Corporate Equity Distribution: Facts and Fallacies

1. Corporate Equity Distribution:Facts and Fallacies At ASLI-SEDAR Roundtable January 14, 2006 Dato Dahan / Hj Abd Khalid YKSM Research & Consulting Centre

2. Genesis of NEP • Must trace to the time of achieving Merdeka in 1957: “social contract”, the balance of malays-non malays including special privileges for the malays, upholding of the position of the Sultans (just to name 2) in return for citizenship rights & participation in national politics for non malays. Embedded in Federal Constitution • A different social contract among component political parties forming first the “Alliance”, later “Barisan Nasional”-power sharing; UMNO became “first among equals” in the legitimate power sharing. Dato Dahan / Hj Abd Khalid YKSM Research & Consulting Centre

3. Genesis of NEP • Watershed events: • the 1969 Riots. The malays’ “near loss of political power”at the ballot box. • the other momentous pre-Merdeka event, upheaval & subsequent challenge by the malays against the British’s “Malayan Union.” In a nutshell: History gives meaning & relevance to nation building Dato Dahan / Hj Abd Khalid YKSM Research & Consulting Centre

4. Seven Facts • 1.1970: malays’ equity share 2.4%. 2004: 19%. Short of the 30 % target. • 2.Demographics: Bumi 2/3 (malays 60%) • 3.Employment: public : private - 1 mil Vs 9 mil. Malays largely in former. In latter malays face discrimination • 4.9/10 shops/biz premises owned & operated by chinese; similar for shopping malls Dato Dahan / Hj Abd Khalid YKSM Research & Consulting Centre

5. Seven Facts (cont’d) • 5.Overall banking & financial sector, malays are represented (simple majority) but within the key merchant banking & capital market mgt services, underrepresented • 6.Household income ratio - malays : non malays, 1:1.65. Crucial significant disparity • 7. Public: private expenditures: RM120 bil : RM430 bil. GDP 2005 RM 550 bil. (est) Dato Dahan / Hj Abd Khalid YKSM Research & Consulting Centre

6. Facts • NEP: push for national unity founded upon two prong strategies of poverty eradication & restructuring of society (equity distribution is just one part), in an economy expanding on average at 7% p.a • Malaysia experienced unprecedented growth propelled by high FDIs, and it coincided with a period of strong Affirmative Action during the period 1970 -1990. • Malaysia is not alone; some elements of Affirmative & economic intervention policies exist in USA, UK & Australia; even S’pore! • What do you understand from the Seven Facts?? Dato Dahan / Hj Abd Khalid YKSM Research & Consulting Centre

7. Seven Fallacies • 1. Affirmative Action Agenda/”NEP” should not continue because It goes against the grain of globalisation & seamless flow of trade & funds, even though the distribution of ownership and the management of the economy of 42 % by the chinese (only 20 % by the malays; 38 % foreigners), the almost total control over supply chain in any economic sector. • 2..Bumiputera commercial & industrial community (BCIC) policy need not be pursued since it hampers Malaysia’s competitiveness, even though wealth creation is made through incorporated companies and enterprises. There are 300,000 active companies/enterprises of which less than 50,000 are owned by Bumiputera. Ratio 1:6 as against population ratio of 66: 34. Not to mention the regional & intern’l networks these companies have established over the years. Dato Dahan / Hj Abd Khalid YKSM Research & Consulting Centre

8. Seven Fallacies • 3. Take care of the strong and competitive few, and the rest will be taken of, whereas it has been said: “In the devt of human resources we cannot afford to neglect half of the population…no nation can achieve full progress with only half its human resources harnessed” Tun Dr Mahathir Mohammed, past PM, 1995 • 4.The malays are ready for open competition, there should not be any more intervention, let market forces decide. The liberals also cite weak implementation and poor follow through (of NEP & NDP), as further reasons. Dato Dahan / Hj Abd Khalid YKSM Research & Consulting Centre

9. Seven Fallacies • 5. Malaysian society is united and prosperous, whereas on the part of the malays, there is a sense of marginalisation. Among the non malays, a sense of alienation, a deprived opportunity. Indeed ethnic polarisation and ‘living in silos syndrome’ are indeed real. • 6. The bumiputeras are getting all the contracts and opportunities. In reality, the non Bumiputeras benefit more from them as a result of leakages. The fact is that the supply chain operators, are largely non malays and foreign. • 7 Bumiputeras have exceeded the 30 % equity target because a number of the big cap companies on Bursa Malaysia are owned by Bumiputeras, even though government owned and trust companies. But within the top/middle management, there are more non Bumiputeras. Dato Dahan / Hj Abd Khalid YKSM Research & Consulting Centre

10. Where Do We Go From Here? • 1. Stress on knowledge. In a knowledge based era, characterised by rapid technological & innovation advances, a rapidly changing market demand & aging population (just to name 3), in unison, all communities focus on making Malaysia ready for a highly competitive & hostile world stage. • 2. Prepare young Malaysians for the new world. Let the young, educated and qualified from both sides build bridges, make meaningful partnerships & JVs. 1000 (or is it 100,000) young who are going to take over the baton come 2020 ( they are 10 years or younger in 2006) be identified, imbued with the right spirits, nurtured & allowed to flourish in a million different ventures. Dato Dahan / Hj Abd Khalid YKSM Research & Consulting Centre

11. Where Do We Go From Here? • 3.History is the best teacher. Let us learn from success stories, domestic, regional and international. Great nations, multi-whatever, have one thing in common: they are bonded by a common sense of purpose and guided by shared values. • 4. Share wealth equitably. Let us focus oncreating wealth, entrepreneurship, devoid of unbridled greed & self gratification as well as corruption. Concept of rizq (God’s bounty for every man) and accountability to oneself/family, above all, to the Almighty. A simple formula to translate the above must be sought, for example, focus on narrowing income disparity and improving Total Factor Productivity (TFP), instead of obsession on corporate equity. Dato Dahan / Hj Abd Khalid YKSM Research & Consulting Centre

12. Q & A • Thank You and we look to hearing from you: • E-mail: • dahanlatiff@gmail.com • abdulkhalidaziz@gmail.com Dato Dahan / Hj Abd Khalid YKSM Research & Consulting Centre