Dr. Boo Cheng Hau's Trilingual Blog: SAY WHAT YOU LIKE

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Umno-linked men in control of GLCs losing money Posted: 03 Aug 2011 08:02 PM PDT Some 17 years ago, I was absolutely delighted when the state government announced that Dana Johor, a trust fund newly set up, was to be opened up to all citizens regardless of race. Before this it had set up Amanah Saham Johor that was for Bumiputera only. My Malay friend was equally excited. We immediately went together to a local bank to sign up for loans to purchase the Dana Johor share units. I was curious when the bank officer told us there were two categories of interest rates for the same amount borrowed – the lower rate for 'members', the higher rate for 'non-members'. I asked her if I could become a 'member'. She practically flushed and apologised, replying that membership was only for Bumiputera. What? Even though both my friend and drew the same salary as government doctors, I would have to a pay higher interest because I am 'non-Bumiputera'! This is outright racial discrimination, not affirmative action. I felt extremely humiliated but I had to thank the Malay officer for her humility in apologising for a racist policy that she had no power over. Who in the world would want to pay higher interests in return for racial degradation? I decided not to take up the loan that was being managed along racial lines as I always understood that any economy would never thrive if managed in such a racist way. It would surely crumble by itself. But my doubt has always been how blanket lower interest rates offered to Bumiputera vis-a-vis non-Bumiputera would help poor Malays move up the socio-economic ladder. Ultimately it turned out that my instinct was correct – immoral economic practices would boomerang on themselves sooner rather than later. Ironically, some years later as a wakil rakyat, I had to raise the issue in the state assembly when the Dana Johor share value dropped from RM1 per unit to 18 sen. And to the displeasure of many buyers, Johor Corp is offering only 50 sen to buy back each share in order to wind up the fund. Before this Johor Corp had wound up Amanah Saham Johor, which was for Bumiputera only, at a one ringgit per unit scheme. Racism dampened our economic growth Please allow me to delve into further details about what is happening in Johor. I know that one Umno state assemblyman openly asked for a directorship – in any government-linked company – upon his retirement from politics. GLCs have become collection of BN, especially Umno-linked, well-paid but non-performing politicians. It is hardly surprising to find out that Johor Corp has a whooping debt of RM6 billion, with RM 3.6 billion in the form of bonds that will be due next year. Yayasan Pelajaran Johor and Kumpulan YPJ According to Auditor-General's report, the Yayasan Pelajaran Johor financial statement which ended 21 Dec 2008 indicated that more than a quarter (26.9% or RM73.2 million) of YPJ's RM271.9 million investment could not verified due to its lack of proper documentation for auditing. Furthermore, it has a debt of RM14.8 million to its subsidiaries. Johor scholars owed as much as RM16.3 million to YPJ, and 95 percent or RM15.5 million in debts could not be verified due to a lack of any documentation. Already, YPJ ran at a loss of RM 2.7 million in 2008 while Kumpulan Pendidikan YPJ Sdn Bhd registered a loss of RM1.5 million in the same year. Due to wastage and mismanagement, it is inevitable that YPJ will go bust eventually – it is only a matter of when. Perbadanan Bioteknologi dan Biodiversiti Negeri Johor (J-Bioetch) J-Biotech has nine subsidiaries with total assets of RM3.5 million and total current liabilities of RM18 million. Five out of these subsidiaries have current liabilities more than their current assets, which in other words mean they are technically bankrupt. Seven out of the nine subsidiaries ran at loss in 2008. Government bailouts are expected until the company goes under one day soon. Most GLCs are not only economically unproductive but also acutely race based. And the GLCs boards are Umno's piece of the pie. MIC and MCA politicians are more often than not excluded. The large number of Umno government-linked politicians sitting on GLCs boards are said to safeguard Malay equities ownership. This arrangement hardly reflects the economic progress of Malay society at large. What it has done is make the corporate world more racially divided than integrated. This may explain why the average Malay household and Chinese income ratio have remained unchanged since the implementation of NEP when compared to Singapore Malays who have achieved better economic progress through the non-racial process of urbanisation, free education and industrialisation. Heavy govt interference in corporate world The NEP's focus has been mainly to enlarge Malay equity ownership. The government invested in various economic activities in the name of Malay interest. That activity brought very little benefit but incurred large fiscal losses of public funds and state resources that rightly belong to all Malaysians. Between 1960 and 1992, the number of public enterprises increased from a mere 22 to a whopping 1,149 – spreading across all economic activities, including agriculture, building and construction, finance, services, extractive industries and others. The government also ventured into heavy and capital-intensive industries in the 1980s. By 1986, public enterprises dominated many industries, including palm kernel oil, palm oil, vegetable and animal oils, food products, hydraulic cement, tires and tubes, sugar, manufacture of industrial gases and manufacturing sub-sectors of petroleum. Their share of the industries ranged from 31 percent to 85 percent, according to economist K.S. Jomo. Public monopolies failed to bring about impressive economic growth in Malaysia compared with what happened at the same time in Taiwan and South Korea. Even though Malaysia had an average GDP growth rate of about four percent per annum in the 1970s and 1980s, Taiwan and South Korea have surpassed Malaysia with their greater growth rates despite both countries having more impoverished economies in the 1960s. Misinterpretation of economic problems and misuse of public resources to build up individual Malay capitalist equity ownership has greatly suppressed Malaysia's economic performance. The misconception about public enterprises as being representative of Malay interests is detrimental to better economic growth as well as to the interests of individual Malays and the Malay masses. It is only a few Malay tycoons who have benefitted. The gap between the mean income of the Malay and the Chinese has remained largely unchanged. Financing of public enterprises was largely from the federal treasury and public agencies such as Majlis Amanah Rakyat (Mara), the Urban Development Authority (UDA) and various state economic development corporations (SEDCs). Another major source of funding was from Malaysian public institutions such as the Muslim Pilgrim Fund and Management Board (LUTH), the Employees' Provident Fund (EPF), and the Bumiputera Investment Foundation. Feathering whose nest? The involvement of public enterprises in businesses in the name of a single race is not only short-sighted but unproductive. It has mainly alienated one segment of the population whilst not helping another segment to make real gains. Nonetheless, the propaganda that the Umno government has safeguarded Malay rights did provide an illusionary sense of well-being for the Malays, many of whom believe that their interests are enhanced by these public ventures in business. Even if we do not institute physical segregation laws such as in apartheid, we have certainly a de facto system of segregation established at a colossal cost amounting to billions of ringgits. Sometimes I have discussions about economics with Umno politicians but I can never agree with their superficial interpretation of wealth distribution. Often they give me a boggling example like "most golfers are Chinese businessmen". A non-racial approach towards corporate equities ownership should be in place if we are determined to get out of this economic dilemma. Non-racial policies such as minimum wage, on-the-job training, and free competition will keep the free market working. One solution is to open the failing GLCs not only to local businesses for bidding takeovers but also to international companies. This approach may help attract foreign direct investment and add competitiveness to our corporate world. It has become clear that GLCs can no longer survive on Malay nationalist prejudice and pride alone.

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