Economist’s basis of calculation erroneous
Dr Zainal Aznam Yusoff’s skepticism of Asian Strategy and Leadership Institute’s view that the bumiputera equity ownership is 45% was not supported by convincing counter arguments. His response in the New Straits Times has created doubts about his real motive because a truly professional economist like himself would not have made such weak technical arguments.
Firstly, Zainal argues that Asli’s use of the 1,000-odd companies listed on Bursa Malaysia is not indicative of the actual equity ownership situation. This is linked to his subsequent argument that Asli’s use of market capitalisation is wrong. Instead, he insisted that the calculation should be made on the basis of the number of shares held, or the par value. It is unfathomable for someone who is a leading economic advisor to the government for failing to understand the simple logic of calculating wealth on the basis of market capitalisation, or the market value. In this regard, Zainal indicates that the value of holding a unit of Tenaga share is equivalent to a unit of a small-medium entreprise share.
More than 90% of all companies registered in Malaysia are small-medium enterprises (SMEs). Almost 75% of all the SMEs are either owned or controlled by Chinese Malaysians. However, the SMEs are responsible for less than 10 percent of the nation’s gross domestic products. Using the par value as a basis of calculation is erroneous because it does not indicate the real level of wealth ownership, which is a better indication of economic well-being. Hence, this explains why the stated bumiputera ownership is at a low18.9% although the actual ownership of wealth could have been as high as 45% or more.
Zainal’s argument leads to more questions. What is the real motive of using the par value as a basis of calculation? Is the government trying to hide the fact that the affirmative policy has benefitted and enriched only a few people and left many stranded under the jaws of poverty? Who control the majority of the wealth attributed to the bumiputera community?
If the New Economic Policy (NEP) has been a great success, what has contributed to the contraction of the income pie of the lowest 40% of the society? The drop of almost 2%, from 15% to 13%, is recorded in the Ninth Malaysian Plan. The richest 20% has expanded their wealth by almost the same quantum.
Is the government trying to hide from the fact that it has failed to build a bumiputera commercial and industrial community, to expand the individual/private bumiputera's participation in the economy? Perhaps Zainal is worried that if the market value is used as a basis of calculation, the government may be facing a difficult time in trying to explain to the truly marginalised segment of the society, which consists of largely the bumiputera community, why the 45% of wealth ownership did not help to alleviate their living conditions.
Secondly, Zainal alleges that Asli had included all ownership by government-linked companies (GLCs) into their estimation as bumiputera. The government has removed GLCs from its figures. Asli had estimated 70% of GLCs ownership as bumiputera. The institute argues that this is done from their observation of the procurement contracts and projects awarded to bumiputera companies.
It is a fact that GLCs are used to support and implement the pro-bumiputera public procurement policy. In the recently announced regional economic corridors, the GLCs are tasked with the development of the economic zones with an objective to increase the participation of bumiputera companies in the economic sector.
All GLCs have made it mandatory to deal with only bumiputera majority-owned companies. The boards of these companies are made up of almost 85% bumiputera directors. The employee composition of the GLCs also reflect similar trend. Hence, it is difficult for anyone to justify that these GLCs represent our national interest. I have two additional questions for Zainal.
First, since he supported the use of par value as a justified method of calculation, would he be willing to propose to the government to swap one Tenaga share for two Farlim shares, as an example? This way the bumiputera community will be able to double up their number of share holding almost immediately.
Second, is he willing to propose to the government to restructure the GLCs to truly represent the interest of our multiracial nation? For the GLCs to be truly representative, they should open up their tender process to all Malaysian companies.
Finally, I echo Zainal’s sentiment that the government should come out with a more accurate, credible and sensible method to calculate the ownership of wealth in the country. This must be done with a genuine interest to address the continuous marginalisation of the poorest 40% of our society, which consists of Malaysians of all communities. A clearer picture of the wealth ownership can be used to assist the government to combat corruption and to go after individuals and rent-seekers who have enjoyed the forbidden fruits of nepotism and corruption.
Zainal’s respond to my questions will determine whether he is an apologist of the corrupt elites or not.