Business

Wednesday July 1, 2009

New department to replace Foreign Investment Committee


KUALA LUMPUR: The Foreign Investment Committee (FIC) has been disbanded effective yesterday and with it the 30% bumiputra equity requirement for listed companies, said Minister in the Prime Minister’s Department in charge of the Economic Planning Unit (EPU), Tan Sri Nor Mohamed Yakcop.

And while companies will still have to comply with Securities Commission’s 25% public spread requirement at the initial public offering (IPO) stage, of which half must be offered to bumiputras, this would be waived if there were insufficient bumiputra investors to buy the shares, he said.

This means that effectively, the bumiputra equity ownership requirement has been reduced to 12.5% at the IPO stage, according to the minister. There will no longer be any equity conditions imposed on companies post IPO, except in the case of reverse takeovers and backdoor listings.

“FIC was a hindrance to growth,” Nor Mohamed told reporters at Invest Malaysia 2009 yesterday. “It was also a blunt and ineffective tool that has not been successful. The liberalisation measures will mean more investment and more business growth which means a bigger pie to share and the bumiputras will certainly benefit,” he added.

FIC had been focused just on equity, but the problem was not just equity but the participation of bumiputras in the economy, he noted.

Nor Mohamed pointed out that from 1984 to 2005, RM54bil worth of equity had been allocated to bumiputras but only RM2bil had remained in bumiputra hands.

Tan Sri Nor Mohamed Yakcop

“Not to belabour a point but the banks – making loans to bumiputra investors to buy shares and then wanting a quick payback period – was one of the reasons for this,” he said, adding that the policy now was to be market friendly.

The main reason for the 30% bumiputra equity quota was that in 1971, only 2.4% of public equity was owned by bumiputra investors while foreign ownership was 63.3% and the poverty level in the country at the time was 49%, he said, noting that in contrast, the poverty level was less than 4% now.

He said in today’s competitive environment the country needed a high growth rate of about 6.5% to 7% to reach its goal of a developed country by 2020, instead of being stuck in the “middle income” group.

“It means that to make sure we reach our goal, we not only need growth, but high growth now,” he said.

Nor Mohamed said the the 30% bumiputra participation had not been abandoned but was now being looked at from a macro-level.

Going forward, he said a new department set up at the EPU would replace the FIC and would only process transactions involving the dilution of bumiputra interests and/or Government interests in properties valued at RM20mil and above, whether bought directly or indirectly through acquisition of companies owning properties.

All other property transactions would no longer require the approval of FIC, he added.

However, foreign investors cannot acquire properties below specified threshold limits, with the threshold amount for commercial properties at RM500,000. For the purchase of residential properties, the present threshold of RM250,000 is maintained until the end of 2009, with the threshold increased to RM500,000 effective of Jan 1, 2010.

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