— Koon Yew Yin
The Malaysian Insider
Feb 24, 2013
FEB 24 — After reading the article “Room for Competitive Bumiputera Companies’ in The Edge this morning, I am encouraged to write this piece to support Petronas Chairman Tan Sri Shamsul Azhar Abbas.
He said that in 2010 and 2011 alone Petronas awarded about Rm 74 billion worth of contracts to Bumiputera controlled companies, a sum cannot be described as anything but huge.
Despite this Petronas has become a punching bag for Malay right wing and business groups in recent months. The Malay Economic Action Council (MTEM)- an umbrella of more than 60 business group blamed Petronas for sidelineling Bumiputera companies and favouring more competitive foreign companies.
The MTEM has called for Tan Sri Shamsul and the Menbers of the Board of Petronas to resign. This is outrageous. The Malays cannot continue to expect hand outs and juicy contracts.
It is time they must realise that they have to become more efficient and competitive to face the real business world.
Although I do not know enough in the oil and gas business to comment on Bumiputera contractors in that field, I am fully qualified to comment on Bumiputera contractors in the civil, electrical and mechanical engineering construction industries which covers a wide range of work including roads, buildings, water supply, sewerage, irrigation, power stations, electrical cabling etc.
I would like to pose a few questions which may appear unkind or insensitive but nonetheless need to be asked. Out of hundreds of high-rise buildings in Kuala Lumpur does anyone know of any Bumiputera contractor who has won any of the building contracts through an open competitive tender process?
Out of hundreds of kilometers of highway in Malaysia, can any Bumiputera contractor who won any part of the highway contracts through open tender be identified?
The answer to the above questions unfortunately is in the negative. The evidence is that all the government’s well-intentioned efforts in trying to produce competitive Bumiputera contractors since 1957 have failed.
Contracting is a very difficult business yet it is so easy to register as a contractor. Why this has happened needs to be openly discussed rather than swept under the carpet.
Continuously giving out contracts to Bumiputeras without competitive tenders will only make them more inefficient.
Conclusion: Half-baked contractors are not in our national interest Contracting is one of the most, if not the most, difficult business and it takes a very long time to produce competent contractors.
It is very dangerous to quickly produce half-baked ones as they will soon find themselves in financial difficulties and require bailouts.
The bankruptcy record shows that a large number of debtors are Bumiputera contractors with many of them unable to pay back the loans given by government- controlled financial institutions.
The government must change its methods and policies which have proven unworkable.
There is no urgency in producing more Bumiputera contractors as many of the key industries e.g. the banks, plantations, motor vehicles, taxis, rice etc are already under the control of Bumiputeras.
Our government must not be narrowly communalistic and should make use of all the groups, irrespective of race, that are more efficient in the contracting business.
Giving out contracts without a full tender process is akin to corruption. I urge the government to stop this corrupt practice and to utilise the savings from these enormous sums to implement the options suggested above.
Since independence 1957, the BN Government would have spent hundreds of trillions of ringgit and have failed to produce some competitive and efficient Bumiputera contractors.
It must be the most wasteful national mission ever known.
Note on the Author
I am a 80 year-old chartered civil engineer and one of the founders of the three larger construction companies listed in Bursa Malaysia.
These are Gamuda Bhd, Mudajaya Group Bhd, and IJM Corporation Bhd. I was a member of the Board of Engineers, Malaysia for three terms.
I was also on the Sirim Board responsible in writing the Malaysian standard specifications for cement and concrete.
In addition, I was the Secretary General of Master Builders Association, Malaysia for nine years. These days, I am completely retired.
My intention in writing this article is honourable. Many people may not like reading what I have written and the truth may be difficult to accept. Nevertheless, this is my considered analysis for the benefit of my country, the Bumiputera contractors and the construction industry.
‘…..in 2010 and 2011 alone Petronas awarded about Rm 74 billion worth of contracts to Bumiputera controlled companies…..’
But it is not equitable.
It might have been given to only a few beneficiaries, the usual suspects, you might say, such that only a few selected Bumiputras benefited from this.
Just like Petron.
Chinese also at fault.
Someone told me not so long ago they are responsible for most of the abandoned housing projects all over the country.
The irony is they reappear again to get more projects and end up abandoning them again with impunity.
But the government condones them and their scams.
Maybe the Ali-Baba system is not working.
