PETALING JAYA: Several economists have recommended that the focus of the New Economic Policy (NEP) be shifted from equity ownership to encouraging the growth of Bumiputera-owned micro, small and medium-sized enterprises (MSMEs).
They argue that improving equity may not necessarily translate to better performance or align with Malaysia’s high income goals.
The 12th Malaysia Plan is set to be tabled this year. Noting this, Lee Hwok Aun, an economist with the ISEAS-Yusof Ishak Institute, said there was now an opportunity to rewrite the script for Malaysia’s future.
He said the priority should be on facilitating the growth of Bumiputera-owned MSMEs rather than fixating on ownership.
“The overall report card for Bumiputera-owned MSMEs would probably be a bit mediocre,” he said, noting that there have been few overwhelming success stories despite numerous funding initiatives.
As of 2015, just 38% of MSMEs were owned by Bumiputeras although they made up 62% of the population that year. More tellingly, Lee said, most of these companies were categorised as micro-businesses despite the various financing schemes available, illustrating the substantial room for growth if a push is made.
With the suggested shift in focus, he said, policy can be targeted at industries with high potential, such as the service sector and the halal food sector.
Such a shift would be “a lot more aligned with high productivity, high income goals”, he told FMT.
“This would also add some more impetus for expansion, where there can be incentives introduced to encourage public procurement and tech upgrades so small firms can become large ones.”
The 30% equity target for Bumiputera set in the NEP of 1971, which has persisted in some form in subsequent Malaysia plans, has been described as “outdated” by economists, who say emphasis should be better placed on driving performance, particularly among MSMEs.
Initially, the goal was to redistribute economic ownership from the 2.4:33:66 split among Bumiputeras, other Malaysians and foreigners in 1970, to 30:40:30. This affected hiring practices and education.
Former CIMB Group chairman Nazir Razak has been a critic of the NEP’s persistent influence, recently pushing for a new National Consultative Council, akin to the one helmed by his father Abdul Razak Hussein, to be established to re-examine Malaysia’s systems and policies.
Yeah Kim Leng, an economics professor with Sunway University, agreed that ownership is no longer an effective barometer, particularly considering how workforce demographics have changed.
“Back in the day, the workforce was less integrated,” he said. “Chinese companies were mostly Chinese, and Malays hired Malays, and so on. Now, there is much more diversity within the majority of companies. So you can lift Bumiputeras by helping MSMEs more broadly.”
In order for Malaysia to reach its development goals, Yeah told FMT, “a move from a shareholder approach to stakeholders approach” was needed.
In the latter approach, he said, a company’s success would be distributed more evenly among workers and the community rather than isolated at the ownership level.
“We should move away from putting limits on ownership and focus on actual contributions to welfare,” he said.
“This is a new form of capitalist and development thinking, where the benefits are spread out among all stakeholders.”