGSAWAN, PUTERA PIMPINAN UMNO, the genetic elite, the inducted elites and so forth. The rest which forms the majority are left belakang- behind. Just like the oppressed natives spoken about by Franz Fanon, the majority BUMIPUTERAS shout- cracy—cracy—while the elite say it loud and proud- democracy. The elite know what democracy means- the chance to enrich themselves at the expense of the majority herd. Indeed, what the majority were shouting and mimicking were words sounding more like kasi-kasi-kasi (not give) but neuter, neuter. They, the majority have been neutered.

What are the positive effects of the NEP on the Malays? It has been successful in so far as it has created the real basis for wealth creation. These include better education, better job opportunities, improvements in agriculture, better standard of living for Malays. The all round improvements cannot however be attributed to the NEP alone especially the 30% equity rule. Maybe it is the outcome of the exercise in normal government responsibilities. It is the nature of government to provide the framework within which, economic actors act on them. They gained by being active and never passive.

The majority Malays are not going to lose sleep over the abolition of the 30% quota rule.

16 comments:

Anonymous,  7 July 2009 at 09:59  

Dato,

very good points you have made there.

who abuses and who really benefits in terms of real change.

but i think we still need not have totally relinquished the rule across the board for fear of giving up key sectors that will ultimately result in us being owned and unable to call the shots.

even Dubai, Qatar etc have their restrictions and they are smart enough to ease some areas but not give it up totally.

popular decisions translate into a few more votes, but I can tell you, the general resentment towards UMNO/Malay will not change through this sell-out.

we will still be losers.

I agree that imbalances do exist in terms of educational opportunities for all races, and poverty across all, but this is not a wise decision. Steps could have been taken to improve the lot of all our citizens, but relinquishing total control is always a very bad idea.

Apa lagi financial and other key sectors. We are not there yet to be able to take such a drastic step.

Even Americans are moaning about how China, Japan and other holders of their key assets are now calling the shots in this gloomy economic scenario.

Lee Kuan Yew can spout a lot of crap about equality, when in fact they are still the "tuans" in Singapore.

Me

Anonymous,  7 July 2009 at 10:04  

The 30 percent ownership rule could have been enhanced with requirements of transfer of technology, transfer of expertise, training of locals, more local/malay emplyees etc, etc instead of outright free and easy ownership by the gratis-seeking Malay elite. That way, the benefits can be channeled further instead of just becoming figureheads.


Me

Tok Snake 7 July 2009 at 10:54  

can't agree more.

well written sir.

abRO 7 July 2009 at 11:30  

Dato SAK,

Well said. Very objective arguments.

You hit the nails right on the dot.

Whatever said would not go down well with some quaters, especially the PUTERAS UMNO (borrowing your term). However it's essential to do away with the 30% equity if we want the wealth to be more evenly-distributed.

Just imagine the wonders if the 54B were to be given to each and every 27m Malaysian population. Wow, everyone in Malaysia becomes a millionaire. No more beggars. No more poor people. No more poverty.

but again, the elite and God chosen few wouldn't agree.

Anonymous,  7 July 2009 at 12:12  

Tok Snake,

why are you following me?

;)

was fun when CCJ followed...heheh

walla 7 July 2009 at 14:58  

A: 'Why you look so glum, one?'

B: 'I was just minding my own bisnes, A. Perambulating at the mall. Then, behold! There she was. So sleek and stunning, with a come-on look to melt the heart of even a siberian tiger.'

A: 'Aren't you ashamed of yourself,B? You're already geriatic. Expired goods, in fact, and prime suspect in the deforestation of our tongkat ali industry, if i may add.'

B: 'Wait a sec, A. Are we tuned to the same wavelength? I was just talking about that beemer. Three series, 320iA to be precise. Like Bond's aston-martin, gunmetal grey. Apogee of luxury and performance. The ultimate of ultimate driving machines. Like me, kekeke.'

