Musa calls NEP be revoked in South Johor?

A lot of hue and cry were recorded about former Deputy UMNO President and Prime Minister, Tun Musa Hitam’s statement two days ago. This was reported by Bloomberg (www.bloomberg.com), which got many Malay nationalists jumping

 

Malaysia Must End Race Policy in Johor, Adviser Says

By Angus Whitley and Haslinda Amin

March 21 (Bloomberg) — Malaysia should exempt the southern state of Johor from policies that favor the ethnic Malay majority to help attract foreign investors to the area, former Deputy Prime Minister Musa Hitam said.

Policies that give the racial grouping privileged access to government contracts and guarantee a minimum presence in the workplace may deter foreign companies from coming to Johor, said Musa, who is advising the government on the state’s development.

Contract awards “will have to be on merit,” Musa, the country’s deputy leader from 1981 to 1986, said in a March 19 interview. “The Malays will have to face competition.”

Prime Minister Abdullah Ahmad Badawi is seeking foreign investors to help fund a two-decade, 382 billion ringgit ($109 billion) redevelopment of Johor, bordering Singapore. Scrapping the race-based program could lure investors and pave the way for the country to completely drop its 36-year-old policy in support of ethnic Malays, who comprise 60 percent of the population.

“It would be an exit route, politically,” said Manu Bhaskaran, a Singapore-based partner at economic research company Centennial Group. Johor “is an extremely important project. The affirmative action program and all the related problems do turn off foreign investors.”

Foreign direct investment in Malaysia in 2005 dropped to 15 billion ringgit from 17.6 billion ringgit in 2004, according to the government’s department of statistics. Last year’s figures haven’t been released.

Wealth Imbalance

The racial program, introduced under the New Economic Policy in 1971 after clashes between ethnic Chinese and Malays, also known as Bumiputras, aimed to increase the wealth of the nation’s poorest grouping through benefits ranging from cheaper housing to greater access to initial public offerings.

Concern about the policy’s validity grew last year after a report by the Asian Strategy and Leadership Institute in Kuala Lumpur showed the original targets to address the wealth imbalance had been surpassed.

The February report by the Centre for Public Policy Studies, controlled by ASLI, said ethnic Malays may own as much as 45 percent of Malaysia’s corporate equity. That was higher than the government’s estimate of 19 percent in 2004 and surpassed the New Economic Policy’s goal of 30 percent.

ALSI on Oct. 10 last year said there were “shortcomings” in its report. Lim Teck Ghee, director of the Centre for Public Policy Studies, quit a day later to protest the retraction.

Policy Revision

A five-member council including Musa and Malaysian billionaire Robert Kuok that’s advising the Johor project agrees the ethnic program should be dropped, Musa said.

“I am confident that this Bumiputra thing, if I may put it this way, need not be the negative factor, and I am stressing this in this particular exercise,” Musa said. “There needs to be a revision, updating, of the way we approach it.”

Incentives to take part in the Southern Johor Economic Region are being finalized, Musa said. Middle Eastern and Japanese investors are among those that have agreed to plow funds into Johor, he said.

The 2,216-square-kilometer development will include roads, offices, homes, theme parks, hotels, factories and hospitals and is Malaysia’s biggest real-estate project. Development of the region will require 382 billion ringgit of investment from 2006 to 2025, according to Khazanah Nasional Bhd., Malaysia’s state investment unit, which is leading the project.

The site will generate more than 800,000 jobs in 20 years, Prime Minister Abdullah said in November. It may boost growth in Johor to an average of 7 percent from 2005 to 2025, compared with 5.5 percent without the revamp, Khazanah said.

 

Its seems that Musa’s sweeping statement is for the revocation of the New Economic Policy (NEP) for the South Johor Economic Region (SJER). The NEP is currently extended by the BN administration from its original period due to inability to reached its planned target. This is expected to bring forth a lot of flak from UMNO stalwarts, especially the ultra Malay factions.

Let’s re-look into the basis of Musa’s arguments. The New Economic Policy, launched by the late Tun Razak in August 1971, as a long term solution to the serious imbalance of development between the Malays and Bumiputras, which comprises 60% of the population, as compared to the other ethnic groups. The gist of NEP is to alleviate the bumiputra socio-economic standing through education, improved infrastructure and business opportunities made by expanding the economic cake (not taking from the others). NEP was launched as a result of consultation with all the political parties, Oppositions included (with exception of DAP, which declined to sit in the consultative committee).

