My Take on Empowering the Malay Economy, part 1

The PM has spoken. He has an agenda to empower the Malay and Bumiputera's economic power. The agenda focuses on five main thrusts:

• Empowering bumiputra human capital;
• Strengthening bumiputra equity ownership in the corporate sector;
• Strengthening bumiputra non-financial asset ownership;
• Improving bumiputra entrepreneurship and business; and
• Strengthening the services delivery ecosystem. 

I don't have a bone with the thrusters; they seem to make sense - common sense.

But I have some issues with the plans for the thrusters. They seem rushed. I don't believe they would bring a quantum leap in the Malay's economic power; I believe the think-tank could think and come up with something better from their tank.

Before we go on, there is something that we must be clear in our head. I am talking about the Malay economic power (in saying Malay, I am including the Bumiputeras as well) AS A SOCIETY, rather than individual or a segment, a caste. When a policy benefits a few individuals and they get extremely rich from it, it does not translate into Malay Economic power unless they give back much more to the Malay community. We must look at the society as a whole, from the poorest to the richest.

In that regard, we must also understand the demographic of the Malay society that while it is true that past policies have created a larger pool of middle class Malays, the society is still dominated by largely the poor, both in terms of financial education as well as the financial itself. This society is by and large, poor and heavily subsidized.

Lets start with the ASB2; RM10 billion of it. And here are my issues:

• ASB is attractive only because it is a superhigh-return savings scheme. The guarantee of the capital makes it risk free (better than bank deposit (?), maybe, because PIDM has a limit on the guaranteed savings amount) and it gives an equity-based return (way higher than the deposit rate of around 3% per annum).
• That would just make people switch their long term fixed deposit into ASB (those poorer ones who needs to withdraw cash regularly cannot benefit because you need to lock the amount in ASB to fully enjoy the yearly dividend). Who has one year long term deposits? Certainly not the poorer Malays nor even the middle class Malays. It will definitely benefit the richer Malays, those who have maxed out their ASB1. 
• So it looked like this plan would benefit the already rich Malays first. But their number is not that big.
• In my opinion, this ASB  does nothing to promote active economic management of the Malays. Instead it is training the Malays to be passive owners of equity. The term "reign but does not rule" comes to mind. I don't believe that passive ownership of equity would make the society any better at creating and managing economic power - that one comes from owning and operating businesses.
• ASB does not directly and significantly help the Malay society in owning and operating businesses. The moneys in ASB would have to be placed in secure investments so that the managers could manage the risk and give the expected return. Amongst others, they would be invested in companies owned by non-Malays (because they still dominate the real economy, they own the businesses) and when this happens, the capital flows to enhance the economic power of the original owner. They would use the much needed cash to build more businesses and when it has grown big enough, they would then go for listing again - and the cycle continues.
• So, I ask myself, does the Malay businesses really benefit from the ASB? Does the Malay society as a whole benefits from ASB? Do Malay entrepreneurs benefit from ASB? I have great difficulty to say a resounding yes. Menang sorak, kampung tergadai.

ASB1 was relevant back then, to tilt some Malays into middle income class and some middle income Malays into rich ones. It was a quick fix to create purchasing power within the society. But now we need something different. We need production power. We need Malay businesses flourishing in a competitive and sustainable manner. I will share my issues on this segment next time. In the mean time, Selamat Hari Malaysia.

Salam.