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Malaysia's Crony Enrichment Plan
Putrajaya’s five-year spending plan
By: Dennis Ignatius
Since Malaysia’s New Economic Policy was launched in 1971, there have been a dozen five-year Malaysia Plans, some 50 national budgets and nine prime ministers. Furthermore, 94 different Bumiputera empowerment agencies have been created and an estimated RM1 trillion (US$241 billion at current exchange rates) poured into the Bumiputera agenda, an affirmative action plan to help the majority race.
And yet, here we are still talking about how far the Bumiputeras – indigenous peoples, most of them ethnic Malays – have fallen behind the non-Bumiputeras, how targets have not been reached, how income inequalities between Malays and non-Malays are increasing, how Malays are still struggling. The reason is that all of these plans are really nothing but a racket designed to enrich political elites and their cronies at the expense of the rest of the people of Malaysia.
Stripped of all the bombast, the current Malaysia Plan is essentially a rehash of the same old NEP structures that favor the elites. It deploys a racial narrative – premised upon questionable statistics and opaque methodologies – to mask the ongoing exploitation of the masses by ruling elites. The result is a continuation of the same discriminatory, divisive and predatory policies that have wrecked so much harm upon the nation.
One of the key justifications for keeping all the NEP structures intact was the claim that Bumiputeras have still not been able to achieve the 30 percent corporate equity target that was set more than half a century ago when the NEP was introduced ij the wake of disastrous race riots that took hundreds of lives.
According to Prime Minister Ismail Sabri, Bumiputera corporate equity in 2019 was just 17.2 percent, well short of the 30 percent figure. The corresponding figure for non-Bumiputeras was 25 percent. Foreign investors held 45.5 percent with the remaining 12.3 percent held by nominees.
A point to note is that these figures rise and fall as shares are traded or sold. In 1991, Bumiputera equity was said to be just over 20 percent. In 2009, Bumiputera corporate equity was 19.4 percent. In 2011 it reached a high point of 23.4 percent. In 2019 it had fallen to 17.2 percent.
In explaining why Bumiputera corporate equity stood at only 19.4 percent in 2009, Najib Razak, who was then prime minister, revealed that of the RM54 billion worth of equity that had been allocated to Bumiputeras since 1971, only RM2 billion was still held by them as of 2009. What this means is that if Bumiputeras had held on to all the shares that had been allocated to them, the 30 percent equity target would have been surpassed by over 500 percent decades ago.
Well-connected Bumiputera elites get allocated shares (initial public offering) which they buy with loans that banks are generally obliged to provide and then sell once the shares go up, making a tidy profit. It’s easy money, a regular lottery for political elites and their cronies.
After selling their shares, they return to the feeding trough for more shares and the game goes on. In this way, RM54 billion (as of 2009) has already gone into the pockets of the elites in the name of helping the Bumiputeras.
Given the way it is structured, the 30 percent target can never be reached. The proposed changes to the system that Ismail Sabari is initiating are unlikely to make a significant difference. Our elites are too addicted to easy money and quick profits to accept any meaningful reforms.
To use such a formula then to justify the continuance of NEP structures is just a shameful abuse of power. It does nothing to uplift the so-called B40 group – the bottom 40 percent of society -- or help other disadvantaged Malaysians.
Surely, at some point, we have to stop and ask why, despite all the time, effort and money expended, the Malays are still lagging behind? On what basis are these claims being made? If true, what went wrong? Where did all that money go to? Why hasn’t it reached poorer Malays who continue to languish in the B40 group?
Simple logic ought to tell us that it makes absolutely no sense to keep on pouring money into failed policies, but these are all inconvenient questions that political elites and their cronies avoid by hiding behind racial narratives. And so, they continue to pour good money into bad solutions or, to be more precise, pour good money directly into their own pockets.
For some time now, the nation’s leading economists have been calling for a shift to a needs-based approach that would focus on those who need assistance irrespective of their ethnicity. Even some of those who have most benefited from the Bumiputera agenda are saying enough is enough.
There is widespread acknowledgment that policies such as Bumiputera share allocations, APs and demands that non-Bumiputera freight forwarding companies hand over 51 percent of their equity to Bumiputeras do little to actually benefit Bumiputeras as a whole. All it does is enrich a few well-connected cronies and their political masters. Besides being entirely counter-productive, it stirs up the kind of resentment that is slowly tearing this country apart. Non-Bumiputeras feel more and more marginalized and left out; it is as if they don’t matter anymore.
The 12th plan indicates that all these calls have fallen on deaf ears. The ruling elite continues to resist change. It is, after all, a system they created to enrich themselves at the expense of the rakyat and they clearly intend to hold on to it for as long as possible. It is also the very framework that facilitates the patronage system upon which political power rests in the country.
The fact is that there is not much money – and thus no real incentive – to be made in programs to help the poor and disadvantaged. It is the big mega projects and the billion-ringgit procurement contracts that provide the best opportunities for corruption. It is one of the reasons why we continue to lurch from one scandal to another. Costs are inflated, payments are made for work not done or for equipment not delivered and money is needlessly spent on consultants, etc.
Money doesn’t just disappear; it is stolen. The public has been swindled but thus far no one has been held accountable. The Public Accounts Committee and the Auditor-General keep highlighting administrative weaknesses and making recommendations year after year but nobody really listens.
If public funds are lost, stolen or diverted year after year and no one is held responsible, it can only mean that there is a massive and well-organized conspiracy to loot public funds, that it is all part of a system of organized and sanctioned pillage. It is not that we don’t know how to stop corruption but the whole system is now designed to facilitate the wholesale looting of public funds.
Under the plan, RM400 billion will be spent over the next five years. The former president of Transparency International has warned that without proper checks and improvements, up to 30 percent of that amount could be lost through corruption. That amounts to a stunning RM120 billion. So far, there has been little clamor from either the public or the political classes for stricter checks and balances. Perhaps, the theft of public funds has become normalized.
Our opposition parties made the usual noises when the 12th plan was debated but they made no effort to seriously challenge it or demand greater accountability. Apparently, honoring their MOU with the government is more important than challenging a seriously flawed policy that perpetuates an unjust and discriminatory system. No wonder many voters have concluded that the opposition has lost its way.
In the meantime, as Malaysia wallows in corruption, racism and religious extremism, our tiny neighbor to the south of the peninsula is punching above its weight in world affairs. At the recently concluded G20 summit, Singapore Prime Minister Lee Hsien Loong was seen hobnobbing with key world leaders.
Dennis Ignatius is a retired Malaysia ambassador and a regular contributor to Asia Sentinel