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Enhancing Bumiputera Economic Community (BEC) Opportunities to Increase Wealth Ownership 3-1

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Enhancing Bumiputera Economic Community (BEC) Opportunities to Increase Wealth Ownership 3-1 INTRODUCTION Enhancing TENTH MALAYSIA PLAN, 2011-2015: PROGRESS Strengthening Bumiputera Entrepreneurship Broadening and Increasing Bumiputera Wealth Bumiputera Ownership Preparing Bumiputera for High Paying Jobs Economic ISSUES AND CHALLENGES Low Participation in Professional and High- Skilled Occupations Community Wealth Ownership is Still below Target Low Capacity to Own Non-Financial Assets Development of Bumiputera Economic (BEC) Community is Still Lagging Lack of Coordination in the Delivery System Opportunities ELEVENTH MALAYSIA PLAN, 2016-2020: WAY FORWARD Empowering Bumiputera Human Capital to Increase Increasing Bumiputera Effective Control and Sustainable Corporate Ownership Enlarging the Share of Bumiputera Wealth Wealth Ownership Empowering Bumiputera Economic Community Strengthening Delivery Effectiveness of Ownership Bumiputera-Oriented Programmes CONCLUSION Strategy Paper 3 For further information refer to: Director General Economic Planning Unit Prime Minister’s Department Block B5 & B6 Federal Government Administrative Centre 62502 Putrajaya MALAYSIA http://www.epu.gov.my Tel.: 603-8000 8000 Fax.: 603-8888 3755 _____________________________________________ Publisher’s Copyright © All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording and/or otherwise without the prior permission of the Economic Planning Unit, Prime Minister’s Department. Eleventh Malaysia Plan Strategy Paper 3: Enhancing Bumiputera Economic Community (BEC) Opportunities to Increase Wealth Ownership 3-1 I. INTRODUCTION 3.1 During the Tenth Malaysia Plan, 2011-2015, the objective of the Bumiputera Development Agenda was to increase the household income of Bumiputera and uplift their living standard in line with the philosophy of development with equity. Focus was on strengthening entrepreneurship, raising ownership beyond corporate equity and increasing the number of Bumiputera in high paying jobs. Although these initiatives have raised the mean monthly income from RM3,624 in 2009 to RM5,548 in 2014, socio-economic imbalances still exist. Hence, during the Eleventh Malaysia Plan, 2016-2020, focus of the Bumiputera Development Agenda will be on enhancing skills and professional training, increasing ownership of corporate equity and non-financial assets, as well as expanding entrepreneurship and business opportunities. II. TENTH MALAYSIA PLAN, 2011-2015: PROGRESS 3.2 Various initiatives were implemented to drive Bumiputera Development Agenda. These included the setting up of Majlis Tindakan Agenda Bumiputera (MTAB), chaired by the Prime Minister Unit Peneraju Agenda Bumiputera (TERAJU) and the launching of the Bumiputera Economic Transformation Roadmap. This Roadmap embodied new policy and strategic dimensions for Bumiputera socio-economic participation. In September 2013, the Pemerkasaan Ekonomi Bumiputera programme was announced and MTAB was renamed Majlis Ekonomi Bumiputera (MEB). Five focus areas and 34 touch points were introduced, which included the establishment of a dedicated Unit Pemerkasaan Ekonomi Bumiputera (UPEB) in each ministry. The formation of UPEB created a new governance structure to ensure effective and sustainable Bumiputera participation in the economy. 3.3 Based on the Household Income and Expenditure Survey (HIES) 2014, mean monthly income (mean income) of Bumiputera households increased by 8.9% from RM3,624 in 2009 to RM5,548 in 2014. Median income also increased 10.7% from RM2,531 in 2009 to RM4,214 in 2014. The mean income in rural areas increased by 9% from RM2,460 to RM3,788 while in urban areas was 7.3% from RM4,458 to RM6,340. The increase in median income in rural areas of 11.8% from RM1,771 to RM3,093 is higher as compared to 8.3% increase in urban areas from RM3,271 to RM4,880. 3.4 The incidence of poverty among Bumiputera households reduced from 5.3% in 2009 to 0.8% in 2014. Meanwhile, the Bumiputera Gini coefficient index improved from 0.440 to 0.389. A lower Gini coefficient index of 0.354 in rural areas compared to 0.378 in urban areas indicated a more balanced income distribution in the rural areas. This is among others, due to the large number of bottom 40% household income (B40 household) in rural areas as well as the nature of the economic activities which is mainly agricultural-related activities. Eleventh Malaysia Plan Strategy Paper 3: Enhancing Bumiputera Economic Community (BEC) Opportunities to Increase Wealth Ownership 3-2 Strengthening Bumiputera Entrepreneurship 3.5 The participation of Bumiputera entrepreneurs in the economy is still low. According to Suruhanjaya Syarikat Malaysia, in 2014, 27.6% or 283,200 of the total 1,026,100 registered companies were Bumiputera. According to Census of Establishment and Enterprises 2005, only 37.4% or 241,281 of the total 645,136 small and medium enterprises (SMEs) were owned by Bumiputera and 90.7% or 218,930 of Bumiputera SMEs are micro enterprises. 