Frankly Speaking

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Change, to thriveIn a public address last week, former finance minister Tengku Razaleigh Hamzah presented an incontrovertible analysis of the roots of Malaysia’s economic and social stagnation.

A statement at the end of his speech aptly sums it up: “We need to break the stranglehold of communal politics and racial policy if we want to be a place where an economy driven by ideas and skills can flourish. This must be done, and it must be done now. We have a small window left before we fall into a spiral of political, social and economic decline from which we will not emerge for decades.”

His frankness about the country’s dimming prospects is as stark, deflating and unnerving as his prescription for reform is liberal, pragmatic and energising. The ideas he proposes are not new but have clearly become urgent.

They include the strategic use of our substantial savings to invest in broad growth sectors overseas; the unleashing of housing development activity; weaning the economy of its dependency on oil and cheap foreign labour and tapping the wealth of the emerging middle class of China, India and Indonesia, among other things.

Unfortunately, Tengku Razaleigh’s message stands out partly because so much of the country’s political discourse is framed by racial parameters. To quote Razaleigh again: “Today we are in a foundational crisis both of our politics and of our economy. Politically and economically, we have come to the end of the road for an old way of managing things.”

Although the writing on the wall is clear, Malaysia’s realpolitik tragedy today is that it has not summoned the courage to make the leap towards a future built on enterprise, innovation and competition. If we continue to remain in denial about our faults, future generations will soon rue our flaccid resolve when the going got tough.
Why was Malton not queried?Bursa Malaysia queried Ho Hup Construction Co Bhd on the joint development agreement that its 70% owned subsidiary Bukit Jalil Development Sdn Bhd (BJD) had entered into with Pioneer Haven Sdn Bhd, a unit of Malton Bhd.

The agreement is to jointly develop a parcel of land owned by BJD and located in Bukit Jalil, Kuala Lumpur. BJD will be entitled to a minimum of RM265 million for the joint development without forking out a single cent.

Bursa wrote to Ho Hup requesting details of the existing use of the land, the basis and justification for the share ratio and the minimum entitlement, the proposed utilisation of the proceeds as well as the original investment cost of the tract.

This is essential information that Ho Hup’s shareholders would want to know. Ironically, the joint partner, Malton, was not queried by the stock exchange for details of the agreement.

How Ho Hup will utilise the proceeds from the project could be irrelevant to Malton’s shareholders. But isn’t Malton also obliged to inform its shareholders how the entitlement ratio was derived, even though the board does not need the shareholders’ approval for the project?
Kudos to ZarinahThe extension of Securities Commission (SC) chairman Tan Sri Zarinah Anwar’s tenure by a year reflects the government’s confidence in her stewardship of the capital market sector.

Zarinah has indeed left her mark on the financial markets with a number of positive measures since she assumed her current post.

Notably, Malaysia is now the global leader in sukuk, accounting for over 60% of Islamic bonds issued. The SC is not the only entity responsible for this achievement but it certainly has played a vital role as the guardian for the issuance of debt papers in the country.

More importantly, the confidence in Malaysia’s regulatory framework that is necessary for this to happen is certainly a valuable prize. The SC’s openness to the media is also noteworthy.

Last May, the SC signalled its changing outlook with the launching of the new framework for listings and equity fund-raising, which entailed the merging of Bursa Malaysia’s Main and Second Boards into a Main Market for large cap firms, and the migration of the Mesdaq Market to the ACE Market for newer firms.

Two weeks ago the SC stirred a hornets’ nest by taking steps to plug a loophole in the takeover of companies.

Currently, companies can be taken over if a predatory buyer can command the support of 50% and one shareholder. This what is commonly known as a takeover via the acquisition of assets and liabilities route as provided for in the Companies Act.

The SC is proposing the introduction of a listing requirement whereby the disposal of assets and liabiities would need at least 75% shareholder support. Also, dissenting shareholders should not exceed 10%. This proposed change is seeing resistance among some segments of the capital markets.

But with the services of Zarinah being extended, hopefully she will see this through to add to her achievements.
This article appeared in Corporate page of The Edge Malaysia, Issue 799, Mar 29-Apr 4, 2010