11 September 2008
I just arrived in Kuala Lumpur this afternoon. Firstly to sort out some issues regarding my next book and also to update on the recent unsuccessful acquisition I carried out in KL. For this learning experience in Malaysia,the topic I choose to share with you is Protectionism and Business..... and a term called Bumiputra.
The term Bumiputra has its origin from some Sanskrit term meaning "Son of the Earth". In Malaysia this term has become a LOVE and HATE affair for many Malaysian. It is LOVE if you are the beneficiary and HATE if you have been disadvantaged due to being a non- Bumi. It is a case of mixing political issues with business.
Some of the examples taht I know of are
1. In some government tenders, it is open only to Bumi companies. Non Bumis are not allowed to tender, hence for these non Bumi businessman, they have to pay someone to front their tender bid.
2. Listed compnaies in KL stock exchange must have 30% Bumis as part of the listing requirements and in some selected industries there must be also at least 30% Bumis ownership, hence you can work all your life to built your business till it qualified for IPO and then you have have to give away at least 30% of that business to some one just because he is a Bumi.
3. In some construction project that I have been involved with, some of the properties must be earmarked for Bumis only. If this is not done, the contractors will not get their final approval from the authority.
4. I remember recently there is a key issues on car import into Malaysia and the import permit is only issued to Bumi. By the way each car import permit can be pass on for a small profit in order for the person to bring in the car into Malaysia.
Protectionism exists in many business economies not just in Malaysia, it is just in different definition. The Middle Eastern countries have also similar rules as well and in some of the states can be even more extreme than Malaysia
How does this affect you?
For you in the future to decide to come to invest or expand your business in Malaysia.... be prepare for this Bumiputra requirement. Having a Bumi in your board of directors can cost you between RM 1000 per month to several thousands for multi national corporation. I have also heard of companies that eventually fall into the hands of the Bumi because he does have shareholding of the business, shares that was given to him in the initial formation of the business :) To find a good Bumi Director is not easy and most will start with their accountants, lawyers and notary public etc.
we will take about doing business in malaysia next.....
to be continued......