///Despite this Petronas has become a punching bag for Malay right wing and business groups in recent months. The Malay Economic Action Council (MTEM)- an umbrella of more than 60 business group blamed Petronas for sidelineling Bumiputera companies and favouring more competitive foreign companies.///–the author
Petronas Chairman Tan Sri Shamsul Azhar Abbas knows very well that Petronas needs to make money so that the government can function, including paying other bumiputras contractors who consume Petronas profit. Clearly there are too many contractors around, and they now want consume the seeds rather than waiting for the produce generated from the seeds. The whole philosophy of promoting bumiputra businessmen needs revisit.
Five decades ago, it was said that Malays resided in rural areas and they had no chance of getting into business. The government has gone in a big way since 1969 to facilitate Malays into taking up business adventures. It is now 43 years after NEP, and Malays have received full government support, financially and licensing and you name them they got. They should now be as good as non-Malays in 1969 when they had to slow down so that Malays could catch up. Chinese were said to ‘control’ Malaysian economy in 1969. Chinese could not be controlling the economy during Japanese occupation which ended in 1945. Chinese had only 12 years before 1957 to be involved in business, and assuming that they had better opportunity for 12 years by virtue of their place of living, they could not be so far ahead of Malays to the extent that they could support what were intended under Article 153. But Chinese leaders then surprised Tun Dr. Ismail in agreeing to the term, and Tun Ismail said that Malays would willingly give up the provision when they no longer required them, out of pride. The rest is history, and possibly now Malays known to Tun Ismail have been outnumbered by Mamakthir-like Malays.
Assuming that Chinese had 12 years advantage, without government assistance, from 1945 to 1957 and Malays have 43 years of government assistance and other preferences from 1969 to 2013, it would be unreasonable to believe that Malays still are unable to compete on equal term with non-Malays. Mamakthir would certainly be quick to say that some new Instant Malays in Sabah are still poor, just like he told a BBC interview that there were still Malay drivers working for Chinese tycoons and thus NEP should continue.
UMNO members and Perkasa racists would certainly say that non-Malays should be discriminated just because the constitution provides for Article 153, and that Islam is the official religion, and Malays are Muslims. But UMNO should know how Article 153 came about, and that it was initially intended to be for 15 years and subject to review until Tun Razak forced through an amendment to Article 153 in 1972 threatening that the NOC would continue military rule without parliament if he did not get what he wanted. Tun Razak died young.
The NEP objective of having Malays participate in 30 percent of business activity could be noble in getting people of all races having a stake in entrepreneurship and a taste of the difficulties involved. The trouble began with the figure of 30 per cent which had to be quantified. Economists in EPU suggested that the 30 per cent should mean the share of equity capital in the corporate sector. That too was meaningful, to a point, since only corporation would maintain separate business accounts from their own household expenses, and that the size of equity capital would represent the extent of the business. This is as rough a measure as that of percentage participation in business activities.
Had the government intended to encourage Malays to participate in business, and not make them the convenient vote bank, it would have ensured that budding Malay entrepreneurs went through the proper learning process to become professional in what they do. The government should have also made them account for money loaned to them.
Unfortunately NEP was utilized to serve racial discrimination purposes. The glaring case being recruitment into government services after the advent of NEP favored Malays when it should have recruited proportionately more non-Malays. Today, government servants being almost entirely of one race cannot be trusted to perform professionally, in dealing with Malaysians of different races.
The target of 30 percent participation once translated to mean corporate equity capital offered civil servants of the right department to create easy money for some Malays. With NEP and the 30% as an excuse, all new listed companies since then have to allot 30% of their shares at par value to Malays while the remaining shares for others, non-Malays included were at market value. As soon as the new shares are listed in KLSE, Malays getting their shares at par would sell them at market value for profit, so that they can use the proceed to once again take up new counters at par value, and make another killing the next time. In effect, as soon as the new shares were listed, equity accrued to Malays would be the same as if the regulations demanding that 30% of share equity be allotted to Malays did not exist. But some Malays who had the connection made easy money and became wealthy, and yet Malays’ equity capital did not increase. Did the government of the day realize this? They certainly did. Najib said that 54 billion RM worth of shares allotted to Malays ended up in the market again. The equity capital of the corporate sector in 2013 is about 100 times the size of that in 1970. All listed companies had to allot 30% of their equity share to Malays. That alone proves that Malays had 30% of equity shares in the corporate sector through their hands. If they choose to have cash rather than share capital, why should non-Malays carry the burden to filling the bottomless pit? Besides, NEP should be for 20 years, and the government still plays with statistics to claim the EPU is right that the 30% objective has not been met.
