Room for Competitive Bumiputera Companies ― A Wasteful National Mission

(This post was originally published at The Malaysian Insider)

After reading the article “Room for Competitive Bumiputera Companies’ in The Edge this morning, I am encouraged to write this piece to support Petronas Chairman Tan Sri Shamsul Azhar Abbas.

He said that in 2010 and 2011 alone Petronas awarded about Rm 74 billion worth of contracts to Bumiputera controlled companies, a sum cannot be described as anything but huge.

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Despite this Petronas has become a punching bag for Malay right wing and business groups in recent months. The Malay Economic Action Council (MTEM)- an umbrella of more than 60 business group blamed Petronas for sideling Bumiputera companies and favouring more competitive foreign companies.

The MTEM has called for Tan Sri Shamsul and the Menbers of the Board of Petronas to resign. This is outrages. The Malays cannot continue to expect hand out and juicy contracts.

It is time they must realise that they have to become more efficient and competitive to face the real business world.

Although I do not know enough in the oil and gas business to comment on Bumiputera contractors in that field, I am fully qualified to comment on Bumiputera contractor in the civil, electrical and mechanical engineering construction industries which covers a wide range of work including roads, buildings, water supply, sewerage, irrigation, power stations, electrical cabling etc.

I would like to pose a few questions which may appear unkind or insensitive but nonetheless need to be asked. Out of hundreds of high-rise buildings in Kuala Lumpur does anyone know of any Bumiputera contractor who has won any of the building contracts through an open competitive tender process?

Out of hundreds of kilometers of highway in Malaysia, can any Bumiputera contractor who won any part of the highway contracts through open tender be identified?

The answer to the above questions unfortunately is in the negative. The evidence is that all the government’s well-intentioned efforts in trying to produce competitive Bumiputera contractors since 1957 have failed.

Contracting is a very difficult business yet it is so easy to register as a contractor. Why this has happened needs to be openly discussed rather than swept under the carpet.

Continuously giving out contracts to Bumiputeras without competitive tenders will only make them more inefficient.

Conclusion: Half-baked contractors are not in our national interest Contracting is one of the most, if not the most, difficult business and it takes a very long time to produce competent contractors.

It is very dangerous to quickly produce half-baked ones as they will soon find themselves in financial difficulties and require bailouts.

The bankruptcy record shows that a large number of debtors are Bumiputera contractors with many of them unable to pay back the loans given by government- controlled financial institutions.

The government must change its methods and policies which have proven unworkable.

There is no urgency in producing more Bumiputera contractors as many of the key industries e.g. the banks, plantations, motor vehicles, taxis, rice etc are already under the control of Bumiputeras.

Our government must not be narrowly communalistic and should make use of all the groups, irrespective of race, that are more efficient in the contracting business.

Giving out contracts without a full tender process is akin to corruption. I urge the government to stop this corrupt practice and to utilise the savings from these enormous sums to implement the options suggested above.

Since independence 1957, the BN Government would have spent hundreds of trillions of ringgit and have failed to produce some competitive and efficient Bumiputera contractors.

It must be the most wasteful national mission ever known. Note on the Author I am a 80 year-old chartered civil engineer and one of the founders of the three larger construction companies listed in Bursa Malaysia.

These are Gamuda Bhd, Mudajaya Group Bhd, and IJM Corporation Bhd. I was a member of the Board of Engineers, Malaysia for three terms.

I was also on the Sirim Board responsible in writing the Malaysian standard specifications for cement and concrete.

In addition, I was the Secretary General of Master Builders Association, Malaysia for nine years. These days, I am completely retired.

My intention in writing this article is honourable. Many people may not like reading what I have written and the truth may be difficult to accept. Nevertheless, this is my considered analysis for the benefit of my country, the Bumiputera contractors and the construction industry.

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