There were two writers (G.Vinod, Focus Malaysia, 18 Nov 2021 and Murray Hunter, Asia Sentinel, 16 Nov 2021) who suggested that Malaysia could be adopting the Zimbabwe economic model.
The Government’s move to force local forwarding companies to divest 51% equity interest to Bumiputeras is the background to it. Then you have the PM suggesting malls and certain SME sectors to have Bumiputera interests. We also have the Minister of Finance introducing the one-off Cukai Makmur (Prosperity Tax) of 33%. Are we sliding down the Zimbabwe slope?
Source:
https://en.wikipedia.org
Mugabe (the then PM of Zimbabwe) inherited a strong economy in 1980. Good infrastructure, solid currency, vibrant manufacturing and a productive agricultural sector were its ingredients. But he managed turn that into a disaster by the turn of the millennium. He sanctioned white-owned farms for redistribution to blacks (who had no land). That ensured a plunge in agricultural output. Zimbabwe from being an exporter of food became an importer.
Zimbabwe’s industrial sector dropped production to 50% of installed capacity. Trade balance turned negative with plunging exports. Inflation or hyperinflation (to be exact) soared to 79.6 billion per month in 2008. Only by “dollarising” did hyperinflation end in 2009. In that same year, Mugabe compelled all foreigners and whites to sell 51% of their equity interest in every existing business (partnership, private company, sole proprietorship) with an asset value of USD0.5 million (or more) to blacks. Failure to do so would mean a fine or imprisonment of up to 5 years. Did this reform work? No! Mugabe is remembered as the man who single-handedly made Zimbabwe a “beggar” country. So, is the PM keen to follow in his footsteps?
Today Bumiputera companies take up 80% of yearly Government contract costs across all Government agencies. Then there is Teraju, Bumiputera Prosperity Council, Bumiputera Development Action 2030, and many other initiatives, policies and agendas. Since 1971, more than RM1 trillion has been poured into Bumiputera enhancement or empowerment programmes. To what avail? Only 17.2% corporate equity interest? That’s understated because it is on par; those allocated sold their shares; and GLIC and GLC interests are not included. A more rational picture would suggest it is above 60%. So, where do we stop?
Meanwhile, we have been losing quality investments in shipping, manufacturing, services, high-tech sectors and others . Google, Amazon, Vodafone, Akzo Nobel and many more are in neighbouring economies. Why? Poor infrastructure, flip-flop policies, restrictions on ownership, brain drain of best talents and the widespread corruption in every aspect of the economy. Why did South Vietnam fall in 1975? Corruption. Why did Afghanistan fall in 2021? Corruption.
The present PM is remembered for his creation of MARA Digital Mall to rival the Low Yat Mall. The MARA Digital Mall Kuantan closed in 2018, while the one in Johor ceased operations in 2019. The one in KL is working but at a slow pace – there are plans to convert that into a conventional shopping space instead. MARA Corp. Chairman admitted that the creation of the digital mall was politically motivated move and not a business driven one.
So, what is our goal? To be another Zimbabwe?
Affirmative action should be in education, employment and entrepreneurship. Employers receive incentives for supporting initiatives (i.e. Government providing tax breaks and the like). Otherwise, we become a very unattractive economy for both local and foreign investors. And the “cake” will not grow and there is nothing to share.
References:
Report: Malaysia adopting disastrous Zimbabwe economic model! G Vinod, Focus Malaysia
The Zimbabwization of Malaysia, Murray Hunter, Asia Sentinel, Nov 17, 2020
PM announces plans for Bumi quotas in malls and ‘strategic locations’, says in line with “Keluarga Malaysa”, Ashman Adam, Malay Mail, 18 Nov 2021
What happened to Low Yat’s contender, MARA Digital Mall? Hakim Hassan, The Rakyat Post, January 24, 2020
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