The above paragraphs described the burden imposed on non-Malays to make Malays achieve their 30 percent target. The other excesses of the government under NEP such as in education, business licensing and other discriminatory policies against non-Malays are too numerous to list.
The 30% easy money from KLSE spoiled Malays and made them seek shortcut to wealth rather than make them entrepreneurs. Mamakthir introduced the negotiated contracts in place of public tenders to the best bidders started the floodgate of corruption flows. Government accountability ceases ever since. Mamakthir even said that he agreed to buy PKFZ price at 25 RM per square feet instead of 10 RM per square feet through compulsory acquisition by law under those circumstances, so that he would be popular to win election; it seems the vendors of PKFZ land numbering a dozen persons perhaps would make a difference in election. To buy votes from those 10 persons, Mamakthir made the government pay 1 billion RM cash value instead of paying 400 million RM through acquisition through the law.Together with interests the project might cost 4 billion ringgit instead of 12.5 billion ringgit. Would any PM make the government pay the difference of 8.5 billion RM to buy 10 persons to make the government popular? That was Mamakthir’s statement to the court. There are more questions we need to ask.
Clearly NEP as implemented has not helped Malays to stand on their own feet in business. Oil business undertakings handled by Petronas are not about kachang putih or frying pisang. It is about making money for the company. The fact that those businessmen complained that they lost out to competitive companies show that they are spoiled. The fact that Najib entertained the demand by Malay businessmen shows that Najib does not know what is right. It proves that he is still playing racial politics hoping that Malays would vote him on race rather than on his capability to govern. With Najib as BN leaders, BN has to lose to save Malaysia.
///Contracting is a very difficult business yet it is so easy to register as a contractor. Why this has happened needs to be openly discussed rather than swept under the carpet.///
Who says anything about contracting is a tough job? I mean, yeah yeah its tough. I know. But all that really means nothing to a commission agent. Get it?
We have to be honest to ourselves if we want assist the bumiputra achieve its goals as stipulated in the NEP. We have to accept the fact by easy hand out of contracts will not, as the fact after 50+ years of record, produce any results. The reverse is true and this practices will only retarded growth the bumiputra contractors.
We also have to accept for fact that when contracts and finance assistance are given easily the contractors choose to become as commission agent. They sub out the contract for quick commissioner.
Many of the genuine bumi contractors always face financial problem, basically they are not the first hand contractor and also many of them have bad altitude toward good financial management practices.
They tend to spend on unnecessary and on unproductive items such as expensive cars .
Bumi putra contractors have long way to go.
Again when is this Bumi crab going to end…..
Your comment is awaiting moderation.
///Despite this Petronas has become a punching bag for Malay right wing and business groups in recent months. The Malay Economic Action Council (MTEM)- an umbrella of more than 60 business group blamed Petronas for sidelineling Bumiputera companies and favouring more competitive foreign companies.///–the author
Petronas Chairman Tan Sri Shamsul Azhar Abbas knows very well that Petronas needs to make money so that the government can function, including paying other bumiputras contractors who consume Petronas profit. Clearly there are too many contractors around, and they now want consume the seeds rather than waiting for the produce generated from the seeds. The whole philosophy of promoting bumiputra businessmen needs revisit.
Five decades ago, it was said that Malays resided in rural areas and they had no chance of getting into business. The government has gone in a big way since 1969 to facilitate Malays into taking up business adventures. It is now 43 years after NEP, and Malays have received full government support, financially and licensing and you name them they got. They should now be as good as non-Malays in 1969 when they had to slow down so that Malays could catch up. Chinese were said to ‘control’ Malaysian economy in 1969. Chinese could not be controlling the economy during Japanese occupation which ended in 1945. Chinese had only 12 years before 1957 to be involved in business, and assuming that they had better opportunity for 12 years by virtue of their place of living, they could not be so far ahead of Malays to the extent that they could support what were intended under Article 153. But Chinese leaders then surprised Tun Dr. Ismail in agreeing to the term, and Tun Ismail said that Malays would willingly give up the provision when they no longer required them, out of pride. The rest is history, and possibly now Malays known to Tun Ismail have been outnumbered by Mamakthir-like Malays.
