Thursday, November 09, 2006

Poor Classification Method: What is Bumi Company and What Isn't?

Comments based on article posted on Malaysia Today:
Govt reveals how bumi share is calculated

Link: http://malaysia-today.net/blog2006/newsncom.php?itemid=597

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HIGHLIGHT 1:
"Opposition Democratic Action Party secretary-general Lim Guan Eng criticised the use of par value calculation and said market value gave a more accurate picture. "

In economics, par value would mean the original price of the companies.

The value of a company fluctuates according to the market value.

Normally the par value of a company is very Low.

As business production of the company increases over time, the market value of the shares and profits increases, therefore this should be the basis of calculation.

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HIGHLIGHT 2:
"As for GLCs, he said shares held by the Employees Provident Fund, Khazanah Holdings and Minister of Finance Inc are not classified as held by any particular ethnic group."

MAS, Telekom, TNB etc. not considered although more than 60% of its shareholders are BUMI companies, more than 60% of its board of directors are BUMIs, and I personally believe maybe 50% or more of their staff are BUMIs? Aren't they private companies?

Maybe EPF and Minister of Finance should not be counted.

What makes Khazanah different is, it is created to fully function as an investment arm. However, Khazanah is not classified as held by any particular ethnic group, it is true, but maybe we can check, how many per cent of its shareholders, Board of Directors and staff are Malays? Can you believe this?

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My goodness, this is what we call the Malaysian governance.

The government has very poor Classification method. Perhaps they should come out with a Standard Classification of what is deemed as Bumiputra company so that the public can view and discuss it.

Maybe they are right, those are UMNOputra companies, not Bumiputras. We are not sure but the government can be sure of that.

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Given 20 years and with huge amounts of money from Petrols and Foreign Investments, this government is still unable to bring up the BUMIPUTRAS. Perhaps, as a Malaysian, I think it is high time to change. Ask yourself, Malaysians, what is it that make the country suffer. Ask whether it is because of Corruption? Whether it is because of incompetence? Whether it is "Harap Pagar, Pagar Makan Padi"?

This is the government you want to vote?

Think about it dear BUMIs and NON-BUMIs. Think of your children and the future of your motherland.
And I meant it for both Malays and Non-Malays.

3 comments:

Anonymous said...

To justify the flaws of par value calculation can be witnessed here:

http://blog.limkitsiang.com/?p=793

and here:

http://blog.limkitsiang.com/?p=794

Troy said...

To say that par value is the original price of the companies is not entirely correct. You could have a par of RM1 but issued at a price of RM2.

The value of a company fluctuates according to the market, PROVIDED, there is a market for the interest in such company. In the case of a private limited company, there isnt. Even in the case of a public listed company, its value is also dependent on efficiency of the market. Evidence suggests, market value may not always reflect true value.

Yes, normally, par value of a company is lower (I am assuming you are comparing to its market value). As time progress, and business profits are accumulated, value of an owners interest increases accordingly. But why should this be the basis of calculation? I mean, the fact that it may represent the market value does not make it the right basis. We should instead be questioning what are we calculating? Wealth, in which case, market value could be a determinant? Or control, in which case, PAR VALUE is certainly a better measure than market value.

Your Highlight 2 seems contradictory to me. If in highlight 1, you are arguing on proportion of wealth instead of control, in highlight 2, you seem ignore wealth and consider control to be the key focus. Going by your argument, that more than 60% of the board and 50% of its staff are bumi, and therefore should be considered as bumi companies for purposes of wealth of its owners? Can we also argue then those you considered as bumi companies but key decision makers being non bumi, or has s proportion of their operations substantially out of the country be considered as non-bumi? And why would you think that perhaps EPF and MOF should not be considered? Are they also not substantially run by bumis? That being the case, we might as well call this a bumi run country and we have achieved a 100% bumi control on the economy? But that is not the issue here isnt it.

I cant comment on the govts classification method. Without any data, I would not want to consider it as poor, when issues tend to be arguable. I would instead be advocating for transparency.

Dont get me wrong. I am all in for a reformation. An alternative, a change, a risk that I am willing to gamble, for the sake of the country and its people. But for that to happen, we have to be clear of what we want to achieve.

Sagaladoola 2 said...

For more on Highlight 1 where why market value is taken instead of par value, please refer to the Ali, Ahmad, Zakaria and Muthusamy story in:

http://blog.limkitsiang.com/?p=794

As for Highlight 2, issues on why some companies are and why some aren't (as bumiputra companies) is due to a Non-Clear Standard Classification Method from the BN government, therefore everything here is made based on assumption.

troy said:
"Without any data, I would not want to consider it as poor, when issues tend to be arguable. I would instead be advocating for transparency."

Well, ask Pak Lah about it, that is the thing that he promised when he first became the PM.

"But for that to happen, we have to be clear of what we want to achieve."

We are clear, but we are not sure whether the BN government is clear or otherwise.

Regards,
Sagaladoola