Private Sector Participation in Affirmative Action in Malaysia: - Asian ...

Third, the NEP which insisted on compulsory restructuring of shares/ownership saw most
blatant way of simple transfer of wealth to Bumiputeras. Many companies had to allocate
shares to Bumiputeras on very generous terms to see the Malay beneficiary sell the shares
next day on the stock market at a huge profit. Many of the Chinese firms that financed
Malay participation would then end up without Malay shareholders. While some of those
who sold their shares did this to set up their own business concerns, but such a patronage
system through compulsory quota often created “paper entrepreneurs” relentlessly in
search of rent- seeking opportunities and cheap money. Besides, many of them invested
only for short term returns usually in the protected domestic sector and rarely in the
unprotected international export sector (Gomez and Jomo 1997). This also encouraged
most inefficient use of prized recourses as it led to high consumption life style and
growth of ‘money politics’ in Malaysia afflicting every segment of political and
economic systems (Chandra, 1986; Jesudason, 1991). In short, combination of state
protection from or domestic and the privileged access to business licenses and funds
through political proximity made life rather easy for some Malay businessmen, thereby
depriving Malay entrepreneurs the real grinding of managerial experience through
‘learning by doing’ (Gomez and Jomo, 1997). This lack of real business skills and
experience was severely tested during the financial crisis of 1997 which saw almost all
the major Bumiputera entrepreneurs collapsed or went near bankruptcy as stocks slided
due to volatile economic environment and government taking away much needed
cushions.
Finally, the implementation of NEP with its strict quantitative quotas became a
mechanical process in which companies tried every possible means either to evade or
delay the restructuring by some excuse or others. In large majority of cases, companies
never took up this as their mandate and whenever agreed to do so, they were under
pressures. Therefore, companies apart from resorting to Ali-Baba type, also tried to
manipulate rules to their advantage. For instance, many cases board of directors were
chosen as pliant ones. Even in the case of recruiting Bumiputeras to white collar
profession, most them were posted as HR managers 20 . In actual sense these exercise has
20 Inputs received from number of key people from the private sector of Malaysia.
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