3.6 Efforts to strengthen Bumiputera entrepreneurship included developing entrepreneurial skills and providing financial assistance. Entrepreneurship development programmes include capacity building of entrepreneurs in areas such as product packaging, marketing and branding. Financial assistance was given according to the size of businesses and activities, from micro financing to large scale financing. 3.7 A total of 413,278 entrepreneurs in micro and small businesses benefited from loans provided by Amanah Ikhtiar Malaysia (AIM) and Tabung Ekonomi Kumpulan Usaha Niaga (TEKUN) Nasional totalling RM8.6 billion. Under the AIM programme, entrepreneurs who earn more than RM3,500 increased from 27,770 entrepreneurs in 2010 to 128,450 in 2014. In 2013, 32.7% of entrepreneurs who received TEKUN Nasional loans, recorded an increase in revenue of between 50% and 150%. In addressing the needs for business space, Majlis Amanah Rakyat (MARA), Perbadanan Usahawan Nasional Berhad (PUNB) and Yayasan Wakaf Malaysia (YWM) have built or purchased 458 business spaces, particularly in strategic locations. 3.8 For companies in the development and growth stage, Malaysian Technology Development Corporation (MTDC), Malaysia Venture Capital Management Berhad, Malaysia Debt Venture Berhad and Multimedia Development Corporation provided a total of RM495.2 million to 760 Bumiputera SMEs. The financial assistance was in the form of grants, loans and venture capital for technology development to improve the quality of products and comply with standards. The Bumiputera Enterprises Enhancement Programme (BEEP) by SME Corporation Malaysia (SME Corp) provided financial assistance and advisory services to enhance the capacity of Bumiputera SMEs. The programme components included training, improvement of production processes, product packaging, labelling and branding, certification, market access and promotion activities. A total of RM71.4 million was allocated for 574 entrepreneurs. 3.9 The Vendor Development Programme (VDP) under the Ministry of International Trade and Industry (MITI) and government-linked companies (GLCs), continued to be implemented to strengthen Bumiputera entrepreneurship. In total, the VDP has benefited 2,923 vendors with 16 anchor companies in various industries, such as oil and gas, engineering services as well as electrical and electronics. In addition, GLCs and government- Eleventh Malaysia Plan Strategy Paper 3: Enhancing Bumiputera Economic Community (BEC) Opportunities to Increase Wealth Ownership 3-3 linked investment companies (GLICs) also contributed to the Bumiputera Development Agenda by increasing Bumiputera shareholding and non-financial assets ownership as well as creating leaders in the supply chain, as shown in Exhibit 3-1. Exhibit 3-1 Contribution by GLCs and GLICs in Bumiputera Development Agenda Source: Putrajaya Committee on GLC High Performance Eleventh Malaysia Plan Strategy Paper 3: Enhancing Bumiputera Economic Community (BEC) Opportunities to Increase Wealth Ownership 3-4 3.10 TERAJU introduced special programmes to provide Bumiputera entrepreneurs with business opportunities and financing. Under Syarikat Bumiputera Berprestasi Tinggi (TeraS) programme, 908 high potential Bumiputera companies qualified to be given special assistance and provided with business opportunities based on merit. A special fund was created in collaboration with SME Bank, RHB Islamic Bank, Malaysian Industrial Development Finance Berhad, Agro Bank and MTDC amounting to RM3.3 billion, to provide financial assistance to these companies. By 2014, a total of RM919.9 million was approved for 265 companies. 3.11 The Skim Usahawan Permulaan Bumiputera (SUPERB) programme was announced in September 2013 with a three-year allocation totalling RM100 million to facilitate start-up companies that have been in operation less than three years. Grants up to RM500,000 were provided to support business ideas that were innovative and creative. By 2014, 54 entrepreneurs have benefited from the programme with a total funding of RM27 million. In addition, 211 Bumiputera companies utilised RM929.8 million under the Facilitation Fund to implement 234 private sector projects. The Carve-out and Compete Programme was introduced to provide opportunities for Bumiputera companies to participate in mega projects. These projects included Mass Rapid Transit, Bukit Bintang City Centre, Menara Warisan Merdeka, the development of RRI land in Sungai Buloh and Malaysia International Trade and Exhibition Centre (MITEC) with
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