Malaysia Uncut

A Repository of Malaysian Stuff and More

The Asian Strategy and Leadership Institute (Asli) Story

ASLI’s basis

THE New Economic Policy was meant to attain national unity by eradicating poverty and restructuring the economy. The target was to raise the pre-1970 ratio of 2.4 per cent Bumiputera equity to 30 per cent by 1990.

By 1990, however, Bumiputeras owned only 19.3 per cent of the economic cake. A new policy to succeed the NEP was formulated. Fifteen years after the end of the actual NEP, the government last year revealed that Bumiputeras had only managed to achieve 18.9 per cent equity.
Asli’s basic premise was that Bumiputera equity was actually more than 20 per cent, about 45 per cent by late last year, based on market capitalisation of companies, including government-linked companies.
The think tank believes market capitalisation is correct to explain wealth ownership by ethnic communities in Malaysia, but should not be taken as the key indicator of wealth distribution.
Datuk Seri Abdullah Ahmad Badawi on Thursday said Asli’s findings that contradicted the government’s Economic Planning Unit’s figure of 18.9 per cent was wrong in its methodology and could lead to anger among the people.
“We are not in business to change government policies. We fully support the government. Our responsibility is to find better ways and means for the effective implementation of the NEP-type policies.
“What we did with the report was to find more available inputs, to help the Bumiputeras, to eradicate poverty and to fund for more development of human resources,” says Asli Director Tan Sri Ramon Navaratnam.
He says Asli’s findings are based on the principle of revisiting theories formulated some 35 years ago, when GLCs were almost unheard of, in 1970.
“What we did was to respond to the Prime Minister’s call more than a year ago to give input to the 9MP. We believe the 18.9 per cent Bumiputera equity is undervalued,” he adds.
The controversy centres on the report by Asli’s Centre for Public Policy Studies, titled “Corporate Equity Distribution: Past Trends and Future Policy”, which claims Bumiputeras have 45 per cent ownership, which includes equity in GLCs.
Refuting Asli’s methodology, the Prime Minister said the think tank based its survey on 1,000 companies listed on Bursa Malaysia, unlike the EPU which studied 600,000 Malaysian companies and used government documents.
Abdullah also rejected Asli’s argument that GLCs were, in effect, Bumiputera companies as the government owned them. He believed such a view would create negative perception among non-Bumiputeras.
Navaratnam agrees that wrong perception could lead to negative reactions. However, he explains that Asli’s methodology was based on ownership of capital, insisting that it gives a truer picture of who owns what than a generalised view based on number of companies.
“For example, even if you survey 100,000 companies that own only fractions of the economic cake, it is the 100 big companies that own the mass of wealth that really reflect the true state of our economy.
“What we did was to help the government to review, or if necessary, to revise the methodology according to changes in trends and time.”
The government should restore the confidence of the corporate world as some major players found that the 18.9 per cent figure was undervalued, says Navaratnam, Transparency International Malaysia president.
Economist Datuk Dr Zainal Aznam Yusof says Asli made a mistake by grouping GLCs as Bumiputera companies, adding that the government excluded GLCs from its figures. He also claimed that Asli’s use of market capitalisation was wrong.
He supported the government’s use of the par value or nominal value, and the number of units of shares a person held, to get the correct equity figures.
Economist Khoo Kay Peng, however, questions the use of par value as the basis of calculation, claiming that it does not reveal the real level of wealth ownership.
He also argues that Asli’s estimation that GLCs are 70 per cent owned by Bumiputera is sound enough for the GLCs to be considered Bumiputera companies.
“GLCs are also supporting Bumiputeras through public procuring policy. It has been announced in the Press that regional economic corridors both in the south and north of the peninsula would involve GLCs providing increased participation of Bumiputera companies. It is also known that GLCs deal mostly with Bumiputera-majority owned companies,” says the Sedar Institute executive director.
Source: New Straits Times <http://www.nst.com.my/Current_News/nst/Saturday/Columns/20061007083705/Article/index_html>

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Badawi says ASLI report is inaccurate and baseless