A: 'Oh, for a while... never mind. But still, you haven't said why you're looking so glum.'

B: 'You want to know why i am glum. Let me tell you why i am glum. As i alighted from that beauty, i felt different. Changed. Uplifted. My imagination expanded beyond all horizons. Today, beemer. Tomorrow, a twenty four million ringgit bungalow. Casa de'Tempe. And day after, hah, you don't want to know what i am imagining for day after. An empire so big, even Genghiz Khan would have quaked in his judpurs.'

A: 'Well, it's good to imagine big and have specific aims in life. That's what motivates people to work hard and improve their lot, so contributing to economy and society, and keeping themselves out of harm's way, even from causing harm to others.'

B: 'Then please tell me how i can get that beemer now that this new equity ruling takes effect? You know i'm in that tadawang category. But i know someone who knows someone who knows someone rich and he can give me a short-term loan. He expects me to vote for him. That's not a problem, A. I don't care what he stands for. Even why he'd want that post so badly. But now, how? Without that money, macam mana i can buy those shares? Without those shares, how to sell them inside the first thirty five minutes upon gonging the bell?

You know, A, we have a wonderful country. Great economy. Just by getting a personal loan repayable for voting support, one can buy some shares and realize capital gains to the tune, in my case, of RM248,888.88. Isn't that a beautiful number? Exactly what we need to buy one of those motor company assets so that it can ask for another AP and do it again.'

A: 'Yes, B, people make rules to help others first so that others will help them back later to continue the cycle of distributive monopoly.'

B: 'But now the rules are coming down, dismantled by global reality more than anything else. What is left for people like me who want to out-conquer even Genghiz Khan?'

A: 'I know how you feel. You've been reading Berlusconi, conquest and all. Now i remember talking to one of those bumi auto vendor ceo's. He said when he started, his factory was just a shed in the outbacks of Shah Alam. No electricity. So he pulled a cable. Imagine that!'

B: 'Hey, that's not right. But still we can understand why. The need to show "i can do it too" thing. The wish to stand up and be financially independent. Not to be left behind. Those kinds of sentiment that gnaw at the innards.'

A: 'But he also made a big mistake. Like almost all the rest from one industry to the next. He bought the wrong technology. Because he didn't know. Real knowledge precedes everything, B. Because of the wrong technology, the car gave problems to every owner. Because all the owners got pissed, the market share shrank. Because the market share shrank, the corporation had to be propped up by artificial policies. Which in turn carromed an effect disproportionate to the original intent. Seeing only the small picture effectively degraded the big picture, which in turn downgraded the whole industry, creating toxic liabilities which finished off future potential at obscene opportunity costs.'

walla 7 July 2009 at 15:00  

B: 'Then what needs to be done, A?'

A: 'Look, B, let's get a couple of things straight. One, the world is not about race or even face. It's about being relevant. If one is not relevant, then one must find ways to be relevant. Two, even those who had gone up through affirmative policies will all one day have to face up to that requirement. If they run a public-listed company, for instance, the business would demand that they also pay homage to relevance. If we had learned anything about the way those corporations had been run by people who were helicoptered in by policy, it's that the whole shebang is not sustainable. In the past, the business could have lasted longer. Because of bailouts. Not today, not tomorrow, not ever again. The world has changed. People have woken up. No one will accept the lackadaisical way of doing things anymore.'

B: '(looks miffed)'

A: 'You follow me so far, B? Let me continue. Three, any market if it is to be efficient must not only be relevant it must also be realistic. You can't start a scheme designed to help the marginalized and then midway shanghai the process to help yourself using public office, rakyat money and national reputation, can you? Please answer me if you think you can.'

