Putrajaya must clear cronyism, graft and leakages for Bumi economic agenda to work, says Malay group

Putrajaya's controversial Bumiputera Economic Empowerment Plan (BEEP) may not be perfect but it can help needy entrepreneurial Malays if the government addresses cronyism, corruption and leakages in businesses, says a public-funded Malay business group.

Malay Economic Action Council (MTEM) chief executive officer Mohd Nizam Mahshar said the majority of the dominant community would continue to face hurdles improving their social class if inequality in the distribution of wealth remained.

“A lot has been given to the Malays but who does it benefit?” Nizam said, referring as well to BEEP which was announced by Prime Minister Datuk Seri Najib Razak more than two weeks ago.

“There’s a lot of inequality between the 1% of the community against the rest of the lower and middle income groups,” he told The Malaysian Insider when interviewed in Kuala Lumpur.

Najib's latest plan has been seen as a reversal of his economic reforms made after he took power in April 2009, when he liberalised 27 sub-sectors meant just for the Bumiputeras.

The country's sixth prime minister had pledged that his New Economic Model (NEM) would make the country a high-income nation by 2020 with equitable share for all races in the country of 29 million people.

But Najib then came up with the latest plan to help the Bumiputeras, who form some 60% of the population, just days ahead of Malaysia's 50th anniversary as a country and ahead of his party's elections.

"The plan can work if the government addresses issues of governance, leakages, corruption, and cronyism. They should not put the criticisms aside and start facing the challenges,” said Nizam.

“We don’t want another round of missed opportunities.”

MTEM’s records of Malay-run businesses show that while there are many Malay companies, over 99% are small and medium enterprises (SMEs).

“The government should focus on the outcome of the plan instead of dumping more money. It just creates negativity between races,” he told The Malaysian Insider.

Nizam also said that there are many young Malay entrepreneurs who strive to be competitive but are facing roadblocks due to the lack of opportunities.

“If you look at the richest people in Malaysia, it doesn’t matter who they are, they all have government support from either licensing or contracts,” he said.

“There’s a lot of social segregation. Monopoly in terms of race and class.”

The whole landscape based on unequal wealth had also created an environment where “Ali Babas” set up firms through government aid but do not produce business successors, he said.

“There are these Ali Baba companies who come up with proxy companies, then sub-contracts the job out to others. There’s no business succession there,” Nizam added.

According to him, the government also needs to look at actual corporate controls within companies, which are still low. Firms that comply with the 30% Bumiputera equity law have been placing figureheads as part of their board of directors, hence diminishing the purpose of creating a robust Malay business community.

“There’s no quick win solution and we can’t have short term measures. The government has to ensure that there’s participation from different entities if they want this to work,” said Nizam.

While groups like MTEM want better governance from the government, the community understands that talents are still lacking. But Nizam said that having re-skilling programmes does not work in the long run.

“I questioned the need to have these re-skilling programmes. Does it mean that universities are not doing their job? Fix the universities then,” he said.

“The skills should have been taught during the university course,” he added, in reference to Najib’s plan to train unemployed graduates to increase their marketability.

“The graduates already have the technical knowhow. The problems are more toward character issues, like leadership, communications, literacy in English,” said Nizam.

The only thing that needs to be updated, he said, are the training schools. To prevent wastage, training schools have to revise their curriculums so that vocational studies are offered as well.

However, once qualified Malay entrepreneurs are out there dabbling in the volatile market, another problem surfaces – they have no backup funds if their first venture fails.

“Our policies do not support failure. There’s no second chance. Once you fail, you can’t get funds anywhere else,” Nizam said.

“The Chinese usually have other support systems like relatives. But the Malays rely on banks since they don't have other forms of financial backing.”

As such, startup programmes like Bumiputera New Entrepreneurs Starting Scheme, or Superb that was announced in the plan have to include a fail-safe mechanism that helps Malay entrepreneurs when their businesses fall apart.

“The first requirement for a successful entrepreneur is to have failed. To teach young entrepreneurs, you can’t have government officers or professional speakers do the job,” said Nizam.

"You need professional entrepreneurs. From there, you can create a partnership between new and seasoned entrepreneurs,” he added.

Despite the imperfect Bumiputera Economic Agenda, MTEM said it was looking at it in a positive manner.

“We do not have an option, so we need to work with the present government. We can’t wait for another five years,” said Nizam.