The prime minister has described the report released by the Asian Strategy and Leadership Institute (Asli) on the New Economic Policy as inaccurate, baseless and irresponsible.
Datuk Seri Abdullah Ahmad Badawi questioned the accuracy of the report as it was based on a survey of 1,000 companies.
He said the information and documents used by the Economic Planning Unit (EPU) when preparing the 9th Malaysia Plan involved surveys on 600,000 companies in Malaysia.
He said the survey’s treatment of government-link companies (GLCs) as bumiputra concerns is incorrect as they are government companies.
“If everybody think GLCs are bumputra, it is wrong and it will create a lot of anger. It is not right and is very irresponsible.”
Source: The Sun <http://sun2surf.com/article.cfm?id=15726>

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Muhyiddin says many Malays still need assistance

Umno vice-president Tan Sri Muhyiddin Yassin has criticised the study by Asian Strategy and Leadership Institute’s (Asli) Centre for Public Policy Studies, which found that bumiputra corporate equity ownership could be as high as 45%, instead of the government’s figure of 18.9%.
In an interview with Mingguan Malaysia published yesterday, he described the findings of the “Corporate Equity Distribution: Past Trends and Future Policy” report, which was submitted to government in February, as “irresponsible”, “rubbish”, and one that challenges the government’s authority.
“The study is rubbish and is useless. As a Malay, I am also angry and believe that the report has an ulterior motive,” he said.
He said if Asli’s study states that bumiputra already owned 45% of equity, it meant the government did not need to do anything more to assist the Malay community.
“Instead, if one were to look at the Malay community, there are still many who are poor, including the bumiputras in Sabah and Sarawak, which according to the government, are the most backward.
“We also have to look at the income per capita and the employment opportunities where there are still obvious shortages (for the bumiputra community),” he said.
Source: The Sun <http://sun2surf.com/article.cfm?id=15753>

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Asli director resigns to defend integrity

Dr Lim Teck Ghee <http://www.columbia.edu/cu/china/Lim.html>, director of Centre for Public Policy Studies (CPPS), has resigned as a director of Asian Strategy and Leadership Institute (Asli).
Dr Lim said he could not agree with Asli president Mirzan Mahathir’s statement that a report on bumiputra corporate equity did not fairly reflect the true picture of the equity ownership by bumiputras in Malaysia.
“Since I cannot agree with Mirzan’s statement and because of the need to defend the position and integrity of independent and non-partisan scholarship, I regret to inform that I will be stepping down from my position as director at the end of the month,” Dr Lim said in a press statement.
Source: The Star <http://www.thestar.com.my/news/story.asp?file=/2006/10/11/nation/20061011122630&sec=nation>

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Asli’s 45% figure yet to proven wrong
Ronnie Liu

The following is an open letter to Muhyiddin Yassin, vice-president of Umno and agriculture and agro-based industries minister.

Dear Tan Sri,

I am borrowing the question raised by Malaysian in his letter to malaysiakini entitled Asli report: Muhyiddin’s threat disappointing <http://www.malaysiakini.com/letters/5799> as the topic of my letter to you. Like Malaysian, I, too, was disappointed with Tan Sri’s remarks on the controversial bumiputera equity debate.
You have spoken twice on the matter within the last one week. It shows the subject is of great interest and importance to you. My earlier statements have asked you to disclose the methodology used by the Economic Planning Unit to determine the percentage of equity held by different ethnic Malaysians and foreigners instead of discrediting the facts and figures presented by Asli.

I certainly did not expect you to describe Asli’s findings as ‘rubbish’ and worse still, you even threatened to take action against Asli if the think-tank refuses to withdraw their report. And what were you thinking about when you said that ‘…as a Malay, I’m very angry’. What were you angry about?

I think Malaysian is right. How long can Umno leaders rule with secrecy and threats? Singapore’s Business Times has a report, ‘Malaysian insight: A lack of openness is driving investors away’, which I find very sensible and relevant to the debate today. Tan Sri, I highlight the last few paragraphs for you to read and ponder over it. I think the concern expressed in the report is well-founded. Secrecy and threats may only work for some period of time.

“A report on the New Economic Policy (NEP) by the Asian Strategy and Leadership Institute (Asli) Centre for Public Policy Studies has concluded that bumiputeras actually own closer to 45 per cent of Malaysian corporate equity – or more than double the government’s figure of 19 per cent.

