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Tan Sri Dr Zeti Akhtar Aziz Should Explain The Basis Of Her Optimism That Economic Growth Will Grow By 6% For 2005 Despite Falling By More Than Half To 4.1% In The 2nd Quarter Of 2005 As Compared To 8.4% Last Year.

at the  DAP forum on “No More NEP” held at Selangor Chinese Assembly Hall

by Lim Guan Eng  

(Kuala Lumpur, Thursday): Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz should explain the basis of her optimism that economic growth will grow by 6% for 2005 despite falling by more than half to 4.1% in the 2nd quarter of 2005 as compared to 8.4% last year. The drop in growth rates is drastic when compared to 5.8% in the first quarter of this year and even more so when compared to the 8.4% last year.

With the first half growth for 2005 at 4.9% as compared to 8.1% last year, it is irresponsible for a Bank Negara Governor to merely express hope that the economic growth will still reach 6%. Economic matters are too serious to be run only on hope. Tan Sri Zeti should relate the basis of her confidence in achieving the 6% economic growth rate to inspire confidence amongst investors of the country’s economic performance.

The country’s economic growth prospects is worrying with the negative growth rate of 1.6% in the mining sector. With strong earnings from higher exports of petroleum caused by record prices, there is no reason for the mining sector to be contracting and not expanding. Another concern is that the construction sector continues to suffer negative growth rate of 2%, which has continued for 2 years. Unless the government takes step to revive the construction sector without discriminating between bumi and non-bumi contractors, the time for recovery may be too late when contractors go bankrupt.

A New Malaysian Agenda That Relies On Competition, Merit And  Maximizing Human Resources And Potential, Not A New National Agenda That  Seeks To Restore The New Economic Policy(NEP) Which Emphasises Ownership And Breeds Corruption.

DAP calls for a New Malaysian Agenda that relies on competition, merit and maximizing human resources and potential, not a New National Agenda that seeks to restore the New Economic Policy (NEP) which emphasizes on ownership and breeds corruption. Malaysia must carry out education reforms, human capital development and capacity-building to produce Malaysians with the skills to lead the country’s economic growth to become a developed nation by 2020. To do so, Malaysia must learn from the successes of countries without any natural resources like South Korea, Taiwan and Singapore.

South Korea’s reliance on maximizing human resources and harnessing human potential should serve as a warning to Malaysia that the correct path is not to restore the NEP which emphasizes ownership instead of competition and merit. Instead Malaysia must study why Malaysia with all its rich natural resources like rubber, tin, petroleum and oil palm has lost out to those countries not endowed with such advantages.

A study on their successes show that the right strategies and policies show that there is no substitute for excellence and meritocracy. There is nothing wrong with equitable wealth distribution. What is wrong is the distribution mechanism of the NEP not only sacrifices merit and competition, it breeds corruption, cronyism, malpractices and inefficiency.

This is shown by the issuance of millions of ringgit of shares to son-in-laws and sons of Ministers and Deputy Ministers. The recent AP controversy exposed by former Prime Minister Tun Dr Mahathir Mohamad where 12,600 Approved Permits(APs) were given to 82 companies but 54,600 APs to only 20 “selected” companies is another example of malpractice and abuse of power. By asking for the full 30% ownership equity, only the few rich Malays benefit from such cronyism and government patronage. How many ordinary Malays own shares or APs?

Another beneficiary of the NEP is former Sabah Chief Minister Datuk Osu Sukam who instead of using his wealth fruitfully, found it fit to gamble RM 160 million in a London casino and incurring losses of RM 31 million. Malaysians are fed up of such accumulation of wealth by questionable means.

We should not forget that this bumi equity ownership is basically Malay dominated and neglects bumis from Sabah, Sarawak and orang Asli. Stressing on a Malay agenda ignores the reality that bumis from Sabah, Sarawak and orang Asli are marginalized and do not have any equity ownership.

Another example of such distortion is reflected by the high number of Indians professionals in proportion to their population but hides the large number of Indian poor. Indians hold only 1.5% of equity ownerhip or RM 3.2 billion. By stressing on race, the government also ignored the plight of non-bumi lower class and poor, in particular the Indians who were completely marginalized. Such neglect breeds resentment as shown by the violence and high incidence of crime involving the poor Indians.

