Saturday, July 4, 2009
The Delicate Balance 3 - Equity Stagnation
It has been reported and admitted by the PM that Bumiputra equity ownership had remained stagnent at 19.4% since nineteen years ago (1990). Why so? Because Bumis have been selling their shares. Of the RM54 billion accorded to the Bumis only RM2 billion remained in their hands.
So the new approach is to liberalize the economy: allow foreign capital to come in with no restraining conditions to ensure a fair equity ownership. so that the economy will grow faster and there will be more wealth to share by everyone. This assumes a redistributive mecahnism par excellent, to overcome the failure of existing institutions made responsible, principally the PNB with its subsidiaries such as ASN. ASB, ASM etc.
Liberalization so far took away the 30% equity requirement for Bumis in 27 trade sectors includinghealth, transport, social, education, computer etc. As for water and energy supply, the 49% limit for foreign participation has been increased to 70%. While the FIC's power to control foreign ownership has been curbed ( stripped?), EQUINAS has been created to (theoreticall) take over and oversee the redistributive function of equity sharing.
What secret weapon EQUINAS will use to ensure what FIC and PNB failed to do ( increase the share ownership the local and foreign scis to 30%) is yet to be seen. If it fails while all the old safeguards introduced by the architects of DEB had been removed, we will be heading for faster economic growth where the rich and powerful (within and outside the country) will control the wealth of the nation.
Sure, capable and promising Bumiputra companies will be assisted by Government to become the acquisition arms of Bumi equity. Will they ensure a fair distribution of wealth to the poorer Bumis? Even the 100 Bumi millionaires which Dr Mahathir said would help the poorer Bumis participate more actively in the economic activities of the country failed to deliver. Can a hundred or more Bumiputra companies, going all out to make their own fortune do what the 100 millionaires ( we don't know how many actually emerged) failed to do?
The bolts and screws installed by the DEB architects to ensure Bumi participation would, of course, no longer be there, once removed. So the liberalization policy must work or bust. Stagnation can become a contraction and an illusion, while the rich become wealthier.