Frankly Speaking

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Challenging ourselvesBursa Malaysia Bhd CEO Datuk Yusli Mohamed Yusoff is in an unenviable spot. The bourse is trying hard to bring the shine back to the Malaysian capital market, but despite a slew of liberalisation measures and makeover moves this year, investors have been slow to take the cue.Among other things, Bursa Malaysia abolished the requirement for initial public offerings (IPOs) to allocate 30% equity for bumiputeras, merged the first and second boards, replaced the Kuala Lumpur Composite Index with a leaner FBM KLCI, tied up with CME, the world's largest derivatives marketplace, and encouraged foreign firms to list on the exchange.So far, two Chinese shoemakers have chosen to list on Bursa Malaysia, namely, Xingquan International Sports Holdings Ltd and Multi Sports Holdings Ltd. Although the IPOs of both firms were oversubscribed, their shares have been languishing since they were listed. Naturally, investment analysts and others have given various views on the possible weaknesses in the firms and their sector, as well as risks and threats for investors.Last week, Yusli expressed disappointment at the "stereotyping" of Chinese firms that chose to list on Bursa Malaysia, citing media articles that made reference to the "poor" quality of foreign listings here.In reality, the media mostly reports the views of key industry players and people with a ringside view of material developments. They do this in order to serve the interests of its audience, which includes investors. There is no denying the fact that Bursa Malaysia faces a daunting task in attracting investor interest due to the changing economic and financial landscape globally.Hopefully, by reflecting the unvarnished truth from all stakeholders, encouraging inquiry and stimulating discussion, the media can act as a catalyst for the local capital market to transform into a world-beater. Surely, we would all be the better for it. Study tours are futileThe National Economic Action Council (NEAC) is sending its members on study tours to countries like South Korea, Taiwan and Singapore to find out how they have managed to transform their economies to become the successes they are today.At this stage of our development, we find it rather worrying that we still need to go on study tours in order to transform the economy. The council members, after all, are carefully selected, based on their expertise and experience, so that they can contribute to Malaysia’s new growth strategies.So, we ask: Do we really need to do that, and most likely at the expense of taxpayers too? Don’t we already know what needs to be done to transform the domestic economy, having come this far in our development and having experienced two economic crises in the last decade?Already, we are behind the curve, struggling to get out of the middle-income rut. Other countries that took off from the same starting block as us back in the 1960s have moved far ahead, and they are still changing in line with global developments.It’s about putting in place a world-class education system, inculcating a culture of meritocracy, removing corruption, promoting good governance and transparency, upgrading skills and training, encouraging the transition to high technology usage, providing excellent services — and the list goes on.Most importantly, the will to change, and change radically, must be there. Learning from our successful regional peers may not be such a bad thing if recommendations are taken heed of and implemented. But so long as recommendations remain just that, nothing will change.

Why a waiver?Last week, Tradewinds (M) Bhd announced that it had been given a waiver from making a general offer for the shares in Padiberas Nasional Bhd (Bernas) that it doesn’t own. To recap, Tradewinds is buying a 31.5% stake in Bernas held by Hong Kong-based Wang Tak Co Ltd, and 22.2% held by Gandingan Bersepadu Sdn Bhd, for a total of RM526 million. This is a related-party transaction as Tradewinds and Gandingan Bersepadu are both controlled by businessman Tan Sri Syed Mokhtar Al-Bukhary.The need for transparency cannot be overemphasised, especially where related-party transactions are concerned. Thus, it would be a good idea for the authorities to explain why a waiver was granted to Syed Mokhtar and Tradewinds.This is also because the waiver seems unfair to the Bernas minorities and allows the major shareholder to consolidate his position without having to fork out extra money.Considering that both Tradewinds and Syed Mokhtar are no corporate lightweights, an explanation on the waiver would help clear the air. It would eliminate any speculation that there were other forces at work. It would have cost Syed Mokhtar a tidy sum had the waiver not come through.Somehow, Securities Commission Malaysia is of the view that the acquisition by Syed Mokhtar does not result in a significant change in Bernas’ business direction or policy, and thus warrants a waiver. But is that really the case?Having a major shareholder increasing his stake from 22.2% to 53.7% is a material change. It changes the fabric of the shareholding structure, something not all Bernas shareholders would be comfortable with. Also, the justification for the general offer by Tradewinds — on the grounds that Bernas was controlled by Wang Tak — does not hold water because in reality, the rice distributor was controlled by the Tan family of IGB Group Bhd fame.The waiver will certainly not be viewed favourably.

This article appeared in Corporate page of The Edge Malaysia, Issue 776, Oct 12-18, 2009