KUALA LUMPUR, Sept 25 – The Finance Ministry’s decision to postpone the enforcement of the 51 percent Bumiputerra equity requirement in International Integrated Logistics Services (ILLS) to 2022 will not solve any of the problems highlighted by stakeholders, says Dr. Ong Kian Ming, Member of Parliament for Bangi and Assistant Political Education Director for the Democratic Action Party (DAP).
“It merely kicks the can down the road. What is sorely needed is for the relevant stakeholders including the Ministry of International Trade and Industry (and Malaysia Investment Development Authority), Ministry of Transport, the port operators, the logistics operators, business chambers (both local and foreign), financial institutions and politicians from both sides of the aisle to sit down and have a proper dialogue and discussion,” he said in a statement issued here today.
He said an open and honest dialogue towards resolving the issue in the spirit of the MOU that was recently signed by PH and the Keluarga Malaysia government would be the way to go “so that we can have a mature discussion and avoid politicking via newspaper headlines.”
He pointed out that there would be many unintended negative consequences if the decision by the Ministry of Finance to enforce the 51% Bumiputera equity requirement is carried out.
FMFF (the Federation of Malaysian Freight Forwarders) has already outlined some of these consequences such as the short time frame and the challenge of finding suitable Bumiputera buyers who are willing to pay a fair price when economic conditions are still very fragile.
“Other negative consequences which were not stated is that some of the domestic IILS providers will move their holding companies overseas to Singapore, for example, since the Bumi equity requirement does not affect companies which are majority owned by foreign companies.
“In the longer term, these companies may even shift some of their logistics business away from Malaysia and this will decrease the flow of goods and services through Westport and Northport in Port Klang, PTP in Johor and Penang Port, just to name a few.”
Such a policy will also reduce the incentives for domestic logistic providers to grow their business in Malaysia because of the fear that once they grow to a certain size, they will be forced to sell a portion of their business and even lose control of their business.
This will also send the wrong signal for foreign investors in the logistics sector including those who want to make Malaysia their regional transportation hub because of the fear that they may be forced to sell a majority stake in their domestic operations, Ong said.
This will mean a slowdown or even contraction in the overall logistic service providers economic output which also mean less jobs and less income for Malaysians of all races and backgrounds that are in the logistics sector and less income and corporate taxes for the Malaysian government.
MIDA should show the overall positive economic impact and investments which the ILS and IILS policies have had on the logistics sector. Port operators, some of whom are Bumiputera or GLC owned and controlled, should also discuss the positive impact of the IILS policies in terms of growing the overall logistics sector.
Ong said the Bumiputera equity issue for the IILS followed the expiry of Bumiputera Equity condition on Dec 31, 2020. An internal circular from the Ministry of Finance, dated 23rd of December 2020, said the enforcement of this condition would be postponed until the 31st of December 2021. However this condition would only be enforced for majority Malaysian owned ILLs providers who are not listed and who are not Bumiputera.
The enforcement of this condition was communicated to the IILS providers in January 2021 as stated in the letter by the FMFF to the MITI Minister on Sept 18, 2021. The reason why FMFF sent the letter to the MITI Minister on this issue is because MIDA’s role includes promoting the industry and encouraging foreign investments in the Malaysian logistics industry.