B: '(dark clouds above eyebrows)'

A: 'Four, those who are relevant, realistic and capable will go up. Those who are less will not go up as fast. It's the engine of growth. Based on ability and performance, add some luck and foresight. Now when they have gone up like that, using their brains, brawns and guts, are you going to penalise them and demotivate the entire process so that those after them will find it hard not to be persuaded to find easier short-cuts to success? Of course not, everywhere where it counts it's like that. Good up, not so good, given a few chances and, up to you. The trouble is the old scheme kept going on and on; get shares today, sell, make a kill, and put the hand out again for another batch of lots. Ad infinitum. Not just ultimate driving machine but also perfect and free cash-cow. And it's all made legal just by loose reference to a national constitution. Even Madoff will scoff, B.'

B: 'But if we don't let people try, how they going to get the experience and knowhow to be confident to try and go up, A?'

A:'The failure was because foresight was not exercised, B. It wasn't exercised with regards human nature. Man by nature will take short-cuts to accumulate wealth. If easy, they will become greedy. They forget the role they were supposed to play. They forget where the money comes from. They forget that when they climb up and are given tributes on silver platters, they are actually trampling down on others who had contributed to those tributes in the collective fund of both society and nation. And then when they are up there, they start to erect fences around themselves to protect their turfs so that they can continue reaping the scheme they have redesigned from what was an intention to give the marginalized an equal crack at success, too.

Now, B, the failure was also due to the other predicate. That the policy is only to be applied during economic growth. Because if you don't do that, then the money will have to be taken from Y and Z to give to X.

walla 7 July 2009 at 15:00  

...Like even this thing about scholarships. It shows the important things they don't really give a damn. Y is finally given a scholarship. She cries with joy after crying with disappointment. It's to Asian Institute of Medicine. But X will still get Liverpool Med although Y's scores are way higher. It's piecemeal release of past holdings on decision-making. Then Y comes back a GP in order to fulfil bonding while X lingers on and on unable to finish the course which is probably ten times more expensive. You know what's the problem here, B? Y could have gone there instead and later progress to be the country's foremost cardiologist. Meanwhile the rakyat cough blood and die in dinghy wards here. And that includes the friends of X.

The policy has been applied like someone commissioned to paint the Mona Lisa. But he has other ideas. He thinks he's an avant garde maestro. So he takes the brush and throws large swarthes of thick paint across the wall. He turns around and tells the world, behold my masterpiece. But he forgets, the audience only wants to see the Mona Lisa. The vietnamese and mexican standing behind see the crowd, and proceed to paint what even Leonardo daVinci couldn't because they use the latest lithographic computerised imaging system. Because they overcame their own comfort zones to learn new languages to acquire the best imaging technologies they could get their hands on. Unlike our friend in Shah Alam.

Capeche, B?'

walla 7 July 2009 at 15:00  

B: 'I don't think any of the X's will disagree with you, A. What you've said is reasonable. But what you seem to be saying is not just limited to the equity rule.'

A: 'You want to know why, B? It's because when people have doubts about it being removed, their thinking is exactly the basis of what i've just been saying that's not right. You want some privilege for free. Yes, i know, privileges can be free, like discount coupons or credit points. But tell me, when are things ever given out for free that don't involve some things to be done or prepaid in another aspect, like coerced customer loyalty, for instance?

Now the argument i've been pushing will appear different to different people. There are three groups at the moment. The first group never benefited from the policy; they work from day to night and live within their means; they don't begrudge others who have come up by honest means regardless of race or face; they remain faithful to universal principles and they always try their best. The second group compares and contrasts, constantly looking for avenues to advance their argument so long as their argument ends in their being right without regard for the actual situation, the true merits of the matter, even the long-term consequences for all. The third group can't be bothered, because they are the ones reaping the real benefits of the policy, accumulating wealth any which way and every second of their pretentious lives, living it up and holidaying away from the languid land that is this sleepy hollow, forgeting that the social largesse they were given was supposed to be returned to society so that it can be weaned from such an exercise which would be considered funny but for the fact too many generations and the future of this country have been sacrificed for them. Which group do you belong, B?'

B: 'Why does all this bother you so much, A?