Eradication of poverty has succeeded only in absolute terms. Relative poverty persists and is particularly evident in urban areas. How NEP has failed can be shown by the latest United Nations Human Development (UNHDP) Report 2004 that shows Malaysia has the worst income disparity between the rich and poor in South East Asia. The UNHDP Report 2004 shows the richest 10% in Malaysia controls 38.4% of our economic income as compared to our poorest 10% controlling only 1.7%. 

If we continue to deny deserving businessmen of equal opportunities or students of their university places because of the colour of their skin, then not only will innocent young Malaysians be victimized but the country’s international standards and economy will lose out. The government should learn that as far as allocative efficiency is concerned, competition and merit rather than ownership is the crucial issue in ensuring wealth creation and a fair distribution of wealth.

South Korea is a very good example of making the correct choice on allocative efficiency. In 1966 annual per capita GNP was less than US$ 150 as compared to Malaysia’s US$350. By 2003 according to the World Bank., GNP per capita in Korea had far exceeded Malaysia at US$12,033 as compared to Malaysia’s US$3,880.

From a situation where Malaysia was more than twice more prosperous than Korea in 1966, Korea is now more than 3 times more prosperous than Malaysia. Malaysia would do well not to make the same mistakes by resorting to the NEP and set us even further back even losing out to Thailand.

So Long As Malays Can Sell Their Shares To Realise Short-term Profits, Malay Equity Ownership Would Never Reach 30% Even If NEP Was Extended For Another 100 Years

Such deteriorating economic performances only reminds us that the right economic polices that emphasizes on maximizing human resource and potential can ensure economic progress. Professor Jomo K.S. “The New Economic Policy and Interethnic Relations in Malaysia”, written for the 2001 UNRISD International Conference on Racism and Public Policy in quoting figures by MCA Vice-President Datuk Dr Fong Chan Onn said.

“If market values are considered, instead of nominal or par values,14 the proportion of publicly listed foreign and bumiputera shares would probably rise rather significantly, at the expense of the Chinese share. According to data from the Kuala Lumpur Stock Exchange (KLSE) Annual Companies Handbook, incorporating information up to September 1988, 29.4 per cent of equity by nominal value was owned by bumiputeras, with 41.9 per cent owned by “other Malaysians” and 28.7 per cent owned by foreigners. However, when market values based on closing prices at the KLSE on 1 March 1989 are considered, the bumiputera and foreign shares rose to 34.5 per cent and 32.2 per cent respectively, with the share of “other Malaysians” falling to 33.3 per cent.”

Clearly the Malays have more than achieved the 30% equity if based on equity in listed companies or much more at 34.5% if based on market values and not par values. But another research paper shows that even if equity is based on par values, the 30% target is achieved.

So long as Malays can sell their shares to realize short-term profits, Malay equity ownership would never reach 30% even if the NEP was extended for another 100 years. If the Malays had held on and not sold the shares, the Malay equity would have reached 30% by its stated period of 1990.  An estimated 40% of the Malay preferential shares given were sold for profit gains.

Documented verification is provided by an academic working paper titled, “Privatisation of Ports: A Malaysian Case Study” by Associate Professor Malcolm Tull and Dr James Revely of Murdoch University in January 2001,

“… By 1995 the privatised companies accounted for 22.1 per cent of the total market capitalisation of the KLSE. Many shareholders took advantage of the opportunity to realise short-term capital gains and sold their shares. The sale of shares in Klang Container Terminal and other privatised companies has, however, led to a dilution of Bumiputra equity: between 1983 and 1990 it declined from 65 per cent to 38 per cent of total paid up capital on the KLSE.”

This Australian study showed that almost 41% of the shares in privatized companies held by the rich Malays were sold. Applying this rough ratio would mean that the 19.3% of Malay shares in 1990 only represented 60% of the shares given by the government. In other words Malays  had sold 12.9% equity stake.  If Malays had held on to every share given, they would have a total 32.2% equity stake, far exceeding the 30% target in 1990.

Instead of stressing on a divisive Malay-only agenda, DAP calls for a Malaysian agenda that benefit and unite all regardless of race and religion to build a harmonius society and  seek social justice for all Malaysians whether poor bumis, poor Malays, poor Chinese, poor Kadazans, poor Ibans and poor orang Aslis? 



* Lim Guan Eng, DAP Secretary-General

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