NEP targeted to achieve 30% of the nation’s wealth being held by Bumiputras. So far, they only managed to get eighteen odd percent. Even NEP is an affirmative action, it is not easy to achieve the desired target. The truth is, the Malays and Bumiputra’s were greatly disadvantaged by almost all perspective, in 1970. They only hold 2.4% of the economy, of which 1.8% of that is institutional. It was a Herculean task.

Their history of being underdeveloped in the rural areas, which is lacking of every basic infrastructure imagined today, needed a lot of assistance, to minimally put them at the level playing field, with the other ethnic groups. For the biggest composition in the society left behind, in almost everything, the country was in a time bomb. When provoked, the inherent ugly side of the imbalance and socio economic disparity exploded, translated at the 13 May 1969 racial riots.

Programs were designed and implemented. Some were successful. Some were not. Indeed it wasn’t easy. However, since the Second Malaysia Plan, the economy has been expanding healthily. From a primary industry and agriculture based economy, Malaysia moved into manufacturing and industrialization. Within thirty years, the economy was greatly transformed.

NEP was part of this transformation. Underhanded, even using Government machineries, the Malays and Bumiputras, numbering over 15 million today, have had some transformation in their socio-economic standing. Many is still below the poverty level.

However, this was not enough. The population is growing and resources to be utilized for the NEP gets smaller and smaller per capita, by the day. Even after 36 years, many areas in the rural still unable to be provided with reasonable basic infrastructure, including schools with electricity and running water and teachers. Health services are still not available for many in the interiors, especially Sabah and Sarawak.

On the same track, some managed to progress from NEP. Most of the group within the Malay business community, who have made it, owed their success to some degree of the affirmative policy. Although Government wanted to achieve a target of 30%, some Malay businesses managed to etch themselves a notch or so, because of the economic cake being expanded.

Let’s not equate the builders into this analysis because many will argue that Government favours ONLY Malay contractors, which is never true. Many non-Bumi contractors benefited from Government contracts as well, including direct negotiations. YTL Corporations, Ekran, Berjaya Group, IJM Group, Tan & Tan, Hong Leong, Country Heights, etc. are some of those who benefited immensely.

Bumiputra groups now like Sapura, Am Group, Ramunia Corporation, Peremba, Emkay, Halim Mazmin, KN Kenanga, AKN, KPJ and personalities like Syed Mokhtar Al Bukhary, Kamaruddin Meranun and Azman Yahya and before, Taiping Consolidated, Land and General, RHB Capital, Diversified Resources, Promet and Landmarks made the mark, in the Malaysian business arena, mostly on their own strength to deliver.

Some made it abroad, where no longer any ‘affirmative protectionist policy’ enforced. Personalities like Tan Sri Halim Saad is said to be actively involved in new infrastructure markets like Sudan, Iran and Turkey. It is said his experiences from UEM and Renong managed to win some RM 10.8 billion in book order. Tun Daim group also is now involved in many business ventures abroad. One of it is a bank in Indonesia. This group also said to have substantial holdings in several investment bank all over Eastern Europe and Central Asia. Recently, the once nearly bankrupt Lankhorst is now known as Ark Resources and is said to have excess of RM one billion book order from projects in Thailand and Saudi.

Most probably these are the people which the former UMNO Deputy President meant. These groups are those who no longer require the affirmative action protectionists’ policy. These are the people who can compete in the deep end of the pool. These are those no longer require the “training wheels”.

Never the less, this is a small composition of the Malays and Bumiputras. The larger groups still need the NEP, to uplift them. This includes the small and medium enterprise / industry business players who are unable to compete, due to many obstacle and limitations.

Inherently, the Malays have no place in the middle level economy. Almost entirely the distribution and wholesalers market is controlled by the non Malays, especially Chinese. Malay SME/Is do not enjoy any opening into this very important business network and supply chain. Sometime, there are direct interventions from non Malays’ firms to deny Bumiputra firms participation in the business networking.

I knew of this because I used to work with a construction company, which has operations including Johor. Once, this Bumiputra firm did very well recording 90% of their book order NOT from Government jobs but private developers, all over Johor. It was reported as a highly potential Bumiputra firm not depending on Government jobs in Johor in the local builders bulletin. Suddenly, there is a serious surge of credit standings from building material suppliers all over South Johor on the firm. Eventually we found out they were given “advice” to do so, by the local industry cartel.

So instances like this justifies the NEP protectionists’ policy. NEP is also designed to develop the Malay and Bumiputra professionals and educated lot into SME/Is. Unless the game is really at real level playing field, the very essence in lifting the NEP will create the imbalance and the state of unhappiness that once everybody so vehemently want to avoid is being revisited, unintentionally.

