THE requirement that locally owned, non-listed freight forwarding companies must comply with a 51% Bumiputera equity, which recently made headlines, is not a new issue.

It was first mooted in 2015 by the Bumiputera Economic Council under the Najib Razak administration.

At the time, the decision to impose the equity requirement was made in line with findings by the Bumiputera Agenda Steering Unit (Teraju).

The policy however was put on hold following a request for exemption from the Federation of Malaysian Freight Forwarders (FMFF) in 2015.

Following the request, the Finance Ministry (MOF), in 2016, gave the FMFF a waiver until December 31, 2020 for local companies with International Integrated Logistics Services (IILS) status to comply.

However, in December 2020, the MOF – now under the Perikatan Nasional administration – decided to extend the period to fulfil the Bumiputera participation requirement to December 31, 2021.

In Malaysia, freight forwarding licences registered before 1976 did not have a Bumiputera equity requirement, while for those registered between 1976 and 1990, a 30% quota was imposed.

As for licences registered after 1990 – the year the Bumiputera equity policy was first implemented – there is a 51% Bumiputera shareholding requirement.

Why is it an issue now?

With only several months left until the December 2021 deadline, FMFF wrote to International Trade and Industry Minister Mohamed Azmin Ali seeking clarification on the ruling, which it said would be bad for local logistics companies, while giving foreign-owned ones an unfair advantage.

The looming deadline, FMFF said, meant non-Bumiputera freight forwarders would be compelled to sell 51% equity in their companies, essentially handing over control in the business.

Given the short timeline, FMFF also questioned if there were even any such investors willing to buy out these quotas from non-Bumiputera owners, especially during a time when the economy was hard hit by the Covid-19 pandemic.

FMFF, which represents more than 1,500 logistics companies, said that Bumiputeras were already in the logistics business and many logistics companies were 100% Bumiputera-owned, with the government already giving them special incentives to be involved in turnkey logistics services to the government.

When presenting the 12th Malaysian Plan on September 29, Prime Minister Ismail Sabri Yaakob said Bumiputera shareholding in national wealth stood at 17.2% as at 2019, with 25% in the hands of non-Bumiputeras and 45.5% held by foreigners.

Critics have hit out at Ismail’s push to increase the Bumiputera quota, saying that it does not promote inclusivity in line with his vision for a Keluarga Malaysia.

Lawmakers have asked for a different approach, as four decades of affirmative policies first introduced under the National Economic Plan (NEP) in 1971 to increase Bumiputera equity in the country to 30% have failed.

They also criticised the 51% Bumiputera equity policy in the freight forwarding business.

Muar lawmaker Syed Saddiq Syed Abdul Rahman questioned the fairness behind the policy and who the true beneficiary of the 51% quota in the freight forwarders would be.

He said the policy would only benefit the elite and not fishermen or farmers while disparaging non-Bumiputera simply because they were not born Malay or Muslims.

Bangi MP Ong Kian Ming, meanwhile, added that the policy would negatively affect jobs, port operations, competitiveness and investments.

Seremban MP Anthony Loke said that the policy could lead to “Ali Baba” practices that are against the spirit of Keluarga Malaysia.

What next?

Since the criticisms levelled against the policy by various parties and calls for it to be reviewed, the MOF announced that the exemption period for freight forwarders to comply with the 51% requirement had been postponed to December 2022.

Finance Minister Tengku Zafrul Tengku Abdul Aziz said this was to allow Teraju to study and review the participation of the Bumiputera community in the logistics sector.

Any future decisions would be made taking into account the interests of various stakeholders, he said.

Teraju’s findings would also be tabled to the cabinet so that a roadmap is drawn up with regard to Bumiputera participation in the logistics sector to ensure that the industry continues to grow, he added. – October 2, 2021.