by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, in Petaling Jaya on Tuesday, 10th March, 1992:
DAP calls on the Cabinet to direct the Foreign Investment Committee (FIC) to withdraw its proposed new guidelines as it goes against the spirit of the National Development Policy to make a major shift from the New Economic Policy in not associating equity ownership with wealth.
DAP calls on the Cabinet at its meeting tomorrow to direct the Foreign Investment Committee (FIC) to withdraw its proposed new guidelines to regulate both foreign and local investments as it goes against the spirit of the National Development Policy to make a major shift from the New Economic Policy in
not associating equity ownership with wealth.
Since its completion in January and circulation to some ten private sector bodies, such as merchant bankers, accountants, housing developers and various chambers of commerce, the proposed FIC new guidelines have already created great anxiety from both foreign and local investors and will greatly dampen and discourage both foreign and local investments if implemented.
The effect of the new F1C proposed guidelines in discourag¬ing foreign and local investments will be
even worse than the Indus¬trial Co-ordination Act in the 1980s, which the Government has now admitted had been a great mistake.
The FIC is seeking new and far-reaching powers to compel companies – including those not undertaking transactions which require FIC’s approval to restructure their equity.
The proposed guidelines for the regulation of acquisition of assets, interests, mergers and take-overs 1991, cover the follow¬ing:
* large private and public corporations;
* companies which have achieved tremendous growth;
* companies issued with licences, such as developer’s licence by the Housing and Local Government
Ministry and licences to operate oil palm mills by the Primary Industries Ministry.
For purposes of equity restructuring, the FIC has defined growth as:
* an increase in the company’s paid-up capital either-through right, bonus of new issues undertaken
for purposes of acquisition, working capital, or other purposes;
* acquisition of fixed assets or interests through internal sources or borrowings; and
* incorporation of subsidiaries to undertake diversifi¬cation of interests.
“Restructuring” is generally defined as an effort by a company to undertake changes in eguity structure, corporate structure, financial structure, in manpower and management structure.
Acquisition of fixed assets and interests and a diversification of business activities by a company is also considered as “restructuring”
The effect of the FIC’s proposed new guidelines are as follows:
1. Companies which had complied with the 30 per cent bumiputra state would be compelled to restore
it to that level should there be subsequent dilution;
2. Companies can be compelled to restructure their equity even when not undertaking transactions requiring FIC approval up till now;
3. When a private company seeks to become a public company, not only the public company has to comply with the 30 per cent bumiputra equity quota, the private holding company also has to comply with the 30 per cent bumiputra equlty rules;
4. Companies involved in sectors where bumiputras have traditional presence or strategic holdings might be required to maintain at least 50 percent bumiputra stake; and
5. A ceiling of 30 per cent for foreign equity in companies seeking a listing on the KL Stock Exchange
It is very clear that the FIC’s proposed new guidelines is against the spirit of the National Development Policy which replaced the 20-year New Economic Policy in 1991.
When the National Development Policy 1991-2000 announced in Parliament by the Prime Minister, Datuk Seri Dr. Mahathir Mohamed, Malaysians were made to believe that it reflected a major shift
from the previous NEP emphasis on associating equity with wealth.
The country was told that enhancing bumiputra equity owner¬ship will continue under the NDP but a specific percentage target of bumiputra share of the nation’s wealth is no longer, a feature and a time frame for its achievement is thus not mentioned.
In his speech introducing the NDP and Second Outline Per¬spective Plan 1991-2000 in June 1991, Dr. Mahathir said that restruc¬turing was not so much the achievement of specific numerical targets but to improve the capacity of the bumiputras to create wealth and to manage it.
The FIC proposed new guidelines will institutionalise three separate economies in Malaysia – bumiputra, non-bumiputra and foreign.
The FIC proposed new guidelines are also against the very spirit of the speech by the Prime Minister, Datuk Seri Dr. Mahathir Mohamed, at the opening of the Third Bumiputra Economic Congress on
10th January, 1992 calling for the integration of bumiputra and non-bumiputra economies.
Dr. Mahathir said Malaysia could not afford to have two separate economies.
This is exactly what the FIC’s new proposed guidelines seeks to perpetuate. In fact, the FIC’s new proposed guidelines are trying to institutionalize three separate economies in Malaysia – bumiputra,
non- bumiputra and foreign.
At the last meeting of parliament, I had asked the government whether companies would be compelled under the National Development Policy to ‘top up’ the 30 per cent bumiputra equity stake because bumiputras have sold the shares allocated to them.
The MCA Deputy Minister for International Trade and Indus¬try, Datuk Chua Jui Meng, categorically replied in the negative, but his assurance is being nullified by the FIC’s proposed new guidelines.
This is a reminder as to the worth of assurances given by MCA Minis¬ters and Deputy Ministers,
whether in Parliament or outside.
It would be most unfair and inequitable to compel companies which had complied with the 30 per cent bumiputra stake to restore it to that level because of subsequent dilution.
Or, is the Government proposing to have two classification for shares, one of which could only be
traded among bumiputras? Or is the FIC envisaging three separate classifications for shares one each for bumiputras, non-bumiputeras and foreigners? Isn’t this what Dr. Mahathir Mohamed had openly spoken against at the Third Bumiputra Economic Congress?
As the FIC’s proposed new guidelines have gone against the very spirit of the National Development Policy, as well as the call by Dr. Mahathir at the Third Bumiputra Economic Congress for the integra¬tion of bumiputra and non-bumiputra economies, the Cabinet tomorrow should take the decisive step to direct the FIC to withdraw its pro¬posed new guidelines.
The FIC should be told that it should draft new guidelines bearing in mind the spirit of the National Development Policy and Dr. Mahathir’s speech at the Third Bumiputra Economic Congress.
The Cabinet should realize that the FIC’s proposed new guidelines is in fact a test of the credibility of
the Barisan Nasion¬al’s promises to both foreign and local investors of more liberal economic policies when the National Development Policy was promulgated in June last year
I hope the MCA Ministers will have good news to report after the Cabinet meeting tomorrow.