New models for Bumiputera empowerment needed as Malaysia looks beyond the NEP

I VISITED the Mara Digital Mall in Jalan Tuanku Abdul Rahman in Kuala Lumpur on a recent Monday afternoon during lunch hour to see for myself how the retail outlets were doing.

This digital mall was originally initiated to rival the digital and IT offerings of Low Yat Plaza back in 2015 by the then rural development minister and now Prime Minister Ismail Sabri Yaakob.

Six years later, this government sponsored initiative has clearly failed its original intentions. The ground floor of the mall, which is usually prime space for exhibitors to display their digital and IT products, sits empty. All the retail stores on the ground floor are selling food and beverage (F&B) products, mostly to the employees of Mara Corporation and the government agencies which have their offices there.

Out of the five floors of the mall, only one floor and a half floors are selling IT and digital products. And even on these floors, some of the stalls and retail lots remain empty. Many retail lots remain unoccupied, closed, or have the sign “stay tuned” indicating that there may be a new store coming soon but we are not quite sure as to what kind of store it will be.

Some of the retail outlets have been converted or rented out to retailers selling non-IT products including stores selling fashion products, a DIY store, and a hair salon which also offers massage, facial, manicure, and eye treatment services.

The only non-F&B outlet which had more customers was Uztaz, an IT retail chain store with outlets in various other shopping malls.

The main reason for my visit to the Mara Digital Mall in KL was in response to PM Ismail Sabri’s recent announcement, on November 18, for proposed quotas for Bumiputera-owned businesses in strategic locations such as shopping malls to increase the community’s participation in the economy. This was proposed as part of the Bumiputera Development Action 2030 (TPB2030) that sit under the Bumiputera Prosperity Council, chaired by the prime minister, naturally.

There is a famous saying that “those who cannot learn from history are doomed to repeat it”. On the anniversary of the 50th year since the start of the New Economic Policy (NEP), it seems that many of our leaders have not learned from the mistakes of the past and seem to be keen to repeat these mistakes repeatedly in coming up with “new” government policies that are supposed to help the Bumiputera community in various economic sectors.

Please do not misunderstand my intentions here. I very much want the Bumiputera community to succeed in business and to have access to job and economic opportunities like other communities and business groups. But the underlying business proposal must be sustainable, resilient to market competition, and able to foster innovation and creativity.

The Mara digital malls were suffering losses even before the start of the Covid-19 pandemic. The challenges faced by the malls, including the flagship mall at Mara Corporation in Kuala Lumpur. were already reported in 2019 and in 2020 before the start of the pandemic.

Mara Digital Kuantan closed in December 2018 and Mara Digital Johor Bahru followed suit in February 2019. I don’t think the lack of success of these digital malls was because Bumiputera businesses cannot succeed in certain areas such as IT and digital retail. The main reason for their failures is that the underlying business concept was flawed from the beginning.

Firstly, by positioning itself as a digital mall for Bumiputera retailers only, it would inevitably discourage non-Bumiputera customers and even foreign tourists from patronising these outlets. Since the non-Bumiputera community and foreign tourists in large cities have significant spending power, this business strategy unnecessarily alienates these potential customers.

Secondly, it was reported that many of the retailers at the Mara Digital Malls had to depend on a single distributor – WGN Scan Sdn Bhd – for its products which made the price points for many of the products uncompetitive. In the hyper-competitive IT and digital products landscape, depending only on one distributor which may not offer the best prices seems to me like a very poor and unsustainable business strategy.

In addition, when it comes to the supply chain for many goods and services in Malaysia, it is very difficult to exclude the participation of non-Bumiputera companies because of their extension experience, access to capital and reliable track record.

Thirdly, it is very difficult to prevent political interference and rent seeking activities in such business initiatives once the government is involved in its conception and execution right from the start.

Different people will try to have a “hand in the pie” for short -erm gain which decreases the financial sustainability of these initiatives in the long run. A limited number of well-connected people gain but ironically, not the Bumiputera traders and retailers, which is the community that the government wants to help through these empowerment programmes.  

Let me contrast the experience of the Mara Digital Mall with some of my personal observations with regard to a specific company, namely the very popular All IT Hypermarket. which has branches in many shopping malls across the country.

One of the characteristics of this company which captured my attention is that in many of its retail outlets which I’ve visited in the Klang Valley, a significant percentage of its staff are Malays. The service level provided by all its staff, Malay and non-Malay, at its stores is top notch. They are responsive, knowledgeable, and attentive to their customers from all backgrounds.

Isn’t this a more sustainable and inclusive business model where a non-Malay privately held company can provide good quality jobs to all Malaysians including a significant number of Malays in an environment that is professional and pleasant to work in and where the customer satisfaction (and presumably, employee satisfaction) is high?

Wouldn’t this be one of the better alternatives to the Mara Digital Mall model which is economically unsustainable, and which benefits Bumiputera employees in the long run?

The all-IT hypermarket model of operations also makes business sense since having more Malay staff will also probably mean that it is able to understand the Malay customer segment better and hence, increase sales to this segment of the market, which is the majority market segment in the country!

