Tuesday, July 25, 2006

Proposed Trade Guidelines. NEP-eeing on business.

The Sun, today, carried an article called "MCA blasts Distributive Trade guidelines". It details the Domestic Trade and Consumer Affairs Ministry's proposed trade guidelines that will affect some 400 types of retail businesses. The guidelines states that all retailers, wholesalers, and specialty stores would be asked to restructure to meet a minimum 30% bumiputra requirement, to raise its paid-up capital to at least RM1 million and to ensure the composition of the directors and employees reflect the racial composition of the country.

In other words all retailers, wholesalers and specialty stores (which are mainly Chinese family owned, btw) will need to "attract" 30% bumiputra ownership (where potential bumi candidates can just sit back wait for the highest "bidder", with no real incentive to contribute anything to the biz. You need them to comply with the guidelines, they don't need you).

When you have a compulsory rule like that, will the bumi partner actually pay cash to buy 30% of the company or does he expect the existing shareholders to hand him 30% of the company for free, or else they don't comply with the law? Even if he does pay, would it be market value or a token sum? Remember, this is NOT an arms length transaction. You need him. He doesn't need you.

Take a step back, out of La-La-Land, back into the real world. Isn't this just a more polite way of getting robbed?

And which bumis can we really expect to benefit from this? The poor Malay farmer in Kelantan who works hard each day making ends meet, or the politically well connected Datuk with the mansion on Kenny Hills with his trophy wife and Mercedes Benz? Won't that be the same bunch of vultures already feeding off the NEP?

Won't this be yet another affirmative action that simply widens the gap between the rich bumis and the poor ones who really need the assistance? Where the rich get richer by imposing policies that help themselves, but in the name of their poorer brothers who don't realise that their supposed champions are the real culprits keeping them poor, ignorant and in poverty. If the rich elite don't maintain a healthy inventory of poor, impoverished cousins - how else will they come up with excuses for a policy like this? What did they call it during the last general election... a leakage!

And the composition of directors and employees to reflect the racial composition of the country simple means that all these Chinese family companies automatically become managed and controlled by Malays. And I'll bet you that it's the same guy who lives in his mansion on Kenny Hills with his trophy wife and Mercedes Benz. And the compulsory nature of the guidelines also means that you can't fire him if he screws everything up. Besides, since the board of directors need to be in line with the country's racial composition, he probably has a majority to get you fired.

When applied to existing companies, what happens to the existing directors and employees? Are they retrenched to make way for the compulsory bumi hires?

I wonder if it's a coincidence that Chinese family businesses are heavily invested in this industry? Since they must know that such compulsory guidelines simply and totally destroys the very fabric of a family owned business, is it a move to dismantle what is seen as another arm of "Chinese dominance" in the economy?

This stinks. This stinks really bad!

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