AP policy is of no help whatsoever to M40 or B40 groups

I was tickled to read the headline “We’ll revoke contracts, APs, licences sold to third parties, warns PM” in a report by Bernama on Jan 30.

Was Prime Minister Dr Mahathir Mohamad serious when he said this at a rural development ministry function or was it just another bit of political rhetoric to be forgotten after the event?

This issue of contracts, approved permits (APs) and licences given to Bumiputera businessmen, which are eventually sold to third parties, is not new.

In fact, we have been talking about it for decades with no solution in sight. It has even given rise to the term “Alibaba” and is a deeply entrenched phenomena in the Bumiputera’s approach to doing business.

Most, if not all, of these contracts, APs and licences were given to a select few only, a minority group of political leaders and members of the previous party in the government — the so-called elite Bumiputeras.

They are more or less the same group of people, representing a tiny percentage of the upper echelon of the population, closest to the people in power or the governing party.

However, the majority of the Bumiputeras fall under the classifications of the Middle 40 or M40, or B40, or the bottom 40% of the entire populace.

It has been pointed out, again and again, that such business opportunities as mentioned by our prime minister, including shares in the restructuring of the corporate sector, business loans, grants and stipends as well as discounts for house purchases, and many other instruments of assistance for the Bumiputeras, are actually taken up by the top group, or T20, or by the privileged few within that group.

Sadly, the larger group, from the lower-income bracket, does not get the same opportunities.

Reading what Mahathir said at this event, the question that most economic analysts would have are probably the following:

  • Why are Bumiputeras still dependent on government handouts to go into business?

My take is this: Please do not blame the entire Bumiputera community for the ineffectual few among the T20, the ones who fail in business and give the Bumiputeras a bad name.

  • Are the giving of contracts, APs and licences the only way that the government can generate economic activities for the Bumiputeras?

Surely not. I am certain the present government can formulate better policies and strategies to correct the economic imbalance that has prevailed in Malaysia for so long.

  • Is this unspoken policy of enriching a few well-connected Bumiputeras still applicable and relevant today?

Many would argue that this is irrelevant and rather out of date in the context of today’s social re-engineering. We need a better formula and brand new ideas to rectify the previously failed policies.

  • Are the success of government policies and its key performance indicators measured by the success of this small, well-connected group of Bumiputeras?

I do not think so. In any case, since when has a successful Bumiputera corporate figure engaged in a practice where the trickle-down effect would ensure smaller Bumiputera businesses are given a chance to be their sub-consultants, sub-contractors, suppliers or undertake subsidiary works?

A check on the website of the international trade and industry ministry (Miti) shows that motor vehicles, heavy machinery, chemicals and iron and steel products are still governed by APs, issued by Miti.

This strange instrument to control the business opportunities is rather outdated and no longer effective in a situation where the same group of people stand to benefit again and again.

For motor vehicles, only 164 of 282 applications were approved by Miti in 2019. Out of these 164 approved applicants, 128 are existing companies and 36 are companies which previously did not receive any APs (termed as “new” companies).

According to a press release from Miti, out of 109 applications from new companies, only 36 were approved.

Looking at the statistics given, the maximum number of APs for vehicles allocated in 2019 by company type are as follows:

  • Category 1 companies (companies which have obtained APs in the past) with a paid-up capital of RM4 million can get up to 240 APs;
  • Category 2 companies (companies which have obtained APs in the past) with a RM3 million paid-up capital can get a maximum of 180 APs;
  • Category 3 companies (companies which have obtained APs in the past) with a paid-up capital of RM2 million can get a maximum of 120 APs; and,
  • Category 4 companies (those which did NOT obtain APs in the past) with the smallest paid-up capital of RM1 million, can get up to 60 APs.

Now, does any reader think that any of these companies belongs to someone from the M40 or B40 category? If you have RM1 million in paid-up capital, you would not be classified under the M40 or B40 group anymore.

Therefore, where is the argument that says the lower-income group will sell their APs for quick gain instead of running their own business?

The 36 new applicants can hardly be seen as representing the low-income group if they can afford to raise RM1 million in paid-up capital in the first place.

Therefore, this AP policy is of no help and has no value whatsoever to the M40 or B40 groups. Similarly, business contracts and business licences, which the government claims to have given to Bumiputeras, do not benefit the M40 and B40 groups at all.

These two latter groups are the ones that need the most help and assistance from the government.

Most definitely, it is the people in the T20 who have been reaping the benefits all these years, without sharing with others.

Isn’t it time we redefined this vision of shared prosperity?

The views expressed are those of the writer and do not necessarily reflect those of FMT.