This article first appeared in The Edge Malaysia Weekly on February 21, 2022 - February 27, 2022

When companies go for a listing on Bursa Malaysia, they have to allocate some 12.5% of the shares to bumiputera investors. In sectors such as oil and gas and logistics, the required level of bumiputera equity ownership is even higher.

When international companies set up businesses in Malaysia, they must comply with the 30% bumiputera equity partnership rule. Normally, international firms will partner a government-linked investment company (GLIC) such as Permodalan Nasional Bhd or Lembaga Tabung Haji when they set up business here.

When there are already rules to ensure that bumiputera equity ownership is not compromised, especially in listed companies, is there a need to impose more restrictions when public-listed companies buy land for expansion?

This is the bone of contention in Supermax Corp Bhd’s now-aborted purchase of two parcels of land from S P Setia Bhd to build the operations headquarters for one of its glove-producing subsidiaries. The land has been approved for commercial development.

According to an announcement, Supermax terminated the RM73.5 million land deal because the Economic Planning Unit (EPU) rejected the company’s appeal to waive the 30% bumiputera equity condition.

Generally, the 30% bumiputera equity ownership rule applies to land that is designated for commercial development, to help facilitate bumiputera participation in malls and retail outlets.

In this case, the company wants the land to build the operational headquarters of its wholly-owned subsidiary. But there is no certainty of whether the headquarters will be built, as the company could change its mind in subsequent years.
Nevertheless, if there are concerns that the company may not build the headquarters as planned, perhaps EPU should insist that the status of the land be converted for industrial use before giving the approval.

Also, to end speculation about interference by rent seekers, EPU needs to convey to investors why approval for some land deals is denied.

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