Let’s also do away with FIC

There are still many conditions and rules on the 30% bumiputra quota requirement that are not only outdated but a hindrance to the further development of the country and a quick recovery from the economic downturn.

By Wong Sai Wan (The Star)

FORMER International Trade and Industry Minister Tan Sri Rafidah Aziz often tells of this complaint from a foreign investor whenever she was able to, because there seemed to be nothing she could do to help him.

According to the Iron Lady, the foreign investor, who had already been in the country for quite some years, had wanted to build a yacht and to “park” it in Langkawi.

The yacht would cost several million ringgit, and he even wanted it to be built locally, being a strong supporter of Malaysian-made products.

His lawyers told him that the boat being a local property, he needed to apply to the Foreign Investment Com­mit­­tee (FIC) for approval.

This he duly did.

The reply from the FIC completely floored him. His application was con­di­­tionally approved, but he must find a bumiputra partner to own 30% of the yacht.

“Why would any local person want to own 30% of a yacht?” Rafidah would ask every time she re-tells the story.

She even appealed to the FIC to re-consider its decision but to no avail. In the end she had to bring the matter to the Cabinet where then Prime Minister Datuk Seri (now Tun) Dr Mahathir Mohamad intervened.

Even with the PM’s intervention, it took the FIC quite some time to approve the purchase, but by then the foreign investor had lost interest in owning a yacht.

This was a loss to a local boat builder.

Rafidah and Dr Mahathir also have another story about the frustration faced by another well-known foreign investor who wanted to build his own house on a piece of land in Bukit Tunku – one of the country’s most expensive real estate.

Again, the man was told that because his company was buying the land and paying for the construction of the house, there must be a bumiputra partner with at least 30% equity in the property.

Dr Mahthir and Rafidah were ta­­ken aback by the FIC decision and had to intervene.

“Who will want a 30% equity in a house? Will the bumiputra own all the toilets in the house?” Rafidah asked when recalling her exasperation at the decision.

Many Malaysians, except those who have to cross swords with the FIC, are not aware of the existence of this powerful committee consisting of senior civil servants led by the Director-General of the Economic Planning Unit within the Prime Minister’s Department.

The FIC was formed in 1974 by the country’s second Prime Minister Tun Abdul Razak Hussein – father of the present PM Datuk Seri Najib – to promote and protect the New Eco­nomic Policy that had then just been formulated.

At a press conference then, Razak said: “Foreign ownership and control of the Malaysian economy is al­­ready very dominant.

“In 1970, about 60% of the share capital of limited companies was owned by foreigners. In agriculture and fisheries it was as high as 75%, and in mining and quarrying about 72%.

“In commerce and manufacturing foreign ownership amounted to about 63% and 59% of total share respectively. This dominance of foreign ownership and control in the major sectors of our economy is a direct by-product of our historical past.

“The New Economic Policy seeks to eradicate poverty and to restructure society so as to correct racial economic imbalance.

“Specifically, the Government has set a target that within two decades at least 30% of the total commercial and industrial activities in all categories and scales of operation should have participation by Malays and other indigenous people in terms of ownership and management.

“As far as ownership of capital in the corporate sector is concerned, we have set ourselves the objective of reaching by 1990 a distribution of ownership by the Malays and other indigenous people of 30%, by the non-Malays 40% and by foreign interests 30%.”

That was 35 years ago, and the country has changed tremendously. I am sure that if Razak were alive today, he would have been very proud of the advancement the country had made, and would say the country no longer needed to fear foreign ownership.

Over the past two years, a government task force to fight red tape in the administration – Pemudah – discussed the need for the FIC.

According to several members of the task force, which is a joint public-private sector panel, they are in unanimous agreement that the FIC has to go if red tape is to be re­­duced.

The members told senior editors at various briefings that then Prime Minister Tun Abdullah Ahmad Bada­wi was to announce the demise of the FIC.

However, that never came about.

Instead, the Government took a re-look at the FIC and on Jan 1 last year announced changes to some of the rules, especially on the purchase of residential property, so that it would be consistent with several announcements on allowing foreigners to buy properties above RM250,000.

However, the exemption from the FIC was only partial because all foreigners still needed approval from the local authorities, which are notorious for being slow in making a decision.

However, the FIC did set out to redefine its role and tried to ease the delay it was causing by imposing a set number of days for it to make decisions.

On Wednesday, Najib announced the lifting of the 30% bumiputra equity requirement for 27 sub-sectors within the service sector, with more liberalisation on the way.

The country’s sixth PM has started off in the right direction.

It is hoped that Najib will dig out the report on the FIC that Pemudah submitted and re-look its recommendations.

There are already enough safeguards to protect local interests, es­­pecially that of bumiputras.

The fear of the “invading and colonising” foreigners is all but gone these days.

Most multi-national companies no longer seek to conquer countries that they invest in but are often frightened away by tonnes of red-tape and indecision that Malaysia has become known for.

The FIC is no more than just a relic of the early days of the NEP and should be done away with to allow for faster business decisions.

We are facing one of the biggest challenges the nation has ever seen.

The present global financial and economic downturn requires quick decision and action, not more road blocks.

Deputy executive editor Wong Sai Wan acknowledges that generally the government service has improved but that doesn’t mean we should make life difficult for foreigners wanting to invest in Malaysia.