“There are significant implications should Asli’s figures be accurate, since the continuation of the national policy is based on the premise that the stated objective of ensuring bumiputeras hold a third of the country’s wealth has not been achieved.

“Both Asli and the government use different methodology and mechanisms to reach their conclusions. Already, the top leadership has dismissed the think-tank’s report as inaccurate, irresponsible and liable to incite anger – in other words, the less said the better.

“But don’t expect the debate to end. It will continue to be discussed – if not openly in mainstream media – in homes, offices, coffee-shops and online. As Malaysia continues to argue the pros and cons of extending the NEP indefinitely, refusing to address larger and more pressing issues, investors – local and foreign – will continue to head for greener pastures. And Malaysia’s competitors will undoubtedly pull even further ahead.”

My challenge to you, Tan Sri, remains unchanged: please show us how the government’s figure of 18.9% was concluded. Or prove to us in what ways the 45% figure put forward by Asli was erroneous?

To calculate the value of equity, it’s wrong to base it on par value instead of market value. The par value simply cannot reflect the real value of any share or equity for that matter. And the value of one Hwa Tai share cannot match the value of one Maybank share although their par values may be of same value.

And no one is saying the Malay poor needs no more help from the government. In fact, all Malaysian poor needs help from the government. No government should neglect or marginalise the poor. To help the poor and close the gap between the haves and have-nots is a duty and obligation no government can run away from.

You are correct to point out that many of our bumiputera brothers and sisters in Sabah and Sarawak are still poor. But did you do anything significant and substantial to help them in the past? Did you do anything to stop both the chief ministers in these two states from amassing wealth for themselves?

I believe Asli was put under tremendous pressure to withdraw its findings and apologise to the government. I am not be overly surprised that Mirzan Mahathir, the chairman of Asli, eventually succumbed to the pressure and was forced to withdraw the study and findings of his institution. This is followed by the shock resignation of the report’s author Dr Lim Teck Ghee today.

But Tan Sri, the fact remains unchanged – that Asli’s 45% figure has not been proven incorrect by the government. And ordinary Malaysians would have more reasons to believe that Asli’s figure is more accurate than the 18.9% figure concocted by the government.

And many Malaysians will start thinking (they are not allowed to say) that the basis to continue with the NEP (nicknamed ‘Never Ending Policy’) is not valid. And sooner or later, the Malay poor will realise that the NEP is not helping them after all but is just a vehicle to enrich a handful of well-connected Malays.

And the entire nation and its people have to pay a heavy price for an outdated, ineffective and self-defeating economic policy. Tan Sri, I put it to you that the NEP is destroying the Malays <http://www.malaysiakini.com/news/57833>, a claim made by no less a personality that the former Guthrie and PNB boss Tan Sri Khalid Ibrahim.

Your former colleague Datuk Seri Anwar Ibrahim was also of a similar view. He, too, has said that NEP has lived out its usefulness after all these years. I, too, would also argue that the NEP is depriving the rights of non-Malays.

In fact, Malaysians now are saying that the denial on your part is to cover up the fact that wealth is concentrated in the hands of a few bumiputera elite. Some feel that it is Umno’s underarm tactic to understate the wealth of bumiputera so that people like you can continue to mislead the Malay poor for their support. How I wish there is no truth in such arguments.

And please tell your colleagues not to turn this debate into a racial spat and bring up the ugly May 13 incident to threaten the non-Malays again. I notice that some overzealous writers in the Malay press have attempted to do this. This would not work except to make the debate meaningless and leave a very bad taste.

It’s time for the Umno-led Barisan Nasional government to admit the anomalies of the NEP and move forward with a colour-blind economic policy for all Malaysians. I trust you to talk to all your peers in the cabinet and convince them that they can no longer rule with secrecy and threats.

The writer is a DAP central executive committee member and the party’s NGO bureau chief.

Source: http://www.malaysiakini.com/letters/58050

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Economist’s basis of calculation erroneous
Khoo Kay Peng

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 <http://www.nst.com.my/Current_News/nst/Friday/National/20060929084239/Article/index_html> 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.

Source: http://www.malaysiakini.com/letters/57791

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Thursday, October 12, 2006 - Posted by | Commentary, Issues, News

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