Redistribution of Malaysia´s Corporate Ownership in the New Economic Policy

Abstract

Introduction In 1965, the First Bumiputra Economic Congress mooted the idea of transferring government held shares of corporations to individual bumiputras.1 Underlying the suggestion were the growing anxieties springing from economic imbalances that still prevailed amongst Malaysians of different ethnic origins. It was not till the tragic racial riots of May 1969 that serious thought was given to the need for policies to rectify the situation. Thus the New Economic Policy (NEP) was initiated. Embodied in the Second Malaysia Plan launched in 1971, the NEP attempts to accomplish two major objectives; namely, to eradicate poverty and to eradicate identification of race with economic functions, through correcting economic imbalance amongst the races.2 With respect to the redistribution of wealth in the corporate sector, the Second Malaysia Plan specified that by 1990, bumiputras would own and control 30 per cent of the capital invested in the sector.3 Subsequendy, the third and fourth five-year economic plans spared no effort in upholding strategies for achieving the goal that had been spelt out earlier. A special task force set up under the Implementation and Co-ordination Unit of the Prime Minister's Department was gathered to formulate guidelines on the manner in which equity transfer into the hands of private bumiputras could be effected. Following the report of the task force,4 the government established the Bumiputra Investment Foundation in 1978, as the key agency responsible for implementing the main equity redistribution strategies. Having painted a brief background to the problem, this paper sets out with three objectives. First, adopting an institutional approach, the paper attempts to describe the structure and functions of the organizations that have been set up under the foundation to carry out various tasks. Second, the paper tries to review the progress of the entire equity redistribution exercise or the *'transference'' scheme. Third, attention is drawn towards specific economic and other issues that are pertinent to the eventual success of the strategies adopted.