One of the many issues why the NEP programs are sluggish to reach its desirable level is the delivery system. This has been analysed and said by so many people, in so many ways, over and over again. The civil servants, being the custodian of Government’s administration service has not manage to translate the Federal Government policy, successfully and effectively. The bureaucracy and lack of administrative abilities and resources seems to be a convenient excuse.

A little about the Iskandar Development Region (IDR). The Federal Government forced this onto the Johor State Government’s throat the South Johor Economic Region (SJER) grand masterplan. The project is about tapping into the Singaporean economic powerhouse growth, strength, expertise (which is cordially now labeled as “human capital”) and of course, capital abilities. The plan is to create a Free Access Zone (FAZ).

SJER is about the Federal Government taking over many State Government’s power on matters like land and local government. Khazanah will play a major role as the prime developer and co-coordinator in wooing investments and participate in property development projects that will be launched. A target of RM 140 billion worth of properties and investments are targeted for the next 15 years. The State Government will play the role of co-coordinator in the Iskandar Development Region Authority.

Once the 2,200 sq. km. area all over South Johor zoned as FAZ, the movement of people and products from Singapore, will be seamless. It means that no documentation and/or inspection required. Singaporean investors now freely own properties, indiscriminately within IDR.

It’s wrong for Musa, especially being appointed as a member of the IDRA Advisory Panel, only to aim at the able few to be the serious players within IDR, competing against the Singaporean businesses but instead he making sweeping statement like uplifting the NEP protectionists policy entirely, within the SJER borders.

In reality only some of the Malay giant firms are able to compete at that level where else the larger SME/Is segment, are able to be supplier and complimentary role to the industry. These SME/Is can play a very important role within the supply chain for the MNCs and major industries that is operating within IDR.

The creation of the Malay and Bumiputra middle class business community had been a serious agenda for the Federal Government since the resolutions of the Fourth Bumiputra Economic Congress (KEB IV) in 1999. Many programs like Tekun and Prosper, have been created to ensure this segment within the Malay and Bumiputra entrepreneurs are being fulfilled.

IDR could be the platform for expediting the creation of Malay and Bumiputra middle class businesses. The local SME/Is actually represent the existing bigger portion of the Malay and Bumiputra middle class business community, which their would be participation categorically denied because the tournament that people like Musa wants to see is only about those who can actually swim in the deep end. In reality, many Malay and Bumiputra SME/Is still need some sort of flotation, to prepare and condition them before the deep end.

This is UMNO Johor’s Information Chief, Sen. Dr. Mohd Fuad Zarkashi’s reaction on Berita Harian, today.

 

Kenyataan Musa tidak telus

 

BATU PAHAT: Kenyataan bekas Timbalan Perdana Menteri, Tun Musa Hitam yang mencadangkan dasar mengutamakan Bumiputera dalam pembangunan dihentikan bagi menarik pelabur asing ke Wilayah Pembangunan Iskandar (WPI), mengelirukan.
“Kejayaan banyak syarikat multinasional milik Bumiputera mendapat kontrak di luar negara tanpa bantuan kerajaan membuktikan kewibawaannya untuk menyiapkan projek mengikut jadual ditetapkan.

“Kejayaan syarikat Bumiputera melaksanakan pelbagai projek mega di negara ini juga membuktikan bahawa mereka memang berdaya saing, mempunyai merit serta kompetitif,” katanya

Beliau diminta mengulas kenyataan Musa berhubung dasar kerajaan memberi keistimewaan kepada Bumiputera dalam pembahagian ekonomi yang didakwanya boleh menghalang pelabur asing menanam dana di WPI.

“Saya kesal dengan kenyataan beliau yang seolah-olah memperlekehkan keupayaan orang Melayu dan menganggapnya sebagai amat tidak wajar serta boleh mengelirukan orang ramai,” katanya.

Johor is a home ground of 500,000 of the 3.2 million UMNO members. Johor Bahru is the birthplace of UMNO 60 years ago. Musa’s call will not go well with the Malays’ sentiments, especially in Johor. The irony is that, Musa Hitam himself is a Johor Bahru native. He is an English College alumnus. In 1969, he was sacked as a Junior Minister of Tunku Abdul Rahman Putra’s administration and from UMNO because of his ‘ultra Malay’ stance against the the administration’s lackluster attitude towards the needs and demands of the Malays, being gravely under developed.

It seems Musa is a changed man now. Even his one time partner-in-crime Tengku Tan Sri Razaleigh Hamzah says so. Of course, this call by Musa will not earn points from former Prime Minister Tun Dr. Mahathir Mohamad’s sharp political criticisms, expected in Kulai, next week.

There is a suggestion that a special forum be organised soon, to react on Musa’s call. Anyone could guess, it will not be a pretty place for Musa to hear about it.