There are other better and more effective models of Bumiputera economic empowerment that have been tried and tested in the marketplace than the Bumiputera quotas model proposed by Ismail Sabri earlier this month.  

Farm Fresh, a local milk producing company that was started by a Chinese businessman, has thousands of Malay distributors in its network serving many Malay customers especially in the semi-urban and rural areas where the prevalence of retail stores selling fresh milk is significantly less than in the big cities.

By providing credit on favourable terms to buy equipment such as chillers to store the milk and basic entrepreneurial training to the distributors, Farm Fresh has been able to produce more Bumiputera entrepreneurs, especially among women, in the rural areas than many government-initiated programmes. Most importantly, these entrepreneurs are able to sustain their businesses over the long haul and earn a decent income at the same time.

There are also more recent examples of partnership and entrepreneurship models which are more inclusive, innovative, and sustainable. SLURP, Malaysia’s first home grown cloud-based point of sales (POS) solutions provider is such an example. They are the providers of the touchscreen POS which all of us use when we are filling up our vehicles at the Petronas petrol kiosks around the country.

In my experience, the touchscreen POS service at the Petronas kiosks is far more user friendly and efficient than all the other petrol kiosks which are owned by foreign companies. And I believe that the operational downtime of the Petronas petrol kiosks, which is also monitored and managed by SLURP, is also less than the other petrol retail chains, especially because the technology is newly installed and can be easily updated over the cloud system.

SLURP’s founders are Reza Fahmi Razali, Calvin Tam Wah Kit, and Zara Aida Razalai and the company operates out of Bandar Baru Bangi (which is in my parliamentary constituency). In addition to Petronas, SLURP also serves many other customers in the F&B industry.

Reza and Tam have known each other for many years. Reza had first approached Tam to ask him to intern at his company when the latter was still a student at the Asia Pacific Institute of Information Technology, now renamed the Asia Pacific University of Technology and Innovation. SLURP’s products definitely have the track record to go overseas which is happening now, even amid a pandemic.

I am sure that there are many more examples of such partnerships involving both Bumiputera and non-Bumiputera entrepreneurs in the country, especially in the technology sector where innovation and capabilities are recognised and rewarded and where execution is key, regardless of the ethnic background of the entrepreneurs.

Innovation and creativity are more likely to thrive in diverse environments, as has been shown in places like Silicon Valley in the United States, and this should be the way to go moving forward in Malaysia, including in Bumiputera economic empowerment (BEE) programmes.

I believe that the models provided by companies such as All IT Hypermarket, Farm Fresh and SLURP are far better and more sustainable examples of shared prosperity in the economic and business landscape than most of the programmes and initiatives which the government has come up with in 50 years of the NEP.

How do we move forward from here, in a year when many are examining and evaluating the legacy of 50 years of the NEP? Here are five proposals for the BEE agenda moving forward:

1. There must be clear rules and regulations about Bumiputera equity in different sectors of the economy. And these rules must not be changed in a retrospective manner as what was reported recently with regard to the 51% Bumiputera Equity requirement for local freight forwarders which have licences to operate, such as international integrated logistics providers.

2. There must be transparent mechanisms for BEE programmes including open tenders for government projects. BEE programmes in various sectors of the economy and under different government ministries and agencies must be evaluated on an annual basis with the reports of these evaluations made public, tabled in parliament and discussed in the relevant parliamentary special select committees.

3. There must be an aggressive push for different and genuine models of partnerships and economic empowerment involving both Bumiputera and non-Bumiputera. There must be meaningful non-Bumiputera involvement and inclusion in any government body or council that discusses BEE programmes and policies.

4. There must be separate evaluations and models of BEE for the Sabah and Sarawak, Orang Asli and Indian communities given that there are many existing barriers with regard to economic empowerment of these groups of people.

5. Finally, timelines and parameters must be established for the gradual phasing out of BEE programmes with a sectoral/industry-specific approach. – November 24, 2021.

* Ong Kian Ming is Bangi MP and assistant political education director for DAP. 

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight.

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  • Malaysia is doomed economically if it retains its anti-meritocratic and discriminatory policies.

    Commercial enterprises need to be profitable to sustain themselves but restricting them with non-market based rules (in Malaysia case, based on 2-3Rs and cronyism) will render them noncompetitive especially against similar companies in other countries which DON'T have such regulations. They will forever be "jaguh kampung" and NEVER world beating.

    The failure of Mara Digital Mall is a stark example why we need a complete free market economy, not curbed by unnecessary and anti-competitive rules. Who bear the consequences? The taxpayers, of course.

    Another example is the failure of our "Multi-Media Super Corridor" but Bangalore, India thrived.

    The countries in the world are fiercely competing with each other and are liberalizing their economies, having less and less regulations, to attract local and foreign investments.

    Malaysia is still stuck with an insular mentality, avoiding economic competition with the world thus ensuring it will become a FAILED nation.

    Posted 1 month ago by Malaysian First · Reply