A: 'It's because someone walking by in one corridor of power had blurted out it was four hundred billion, B.'

B: 'That must be a rascally statement, A. Even if it was that, some would have been paid for goods still enjoyed by the people.'

A: 'No doubt, but even if we ignore that and think about the other number, fifty two billion would have been no small potato if kept for the future of all who would need funds to get up in their lives. And the other side of the coin is to ask how many of those listed companies had turned turtle and gone pn4? So those who had bought them up would be suffering financially on top of the slight, wouldn't they?

The whole matter also begets the question whether we are a welfare state or not. We're neither hightech nor hightouch so how can we continue to afford lopsided welfarism in this changed world? Simple question - when you stop? when the family is five, or ten or twenty? when the household income is two thousand or twenty thousand? and on what grounds do you give out? shares for free, interest-free loans to start their own business when they don't want to or can't, money to dabble in the stock market? what? Even to distribute you must be rational.'

B: 'What do you see happening ahead, A?'

A: 'End of elitism, cronyism and corruption. You want to have your own Case De'Tempe? Earn it. And if you can't, right-size your dreams to fit your destiny. If everyone by just dreaming and taking short-cuts can get all that they desire, this world would just have dreamers and schemers, there will be no competitiveness indices, the stock markets will inflate and then the bubbles will devastate all wealth. Then all will wake up that there's no free lunch in life. Not even for umno-putras. Even if they are also permanent residents.'

Anonymous,  7 July 2009 at 18:34  

A perfect example of the NEP of Umno is the collapsed TRENGGANAU STADIUM, BEAUTIFUL FROM FAR, BUT IN REALITY, FAR FROM BEAUTIFUL. In other words looks grand till it collapses, thats the tale of Umno, unfettered greed without thinking about the consequences, the bottom line is this I as a non bumi say thank you Umno, you have made me much stronger mentally, to strive hard and sucseed by my own efforts without crutches, free handouts till bila, you can even give out free passes to mediocore students and let them pass to become degree holders, but it will catch up with you, remember when we Malaysians used to laugh at the bangladeshis with degrees, well we never did look at our own backyard did we, so now we have sintok professorris teaching our graduates mediocority, I say carry on being mediocore, you may be able to fool your selves, but for how long, look at history- every corrupt and useless empires collapsed due to stupidity and greed, well today we inport maids fron indonesia, well don't worry we'll be exporting maids soon to indonesia, WHY? The way things are going, They will be overtaking us soon, than where will the famous melayu tidak akan hilang di dunia SLOGAN BE, UMNO AND THEIR ILK WILL BE THE THE FALL OF THE MALAYS.
Meanwhile we non crutches needing non bumis will still be driving our mercs to the spas where the maids and servants will be who... give you 2 guesses! EITHER WAKE UP, OR FIL, ITS ALL UP TO YOU.

Anonymous,  7 July 2009 at 18:36  

The windfall of RM half a trillion from Petronas could have been better utilised in upgrading the education facilities in the countries rather than in building white elephants and enriching the politicians in Malaysia. There was no need for NEP, and without it Malays today would have been better trained than what they are. The harm to the Malay race was perpetrated because UMNO leaders wanted Malays to get into the institutions of higher learning through short cuts, and to graduate without gaining the required training through bonus-marks, and special tutorials for Bumiputras just before the examinations. The result was sub-qualified educators get to make their students put in more efforts but derived diminished outcome. The overly high ratio of Malays in university teaching posts says that they were recruited not by merit.

NEP makes the government services an extension arm of UMNO. The government servants are no longer neutral and they are not able to make the country enjoy the benefits of good governance which is the prerequisite for both social and economic development in keeping with the modern world.

Because of NEP, and the way appointments are made within the police force, even merit was not applied within the single dominant race, Malaysians fear the police like they were members of secret society. Police are uniform thugs, and they were no difference from those not in uniform, other than that the latter do not stand out as possible thugs to warn off their victims.

