Wednesday, October 11, 2006

An open letter to Muhyiddin over equity debate

How much longer can Umno leaders rule with secrecy and threats?


An Open Letter to Tan Sri Muhyiddin Yassin, Vice President of UMNO and the Agriculture and Agro-based Industry Minister
On Wednesday, October 11, 2006 in Petaling Jaya.

By Ronnie Liu Tian Khiew, DAP CEC member and NGO Bureau Chief

Dear Tan Sri,

I am borrowing the question raised by Malaysian in his letter to Malaysiakini titled “ Asli report: Muhyiddin’s threat disappointing” as the topic of my letter.

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.

In my earlier statement titled “ Bumiputera equity- 18.9% or 45%?” ( www.dapmalaysia.org and Malaysiakini) , I have asked you to disclose the methodology used by the EPU 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 threaten to take action against Asli if the think-tank refuses to withdraw their report.

And what were you thinking about when you say that “ as 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?

Business Times Malaysia has a report on October 9, 2006, which I find very sensible and relevant to the debate today. I like to reproduce the report here in toto for the benefit of our discussion.

Malaysian Insight :A lack of openness is driving investors away.
One example is the reluctance in discussing the extent of NEP's success.

FOR years now, Malaysia's market players have racked their brains for remedies for its slumping stock exchange. Last week, when the Dow Jones set new all-time highs, Bursa Malaysia's pulse flickered briefly, a six-and-a-half year peak barely raising any interest.

Although the country has gradually rolled back capital controls which in 1998 made it a pariah in the international community, there has been close to zero interest in the Malaysian market, except for very brief periods of large foreign buying or hedge fund activity - which is strange, given that Malaysia's economic growth has been reasonably impressive and its reserves solid, courtesy of surging oil and commodity prices and strong exports.

Somewhat belatedly, the regulatory authorities are trying to inject confidence into the market. It is, for example, attempting to clean up bad public listed companies (PLCs) and ensuring only quality share offerings get listed after the disastrous late 1990s implementation of the disclosure-based system and the notion of caveat emptor. Many retailers have gone to the extent of closing their trading accounts.

Surveillance of PLCs has been stepped up, and the Securities Commission recently warned them 'to perform to stay listed'. On its part, Bursa has made it easier for foreign investors and introduced new products. But nothing seems to excite the market. Even the proposed reintroduction of securities lending and regulated short-selling (RSS) for some 40-odd companies this month is expected to meet with muted enthusiasm. Already, a foreign stockbroking firm has noted it was too cumbersome to be effective.

The nod for dual listings on the local bourse also seems ironic now in view of an increasing trend by controlling shareholders to take their companies private and delist them in order to relist on other regional bourses. After enduring years of poor single-digit valuations in the Malaysian market, controlling shareholders are looking at other options. Often this means looking abroad.

More the pity then for the Malaysian exchange, for there are good undervalued companies that deserve a second look. However, as much as regulators can do their utmost to ensure PLCs abide by corporate governance rules or to drum into entities the principles of corporate social responsibility, it appears all too hollow given the corresponding lack of transparency or accountability at the municipal, state or national levels. This in spite of the many, many glaring examples of mismanagement.

What are foreign investors to think? And what are they to make of the political stand-off between Prime Minister Abdullah Ahmad Badawi and his former boss Mahathir Mohamad, which shows little sign of ending? Or the current controversy surrounding Malaysia's over-three-decade-old affirmative action policy which favours bumiputras or indigenous Malaysians who are mainly Malays?

A report on the New Economic Policy (NEP) by the Asian Strategy and Leadership Institute (Asli) Centre for Public Policy Studies has concluded that bumiputras 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 bumiputras 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.”

Tan Sri, I have highlighted the last paragraph 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.
My challenge to you remains unchanged: please show us how the figure 18.9% was concluded. Or prove to us in what ways the figure 45% put forward by Asli was erroneous?

To calculate the value of equity, it’s wrong to base 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 the help from the government. No government should neglect or marginalize the poor. To help the poor and close the gap between the haves and have-nots is a duty and obligation no government could run away.

You are correct to point out that many Bumiputera brothers and sisters in Sabah and Sarawak are still living in 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 to amass wealth for themselves?

I believe Asli is now under tremendous pressure to withdraw and apologize to the Government. I hope they have the resolute and courage to stand by their study and finding.

If Mirzan Mahathir, the Chairman of Asli, was eventually succumbed to pressure and forced to withdraw the study and finding of his institution as suggested by some of your colleagues in UMNO, we would not be overly surprised.

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

And many Malaysians will start thinking ( they were not allowed to say ) that the basis to continue with the NEP ( nicknamed “Never Ending Policy” , “Never Ending Payouts”, “Not Equal Policy”, Never Enough Payouts”) is not valid.

And sooner or later, the Malay poor will realize that NEP is not helping them after all said and done, but 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 (Malaysiakini), a claim made by the former Guthrie and PNB boss Tan Sri Khalid Ibrahim.

Your former colleague Datuk Seri Anwar Ibrahim was also of similar view. He too has said that NEP has lived out its usefulness after all these years and I quote,
… "Far from charting a new way forward, the Ninth Malaysia Plan that Mr. Abdullah unveiled in April retains one of the ugliest legacies of the past: the race-based affirmative action policy that favors bumiputra -- mostly Muslim Malays -- for educational and business opportunities. While this policy may have served a useful purpose in promoting more equitable growth during the initial decades after Malaysia’s 1957 independence, it has long since outlived its usefulness. In recent years, it has devolved into an instrument for corruption and rent seeking that heightens racial tensions and deters foreign investments. Most of all, it demonstrates the Abdullah administration’s lack of resolve in dealing with the challenge of global competitiveness while ensuring social justice for all." ...

WSJ- October 3, 2006- Malaysian Mudslinging- COMMENTARY by ANWAR IBRAHIM- Source: http://online. wsj.com

I 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 was to cover up the fact that wealth was concentrated in the hands of a few Bumiputera. Some feels that it is UMNO’s underarm tactic to understate the wealth of Bumiputera so that people like you could 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 the debate into a racial spat and bring up the ugly May 13 Incident to threaten the non-Malays again. I noticed some of the overzealous writers in the Malay press have attempted to do that. This would not work anymore except making the debate meaningless and leaving a very bad taste.

It’s time for the UMNO-led Barisan Nasional Government to admit the anomalies of NEP and move on with a colour-blind economic policy as suggested by DAP Sec Gen Lim Guan Eng.

I trust you to talk to all your peers in the Cabinet and convince them that “you guys can no longer rule with secrecy and threats.”


Yours sincerely,

Ronnie Liu Tian Khiew
- liu.ronnie@gmail.com

1 Comments:

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3:19 PM  

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