UMNO members and Perkasa racists would certainly say that non-Malays should be discriminated just because the constitution provides for Article 153, and that Islam is the official religion, and Malays are Muslims. But UMNO should know how Article 153 came about, and that it was initially intended to be for 15 years and subject to review until Tun Razak forced through an amendment to Article 153 in 1972 threatening that the NOC would continue military rule without parliament if he did not get what he wanted. Tun Razak died young.
The NEP objective of having Malays participate in 30 percent of business activity could be noble in getting people of all races having a stake in entrepreneurship and a taste of the difficulties involved. The trouble began with the figure of 30 per cent which had to be quantified. Economists in EPU suggested that the 30 per cent should mean the share of equity capital in the corporate sector. That too was meaningful, to a point, since only corporation would maintain separate business accounts from their own household expenses, and that the size of equity capital would represent the extent of the business. This is as rough a measure as that of percentage participation in business activities.
Had the government intended to encourage Malays to participate in business, and not make them the convenient vote bank, it would have ensured that budding Malay entrepreneurs went through the proper learning process to become professional in what they do. The government should have also made them account for money loaned to them.
Unfortunately NEP was utilized to serve racial discrimination purposes. The glaring case being recruitment into government services after the advent of NEP favored Malays when it should have recruited proportionately more non-Malays. Today, government servants being almost entirely of one race cannot be trusted to perform professionally, in dealing with Malaysians of different races.
The target of 30 percent participation once translated to mean corporate equity capital offered civil servants of the right department to create easy money for some Malays. With NEP and the 30% as an excuse, all new listed companies since then have to allot 30% of their shares at par value to Malays while the remaining shares for others, non-Malays included were at market value. As soon as the new shares are listed in KLSE, Malays getting their shares at par would sell them at market value for profit, so that they can use the proceed to once again take up new counters at par value, and make another killing the next time. In effect, as soon as the new shares were listed, equity accrued to Malays would be the same as if the regulations demanding that 30% of share equity be allotted to Malays did not exist. But some Malays who had the connection made easy money and became wealthy, and yet Malays’ equity capital did not increase. Did the government of the day realize this? They certainly did. Najib said that 54 billion RM worth of shares allotted to Malays ended up in the market again. The equity capital of the corporate sector in 2013 is about 100 times the size of that in 1970. All listed companies had to allot 30% of their equity share to Malays. That alone proves that Malays had 30% of equity shares in the corporate sector through their hands. If they choose to have cash rather than share capital, why should non-Malays carry the burden to filling the bottomless pit? Besides, NEP should be for 20 years, and the government still plays with statistics to claim the EPU is right that the 30% objective has not been met.
The above paragraphs described the burden imposed on non-Malays to make Malays achieve their 30 percent target. The other excesses of the government under NEP such as in education, business licensing and other discriminatory policies against non-Malays are too numerous to list.
The 30% easy money from KLSE spoiled Malays and made them seek shortcut to wealth rather than make them entrepreneurs. Mamakthir introduced the negotiated contracts in place of public tenders to the best bidders started the floodgate of corruption flows. Government accountability ceases ever since. Mamakthir even said that he agreed to buy PKFZ price at 25 RM per square feet instead of 10 RM per square feet through compulsory acquisition by law under those circumstances, so that he would be popular to win election; it seems the vendors of PKFZ land numbering a dozen persons perhaps would make a difference in election. To buy votes from those 10 persons, Mamakthir made the government pay 1 billion RM cash value instead of paying 400 million RM through acquisition through the law.Together with interests the project might cost 4 billion ringgit instead of 12.5 billion ringgit. Would any PM make the government pay the difference of 8.5 billion RM to buy 10 persons to make the government popular? That was Mamakthir’s statement to the court. There are more questions we need to ask.
Clearly NEP as implemented has not helped Malays to stand on their own feet in business. Oil business undertakings handled by Petronas are not about kachang putih or frying pisang. It is about making money for the company. The fact that those businessmen complained that they lost out to competitive companies show that they are spoiled. The fact that Najib entertained the demand by Malay businessmen shows that Najib does not know what is right. It proves that he is still playing racial politics hoping that Malays would vote him on race rather than on his capability to govern. With Najib as BN leaders, BN has to lose to save Malaysia.