The 30% bumi ownership requirement should go. The double pricing of houses should go. The quota based on race in licensing and all else in the country should go. Government policy should be race-blind. It might still take longer to go back to pre-1969 days. But a start should be made.

End NEP now, and all those regulations which came about because of NEP.

Anonymous,  7 July 2009 at 20:26  

Malaysia will be taking on Manchester Utd on the 16th..a timely reminder that there will be no more 30%..no more handicapping when we play golf..and paralympics will be open to all..

1Malaysia

ajoyly 7 July 2009 at 23:00  

There are two types of Bumiputra businessmen, one, manage and run their businesses themselves from scratch and the other just rent their licences or have joint ventures with non-Bumiputras. Becoming sleeping partners.

The first category benefitted and grow from their sweat and toil. They mastered their businesses. The second group didn't because they had an easy time. Every race has talented people. You don't have to help them. They can smell and see opportunities anywhere.

Conversely,there are lazy and mundane characters in every ethnic group too. Meaning, all races are human beings and therfore have the ability to think and decide for themselves. These are God given gifts but the decision to apply them will be decided by the individual whatever his ethnicity is?

That being the case, whether a person will be successful or not in his business enterprise will depend ultimately on choice.

In the case of the 30% handicap, even without it, Bumiputras in the first category mentioned in paragraph two above will still become sucessful businessmen.

Frank,  8 July 2009 at 04:07  

Dato Sako

This article deserves a wider reading.

One of the most profound analyses on the NEP and the 30 percent stake issue.

I can't agree more than what was said.

The racially-based gratis is too entrenched in the psyche of the Malays, its more than 40 years, that it will be hard to take its shackles off.

Among the capacity-enhanced Malays, and those Malays who see competition as the way forward, the NEP is only a catalyst for the betterment of their livelihood, noot as a SOURCE, whilst the parasitic groups, those who brilliantly described as putera depan bumi belakang , see the 30 %NEP as a golden goose that should not be taken away even after 40 years.

Unfortunately, the race based parties of the ruling govt of the day encourages race-based politics, that is their raison d' etre. The existence of UMNO, MCA and MIC is by itself an affirmation that socio-economic development of the nation in years to come will still be race- based, and any effort to get the Malay community to step outside of this dependency syndrome will be hard to come by.

After 40 years of abuse and misuse by UMNO of affirmative action to help the Malay community, perhaps the only way out for the Malay community in the longer term is to make constitutionally illegal the establishment of any RACE BASED POLITICAL PARTIES.

In the 12 General Election 2008, we see a dawning maturity of the Malaysian voters of the three major races. They have truly crossed racial lines to vote the party they think will serve them best. It is unheard of in recent past of Non-Muslims supporting ardently an Islamic Party against their own ethnic political parties. They go out an campaign for PAS.

There is a need for the Malay community, to be led by the Malay intelligentsia to make a dramatic paradigm shift in attitudes with regard to the NEP and the 30% gratis.... the first step is to walk away from Race-Based political parties.

James 8 July 2009 at 09:15  

AK!
A very good analysis of the prevaling situation of the 30 percent NEP.
No one bothered to write about the blantant abuse of this system.
Thanks!an eye opener for us non-bumis.

Peter,  8 July 2009 at 19:11  

Yes the NEP has helped a lot of Malays relative to their non Malay counter parts who could have soured sky high as their counterparts in Singapore, Taiwan, Hong Kong and China(if they had been taken better care of).

In the end, and look at the facts, the non Malays today is no where able to compete with those in other countries. The sum total of loss is what we are today. .... how far are we behind Singapore, Hong Kong, Taiwan and China? That is worth trillions of ringgit gone.

At the end of the day, yes, the Malays got better but the Chinese etc got very very much worse by far larger amount. The sum total... we lost and lost very bad.

The worse is the number of top talented Malaysians working overseas. This cannot be quantified.

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