Bumi equity: Gov’t retracts 36.6% figure
Malaysiakini
Nov 13, 2006

In a dramatic reversal, the government today retracted the figure which it provided six days ago in Parliament that bumiputera corporate equity ownership in Bursa Malaysia was 36.64 percent.

“The recently quoted figure of 36.64% of bumiputera equity ownership in 2005 for listed companies is incorrect,” said Minister in the Prime Minister’s Department Effendi Norwawi in a press statement today.

He was referring to Deputy Finance Minister Dr Awang Adek who told Parliament last Tuesday that bumiputera share ownership hit 36.64% as at Dec 31 last year.

Effendi said that the correct figure of bumiputera equity ownership in listed companies was 21.8%, and not 36.64% as stated earlier.

According to Effendi, the methodology used in deriving the earlier figure was wrong because it apportioned 45% of equity ownership held by nominee companies to bumiputeras, when it should be only 8.3%.

“Based on a survey conducted by the Economic Planning Unit (EPU) on equity of nominee companies, bumiputera ownership in such companies is only at 8.3%.

“Not only that, the estimated figure of 36.64% so derived, assumed that the equity held by government agencies are also owned by bumiputera."

Nominees firms info from survey

Effendi said that nominee companies in Bursa Malaysia collectively owned RM139.5 billion, or 25.9 percent, of the total corporate equity in 2004.

“In March 2005, EPU with the cooperation of SSM (Companies Commission of Malaysia) conducted a survey on 359 nominee companies to ascertain the status of ownership and beneficiaries of shares registered under nominees. 

He said that a total of 179 companies responded to this survey, and they represented 74.3 percent - or RM103.7 billion - of the total equity held by nominee companies.

A nominee company’s function is to hold shares or securities on behalf of someone else.

This corrected 21.8% figure of bumiputera equity ownership in Bursa Malaysia - which is previously known Kuala Lumpur Stock Exchange (KLSE) - is based on a study of the 914 public-listed companies.

However, Effendi said when this is extrapolated to include all the 609,595 active companies registered with the Companies Commission, the figure of bumiputera corporate equity ownership amounts to only 18.9%.

“The government, therefore, wishes to reaffirm that the equity ownership of bumiputera in the corporate sector, as of Dec 31, 2004, was 18.9% as clearly set out in the Ninth Malaysia Plan,” he added.

Defends par value calculation

Effendi also defended the government’s controversial methodology in using the companies' par value, instead of market value, in its computation.

“In calculating the equity ownership, par value was used as it provides a constant measurement to all companies in the corporate sector as compared to the market value, which can only be used on the listed companies.”

He said that this data is produced by the EPU’s technical committee.

“The committee comprises experts from the EPU, CCM, Securities Commission, Bursa Malaysia and Permodalan Nasional Berhad. The committee also consists of external expertise in the field of information technology to generate the data required.”

Effendi added that the methodology used by the technical committee was based on the “best practice available and has been consistently used”.

“The methodology used is recognised by international financial bodies, such as the World Bank, the International Monetary Fund and the Asian Development Bank.” 

Some GLCs included

According to Effendi, the main source of data to calculate the overall equity ownership was derived from the Companies Commission.

“Among the information used from the annual reports of the companies in this methodology include type of companies and their activities, composition of equity ownership by ethnic groups and nationality.”

Effendi said that shares held by the government were excluded from the computation.

“The major portion of the government equity ownership is in the public-listed government-linked companies (GLCs). Equity held by Employees' Providence Fund, Khazanah Holdings and Minister of Finance Inc was considered as government interest.”

However, equity held by private companies and individuals in non-listed and listed GLCs such as Petronas, Telekom Malaysia Berhad, Tenaga Nasional Berhad (TNB) and Malaysia Airlines System (MAS) was included in the calculation of equity held by the respective ethnic groups.

The government used the following data sources to estimate equity ownership:

    * Records from the annual reports of companies registered with the Companies Commission of Malaysia.

    * Equity ownership of public-listed companies in Bursa Malaysia.

    * Data from bumiputera institutions such as Lembaga Tabung Haji, Lembaga Tabung Angkatan Tentera and Cooperatives Development Department.

    * Data from Permodalan Nasional Berhad (PNB), Mara and all SEDCs (state economic development corporations).

    * Data from Securities Commission on unit trust funds and related trust fund management companies such as PNB.

    * Information on ownership in nominee companies based on a survey done in March 2005.